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Guest
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 Posted: Thu May 06, 2010 6:27 pm GMT Post subject: |
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| GenXer wrote: | Don't take any predictions seriously. One can be optimistic, yet bet on housing prices to fall. If there is anything certain is that interest rates are going up, in a year or in 2 or in 5. They may be going up a little or a lot, depending on what's happening. The dynamic will be different howerver - it is very much possible to maintain a 10% unemployment for years, and inflation may be coming in terms of higher oil prices (and most likely not higher housing prices). However, again, too much push and pull and grey areas. Anything can set off another avalanche of a crisis. This is what I'm willing to put all my money on - we'll definitely have a crisis in the future. But again, buying a house in Tx with cash (or at least, putting up a good chunk of it in cash) will certainly beat anything one can buy in Boston when the interest rate rises. Savers will win on this one - higher rates certainly mean lower prices in Boston, and given that there is a very high chance that the rates will INCREASE, I'd say there is also a very high chance that the prices will fall in the future, or at least not rise (again, depending on where we look - I'm thinking Boston). Again, we don't know by how much, and it is also not a given that prices will necessarily fall when interest rates rise, but one can be sure that in areas where the prices are very high there will be much more pressure on prices to fall.
But to anybody buying a house in Boston right now this is almost a wash - just like a bond whose price falls when interest rises, buying a house thats 20% overpriced now with a low rate may mean the same thing as buying a house that's 20% lower in price but with a higher interest rate to compensate. However, as I said before, those who save and put down more than 20% will definitely have an advantage when interest rates rise. Thus, one way to play this real estate market is to wait and save - in the long run, not only will you win because you rent, but you'll definitely have the opportunity to buy a house when nobody else wants to buy because of high interest rates. Again, we don't know how much they'll rise, and when, but rise they will. |
I agree with most of what you said above. Interst rates will rise it's just common sense if you have a very basic knowledge of economics and/or the history of interst rate peak and troughs over the years.
The longer interest rates stay low the better the chance prices will remain stable or experience much smaller price drops. Rates will go up but at a very slow pace for at least through 2010. The longer the rates stay low and more homes are sold we work through this foreclosure inventory as well as this increases the number of homes purchased at higher prices. If rates go up very quickly people will panic and start to make big price drops and therefore the avg home sale will drop bringing the rest of the mkt down with it. So far rates have barely moved since the fed announced they will stop purchasing. Most "experts" are saying the rates will not be spiking up anytime soon and will remain lower through 2010. If your waiting to buy until rates go up to a level where people will start to cut their prices there is a good chance you may be waiting until 2011 for this to happen. Who knows they could spike next week? |
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GenXer
Joined: 20 Feb 2009
Posts: 703
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| Posted: Fri May 07, 2010 11:05 am GMT Post subject: |
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| admin wrote: | What about the decline of the US dollar as the world's sole reserve currency? I think that would change a lot of things here, such as our ultra low interest rates, our ability to run massive federal deficits, and our bubble driven economy in general. Does anybody have any thoughts on how a shift away from the USD could be triggered and/or what system might replace it as the main reserve currency?
- admin |
What will replace the $? Euro? Look at Europe right now. Pathetic. Its the ghost of our financial future, unfortunately. I'm not too worried about this. The biggest worry right now is to replace the regime in power here, so that the next government is actually accountable to the people who elected it. |
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Kaidran
Joined: 17 Mar 2010
Posts: 289
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| Posted: Fri May 07, 2010 12:01 pm GMT Post subject: |
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Definitely not the Euro but any thoughts on a return to Gold, or at least a proportion of gold backing? Does anyone have an opinion on the accusations of manipulation in the metals markets? I read some bubble stories.
Boston ITer: I would personally call Wyeth, Genzyme etc pharma companies not biotech but you get the idea. The joke is a biotech is just a pharma company that does not make any money. |
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GenXer
Joined: 20 Feb 2009
Posts: 703
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| Posted: Fri May 07, 2010 12:34 pm GMT Post subject: |
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Any big player or a group of players with almost unlimited resources (central banks working for governments, for example) are manipulating markets simply because when they buy or sell, the market feels it. Also, eventually the news comes out that so and so bought or sold, and the market moves. If that's the definition of manipulation, then everybody is guilty as charged. If you mean to suggest that these players are able to actually 'predict' where the market goes, and make it go that way, then no, they can not manipulate markets that way because there are other players who have an opposite idea and so the resulting 'force' is unknown to anybody. But because of their size and ability to place fast trades, some entities are able to alter the markets, even if temporarily, though it is hard to say if they are actually able to profit from it themselves consistently. So in short, I don't believe the market is manipulated (of course, if producers withhold a commodity, it can go up in price, and they can all agree to produce a certain amount, but they can't really control the direction of prices - at least, not consistently and not for a long as they want).
