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House Price Crash Forum


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Everything posted by aa3

  1. If renters do become the majority of voters, politicians would at least have to pretend to be fighting for their rights. An idea I like from this forum, is that real rights for tenants will not only help the tenants, but in the long run create a more professional class of landlord. For example the fear of having to move, and possibly not finding another tenancy in the same school area. Well a professional landlord isn't a person renting out a second house, then trying to flip it. Likely they will have dozens or even hundreds of rental units, and will follow the code line by line.
  2. Nice, I went to youtube and now am watching the Ford F-150 megafactories show. Vehicles are mainly made of steel, and since the 1950's steel mills have reduced the need for labour by between 80 and 90%. Yet national steel output remains the same, with obviously results. Yet another example is the dock workers union. One of the great unions, in Britain during the 70's, there was 125,000 workers. Today just 14,000 handle the cargo, and this with the rise of global trade. PHD economists cannot figure out why the private economy is not generating jobs in this day and age. Yet to a layperson it seems blatantly obvious.
  3. Pretty much, although I can make an argument where sometimes it is beneficial to rent(like your case where the rentier was actually subsidizing you).. Of course you and I both know where this is headed.. we are going back to the way it always was, where 90% of the population are renters, a small middle class of owners, and a tiny group of insanely rich rentiers. You can see in my post how the business starts becoming more powerful the longer the time horizon and the more units a person owns. Remember also there are people who legitametly make £500k a year. So can go 50% down on every £200k unit they buy.
  4. 800 workers at Honda in the UK faced the boot. Posters on another thread noticed that just recently Honda announced £270 million in new capital spending at the plant. The new machinery will require lower labour input per unit of production. There has indeed been a historic 300% rise in factory floor productivity in auto plants just since 1990. This has led to many hundreds of thousands of high paying jobs lost throughout Europe over this time period. This is a textbook example, a successful global corporation, in a major industry, and they are reducing staffing.
  5. The 800 job cuts and the 270 million pounds in capital investments may well go together. It may have been time for the machine upgrade cycle. And the new capital machinery will require less man hours per unit of production. Since there are about 5,000 workers at a modern automobile assembly plant, a 20-25% increase in productivity by the new machinery would lead to ~800 job losses. From 1990-2010 there was a 300% rise in productivity of automobile capital machinery. So this seems easily possible. This huge rise is why there has been never ending job loss in automobile production. But automation is a factor like globalization and mass immigration that we are not supposed to talk about. The conventional economists viewpoint is that 800 people became lazy scroungers with their curtains drawn for an unexplicable reason. This viewpoint is supported by the current leaders of the Kingdom.
  6. Whatever rate of inflation, business has to know what it will be ahead of time.. and all the millions of citizens need ample access to have medium of exchange so that they can participate in the economy. The money supply seemed to be working fine in the west during the 50's and 60's.. back then 30% of the money supply was debt free fiat money. The bankers didn't like that and now only 2-3% of the money supply is debt free money. And this does not seem to work well.
  7. Well Japan has had steady or even slightly declining prices for at least a decade. Meanwhile China with its 3% inflation target has quadrupled its real economy just since 2000. I think in fairness to monetary authorities there are so many factors besides the rate of inflation that affect a nation's economy.
  8. I think the reason 2 or 3% tends to work better is there is a hard to measure qualitative increase going on. Just one example but an older friend of mine noted how in his day you would see cars at the side of the road broken down all the time. Now it is fairly rare to see. The same modern cars get dramatically better fuel efficiency, much improved safety. The calculations used assume a 1.5% increase in quality across the board. But if those are wrong and its really 2.5% then a 0% target would mean deflation. Which in a debt backed monetary system has proven very problematic.
