I suppose this thread is as good as any for a news report that Canada's middle class, measured by median income, is now the "richest". Our median income after taxes grew at 19.7% since 2000 while in the US the figure was only .3%.
For all of that another striking figure is how low the median income is in Canada - only 30k (Can).
Quote
Canada's middle class appears to be the richest in a new income study of about 20 countries.
The in-depth report published today in The New York Times indicates that Canadians have bumped Americans out of the top spot they have long held.
"Middle-class incomes in Canada – substantially behind in 2000 – now appear to be higher than in the United States," the report says.
"Median income in Canada pulled into a tie with median United States income in 2010 and has most likely surpassed it since then," it adds.
The New York Times backs up its findings saying they're based on 35 years of surveys and compiled by LIS, which runs the Luxembourg Income Study Database. The findings were also studied by LIS researchers, along with colleagues at a New York Times website, and outside economists.
The findings show that median per-capita income among middle-class Canadians, after taxes, ranked with that of Americans in 2010 at shy of $20,000 (U.S.), though, as the report noted, has probably increased since.
Even in 2010, Canada was ahead of Norway, the Netherlands, Britain, Germany, Sweden, France, Ireland and Spain.
"Because the total bounty produced by the American economy has not been growing substantially faster here in recent decades than in Canada or Western Europe, most American workers are left receiving meager raises," the report says.
"Finally, governments in Canada and Western Europe take more aggressive steps to raise the take-home pay of low- and middle-income households by redistributing income."
Douglas Porter of BMO Nesbitt Burns noted that commodity prices, and the Canadian dollar, were strong in 2010, and, of course, the country had an exceptional rebound from the global recession compared to most other countries.
"And, historically, of course," Canada's going to be up there, in any event," he said.
Median income in Canada has climbed by 19.7 per cent since 2000, according to the New York Times report, matching the pace in Britain, ahead of Ireland, the Netherlands, Spain and Germany, and far ahead of the meagre 0.3 per cent in the United States.
Wealthy Americans, of course, still come out on top.
According to BMO's Mr. Porter, the report offers some confirmation of what anecdotal and other evidence have suggested.
"I would attribute some of this divergence to the much deeper recession the U.S. suffered through, especially on the employment front," he said.
"U.S. private sector employment finally recouped its recession losses in March, something Canada had accomplished about three years ago. And, payrolls in both U.S. manufacturing and construction are still down about 2 million jobs each from pre-recession levels, both industries that represent relatively well-paying, middle class jobs. In a nutshell, I believe that some of this weakening in the U.S. middle represents the lingering hangover of the most savage U.S. recession in the post-war era."
On top of that, he added, America's emphasis on "low taxes and low social support" oft means stronger income gains in good economic times, and soft incomes in poor times.
According to Statistics Canada, median income in 2010 was just shy of $30,000 (Canadian), while median family income was $76,000.
That, of course, masks the vast differences across the country and across income groups.
Deputy chief economist Benjamin Tal of CIBC World Markets cited the widening income gap in the United States over the past 15 years, and, at a slower pace, in Canada, which he believes is a huge issue.
"It is not that we are doing great (we are not), it is that the U.S. is doing much worse," Mr. Tal said.
"In my opinion, the widening income gap in the U.S. is the number one economic problem facing the U.S."
Given that, many manufacturers are now targeting the middle class in emerging economies as that group in America is a "shadow of its former self," Mr. Tal added while warning about Canada, as well.
"I do believe that the growing income gap in Canada is an important and a significant problem with real macro economic implications," he said.
"The debate about employment quality and skill mismatch is part of this picture. The fact that we are doing better than the U.S. does not mean that we have to relax about this issue. The opposite is the case."
Average weekly earnings across the provinces rose last year to $910.74 from $894.71, lowest in Prince Edward Island at $753.58 and highest in Alberta at $1,108.01.
<_<
I knew this would be on Languish the moment I saw it.
What is wrong Grey Fox? Sorry to see your country doing well?
Quote from: crazy canuck on April 22, 2014, 12:20:12 PM
I suppose this thread is as good as any for a news report that Canada's middle class, measured by median income, is now the "richest". Our median income after taxes grew at 19.7% since 2000 while in the US the figure was only .3%.
Is that constant dollar?
If not, changes over a 10 year period or so are likely to badly skewed by exchange rates.
The most relevant comparison is PPP, but that involves lots of estimates and judgments to calculate. Nominal exchange rates are arguably the best because of that, but I'd be reluctant to compare growth rates between countries with nominal exhange rates because of the volitility.
Quote from: Savonarola on April 18, 2014, 07:29:52 AM
Quote from: Capetan Mihali on April 17, 2014, 11:29:32 PM
Quote from: Habbaku on April 17, 2014, 10:26:04 AM
Odds are you get paid more working at McDonald's with a law degree than you would taking that job.
McD's generally won't hire people with law degrees, whereas they will.
Yet another career path closed to Ide. :(
I've actually been thinking about seeing if I could get back into food service in a management training program.
Quote from: crazy canuck on April 22, 2014, 12:20:12 PM
I suppose this thread is as good as any for a news report that Canada's middle class, measured by median income, is now the "richest". Our median income after taxes grew at 19.7% since 2000 while in the US the figure was only .3%.
See, Jake? This is what I mean by superior culture.
Quote from: crazy canuck on April 22, 2014, 12:20:12 PM
I suppose this thread is as good as any for a news report that Canada's middle class, measured by median income, is now the "richest". Our median income after taxes grew at 19.7% since 2000 while in the US the figure was only .3%
And yet you guys still can't get true fixed rate mortgages. :rolleyes:
Quote from: alfred russel on April 22, 2014, 12:41:30 PM
Quote from: crazy canuck on April 22, 2014, 12:20:12 PM
I suppose this thread is as good as any for a news report that Canada's middle class, measured by median income, is now the "richest". Our median income after taxes grew at 19.7% since 2000 while in the US the figure was only .3%.
Is that constant dollar?
Yes, according to the report the analysis was done in US dollars.
Quote from: Ideologue on April 22, 2014, 12:45:21 PM
Quote from: crazy canuck on April 22, 2014, 12:20:12 PM
I suppose this thread is as good as any for a news report that Canada's middle class, measured by median income, is now the "richest". Our median income after taxes grew at 19.7% since 2000 while in the US the figure was only .3%.
See, Jake? This is what I mean by superior culture.
I think you have a shaky concept of what culture means and how the concept is used in the public discourses in various parts of the world, including your own.
Quote from: Jacob on April 22, 2014, 02:54:18 PM
Quote from: Ideologue on April 22, 2014, 12:45:21 PM
Quote from: crazy canuck on April 22, 2014, 12:20:12 PM
I suppose this thread is as good as any for a news report that Canada's middle class, measured by median income, is now the "richest". Our median income after taxes grew at 19.7% since 2000 while in the US the figure was only .3%.
See, Jake? This is what I mean by superior culture.
I think you have a shaky concept of what culture means and how the concept is used in the public discourses in various parts of the world, including your own.
Culture makes a pretty big difference in how redistributive policies are or are not enacted, and how inequality is or is not combated, and even whether people are or are not paid (or jobs are created). You think the reason that the U.S. has some of the lowest taxes in the OECD has nothing to do with its culture of wealth-worship, poor-blaming, individualism and anti-communism? If so, to what
do you attribute it?
Quote from: crazy canuck on April 22, 2014, 01:49:03 PM
Quote from: alfred russel on April 22, 2014, 12:41:30 PM
Quote from: crazy canuck on April 22, 2014, 12:20:12 PM
I suppose this thread is as good as any for a news report that Canada's middle class, measured by median income, is now the "richest". Our median income after taxes grew at 19.7% since 2000 while in the US the figure was only .3%.
Is that constant dollar?
Yes, according to the report the analysis was done in US dollars.
Yi's favourite magazine suggests it is mostly due to our enormous property bubble.
http://www.theatlantic.com/business/archive/2014/04/how-did-canadas-middle-class-get-so-rich/361053/
OK, maybe Canadian culture isn't better, it's just charmingly retro.
Quote from: Barrister on April 22, 2014, 03:22:23 PM
Quote from: crazy canuck on April 22, 2014, 01:49:03 PM
Quote from: alfred russel on April 22, 2014, 12:41:30 PM
Quote from: crazy canuck on April 22, 2014, 12:20:12 PM
I suppose this thread is as good as any for a news report that Canada's middle class, measured by median income, is now the "richest". Our median income after taxes grew at 19.7% since 2000 while in the US the figure was only .3%.
Is that constant dollar?
Yes, according to the report the analysis was done in US dollars.
Yi's favourite magazine suggests it is mostly due to our enormous property bubble.
http://www.theatlantic.com/business/archive/2014/04/how-did-canadas-middle-class-get-so-rich/361053/
Sigh. The housing bubble again. It's like the Cuisinart of financial explainations - it slices! it dices!