Gold is an extremely volatile commodity. Tying your currency to gold would definitely change things a lot. There are a lot more players now, and the markets appear to be a lot more volatile than in the past. Maybe it would be a good thing, and maybe not, but I don't believe that our government, which prefers to use fiat out of thin air, would at any point consider going back to the gold standard (which is probably true for other governments for that matter). |
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Kaidran
Joined: 17 Mar 2010
Posts: 289
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| Posted: Fri May 07, 2010 12:46 pm GMT Post subject: |
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| There were some very specific recent allegations of manipulation exactly as you describe that companies were making trades and short selling in such volume that they actually could shift the market. I'll see if I can find a link later. They allegations were in the silver market but I think they were questioning gold too. |
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CC
Guest
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| Posted: Fri May 07, 2010 2:47 pm GMT Post subject: |
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| admin wrote: | What about the decline of the US dollar as the world's sole reserve currency? I think that would change a lot of things here, such as our ultra low interest rates, our ability to run massive federal deficits, and our bubble driven economy in general. Does anybody have any thoughts on how a shift away from the USD could be triggered and/or what system might replace it as the main reserve currency?
- admin |
I am not worry about it too. Not because US dollar can't not be replaced, but it probably will not happen in our life time (25-50 years). The main problem is almost every government is deeply in debt. Japan's debt to GDP ratio is nearing 200%; US's is probably around 110% (and still increasing!!); many Euro countries are about the same.
I don't know the figure about China, but I think it's not good either (you can't trust the data they provide anyway). There are only 4 main banks in China and they all belonged to the governments, but they are all deeply in troubles. Thanks for the highest saving rate and people somehow still trust the government, or these banks had been closed.
The show must go on!
| Kaidran wrote: | | Definitely not the Euro but any thoughts on a return to Gold, or at least a proportion of gold backing? |
No, it will not happen. There are simply not enough gold and more important people and every government just love to print money.
Devaluation is the only way to go. |
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CC
Guest
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| Posted: Fri May 07, 2010 2:52 pm GMT Post subject: |
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Regarding greater Boston housing market, I think it may go down another 10-25%, depends on location, but it's hard to predict how fast it is.
Personally I have decided to get into the market before next spring, since life is too short. If I can find a good property, loosing 10-15% in the first few years is fine with me. |
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GenXer
Joined: 20 Feb 2009
Posts: 703
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| Posted: Fri May 07, 2010 3:47 pm GMT Post subject: |
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| It's not the price of the property that kills you - it's the monthly expenses. My landlord just told me that he's 3 months behind on the payments...not sure if I have to be worried |
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Sat May 08, 2010 2:14 pm GMT Post subject: |
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| I always rent from large complexes, which avoids this problem. It's a shame that there's so few inside the 128 belt. I've never understood how the rents in run down triple deckers and tandem or street parking is comparable to the brand new luxury complex down the street with covered parking. Maybe those people can't pass the credit check? |
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Sat May 08, 2010 2:16 pm GMT Post subject: |
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Or, considering how much leverage people around here take on buying, maybe those people don't meet the affordability guidelines that the big complexes have (but a small landlord is willing to overlook).