  9. A lot of people think they can take a ton of debt and make a real killing on BTL. And if the asset has a massive increase in price, the returns are stunning. Likewise a massive fall in price and the losses are stunning - see Ireland, Spain, parts of the USA. I've done books for companies who own rental properties, and its not the ultra-lucrative business talked about in the media. Its something that over many years, like 30+ years, can build capital, and produce a modest income per unit/house. I recommend BTL to people with very high incomes, like specialist doctors, as something to build up capital to pass on to their children and grandchildren. These are people who actually invest and maintain their properties; they hire a commercial operator and follow their recommendations. It is a professional level approach. The unit you mentioned pays £720 a month. So £8,640 a year, not a bad start. Then £210 is deducted in the service charges. Then there is council tax. Then insurance which realistically is going to be £600 a year. Long term maintenance is about 1.5% of the value of the unit a year, although the service charge will cover most of this. (to do it on a professional level I am a big fan of the condos.. detached houses have too many costs associated with them). When you start accumulating units there will be a vacancy rate, realistically 5%. To have a property management company takes between 12-30% of the rent depending on how many units you have. Again favouring the people with very high incomes, who can have many. Then to have it incorporated, it is going to take annual legal fees and bookkeeping and accountancy fees. Again favouring the person who has many units. There are also mortgage refinance fees, but this can be factored into the cost of financing. The real payoff comes many years from now, like 30-40 years, when you have 40 units, and the early ones are now paid off. But even then you won't be a super rich person. 40 units, each bringing in net income of £4,000 a year, is £160,000 a year. But assuming you have a small family, it is an incredible advantage for those children.
  10. I'm not sure why there is so much debate on this issue. The central bank's job is to have a stable and low inflation rate. In the 2% range. In times of debt deflation in the private sector as now, this means printing and expansion of the national debt. During times of debt expansion in the private sector this means stopping printing, raising base rates and slowing down the national government borrowing. China also uses the very effective tool of lowering and raising the capital reserve requirements for banks in response to the inflation rate. The Western bankers don't like that idea, so we don't use it. Because of the severity of the debt deflation in the private sector, it must mean a larger monetary expansion by the national state. Where there is room for debate is on what the inflation target should be. Japan's 1% target, (which they have failed to hit even that), seems to be too low. There is much debate in Japan about raising the target to 2%(and possibly nominal gdp targeting). Even the 2% rate in the West seems too low. The Chinese target is 3% and seems to function well. There is also debate on what to do after targets are missed. For example if inflation comes out at 0% in 2012, what should a nation target in 2013. Should it aim for the 2% in 2013, or should it make up for the missed target.. and if it is to make up for the missed target should this be carried out over several years. Say 4 years at 2.5% inflation. Savers and investors just need to know what the rate of inflation will be, and with that knowledge they can make investment decisions. Where business gets in trouble is with wildly fluctuating inflation. Even in places like Greece which in days gone by were running 10% inflation year after year, business simply priced that into all the contracts.
  11. Your point about private corporations in the power generation is also true. In most areas of economic life for profit companies work best. But nuclear reactors are something that pay off over decades. France which was reliant on oil powered electric generation up until the Arab oil crisis of the 70's, embarked on a massive nuclear build program during the 80's. Today the French have their usual generous French wages and benefits and overstaffing at EDF, yet enjoy the lowest electricity prices in Western Europe, and the corporation also issued a 10 billion Euro dividend to the French government. Once those plants are paid off the cost of fuel is next to nothing. Representing only 1% of the retail price of electricity. So it is impossible to underbid nuclear power at that point.
  12. I am a big fan of Thorium Nuclear Power so whole heartedly support a massive program to expand it. But even the current nuclear plants in operation are excellent. At Fukushima a worst case scenario happened. And of the six reactors there 1 melted down. The one that melted down was the among the earliest reactors built, construction started during the late 1960's. The newer technology reactors at Fukushima all shut down safely. The Japanese Nuclear Commission around 2009 conducted a study and recommended that the older unit at Fukushima be shut down, in case such a disaster happened. Because the Japanese fleet had been so successful, including the earliest reactors, they decided not to shut it down. With the newer technology we now know they can survive a magnitude 9 earthquake, and monster tsunami. Of course the usual suspects demanded all reactor technologies be shut down around the whole world after Fukushima. Sadly the western nations are even more freaked out about nuclear power than before, and interestingly the East Asian nations are going back to constructing more reactors - including Japan. They will benefit from cheap, abundant, reliable electricity.