It does everything except
happen, so far.
I've been hearing about Canada's housing bubble practically my whole adult life ...
I look forward to the day I can buy your house in Toronto for pennies on the dollar. :menace:
Too cold.
Quote from: Malthus on April 22, 2014, 04:10:11 PM
Quote from: Barrister on April 22, 2014, 03:22:23 PM
Quote from: crazy canuck on April 22, 2014, 01:49:03 PM
Quote from: alfred russel on April 22, 2014, 12:41:30 PM
Quote from: crazy canuck on April 22, 2014, 12:20:12 PM
I suppose this thread is as good as any for a news report that Canada's middle class, measured by median income, is now the "richest". Our median income after taxes grew at 19.7% since 2000 while in the US the figure was only .3%.
Is that constant dollar?
Yes, according to the report the analysis was done in US dollars.
Yi's favourite magazine suggests it is mostly due to our enormous property bubble.
http://www.theatlantic.com/business/archive/2014/04/how-did-canadas-middle-class-get-so-rich/361053/
Sigh. The housing bubble again. It's like the Cuisinart of financial explainations - it slices! it dices!
It does everything except happen, so far.
I've been hearing about Canada's housing bubble practically my whole adult life ...
:huh:
It's only been a story for the last ten years or so, and moreso after the US property bubble burst in 2008.
Quote from: Malthus on April 22, 2014, 04:10:11 PM
I've been hearing about Canada's housing bubble practically my whole adult life ...
I predicted a housing market crash in the U.S. back in 2004. I was scorned. We'll see how yours goes.
Quote from: Ideologue on April 22, 2014, 04:17:02 PM
Quote from: Malthus on April 22, 2014, 04:10:11 PM
I've been hearing about Canada's housing bubble practically my whole adult life ...
I predicted a housing market crash in the U.S. back in 2004. I was scorned. We'll see how yours goes.
Everybody predicted it. Everybody was talking about it. Somehow people still were surprised when it happened and it nearly took down our entire financial system. Always good to know the captains of finance are around making millions to suck ass at their jobs.
Quote from: Malthus on April 22, 2014, 04:10:11 PM
Sigh. The housing bubble again. It's like the Cuisinart of financial explainations - it slices! it dices!
It does everything except happen, so far.
I've been hearing about Canada's housing bubble practically my whole adult life ...
The bubble happened, what hasn't happened is the bursting of the bubble. That happens occasionally, bubbles wouldn't happen if the timing of their bursting were entirely predictable.
Quote from: DGuller on April 22, 2014, 04:26:31 PM
The bubble happened, what hasn't happened is the bursting of the bubble. That happens occasionally, bubbles wouldn't happen if the timing of their bursting were entirely predictable.
Excuses excuses.
Quote from: Valmy on April 22, 2014, 04:19:11 PM
Everybody predicted it. Everybody was talking about it.
That's not true at all, unless you're talking about 2008, when it already happened. I recall a lot of arguments being made that there was a pent-up demand for real estate, or that real estate can never go down in price, or some other bullshit theories.
Quote from: crazy canuck on April 22, 2014, 01:49:03 PM
Yes, according to the report the analysis was done in US dollars.
That doesn't mean it was constant dollar. Constant dollar means you pick an exchange rate, usually the one at the beginning of the period, and leave it unchanged throughout the analysis.
If they didn't do that, the biggest driver of the change could well be the appreciation of the canadian dollar, which probably doesn't reflect so much in the way of day to day living standards.
Quote from: Valmy on April 22, 2014, 04:27:26 PM
Quote from: DGuller on April 22, 2014, 04:26:31 PM
The bubble happened, what hasn't happened is the bursting of the bubble. That happens occasionally, bubbles wouldn't happen if the timing of their bursting were entirely predictable.
Excuses excuses.
Yeah, I have no illusions that I would be able to convince Malthus. He's looking at himself in the mirror every night, enamored with the sight of a man who was wise enough to ignore the doom-sayers when he was buying his house.
Quote from: DGuller on April 22, 2014, 04:30:25 PM
Quote from: Valmy on April 22, 2014, 04:27:26 PM
Quote from: DGuller on April 22, 2014, 04:26:31 PM
The bubble happened, what hasn't happened is the bursting of the bubble. That happens occasionally, bubbles wouldn't happen if the timing of their bursting were entirely predictable.
Excuses excuses.
Yeah, I have no illusions that I would be able to convince Malthus. He's looking at himself in the mirror every night, enamored with the sight of a man who was wise enough to ignore the doom-sayers when he was buying his house.
Malthus probably was wise to buy his house when he did. It may well decrease in value over the next several years, but that doesn't mean he still didn't come out ahead of the game.
Anyone looking to buy their first house now though... :o
Quote from: Barrister on April 22, 2014, 04:32:16 PM
Malthus probably was wise to buy his house when he did. It may well decrease in value over the next several years, but that doesn't mean he still didn't come out ahead of the game.
Anyone looking to buy their first house now though... :o
I'm not saying that he made the wrong decision, in hindsight or at the time. Sometimes personal circumstances overpower the cost of the market risk. It's the just that the world is full of people who bet on black and won, and based on that accomplishment alone think they have something about the physics of roulette wheels figured out.
Malt: worst human ever
Quote from: DGuller on April 22, 2014, 04:28:47 PM
Quote from: Valmy on April 22, 2014, 04:19:11 PM
Everybody predicted it. Everybody was talking about it.
That's not true at all, unless you're talking about 2008, when it already happened. I recall a lot of arguments being made that there was a pent-up demand for real estate, or that real estate can never go down in price, or some other bullshit theories.
Ok anybody with a grasp for the obvious were predicting it. It was a big topic of conversation from 2004 onwards...probably even before then.
Quote from: Barrister on April 22, 2014, 04:16:55 PM
It's only been a story I have been aware of for the last ten years or so, and moreso after the US property bubble burst in 2008.
fyp
The housing bubble scare has been around for a very long time in Vancouver and iirc Toronto.
It is useful to make people who are not in the market feel smug about their inability to purchase dirt.
I bought a house in 2009. Am I: a real estate genius?
Quote from: crazy canuck on April 22, 2014, 05:08:01 PM
It is useful to make people who are not in the market feel smug about their inability to purchase dirt.
:lol:
Quote from: Valmy on April 22, 2014, 04:47:50 PM
Quote from: DGuller on April 22, 2014, 04:28:47 PM
Quote from: Valmy on April 22, 2014, 04:19:11 PM
Everybody predicted it. Everybody was talking about it.
That's not true at all, unless you're talking about 2008, when it already happened. I recall a lot of arguments being made that there was a pent-up demand for real estate, or that real estate can never go down in price, or some other bullshit theories.
Ok anybody with a grasp for the obvious were predicting it. It was a big topic of conversation from 2004 onwards...probably even before then.
Yeah, people might not have known when but most people(?) knew that prices rise and fall. :unsure:
Quote from: garbon on April 22, 2014, 05:13:40 PM
Yeah, people might not have known when but most people(?) knew that prices rise and fall. :unsure:
I think these recollections are a little colored, just like the recollections from all those people who were never misled before the Iraq War.
Even as late as 2005, when I started the big debate about the bubble on Languish, I was still in a minority. The majority either subscribed to one theory or another about how real estate is a special kind of asset that's not subject to price adjustments, or subscribed to the theory that real estate price correction can't really result in any catastrophic effects on the economy at large.
Quote from: DGuller on April 22, 2014, 05:22:23 PM
I think these recollections are a little colored. Even as late as 2005, when I started the big debate about the bubble on Languish, I was still in a minority. The majority either subscribed to one theory or another about how real estate is a special kind of asset that's not subject to price adjustments, or subscribed to the theory that real estate price correction can't really result in any catastrophic effects on the economy at large.
Maybe you just left a big impression on me.
From NYT:
(https://fbcdn-sphotos-g-a.akamaihd.net/hphotos-ak-frc1/t31.0-8/904744_10150402876949999_6191231278182336898_o.png)
Quote from: DGuller on April 22, 2014, 05:22:23 PM
Quote from: garbon on April 22, 2014, 05:13:40 PM
Yeah, people might not have known when but most people(?) knew that prices rise and fall. :unsure:
I think these recollections are a little colored, just like the recollections from all those people who were never misled before the Iraq War.
Even as late as 2005, when I started the big debate about the bubble on Languish, I was still in a minority. The majority either subscribed to one theory or another about how real estate is a special kind of asset that's not subject to price adjustments, or subscribed to the theory that real estate price correction can't really result in any catastrophic effects on the economy at large.
That was hardly the first time we've seen declines in housing prices, no?
Quote from: garbon on April 22, 2014, 05:26:49 PM
That was hardly the first time we've seen declines in housing prices, no?
I'm not re-arguing these points now. Obviously those points were idiotically wrong even back then, and couldn't stand up to scrutiny. You didn't need the hindsight to demolish them. However, bubble mentality doesn't persist because people get the rational arguments wrong: bubble mentality persists because people make emotional conclusions and rationalize them after the fact.