GenXer - you're single and have no reason to be renting a house. Why don't you move in to one of these places? Let me know if you want to move in here. I'll split the referral bonus with you (have to check what it is now but in the past it's been up to $1k). 1br runs $1300 - $1500 and 2br runs $1700 - $1900. |
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Boston ITer
Joined: 11 Jan 2010
Posts: 269
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| Posted: Sun May 09, 2010 1:45 am GMT Post subject: |
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| Quote: | | I've never understood how the rents in run down triple deckers and tandem or street parking is comparable to the brand new luxury complex down the street with covered parking. |
I think the secret of the three bedroom triple deckers is that there are 3-4 students per floor whereas complexes have 2 bedrooms and owners have a lot of rules on how many people actually live there. And yeah, they're generally run down, almost equivalent to section 8 housing for other cities (sans perhaps Detroit). |
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balor123
Joined: 08 Mar 2008
Posts: 1204
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| Posted: Sun May 09, 2010 2:38 am GMT Post subject: |
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| Well there's students but even non-students rent these pieces of junk at terrible prices. My wife had some friends who did this until we showed them our property and the prices. I think they just assumed that the junk was a lot cheaper. It's like the whole city is wearing beer goggles when looking for rentals. I don't know if where GenXer is living is one of these places but I'd like to hear what led him to his current place. |
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admin
Site Admin
Joined: 14 Jul 2005
Posts: 1826
Location: Greater Boston
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| Posted: Sun May 09, 2010 5:02 pm GMT Post subject: |
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| CC wrote: |
I am not worry about it too. Not because US dollar can't not be replaced, but it probably will not happen in our life time (25-50 years). |
OK, how about something less severe, but still of great impact - a first step in that direction? What about the US government's loss of its AAA rating? http://www.investors.com/NewsAndAnalysis/Article.aspx?id=532490
- admin |
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CC
Guest
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| Posted: Sun May 09, 2010 5:49 pm GMT Post subject: |
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| admin wrote: | | CC wrote: |
I am not worry about it too. Not because US dollar can't not be replaced, but it probably will not happen in our life time (25-50 years). |
OK, how about something less severe, but still of great impact - a first step in that direction? What about the US government's loss of its AAA rating? http://www.investors.com/NewsAndAnalysis/Article.aspx?id=532490
- admin |
When Greek default came to real possibility just few weeks ago, I was laughing out loud. Because comparing to US public debts either as total amount or percentage to the GDP, their debt is nothing.
I don't think rating agencies will downgrade America's 'AAA' status, just like what they did to the junk subprime mortgages. More importantly, sooner or later the government will have to raise tax way much higher to control the deficit. That's why I think people who are counting mortgage tax deduction are taking a great risk.
However, you could be right. If rating agencies downgrade America's 'AAA' status, the interest rate could be as high as 15-20%. Average housing price could be cut to half or even more (by the time that happens, housing market is really a small problem comparing to the world crisis). BUT even that's a possibility, I probably still will buy a house in one year. Life is really too short. I want to take a reasonable risk and enjoy life but not to calculate every move and worry too much.
I really can't imagine if that day really comes. Actually I don't even want to think about it. Everyone will gets hurt badly.... even the savers. Besides, that could be the end of American empire. |
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Boston ITer
Joined: 11 Jan 2010
Posts: 269
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| Posted: Mon May 10, 2010 12:19 am GMT Post subject: |
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| Quote: | | Everyone will gets hurt badly.... even the savers. Besides, that could be the end of American empire. |
Concerning the end of the American empire, I for one believe that it'll be like the end of the British one, starting from '47 (India's independence), flat lining till '54 (Suez Canal), and then through the subsequent slide which completed in '72 (Bahrain's independence).
Here's the difference... at the end of WWII, the US had taken over Britain's global position. Today, there's no one nation nor collection of nations which has this situation. The EU is a political (and now, economic) joke and the world's traders, sovereign funds, and banks don't see Euroland as a place to stash their bonds and currency pools. The myth is shattered, the EU should go back to the EEC trading bloc of the 60s/70s.
Then, for the world's productive economies, ala east Asia, the zone from Japan to Singapore to India/South Asia, the various nations don't trust one another, have strict currency controls in place, and favor *weak* national fiats to play 'beggar thy neighbor' in the world's trading arenas. It's yet to be seen if an Asian economic union is in the cards. China is building its global power by diversifying its holdings but that could take another 20 or so years to see if they can indirectly control the entire Asia-Pacific region through financial machinery. If so, then that's our *Suez Canal* incident of the 21st century.
And then finally, for the world's commodity's currencies: Australia, South Africa, Canada, and Norway... the total forex currency volumes are low, relative to the USD, Yen, and Euro, and those economies can't handle sharp spikes or drops in their currencies to continue doing business with anyone. For those places, investors tend to buy into the various commodities or precious metal trusts to stash their capital.
So I guess my conclusion is that the US will continue in a zig-zag pattern, since there's no subsequent global political will on the other 'side' to re-shuffle the planet into a European or Asian based empire, aside from each region's particular industrial or commercial successes. If the dollar collapses, most other currencies will go with it and Gold will probably be some $5000 per oz but priced the same in pretty much every currency out there. My suspicion is that the dollar will hold, yes, a lot weaker than today, but it'll still be widely used in the world for accounts settlement, as competing economic blocks would rather trust our treasury vs the ones in Beijing, Brazilia, or Moscow. |
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