  13. The government is at the point where its not capable of doing many of its functions internally. So contracting it out makes sense. Think of if the British government tried to develop their own military equipment internally with no contractors. Or try to manage their internal IT systems. Or write their own software, etc. Get the private sector running probations and throw in bonuses if they lower re-offending. Of course there will always be some level of corruption in the process.. but at the end of the day a company like BAE systems must deliver a working product. While a government ran defense manufacturing operation would just never get it done, regardless of how much money was paid. In time virtually the whole state is going to be privately ran by contractors. And the state will employ more people than ever. Of course most of those state workers won't actually do anything, it is essentially a giant welfare system and to provide consumer demand.
  14. I've been following politics and economics online in forums since the late 90's. Eventually I realized democracy was just an untenable idea. Its one of those ideas like communism, that on paper, if you don't think about some fatal flaws, it would work... but in the real world it never does. Whereas monarchy is enduring. That is why for all nations, most of their history has been in monarchy. The Queen would appoint someone capable and pragmatic. As long as that appointee does a good job, her family line as 'the crown' is safe. So she has a self interest in a stable, progressing nation. Nations from Canada, to Australia, to Hong Kong, to Singapore flourished under Governor Generals appointed by the monarch, and imo there is no reason Britain wouldn't do the same. One day I am going to write several books on the positive differences, your example is going in that book. The Queen is not likely to be bribed into selling the country down the river for an EU sinecure.
  15. Many new immigrant minorities in Britain would love to be entrepreneurial. But alas to operate any good business in the UK you need a license from the government. But all of the licenses are already owned, and the current owners only sell them for millions of pounds. The only people who can afford to buy the licenses, are people who already own the licenses. So Dave and George have been carrying out their brilliant plan of importing 500,000 new immigrants a year, but using the force of the state to stop them from getting into any viable area of economic life. Shockingly to the Tories and their buddies in Labour and Libdems, most of those new immigrants need social assistance to simply survive each month. Their new plan is to 'encourage' minorities to start businesses. As if grown adults need some career politician to 'encourage' them to want to own a business. For the immigrants knowing that all mainstream parties are committed to denying them opportunity using the full power of the state.. but one party Labour offers them higher social assistance.. guess which party they vote for? Five years between elections, so there should be another 2 million or so new Zanu-Labour voters.
  16. It does seem a great time to get into US real estate. Basically you buy after a crash has occured and there is pessimism in the marketplace. That hedge fund guy's plan to buy subprime bonds now is interesting. Any move up in the underlying value of the real estate, will dramatically increase the value of those bonds. I wouldn't personally follow that plan, as I like owning assets outright myself, not through shady banks. America grows by about 3 million people each year. So as long as you buy in a big city that has strength, it looks good. Also since America, unlike Europe has let the crash happen(or more accurately tried everything to stop it, but unable to), food, energy and housing are cheap in the country. We talk about this all the time on the blog, the power of a cheap cost of living in promoting economic strength. Industry is noticing how good America looks. Like refining, coal mining across the country to export, food production in America always looks good, etc. American refiners have an unbelievable advantage right now. With natural gas at under $3 in America, vs. $8 in Europe and $15 in Asia, and natural gas being their main feedstock. Then add in cheap electricity and a cheaper labour force than Europe with the low cost of living. A last bullish point on America.. no nation is remotely close to America in human capital.
  17. My idea is just to disband parliament and have the Queen appoint a governor general who has the powers of the prime minister. Would a monarch choose a 35 year old, to run the whole country? Probably not. There probably are 35 year olds who would be amazing, but by appointment the Queen will choose someone who has a record of achievement in public administration. And that takes time. See the choice for the Governor of the Bank of England. They found someone who had actually been running a significant central bank, and viewed in comparison to peers is thought to have a better record. You don't start with your first leadership role as the Governor of the Bank of England. You select by personality testing and aptitude testing a stable of leaders. And then groom them in appointments of increasing responsibility. Several should emerge as potential leaders of the whole country. The other thing is you don't vote someone out on a whim. If someone is in and things are going well, they stay. Think if Clinton was able to still be President all the way from 2000-2012. That also gives constancy of purpose from leadership.