I'm a little surprised by the 1980 column in Syt's graph.
Quote from: DGuller on April 22, 2014, 05:29:12 PM
Quote from: garbon on April 22, 2014, 05:26:49 PM
That was hardly the first time we've seen declines in housing prices, no?
I'm not re-arguing these points now. Obviously those points were idiotically wrong even back then, and couldn't stand up to scrutiny. You didn't need the hindsight to demolish them. However, bubble mentality doesn't persist because people get the rational arguments wrong: bubble mentality persists because people make emotional conclusions and rationalize them after the fact.
Well perhaps said individuals are falling to some sort of thinking that it won't affect them.
At any rate, I don't remember anyone I know of who told me that housing prices could never decline dramatically and painfully. My aunt spent a good portion of my life in a house underwater...so wasn't a leap to see that happening on a widespread scale.
Quote from: Admiral Yi on April 22, 2014, 05:30:03 PM
I'm a little surprised by the 1980 column in Syt's graph.
What was Austria doing right in '88?
Quote from: Syt on April 22, 2014, 05:25:49 PM
From NYT:
Comparing after tax income is a bit flawed too. Other countries pay more taxes, and for that get more benefits.
Quote from: Admiral Yi on April 22, 2014, 05:30:03 PM
I'm a little surprised by the 1980 column in Syt's graph.
I'm not surprised at all. The income inequality really started taking off from right around that point, and high inflation is a pretty good equalizer.
Quote from: garbon on April 22, 2014, 05:32:24 PM
Quote from: Admiral Yi on April 22, 2014, 05:30:03 PM
I'm a little surprised by the 1980 column in Syt's graph.
What was Austria doing right in '88?
Are you better off than you were 8 years ago? Or has Reagan made you worse off than Austria?
See Dukakis could have won with that slogan.
Quote from: Admiral Yi on April 22, 2014, 05:48:43 PM
Quote from: DGuller on April 22, 2014, 05:34:04 PM
high inflation is a pretty good equalizer.
How so?
High inflation effectively acts as a tax on accumulated wealth.
Quote from: alfred russel on April 22, 2014, 05:54:11 PM
High inflation effectively acts as a tax on accumulated wealth.
The graph is measuring income, not wealth.
As an aside, not all forms of wealth get depreciated by inflation.
Quote from: Ed Anger on April 22, 2014, 04:47:29 PM
Malt: worst human ever
Other than the Canuckleheadedness and baby-eating, he's ok. :)
BTW, shouldn't Monaco and Luxembourg be showing up in that graph? :huh:
Quote from: Admiral Yi on April 22, 2014, 05:57:47 PM
Quote from: alfred russel on April 22, 2014, 05:54:11 PM
High inflation effectively acts as a tax on accumulated wealth.
The graph is measuring income, not wealth.
As an aside, not all forms of wealth get depreciated by inflation.
Inflation is bad for capital, even if some forms of capital are supposed to be "inflation sensitive".
Quote from: Peter Wiggin on April 22, 2014, 06:03:20 PM
BTW, shouldn't Monaco and Luxembourg be showing up in that graph? :huh:
It wouldn't surprise me if all those micro-state tax heavens were removed, as they're misleading much more than they're illuminating.
Syt's table is not a measure of distribution: it's a comparison of absolute income levels in different countries. I don't see how inflation in the 70's explains the US 10th percentile having a higher income than anyone else's 10th percentile in 1980.
Quote from: Admiral Yi on April 22, 2014, 06:12:19 PM
Syt's table is not a measure of distribution: it's a comparison of absolute income levels in different countries. I don't see how inflation in the 70's explains the US 10th percentile having a higher income than anyone else's 10th percentile in 1980.
It's a chain of reasoning. Here are the facts that when put together make Syt's graph reasonable:
1) US has for a long time enjoyed the lead in per capita GDP, and IIRC, it was farther ahead decades ago than it is now.
2) US always had higher income inequality than European countries, though to a different degree depending on what year you look at. It's this higher inequality that would cause low-tier percentiles to give way to Europe, if it gets high enough to overpower the overall per capita lead.
3) However, in 1980, capital only started to anally penetrate labor, which explains the breadth of America's lead over Europe. There are multiple reasons why it didn't do so earlier, and inflation is one of them. Advantages to capital over labor manifest both in the wealth inequality and income inequality. It makes it both easier to maintain your wealth, and it makes the income of the top percentiles go up disproportionately (as top percentiles are much more dependent on income from capital).
That's fine and all, but my comment was about the relative prosperity of the American 10th percentile in 1980, not about the changes since then. I would have thought the 10th percentile in some workers' paradise would have been better off than our guys in 1980.
Also still don't see what inflation has to do with anything.
Quote from: Admiral Yi on April 22, 2014, 07:37:08 PM
Also still don't see what inflation has to do with anything.
As I said earlier, low inflation disproportionately favors people who derive their income from capital. Since those people are at the top of the income charts anyway, everything that disproportionately increases their income increases the income Gini index.
Quote from: Admiral Yi on April 22, 2014, 07:37:08 PM
That's fine and all, but my comment was about the relative prosperity of the American 10th percentile in 1980, not about the changes since then. I would have thought the 10th percentile in some workers' paradise would have been better off than our guys in 1980.
Also still don't see what inflation has to do with anything.
I think it just reflects how much ass American businesses kicked during the middle of the 20th century.
Quote from: Admiral Yi on April 22, 2014, 07:37:08 PM
Also still don't see what inflation has to do with anything.
To say what DGuller has been saying in other words, high inflation, especially over time, erodes real financial wealth. Thus you would expect high inflation over a period of time to reduce the real financial assets generating income.
You also get an increase in taxes. For example, suppose you have $100, but are earning only negligible interest in a no inflation environment. At the end of the year, you have $100, both in real and nominal terms.
But now suppose you earn 5% interest, but inflation is 10%. Keeping things simple, you now have $105 nominal dollars, and owe taxes on the $5 of interest. After tax, lets say you have $103 nominal dollars. But in real terms, you have more like $92.70.
Quote from: alfred russel on April 22, 2014, 09:00:31 PM
To say what DGuller has been saying in other words, high inflation, especially over time, erodes real financial wealth. Thus you would expect high inflation over a period of time to reduce the real financial assets generating income.
You also get an increase in taxes. For example, suppose you have $100, but are earning only negligible interest in a no inflation environment. At the end of the year, you have $100, both in real and nominal terms.
But now suppose you earn 5% interest, but inflation is 10%. Keeping things simple, you now have $105 nominal dollars, and owe taxes on the $5 of interest. After tax, lets say you have $103 nominal dollars. But in real terms, you have more like $92.70.
And how, once again, does this relate to the relative performance of America's 20th percentile compared to the ROTW's 20th percentile?
:frusty: You know, Yi, occasionally in life you need to follow a chain of reasoning with more than two links, and keep the whole chain in your working memory as you're going from a link to a link.
:frusty: :pope: :uffda: :osama:
The connection between inflation, to income distribution in the US, to changes in absolute income relative to the ROTW does not hold up. If a US 1 percenter gets poorer it will not affect a US 20th percentiler's position relative to a Norwegian 20th percentiler. Nor does a US 1 percenter getting richer affect that relationship.
Quote from: Admiral Yi on April 23, 2014, 12:37:05 PM
:frusty: :pope: :uffda: :osama:
The connection between inflation, to income distribution in the US, to changes in absolute income relative to the ROTW does not hold up. If a US 1 percenter gets poorer it will not affect a US 20th percentiler's position relative to a Norwegian 20th percentiler. Nor does a US 1 percenter getting richer affect that relationship.
Sure it does. If inflation is redistributive, and the US 1%ers are the top in the world, it makes sense that inflation would relatively benefit the general population in the US more than other countries.
Quote from: Admiral Yi on April 23, 2014, 12:37:05 PM
:frusty: :pope: :uffda: :osama:
The connection between inflation, to income distribution in the US, to changes in absolute income relative to the ROTW does not hold up. If a US 1 percenter gets poorer it will not affect a US 20th percentiler's position relative to a Norwegian 20th percentiler. Nor does a US 1 percenter getting richer affect that relationship.
You're assuming independence between the capital income and the labor income.
No wonder Zanza started another thread.
Quote from: Ideologue on April 22, 2014, 04:17:02 PM
Quote from: Malthus on April 22, 2014, 04:10:11 PM
I've been hearing about Canada's housing bubble practically my whole adult life ...
I predicted a housing market crash in the U.S. back in 2004. I was scorned. We'll see how yours goes.
People have been predicting a housing market crash in Toronto and Vancouver since
before 2004.
