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john p · Joined: 10 Mar 2006 Posts: 1820

When you study history, certain things seem to speed up with modern times. I think there were less changes in the years 300 AD to 400 AD than from 1911 to 2011.

Now think about modern business cycles and the yield curve.

Is black the new pink?

newbie · Guest

May I interject this quite intellectually stimulating discussion and ask another question related to rent prices.

Since I read that 75 to 80% of the rental are done on September 1st in Boston, do I suffer considerably by renting out in November to March or any other non September months(except maybe june , july and august?)

I was working on some analyses, and hoping others could help enlighten, although there is less renters in other months, doesn't that mean also less competition? as a landlord, you will face less competition, maybe less people rushed into decisions; also people who are non students might be more likely to stay put for more than 1 year so give more stability and less maintenance hassle? In addition, the rent trend has already been established by september so whether to hike up rent or stay put on price are easier to judge. but I can also imagine people will take longer to sign, and will carry tougher negotiations....

what do you think?

mpr · Joined: 06 Jun 2009 Posts: 344

Xenos · Joined: 24 Jun 2009 Posts: 31 Location: Western Mass

[quote="john p"]When you study history, certain things seem to speed up with modern times. I think there were less changes in the years 300 AD to 400 AD than from 1911 to 2011.

Now think about modern business cycles and the yield curve.

Is black the new pink?[/quote]

I imagine that if I owned some real estate in Rome the events of the 4th century would have been a bitch, financially.

I feel bad about how Boston has been left behind in our new economy, but at least our entire civilization has not decamped for Byzantium and left New England to the barbarians. Talk about declining real estate values!

admin · Posted: Wed Sep 28, 2011 12:06 pm GMT Post subject:

john p · Joined: 10 Mar 2006 Posts: 1820

When I think of Inflation I think about heating a house.

The size of the house and the insulation properties of the exterior walls and the outside temperatures and sunlight affect how much you have to heat it.

The way this is done is basically like this. ASHRAE takes different areas of the world and determines how many heating degree days and cooling degree days there are for a given area. (basically identifies the exterior conditions to the building) Then the HVAC engineer gets the wall sections and elevations of the building to see how well the exterior envelope performs. Then they determine how much heat or cooling needs to be provided. These heating and cooling loads determine the capacity of the systems.

When I see Stimulus spending, I see government cranking up the heat in the furnace. After NAFTA we basically knocked down the north and south wall of the house so the exterior envelope of our economy doesn't hold in the heat like it did. When we pump money in through Stimulus we just accelerate that money right out these open windows in a Global Market.

Trying to compare the heating performance of our old house (the old economy) with today's which has a less insulated jacket may bring you false expectations. Before the FED could crank up the heat and we could predict the temperature because our economy was a bit more insulated. Now we just keep cranking the heat and watch it go out the window.

Two approaches to reducing the Trade Deficit

The first approach is to wall off our economy with tariffs and increase the insulation jacket. Honestly, most people have this knee jerk reaction about no to this proposition because of the Hawley Smoot Tariff which hurt us in the Depression, but if done correctly and in a mirrored response to any other foreign nation manipulating their currency, it is really a form of self defense. The key is to have a very fair and measured approach so that we can defend our responses in a court of international opinion.

The second approach is more like a pile foundation for a building. Typically we have "spread" footings which are like big wide concrete pads that columns sit on and the weight gets distributed across. Imagine a colum resting on a concrete pad like 4 feet wide by 4 feet wide. The bearing capacity of the soil underneath these spread footings determines how big the footing is. If the soil is too soupy we use piles. The way piles work is like this: Take a pencil and grip it with your palm and squeeze and then try to pull or push the pencil up or down. It is the compression against the sides of the pencil which create the resistance which keeps the pile from sinking.

Economically the properties of the global market are more liquid and the spread footing is just sinking. They have a foundation called a "Raft" foundation which is an enormous spread footing which sits like a boat in the water. This would be like a heavy tariff which would isolate us from a global market. A pile strategy of policy would be more related to regulations. Regulatory arbitrage (having each company able to gain advantage by having looser regulations) is what makes the soil soupy. If the G20 Countries could come up with a framework of regulations which created a more uniform economically structural strata to build off of we would have less unknowns.