  18. Once it starts spending the money, miraculously there will be enough money. Thats how the USA went from dead broke with a weak, struggling economy in 1938.. to able to field a fully equiped 10 million man army several years later. And supply them on a global basis. Once the printing presses started humming suddenly it was possible.
  19. Thats funny because the latest reports from the ministry of information show falling unemployment and record job creation.
  20. Its a good point about the real incomes in Britain. Watching the electric propoganda machine, it seems like your average person makes about £150k a year. I remember a study I read once where they were looking at daytime soap operas. One middle aged woman in the show was single, yet owned a nice home on what looked like a nice street. She had brand new expensive furniture. And new clothes every show. She worked as a secretary in a law office. During the season they were studying she took off for a month long holiday to Italy. The difference between the image 'the party' presents to the people on television, and the reality on the ground it is nearing 1984 levels. But your average person spends about 4 hours a day watching that electric machine. And the images seem so real.. people forget that it is all make believe. On those house hunting shows, it seems every typical young couple can afford at least £400,000, and if a good house appears they have no trouble raising their limits to £500,000. Back in reality the majority of under 35 are either unemployed or working for under £10 an hour.
  21. Reminds me when I was following the US housing bubble and bust on the blogs. I remember in 2007 one show was helping a successful young man buy a condo in LA. It was a ways out of downtown, in what looked a middle class area, and the 2 bedroom/2 bath condos were going for 1.3 million USD. He was happy he managed to find one for just under 1 million. Meanwhile in booming Dallas, Texas, a couple was looking at houses. They found one that was about 4500 sq ft, 5 bathrooms, swimming pool, and a 1500 sq ft poolhouse/servant quarters. It was 600,000. It probably would come with 2 Mexican servants and still be under what that poor guy paid for the condo.
  22. A lot of bears assumed that interest rates would come back up. I am a bear, but for different reasons, I have always argued we'll never see over 1% base rates again. I felt the longer term factor would be falling employment and falling incomes as the forces of globalization, over-regulation and automation took hold. What is happening outside of the southeast, is unemployment is so high, and incomes of those employed in the private sector so low, that house prices have had to come down, even as rates collapsed. The move down really has been strong when factoring in the change in rates. From 4% in 2007 to 0.5% today. Greater London's strength has been amazing, but for most people the prices there are so out of reach its a moot point anyway. Your brother must have been a rare bird who wasn't in the market in 2009 and had a very high income and timed it just right.
  23. I've seen happy renting young couples, become unhappy, stressed out owners. I think what existed for centuries was 10% of the population owning, and 90% renting, is the natural order of the world. To really own you need deep pockets in case of unexpected major costs, most people will never have the financial control to amass savings. (as seen how they run up consumer debt). Its not popular in this day and age.. but I think most people need a life of stability with a regular bi-weekly or monthly paycheque, disability and health insurance deducted automatically, pensions looked after for them, and renting something very affordable. Another aspect is how easy going people are when renting. They don't hyper-worry about the neighbourhood, because if their worst fears are realized and it goes downhill, they can simply move at any time.
  24. Now we know the Southeast is out of control, but I'm talking about for the rest of the UK. In 2007 house prices across the country had a median of ~£195,000. And interest rates were 6%. So let us say you were a conservative hpc forum type and you saved 20% down, and amortized over 25 years. You would need a downpayment of ~£40k, and the monthly payment on the £155,000 loan was £1,000. Really not too hard for a couple. Over 5 years the prices have declined to about £170k. So you stay with the 40k downpayment, and finance the remaining 130k. Mortgage rates have declined to say 4%.. the monthly payment is ~£700. Virtually any couple can make that payment.
  25. A good indictment of the economists who dont' even factor in things like technology. What I found strange was that blogger's conclusion that social security is unaffordable. With robots producing night and day the system is easily affordable.. just not funded by a payroll tax.
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