Now, I'm not saying it won't happen. Maybe it will. Prices rise and fall, and bubbles do burst. But I am tired of hearing the same doom-saying repeated year after year after year ... sure, when it eventually happens, evert Dguller out there will happily pat themselves on the back and congratulate himself on his foresight - it's like a doctor predicting you will die: he's never actually wrong. :lol:
Quote from: DGuller on April 22, 2014, 04:30:25 PM
Quote from: Valmy on April 22, 2014, 04:27:26 PM
Quote from: DGuller on April 22, 2014, 04:26:31 PM
The bubble happened, what hasn't happened is the bursting of the bubble. That happens occasionally, bubbles wouldn't happen if the timing of their bursting were entirely predictable.
Excuses excuses.
Yeah, I have no illusions that I would be able to convince Malthus. He's looking at himself in the mirror every night, enamored with the sight of a man who was wise enough to ignore the doom-sayers when he was buying his house.
You read me wrong. I judge the risk greater now than ever before. I think the condo market here is particularly threatening.
The difference between me and the doom-sayers, is that I wasn't busy predicting a likely bubble burst in the Toronto market the last decade or more. Another difference: I was proved right.
Quote from: Malthus on April 24, 2014, 08:35:52 AM
Now, I'm not saying it won't happen. Maybe it will. Prices rise and fall, and bubbles do burst. But I am tired of hearing the same doom-saying repeated year after year after year ... sure, when it eventually happens, evert Dguller out there will happily pat themselves on the back and congratulate himself on his foresight - it's like a doctor predicting you will die: he's never actually wrong. :lol:
Should I be saying something that I think is deeply misguided just to not tire you out any more? Unsustainable trends do sometimes sustain themselves for far longer than might be reasonably expected, before they don't, but I think we're still better off calling them what they are.
Quote from: DGuller on April 24, 2014, 08:42:29 AM
Quote from: Malthus on April 24, 2014, 08:35:52 AM
Now, I'm not saying it won't happen. Maybe it will. Prices rise and fall, and bubbles do burst. But I am tired of hearing the same doom-saying repeated year after year after year ... sure, when it eventually happens, evert Dguller out there will happily pat themselves on the back and congratulate himself on his foresight - it's like a doctor predicting you will die: he's never actually wrong. :lol:
Should I be saying something that I think is deeply misguided just to not tire you out any more? Unsustainable trends do sometimes sustain themselves for far longer than might be reasonably expected, before they don't, but I think we're still better off calling them what they are.
A trifle longer than expected - a mere ten, fifteen years or so. A bagatelle. :lol:
The problem with you, is that no amount of failure will ever convince you of the unsoundness of your predictive method. It is completely unfalsifiable. Given that a bubble bursting or sharb downturn in a market will, inevitably, happen eventually, it can never be "wrong" to predict it.
Problem is, no-one cares what will happen "eventually" in making actual decisions, they care what is going to happen
soon. Your advice is true only to the extent it is trivial - downturns will happen, eventually.
I myself would not advise buying a house right now in Toronto - I'm "Dguller" enough to be getting spooked of this market at this time.
Quote from: Malthus on April 24, 2014, 08:39:15 AM
The difference between me and the doom-sayers, is that I wasn't busy predicting a likely bubble burst in the Toronto market the last decade or more. Another difference: I was proved right.
Guessing the timing of the bubble pop doesn't really give you any "proved right" credentials. There are inherent uncertainties that are unpredictable, and you don't prove anything about your understanding by happening to be in synch with them.
Let's say we go into a casino and observe the guy playing roulette using a martingale system (you basically bet, and if you lose, you keep doubling down until you win, then go back to regular bets). I say that this isn't going to end well for him. You say "nah, he's been doing fine so far, he hasn't had any really long losing streaks yet".
Two hours later he's still at the table. I still say that this isn't going to end well for him. Now you start worrying as well, the guy just lost the last five rounds, but you do make a point that I have been predicting his doom for a long while, and the guy is still at the table. You haven't been predicting it until now, and were proven correct (the guy hasn't gone broke yet), so obviously you have deeper understanding of gambling systems.
Quote from: DGuller on April 24, 2014, 08:51:38 AM
Quote from: Malthus on April 24, 2014, 08:39:15 AM
The difference between me and the doom-sayers, is that I wasn't busy predicting a likely bubble burst in the Toronto market the last decade or more. Another difference: I was proved right.
Guessing the timing of the bubble pop doesn't really give you any "proved right" credentials. There are inherent uncertainties that are unpredictable, and you don't prove anything about your understanding by happening to be in synch with them.
Let's say we go into a casino and observe the guy playing roulette using a martingale system (you basically bet, and if you lose, you keep doubling down until you win, then go back to regular bets). I say that this isn't going to end well for him. You say "nah, he's been doing fine so far, he hasn't had any really long losing streaks yet".
Two hours later he's still at the table. I still say that this isn't going to end well for him. Now you start worrying as well, the guy just lost the last five rounds, but you do make a point that I have been predicting his doom for a long while, and the guy is still at the table. You haven't been predicting it until now, and were proven correct (the guy hasn't gone broke yet), so obviously you have deeper understanding of gambling systems.
Interesting and revealing comparison.
Seems that, for you, real estate is *always* a doomed proposition unless you are stupid-lucky, like doubling down at a casino. :hmm:
Another problem with the analogy - your prospective bettor is digging himself deeper in the hole with every throw - indeed, exponentially. How does that apply to real estate? Say if instead of a casino, the guy plunked his cash down on a house ten years ago. Every year since then, prices have risen by an absurd amount. The guy refuses to listen to you and holds on to his house. The "bubble bursts" and prices go down 40%. He would have been better off to sell right before the bubble it is true, and maybe over that ten-year period the averaged return on investment is less than if he put it into stocks (taking into account the downturn) - but it still is not the disaster your gambler faces, of losing all his money and being ruined.
The better analogy here is that of a doctor predicting that his patient will die. It is true but useless information, because of course everyone dies ... eventually.
The casino example was to highlight uncertainty (as that is the environment where it is most prominent with fewest confounding factors). In an environment where there is great uncertainty, and markets are definitely one such environment, you can be right and still wait for a long time before reality catches up to expectation in any individual case. It doesn't mean that in the long run you would be better off being wrong.
Quote from: DGuller on April 24, 2014, 10:54:13 AM
The casino example was to highlight uncertainty (as that is the environment where it is most prominent with fewest confounding factors). In an environment where there is great uncertainty, and markets are definitely one such environment, you can be right and still wait for a long time before reality catches up to expectation in any individual case. It doesn't mean that in the long run you would be better off being wrong.
Again, you are facing the problem that your position appears unfalsifiable. If you can allegedly be "right" and yet the actual evidence not demonstrate it, how can you ever come to the conclusion you were "wrong"? If you can't predict it because it is too uncertain, why is one plan "wrong" and the other "right"?
And if 15 or so years isn't the "long run", what on earth is? Are you planning on immortality? That's a decent slice of one's working life - the 32-47 years. Say someone was faced with a choice - buy a house now, when they are 32 and about to start a family, or wait "until the bubble bursts". They wait, and it fails to burst. They are now 47, and it bursts, so now they buy. How are they "better off" having been "right" all along in the "long run"? What was gained by following advice here?
When I was in business school, we were taught that 5 years is the threshold of long term.
Quote from: Malthus on April 24, 2014, 11:16:42 AM
Quote from: DGuller on April 24, 2014, 10:54:13 AM
The casino example was to highlight uncertainty (as that is the environment where it is most prominent with fewest confounding factors). In an environment where there is great uncertainty, and markets are definitely one such environment, you can be right and still wait for a long time before reality catches up to expectation in any individual case. It doesn't mean that in the long run you would be better off being wrong.
Again, you are facing the problem that your position appears unfalsifiable. If you can allegedly be "right" and yet the actual evidence not demonstrate it, how can you ever come to the conclusion you were "wrong"? If you can't predict it because it is too uncertain, why is one plan "wrong" and the other "right"?
And if 15 or so years isn't the "long run", what on earth is? Are you planning on immortality? That's a decent slice of one's working life - the 32-47 years. Say someone was faced with a choice - buy a house now, when they are 32 and about to start a family, or wait "until the bubble bursts". They wait, and it fails to burst. They are now 47, and it bursts, so now they buy. How are they "better off" having been "right" all along in the "long run"? What was gained by following advice here?
Long run is statistical expectation. It is true that statistical long run may be incompatible with human lifespan, especially in financial matters where getting or missing out on one big score can make all the difference.
If you have an offer to quadruple the money you bet by guessing the number that comes up after a die roll, in the long run that's a bad proposition, the odds are against you. But if your success in life is determined by the result of one such die roll, how can you ever on a personal level confirm which decision was right? You can't, it's not falsifiable nor confirmable on that level. Sometimes you just have to go with the best decision and hope luck doesn't completely overpower it.
Uncertainty is a bitch, and it can really mess with your intuitive learning algorithms. That's why I find it very interesting.