Think about the Monty Python movie where they talked about that castle that kept sinking in to the swamp... Holy Grail right??

The deeper and deeper a corporation penetrated into this soupy soil to get competitive cost advantage would face pressures of internationaly accepted regulations. I certainly am against any form of a New World Order and think that each country should have soveriegn rights to make their own rules, but if the forces of capitalism were to promote a commonly accepted platform and those that participated gained more than those that didn't, the foundation would hold.

They had this exhibit at Harvard's Business School about Disruptive Technologies, or technologies that deflected common progress. One can argue that thinking out of the box is a good thing, but imagine if every plug you had was different based on the country and the manufacturer. Common Specifications and performance standards is what keeps us being able to plug into each other. If China has a bad regulatory infrastructure and falsifies the specifications, all bets are off with warranties. They had this article in either Bloomberg or the WSJ about all the parts that went into this really expensive fighter jet. The parts came from all over the world. Imagine if the Rolls Royce components were faulty or the parts made in a 3rd World Nation weren't up to Specifications, that whole plane would be in jeopardy.

China has been able to get away with making cheaper products because they are still just so cheap. The skill saw made in China isn't as good as say an american made one, but if they are 1/3rd the price, it is only going to be the contractor who will pay the premium because the weekend warrior will never really burn out the cheaper saw. What scares me is that it isn't just these disposable things that have been handed off to China, it is like General Electric's Aviation stuff. We have to at least be able to compete on the high spec stuff. In order to really beat them, we have to take advantage of a smaller tooth to tail. In one project I was working on, it would have been cheaper to ship huge chunks of granite to China to be carved and then shipped back to the US than to have them made here. We have to increase our sophistication in manufacturing engineering and distribution which are commonly fought against by organized labor because they take jobs.

http://www.youtube.com/watch?v=-_SxW_7v9is

If things that can be done by machines can be done more cheaply here in the US, our workforce can be shifted to more service related things. What ends up happening is that you can get a car cheaper than to build a deck off of your house. What happens then is that people get a better marginal benefit from buying flat screen t.v.'s, computer games, gadgets made overseas than building swimming pools, tennis courts, decks, etc. made by local tradesmen. This is why Somerville still looks like Slumerville on the exterior except unlike in the 70's when people were poor, these houses have multiple flat screen t.v.'s computers, I-Phones, etc. Because manufacturing has become more and more automated, jobs have shifted to the service industry and now that is so expensive that people don't even bother build houses any more because there is no profit margin.

When it is cheaper for a couple to build a nice little courtyard in their back yards than it is to get a flat screen t.v. and entertain in their living room, you will see our economy come back. China and Japan will kill us on manufacturing unless we make our plants more sophisticated with technology. When people can get more bang for their buck in the industries that we have here and there is more mariginal benefit for what we make here, we will see the economy's bottom.

You guys see the mechanics of the numbers and the financial tinkering, but you need to also have real life manifestations of these inflection points because they are tell signs worth looking at. When you hear mechanics say that Fords are just as good as Hondas that means something. When you see more people painting their homes and sitting on their portches creating an outdoor streetscape activity and fewer satellite dishes and interior worlds, that is a tell sign. Money used to stay at home. People used to go to local football games until television gave them college games on Saturdays and Pro's on Sunday. You would never on your life eat Dominoes Pizza because you'd get it from the local Italian family's pizzeria which was ten times better. When you see people having carpenters building their front doors versus buying a premanufactured one that is a tell sign. I have told carpenters to stop making those ridiculous old fashioned desks and make custom wooden tops using the IKEA steel legs and the better hardware for the drawers etc. We have carpenters making old fashioned claw foot tables when people want IKEA's styles.

Anyway, it is the critical mass where the marginal benefit of US goods and services outweighing foreign products where we will see the money stay home. When people start hanging outdoors and interacting with their neigbors and it is more stimulating to go to that High School Football game that people get to meet more and more of their neighbors, find out what their skills are that we actually create societies that can harness the power and resourcefulness of eachother and we can create our own tooth to tail products and services that can outperform something else made on the other side of the world.