That said, DGuller and I had epic arguments before 2008 about the housing market and stock market. I took the side that it wasn't just a bubble. In hindsight, I'm not sure that it was so simple that I was wrong and he was right, but at least with the housing market I think most people would give him the edge. I bought in early 2008, when things first started to slide, convinced it was a buying opportunity, but now I'm hopelessly underwater.
My father bought a home in the early 1990s in South Florida. He had absurd appreciation. Then the market tanked. His home value is roughly what he paid for it 25 years ago. So not a disaster, but it real terms he has lost a lot of value (especially considering upkeep costs/renovations). The loss of value happened in 2008 and immediately afterwards. Had DGuller started harping on the Florida market being irrational in the late 90s, he might have had a point, but it wouldn't be evident for quite a while.
If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash. My net worth would also be significantly less.
Sometimes it pays not to listen to your accountant.
Quote from: crazy canuck on April 24, 2014, 11:30:05 AM
If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash. My net worth would also be significantly less.
Sometimes it pays not to listen to your accountant.
Um, the early 90s were the last noticeable housing slump. People back then might have told you not to buy, but only because they were saying real estate never goes up in value so it's a lousy investment.
Quote from: Barrister on April 24, 2014, 11:34:46 AM
Quote from: crazy canuck on April 24, 2014, 11:30:05 AM
If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash. My net worth would also be significantly less.
Sometimes it pays not to listen to your accountant.
Um, the early 90s were the last noticeable housing slump. People back then might have told you not to buy, but only because they were saying real estate never goes up in value so it's a lousy investment.
Um, we have had this discussion before BB. In the Vancouver market the slump didnt hit until about the mid 90s - a few years after I bought my first property. But it wasnt much of a slump at that. Within a very short period - I cant remember exactly - the market had rebounded and all those poor DGs who were waiting for it to actually crash were left out in the cold.
Quote from: crazy canuck on April 24, 2014, 11:38:46 AM
Quote from: Barrister on April 24, 2014, 11:34:46 AM
Quote from: crazy canuck on April 24, 2014, 11:30:05 AM
If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash. My net worth would also be significantly less.
Sometimes it pays not to listen to your accountant.
Um, the early 90s were the last noticeable housing slump. People back then might have told you not to buy, but only because they were saying real estate never goes up in value so it's a lousy investment.
Um, we have had this discussion before BB. In the Vancouver market the slump didnt hit until about the mid 90s - a few years after I bought my first property. But it wasnt much of a slump at that. Within a very short period - I cant remember exactly - the market had rebounded and all those poor DGs who were waiting for it to actually crash were left out in the cold.
Yeah, I got a buddy who's been telling me about the impending crash since about 1999 and has stayed out of the property market since then. The crash would have to be pretty significant for him to end up ahead now.
Quote from: alfred russel on April 24, 2014, 11:19:33 AM
When I was in business school, we were taught that 5 years is the threshold of long term.
If that's the case, we are passing two "long terms" since I actually started to seriously look into real estate (I started looking 10 years ago and bought 8 years ago), and three "long terms" since I heard that the Toronto/Vancouver housing market was in a bubble, better wait it out (late 90s).
Quote from: Jacob on April 24, 2014, 12:34:08 PM
Quote from: crazy canuck on April 24, 2014, 11:38:46 AM
Quote from: Barrister on April 24, 2014, 11:34:46 AM
Quote from: crazy canuck on April 24, 2014, 11:30:05 AM
If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash. My net worth would also be significantly less.
Sometimes it pays not to listen to your accountant.
Um, the early 90s were the last noticeable housing slump. People back then might have told you not to buy, but only because they were saying real estate never goes up in value so it's a lousy investment.
Um, we have had this discussion before BB. In the Vancouver market the slump didnt hit until about the mid 90s - a few years after I bought my first property. But it wasnt much of a slump at that. Within a very short period - I cant remember exactly - the market had rebounded and all those poor DGs who were waiting for it to actually crash were left out in the cold.
Yeah, I got a buddy who's been telling me about the impending crash since about 1999 and has stayed out of the property market since then. The crash would have to be pretty significant for him to end up ahead now.
If he'd been investing the extra money that would have gone towards his mortgage it wouldn't have to be very significant at all. WHile obviously 1999 is a bad year to start a comparison, if he'd been "dollar averaging" his investments over the last 15 years he'd have made a very handsome return.
Quote from: Barrister on April 24, 2014, 01:16:35 PM
If he'd been investing the extra money that would have gone towards his mortgage it wouldn't have to be very significant at all. WHile obviously 1999 is a bad year to start a comparison, if he'd been "dollar averaging" his investments over the last 15 years he'd have made a very handsome return.
Maybe he has been, I don't know.
But yeah, '98-'99 was funny like that. My office was full of guys trading stocks all the time online, passing hot tips back and forth, bragging about their smart bets, and reading stock websites like crazy. They all had some sort of system, and they were all convinced they were super smart and ahead of the curve. Then that stopped.
A few years later, it seemed like most of those guys got into poker. Again, reading the sites, talking big about how smart they were, having systems, reading books and websites, and being convinced they were super smart, making money, and were ahead of the curve. That has about petered out now too.
Quote from: Barrister on April 24, 2014, 01:16:35 PM
Quote from: Jacob on April 24, 2014, 12:34:08 PM
Quote from: crazy canuck on April 24, 2014, 11:38:46 AM
Quote from: Barrister on April 24, 2014, 11:34:46 AM
Quote from: crazy canuck on April 24, 2014, 11:30:05 AM
If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash. My net worth would also be significantly less.
Sometimes it pays not to listen to your accountant.
Um, the early 90s were the last noticeable housing slump. People back then might have told you not to buy, but only because they were saying real estate never goes up in value so it's a lousy investment.
Um, we have had this discussion before BB. In the Vancouver market the slump didnt hit until about the mid 90s - a few years after I bought my first property. But it wasnt much of a slump at that. Within a very short period - I cant remember exactly - the market had rebounded and all those poor DGs who were waiting for it to actually crash were left out in the cold.
Yeah, I got a buddy who's been telling me about the impending crash since about 1999 and has stayed out of the property market since then. The crash would have to be pretty significant for him to end up ahead now.
If he'd been investing the extra money that would have gone towards his mortgage it wouldn't have to be very significant at all. WHile obviously 1999 is a bad year to start a comparison, if he'd been "dollar averaging" his investments over the last 15 years he'd have made a very handsome return.
My understanding is that, historically over the past 50 years or so, stocks outperform real estate on average as an investment by a goodly margin.
The problem is that, purely as a practical matter, few actually have the financial discipline to invest in equities with the same sort of fanaticism that the banks have in insisting on being repaid ... in short, that for the average idiot, a mortgage acts as "forced savings".
Also, those worried about real estate bubbles really ought to be equally worried about stock market bubbles. At least if a real estate bubble pops, you still have a house to live in. If a stock market crashes, and you have invested every penny into it, you are fucked.
Quote from: Jacob on April 24, 2014, 01:23:08 PM
Quote from: Barrister on April 24, 2014, 01:16:35 PM
If he'd been investing the extra money that would have gone towards his mortgage it wouldn't have to be very significant at all. WHile obviously 1999 is a bad year to start a comparison, if he'd been "dollar averaging" his investments over the last 15 years he'd have made a very handsome return.
Maybe he has been, I don't know.
But yeah, '98-'99 was funny like that. My office was full of guys trading stocks all the time online, passing hot tips back and forth, bragging about their smart bets, and reading stock websites like crazy. They all had some sort of system, and they were all convinced they were super smart and ahead of the curve. Then that stopped.
A few years later, it seemed like most of those guys got into poker. Again, reading the sites, talking big about how smart they were, having systems, reading books and websites, and being convinced they were super smart, making money, and were ahead of the curve. That has about petered out now too.
I knew some guys who quit their day jobs, went into day-trading full time in the late 90s. I sorta lost track of them, as I knew them through work - I wonder how that worked out for them.
Better than investing in the higher education bubble. "Zero" is a lot better than "negative hundred thousand with no BK protection."
Quote from: Ideologue on April 24, 2014, 01:39:06 PM
Better than investing in the higher education bubble. "Zero" is a lot better than "negative hundred thousand with no BK protection."
I was going to make some jokes about this, but I was restrained by some vestigal stirrings of concience. ;) Yes, that does indeed suck, and in my opinion, we as a society are selling young people short, and we are going to pay a price for that.
Quote from: Malthus on April 24, 2014, 01:37:24 PM
My understanding is that, historically over the past 50 years or so, stocks outperform real estate on average as an investment by a goodly margin.
The problem is that, purely as a practical matter, few actually have the financial discipline to invest in equities with the same sort of fanaticism that the banks have in insisting on being repaid ... in short, that for the average idiot, a mortgage acts as "forced savings".
Also, those worried about real estate bubbles really ought to be equally worried about stock market bubbles. At least if a real estate bubble pops, you still have a house to live in. If a stock market crashes, and you have invested every penny into it, you are fucked.
On the one hand I'll admit - for me a mortgage (together with a pension plan) acts as "forced savings". I've never saved as much as I should be, but those forced savings have given me a pretty decent amount of equity over the last 10 years.
However, there's a pretty strong argument to be made that a housing bubble will be dramatically more devastating than a stock market bubble. The reason is simple - margin. Most people do not borrow the money they use to invest in the stock market, or if they do the margin is low.
When it comes to housing, however, a huge number of people have bought houses with very little money down, or if they did have a significant downpayment, they have obtained lines of credit leaving them with very little equity in their home. As a result even a fairly modest decrease in house prices will leave a lot of people underwater.
Quote from: Barrister on April 24, 2014, 01:59:06 PM
Quote from: Malthus on April 24, 2014, 01:37:24 PM
My understanding is that, historically over the past 50 years or so, stocks outperform real estate on average as an investment by a goodly margin.
The problem is that, purely as a practical matter, few actually have the financial discipline to invest in equities with the same sort of fanaticism that the banks have in insisting on being repaid ... in short, that for the average idiot, a mortgage acts as "forced savings".
Also, those worried about real estate bubbles really ought to be equally worried about stock market bubbles. At least if a real estate bubble pops, you still have a house to live in. If a stock market crashes, and you have invested every penny into it, you are fucked.
On the one hand I'll admit - for me a mortgage (together with a pension plan) acts as "forced savings". I've never saved as much as I should be, but those forced savings have given me a pretty decent amount of equity over the last 10 years.
However, there's a pretty strong argument to be made that a housing bubble will be dramatically more devastating than a stock market bubble. The reason is simple - margin. Most people do not borrow the money they use to invest in the stock market, or if they do the margin is low.
When it comes to housing, however, a huge number of people have bought houses with very little money down, or if they did have a significant downpayment, they have obtained lines of credit leaving them with very little equity in their home. As a result even a fairly modest decrease in house prices will leave a lot of people underwater.
Yes, allowing people to borrow too much with too little down is stupid, which is why I'm glad the Canadian gov't at least has put the kibosh on 40- and 30-year mortgages and such foolishness, and raised the maximum borrowing against house value to 80%, and forced a 20% down payment on million-dollar houses.
I have never really understood how being "underwater" on real estate is so very harmful to individuals, other than psychologically. You owe more than the property is worth to be sure, but seems to me the risk is to the lender. The real concern, I would have thought, is interest rates going up so you can't pay.
Quote from: Malthus on April 24, 2014, 02:13:38 PM
Yes, allowing people to borrow too much with too little down is stupid, which is why I'm glad the Canadian gov't at least has put the kibosh on 40- and 30-year mortgages and such foolishness, and raised the maximum borrowing against house value to 80%, and forced a 20% down payment on million-dollar houses.
I have never really understood how being "underwater" on real estate is so very harmful to individuals, other than psychologically. You owe more than the property is worth to be sure, but seems to me the risk is to the lender. The real concern, I would have thought, is interest rates going up so you can't pay.
It is my understanding there are still numerous ways to buy a house with even less than 5% down.
There is significant risk to a homeowner to be "underwater". First is DGuller's favourite - the term mortgage. If you're underwater and the term is up the bank will refuse to renew your mortgage for the amount owing, and may well foreclose (and go after you for the remainder). Second is it locks you into your home against your will. Want to move across the country to pursue a better job? Want to downsize your house to cut down on expenses? Sorry, your house is unsellable because you're underwater on your mortgage.
Quote from: Barrister on April 24, 2014, 02:19:07 PM
Quote from: Malthus on April 24, 2014, 02:13:38 PM
Yes, allowing people to borrow too much with too little down is stupid, which is why I'm glad the Canadian gov't at least has put the kibosh on 40- and 30-year mortgages and such foolishness, and raised the maximum borrowing against house value to 80%, and forced a 20% down payment on million-dollar houses.
I have never really understood how being "underwater" on real estate is so very harmful to individuals, other than psychologically. You owe more than the property is worth to be sure, but seems to me the risk is to the lender. The real concern, I would have thought, is interest rates going up so you can't pay.
It is my understanding there are still numerous ways to buy a house with even less than 5% down.
There is significant risk to a homeowner to be "underwater". First is DGuller's favourite - the term mortgage. If you're underwater and the term is up the bank will refuse to renew your mortgage for the amount owing, and may well foreclose (and go after you for the remainder).
I don't understand the sense of this strategy.
:mad: Bank: you owe us $10 and your house is only worth $8. We want our $10 back now.
:( Homeowner: I haven't got your $10. Every cent I have, I put in this house worth $8. If you let me, I'll keep paying what I owe, until I've paid off my debt. :)
:mad: Bank: no, we need our $10 now. We are going to foreclose. We well sell your house in a depressed market, maybe only getting $7. Then, we will pay a heap of legal fees in a futile attempt to get you to pay the remaining $3. Likely this will simply force you into bankruptcy, and make the housing market crisis worse in the bargain thus further depressing the value of all our other security, but we don't care!
:hmm:
QuoteSecond is it locks you into your home against your will. Want to move across the country to pursue a better job? Want to downsize your house to cut down on expenses? Sorry, your house is unsellable because you're underwater on your mortgage.
This is true, but presumably not permanent.
Also, it's a really privileged thing to crybaby about--with the (big) caveat regarding still having the job you had to buy the house in the first place.
Quote from: Ideologue on April 24, 2014, 02:29:42 PM
Also, it's a really privileged thing to crybaby about--with the (big) caveat regarding still having the job you had to buy the house in the first place.
A couple of lawyers and an actuary arguing about the relative value of real estate versus equities is usually enough to set the masses to sharpening the guillotine in the first place ... :lol:
Quote from: Malthus on April 24, 2014, 02:28:11 PM
Quote from: Barrister on April 24, 2014, 02:19:07 PM
Quote from: Malthus on April 24, 2014, 02:13:38 PM
Yes, allowing people to borrow too much with too little down is stupid, which is why I'm glad the Canadian gov't at least has put the kibosh on 40- and 30-year mortgages and such foolishness, and raised the maximum borrowing against house value to 80%, and forced a 20% down payment on million-dollar houses.
I have never really understood how being "underwater" on real estate is so very harmful to individuals, other than psychologically. You owe more than the property is worth to be sure, but seems to me the risk is to the lender. The real concern, I would have thought, is interest rates going up so you can't pay.
It is my understanding there are still numerous ways to buy a house with even less than 5% down.
There is significant risk to a homeowner to be "underwater". First is DGuller's favourite - the term mortgage. If you're underwater and the term is up the bank will refuse to renew your mortgage for the amount owing, and may well foreclose (and go after you for the remainder).
I don't understand the sense of this strategy.
:mad: Bank: you owe us $10 and your house is only worth $8. We want our $10 back now.
:( Homeowner: I haven't got your $10. Every cent I have, I put in this house worth $8. If you let me, I'll keep paying what I owe, until I've paid off my debt. :)
:mad: Bank: no, we need our $10 now. We are going to foreclose. We well sell your house in a depressed market, maybe only getting $7. Then, we will pay a heap of legal fees in a futile attempt to get you to pay the remaining $3. Likely this will simply force you into bankruptcy, and make the housing market crisis worse in the bargain thus further depressing the value of all our other security, but we don't care!
:hmm:
QuoteSecond is it locks you into your home against your will. Want to move across the country to pursue a better job? Want to downsize your house to cut down on expenses? Sorry, your house is unsellable because you're underwater on your mortgage.
This is true, but presumably not permanent.
I would suggest that the bank is unable to issue you a new mortgage when the value of the mortgage is greater than the value of the home.
BB--I posted this idea before, but what of the concept that there wasn't ever a stock market, or even housing market, bubble?
The S&P 500 is an all time high. Someone dollar cost averaging since 2000 or the last 10 years has done very well. What we call a bubble when you step back looks more like volitility.
The housing market is a bit different. There seems to be a real loss in in parts of the country (my condo for instance). But still, there are parts of the country that have fared well. If you aren't talking about specific places--Atlanta condos, South Florida, Las Vegas, etc--the story isn't awful. Even in those places, there are usually bright spots.
Quote from: Malthus on April 24, 2014, 01:37:24 PM
The problem is that, purely as a practical matter, few actually have the financial discipline to invest in equities with the same sort of fanaticism that the banks have in insisting on being repaid ... in short, that for the average idiot, a mortgage acts as "forced savings".
Yeah, that most definitely applies to me.
EDIT: and most of the people I've known who were heavily into stocks had more of a gambling approach than a disciplined investor one, it appeared to me.
Quote from: Barrister on April 24, 2014, 02:40:12 PM
I would suggest that the bank is unable to issue you a new mortgage when the value of the mortgage is greater than the value of the home.
This isn't my area - but really? A bank is literally unable to make any sort of compromise, even if it was in its best interests?
Quote from: Malthus on April 24, 2014, 03:01:50 PM
Quote from: Barrister on April 24, 2014, 02:40:12 PM
I would suggest that the bank is unable to issue you a new mortgage when the value of the mortgage is greater than the value of the home.
This isn't my area - but really? A bank is literally unable to make any sort of compromise, even if it was in its best interests?
I expect there is a number of important risk-management policies in place, some of which may very well be grounded in various regulations and laws, that would make it non-trivial for a bank to enact such a compromise, especially on a case-by-case basis.
The bank may not own the mortgage. It may be securitized and sold to a bunch of faceless passive investors. In that case, the mortgage comes due, and the bank can't talk to ultimate holders of the mortgage note to negotiate, and the homeowner is underwater so can't get new financing, so the whole thing blows up.
Quote from: alfred russel on April 24, 2014, 02:49:21 PM
BB--I posted this idea before, but what of the concept that there wasn't ever a stock market, or even housing market, bubble?
The S&P 500 is an all time high. Someone dollar cost averaging since 2000 or the last 10 years has done very well. What we call a bubble when you step back looks more like volitility.
The housing market is a bit different. There seems to be a real loss in in parts of the country (my condo for instance). But still, there are parts of the country that have fared well. If you aren't talking about specific places--Atlanta condos, South Florida, Las Vegas, etc--the story isn't awful. Even in those places, there are usually bright spots.
There very obviously was a bubble in the late 90s. It wasn't so much a "stock market" bubble, as it was a tech and dotcom bubble.
The NASDAQ index has still not returned to its 1999 highs (though I see 15 years later it is getting close).
https://ca.finance.yahoo.com/echarts?s=%5EIXIC#symbol=%5EIXIC;range=my
Which perhaps ties into your point that there is variation in these things. Certain areas will do better than others, much as certain stocks will do better than others.
Quote from: Malthus on April 24, 2014, 01:38:42 PM
Quote from: Jacob on April 24, 2014, 01:23:08 PM
Quote from: Barrister on April 24, 2014, 01:16:35 PM
If he'd been investing the extra money that would have gone towards his mortgage it wouldn't have to be very significant at all. WHile obviously 1999 is a bad year to start a comparison, if he'd been "dollar averaging" his investments over the last 15 years he'd have made a very handsome return.
Maybe he has been, I don't know.
But yeah, '98-'99 was funny like that. My office was full of guys trading stocks all the time online, passing hot tips back and forth, bragging about their smart bets, and reading stock websites like crazy. They all had some sort of system, and they were all convinced they were super smart and ahead of the curve. Then that stopped.
A few years later, it seemed like most of those guys got into poker. Again, reading the sites, talking big about how smart they were, having systems, reading books and websites, and being convinced they were super smart, making money, and were ahead of the curve. That has about petered out now too.
I knew some guys who quit their day jobs, went into day-trading full time in the late 90s. I sorta lost track of them, as I knew them through work - I wonder how that worked out for them.
I got out of the market just about right time. The danger signal for me was hearing people on the bus trading stock tips.
I invested those gains in another property. :)
Quote from: crazy canuck on April 24, 2014, 11:30:05 AM
If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash. My net worth would also be significantly less.
Sometimes it pays not to listen to your accountant.
Um I am pretty sure DGuller was not saying nobody should ever buy property. I presume you were buying to live and pay off over decades and you were not house flipping or entering into tons of debt you could not afford so the bubble was not really an issue. You were not exposing yourself to be concerned about something like that. So I guess I do not see the big slam on DGuller here.
Quote from: Valmy on April 24, 2014, 03:57:02 PM
Quote from: crazy canuck on April 24, 2014, 11:30:05 AM
If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash. My net worth would also be significantly less.
Sometimes it pays not to listen to your accountant.
Um I am pretty sure DGuller was not saying nobody should ever buy property. I presume you were buying to live and pay off over decades and you were not house flipping or entering into tons of debt you could not afford so the bubble was not really an issue. You were not exposing yourself to be concerned about something like that. So I guess I do not see the big slam on DGuller here.
Exactly. Buying a house is a personal decision with personal circumstances. The expected appreciation/depreciation is just one of factors, which may or may not be important to you, or may or may not be a significant factor among all factors in your decision. What's important is to rationally evaluate that factor.
Our family moved out of the apartment we rented in 2005 because the landlord sold the house, and my parents were looking for a coop to buy. I knew there was a huge bubble waiting to pop, but their circumstances were such that they didn't really have much of a choice, and they were more insulated than most if property values took a dip. Therefore I didn't really object to their decision, because it was still the right one.
Quote from: Valmy on April 24, 2014, 03:57:02 PM
Quote from: crazy canuck on April 24, 2014, 11:30:05 AM
If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash. My net worth would also be significantly less.
Sometimes it pays not to listen to your accountant.
Um I am pretty sure DGuller was not saying nobody should ever buy property. I presume you were buying to live and pay off over decades and you were not house flipping or entering into tons of debt you could not afford so the bubble was not really an issue. You were not exposing yourself to be concerned about something like that. So I guess I do not see the big slam on DGuller here.
The issue, though, is that if you are one of those folks who just want a house to live in, whether you should buy or wait because of this "huge bubble waiting to pop". If you really thought a huge bubble was waiting to pop, then you would be better off waiting for it to do so, because your money would get you more house, or a house in a nicer area - nothing to do with flipping or anything, necessarily.
Of course, as CC points out, those who listened to the Dguller equivalents duly predicting a "bubble waiting to pop" in the 1990s in Vancouver and looking forward to buying a nicer house or one in a better area, would still be waiting. Ditto in Toronto. I had tons of people tell me I was a fool to buy when I did, and I assume CC had the same experience.
This is why continually predicting bubbles popping is sub-optimal, even though bubbles do exist and they do pop.
Quote from: Barrister on April 24, 2014, 03:21:31 PM
There very obviously was a bubble in the late 90s. It wasn't so much a "stock market" bubble, as it was a tech and dotcom bubble.
The NASDAQ index has still not returned to its 1999 highs (though I see 15 years later it is getting close).
https://ca.finance.yahoo.com/echarts?s=%5EIXIC#symbol=%5EIXIC;range=my
Which perhaps ties into your point that there is variation in these things. Certain areas will do better than others, much as certain stocks will do better than others.
The NASDAQ is a bizarre metric to track. It isn't really an index, it is a collection of companies on an exchange. Which tilted heavily toward tech stocks in the 1990s.
The late 1990s were an odd time. I'm not saying there was no tech bubble--there are some stories that make clear there was bubblish stuff going on. But the internet as a major business proposition was fairly new. A lot of people felt it was going to transform basically everything--and those people were right. How do you value the companies with the first mover advantage in that type of environment?
I interviewed a Canadian today. :yuk:
No, in all seriousness, he was actually pretty good.
Quote from: Malthus on April 24, 2014, 05:06:36 PM
Quote from: Valmy on April 24, 2014, 03:57:02 PM
Quote from: crazy canuck on April 24, 2014, 11:30:05 AM
If I had listened to DGuller back in the early 90s when I bought my first property I would still be renting and waiting for the crash. My net worth would also be significantly less.
Sometimes it pays not to listen to your accountant.
Um I am pretty sure DGuller was not saying nobody should ever buy property. I presume you were buying to live and pay off over decades and you were not house flipping or entering into tons of debt you could not afford so the bubble was not really an issue. You were not exposing yourself to be concerned about something like that. So I guess I do not see the big slam on DGuller here.
The issue, though, is that if you are one of those folks who just want a house to live in, whether you should buy or wait because of this "huge bubble waiting to pop". If you really thought a huge bubble was waiting to pop, then you would be better off waiting for it to do so, because your money would get you more house, or a house in a nicer area - nothing to do with flipping or anything, necessarily.
Of course, as CC points out, those who listened to the Dguller equivalents duly predicting a "bubble waiting to pop" in the 1990s in Vancouver and looking forward to buying a nicer house or one in a better area, would still be waiting. Ditto in Toronto. I had tons of people tell me I was a fool to buy when I did, and I assume CC had the same experience.
This is why continually predicting bubbles popping is sub-optimal, even though bubbles do exist and they do pop.
:yes:
Quote from: Caliga on April 24, 2014, 06:34:11 PM
I interviewed a Canadian today. :yuk:
No, in all seriousness, he was actually pretty good.
You have to keep in mind that he could have been earning more in Canada.
See how I got this back on topic. :)
Quote from: Malthus on April 24, 2014, 05:06:36 PM
The issue, though, is that if you are one of those folks who just want a house to live in, whether you should buy or wait because of this "huge bubble waiting to pop".
You should buy when it is reasonable to buy. You are going to have this house for a long time so a dip in the market, even a crash, is not really your concern. Buy the time the place gets sold off the market will have recovered enough that you will not be eating a huge loss....I guess unless you bought your place in Detroit in the 1970s or something.
The bubble is only a factor if you are going to be really sensitive and exposed to price fluctuations for some reason, like this is a short term investment.
Quote from: crazy canuck on April 25, 2014, 10:35:02 AM
You have to keep in mind that he could have been earning more in Canada.
See how I got this back on topic. :)
Not necessarily. Per the chart, the 60th percentile and up do better in the US. So if the guy is above average, he should be able to do better in the US.
Quote from: Valmy on April 25, 2014, 10:39:07 AM
The bubble is only a factor if you are going to be really sensitive and exposed to price fluctuations for some reason, like this is a short term investment.
One wonders why you were disagreeing earlier. :hmm:
Quote from: Valmy on April 25, 2014, 10:39:07 AM
You should buy when it is reasonable to buy. You are going to have this house for a long time so a dip in the market, even a crash, is not really your concern. Buy the time the place gets sold off the market will have recovered enough that you will not be eating a huge loss....I guess unless you bought your place in Detroit in the 1970s or something.
The bubble is only a factor if you are going to be really sensitive and exposed to price fluctuations for some reason, like this is a short term investment.
I agree with that. The factors that go into house buying are all, in my mind at least, about the suitability of the property for my needs - like, am I going to be living in the same place for a long time? What's the neighbourhood like? Close to schools for my kid, shopping, transportation? Is it "walkable" (very important to me)? Etc.
Fluctuations in the real estate maket don't matter to me very much, other than in three respects:
(1) if house prices go up continually, eventually my property taxes follow. Not good.
(2) if house prices crash, there is an opportunity for me to buy a bigger house (the decline in value of my property will be less than the total decline, on average, of a larger property, assuming the whole market is equally affected by the decline).
(3) When I'm old and withered, maybe I'll want to sell and buy a smaller retirement place somewhere, with a sweet young nurse to feed me my daily pap - like Ed. :D In that case, I want my house to be worth a lot of cash, so I can pay the sweet young thing with the difference.
Quote from: crazy canuck on April 25, 2014, 10:42:45 AM
Quote from: Valmy on April 25, 2014, 10:39:07 AM
The bubble is only a factor if you are going to be really sensitive and exposed to price fluctuations for some reason, like this is a short term investment.
One wonders why you were disagreeing earlier. :hmm:
I don't remember but I bet I had a good reason.
Quote from: alfred russel on April 22, 2014, 05:33:01 PM
Quote from: Syt on April 22, 2014, 05:25:49 PM
From NYT:
Comparing after tax income is a bit flawed too. Other countries pay more taxes, and for that get more benefits.
Not to mention the countries which pay more taxes and for that get less benefits.
Quote from: Malthus on April 24, 2014, 02:13:38 PM
Quote from: Barrister on April 24, 2014, 01:59:06 PM
Quote from: Malthus on April 24, 2014, 01:37:24 PM
My understanding is that, historically over the past 50 years or so, stocks outperform real estate on average as an investment by a goodly margin.
The problem is that, purely as a practical matter, few actually have the financial discipline to invest in equities with the same sort of fanaticism that the banks have in insisting on being repaid ... in short, that for the average idiot, a mortgage acts as "forced savings".
Also, those worried about real estate bubbles really ought to be equally worried about stock market bubbles. At least if a real estate bubble pops, you still have a house to live in. If a stock market crashes, and you have invested every penny into it, you are fucked.
On the one hand I'll admit - for me a mortgage (together with a pension plan) acts as "forced savings". I've never saved as much as I should be, but those forced savings have given me a pretty decent amount of equity over the last 10 years.
However, there's a pretty strong argument to be made that a housing bubble will be dramatically more devastating than a stock market bubble. The reason is simple - margin. Most people do not borrow the money they use to invest in the stock market, or if they do the margin is low.
When it comes to housing, however, a huge number of people have bought houses with very little money down, or if they did have a significant downpayment, they have obtained lines of credit leaving them with very little equity in their home. As a result even a fairly modest decrease in house prices will leave a lot of people underwater.
Yes, allowing people to borrow too much with too little down is stupid, which is why I'm glad the Canadian gov't at least has put the kibosh on 40- and 30-year mortgages and such foolishness, and raised the maximum borrowing against house value to 80%, and forced a 20% down payment on million-dollar houses.
I have never really understood how being "underwater" on real estate is so very harmful to individuals, other than psychologically. You owe more than the property is worth to be sure, but seems to me the risk is to the lender. The real concern, I would have thought, is interest rates going up so you can't pay.
Those rules are only good when the mortage is insured. It's still pretty much anything for non-insured mortgages.
Also, next time your wife thinks your poor, quote her your post.
30 years & 40 years mortgages were a god send. Flaherty was wrong to remove them.
Quote from: Grey Fox on April 25, 2014, 11:40:34 AM
Those rules are only good when the mortage is insured. It's still pretty much anything for non-insured mortgages.
The people who have the capital to obtain an uninsured mortgage also probably have ability to obtain mortgages that make good commercial sense.
Quote from: Grey Fox on April 25, 2014, 11:40:34 AM
Those rules are only good when the mortage is insured. It's still pretty much anything for non-insured mortgages.
I think it's the other way around. If you don't meet the criteria in the rules, you have to buy mortgage insurance.
QuoteAlso, next time your wife thinks your poor, quote her your post.
30 years & 40 years mortgages were a god send. Flaherty was wrong to remove them.
It was a "god send" for folks who could barely afford mortgage payments, yet who wanted to purchase real estate. However, these are exactly the same folks who, if interest rates go up a few percentage points, will no longer be able to afford mortgage payments at all.
Interest rates are, right now, at historic lows. No-one believes they will not go up eventually. This means that many of those people taking 30 or 40 year mortgages will almost certainly be screwed sooner or later (assuming they don't get any richer over the life of the mortgage). Lacking such mortgages means lots of those people have to rent until they get more money ... which is almost certainly a more financially prudent thing for them to do in the circumstances.
The effect on the economy of lots of poor folks suddenly being unable to afford their mortgage payments simultaneously - for example, if interest rates went up by a noticable percent, which is likely - would be very bad.
Then to solution is to regulate interest rates.
We need more owners. It's the only way to raise the quality of life of society.
Quote from: Grey Fox on April 25, 2014, 12:20:37 PM
We need more owners. It's the only way to raise the quality of life of society.
:unsure:
Renters are bad.
Quote from: Grey Fox on April 25, 2014, 12:29:21 PM
Renters are bad.
What about all those people who invested their money in rental properties? What of them? :cry:
Quote from: Grey Fox on April 25, 2014, 12:20:37 PM
Then to solution is to regulate interest rates.
We need more owners. It's the only way to raise the quality of life of society.
That's an odd point of view.
Quote from: Valmy on April 25, 2014, 12:29:52 PM
Quote from: Grey Fox on April 25, 2014, 12:29:21 PM
Renters are bad.
What about all those people who invested their money in rental properties? What of them? :cry:
Wolves preying on the weakest of society!
Grey Fox, I disagree with your idea like everyone else, but I get where you are coming from. :hug:
Quote from: alfred russel on April 25, 2014, 01:09:25 PM
Grey Fox, I disagree with your idea like everyone else, but I get where you are coming from. :hug:
But will you defend to the death his right to have it?
Quote from: Capetan Mihali on April 25, 2014, 01:10:56 PM
Quote from: alfred russel on April 25, 2014, 01:09:25 PM
Grey Fox, I disagree with your idea like everyone else, but I get where you are coming from. :hug:
But will you defend to the death his right to have it?
That depends. Whose death, exactly? :hmm:
Quote from: Capetan Mihali on April 25, 2014, 01:10:56 PM
But will you defend to the death his right to have it?
The right to hold the view that interest rates should be regulated with a mindset of increasing homeownership?
That is a sort of specific and narrow point of view to die over.
Quote from: Valmy on April 25, 2014, 10:39:07 AM
Buy the time the place gets sold off the market will have recovered enough that you will not be eating a huge loss....I guess unless you bought your place in Detroit in the 1970s or something.
Technically, that kind of thinking of is one of behavioral biases. When you buy high, you buy high. Whether timing the buy wrong results in a loss or just a lower gain, that doesn't really matter much. The amount you overpay is lost forever.
Not that I'm saying that there is anything you can do about the timing risk, I'm just pointing out that the reasoning above isn't really alleviating the concern.
Quote from: alfred russel on April 25, 2014, 01:24:47 PMThe right to hold the view that interest rates should be regulated with a mindset of increasing homeownership?
That is a sort of specific and narrow point of view to die over.
:( It's attitudes like these that have eroded free speech in our society.
Quote from: DGuller on April 25, 2014, 01:37:20 PM
When you buy high, you buy high.
Just look at FB.
Quote from: Capetan Mihali on April 25, 2014, 01:38:03 PM
:( It's attitudes like these that have eroded free speech in our society.
Grey Fox is a francophone canadien. Not only is he not in our society, I couldn't understand him if he was.