Sunday, August 27, 2006

The "Golden Era Of Profitability"

Here's why a wide majority of Americans give the Bush administration low marks for its handling of the economy:

With the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers.

...

The median hourly wage for American workers has declined 2 percent since 2003, after factoring in inflation. The drop has been especially notable, economists say, because productivity — the amount that an average worker produces in an hour and the basic wellspring of a nation’s living standards — has risen steadily over the same period.

As a result, wages and salaries now make up the lowest share of the nation’s gross domestic product since the government began recording the data in 1947, while corporate profits have climbed to their highest share since the 1960’s. UBS, the investment bank, recently described the current period as “the golden era of profitability.”

...

In the first quarter of 2006, wages and salaries represented 45 percent of gross domestic product, down from almost 50 percent in the first quarter of 2001 and a record 53.6 percent in the first quarter of 1970, according to the Commerce Department. Each percentage point now equals about $132 billion.

Total employee compensation — wages plus benefits — has fared a little better. Its share was briefly lower than its current level of 56.1 percent in the mid-1990’s and otherwise has not been so low since 1966.

...

For most of the last century, wages and productivity — the key measure of the economy’s efficiency — have risen together, increasing rapidly through the 1950’s and 60’s and far more slowly in the 1970’s and 80’s.

But in recent years, the productivity gains have continued while the pay increases have not kept up. Worker productivity rose 16.6 percent from 2000 to 2005, while total compensation for the median worker rose 7.2 percent, according to Labor Department statistics analyzed by the Economic Policy Institute, a liberal research group. Benefits accounted for most of the increase.

Fair or not, the president is often seen as the steward of the economy. He gets credit when all is well (ask Clinton), he gets the blame when all is not well (ask Hoover, Carter, and George H.W. Bush.)

For most workers in the country, all is not well with the economy. According to the Times article, even workers at the 90th percentile of earners ($80,000 a year) have failed to receive pay increases that have kept up with inflation the past three years. As for those above the 90th percentile, however, they seem to be doing just fine. And the top 1% of all earners are doing the best:

“There are two economies out there,” Mr. Cook, the political analyst, said. “One has been just white hot, going great guns. Those are the people who have benefited from globalization, technology, greater productivity and higher corporate earnings.

“And then there’s the working stiffs,’’ he added, “who just don’t feel like they’re getting ahead despite the fact that they’re working very hard. And there are a lot more people in that group than the other group.”

In 2004, the top 1 percent of earners — a group that includes many chief executives — received 11.2 percent of all wage income, up from 8.7 percent a decade earlier and less than 6 percent three decades ago, according to Emmanuel Saez and Thomas Piketty, economists who analyzed the tax data.

Herbert Hoover, Jimmy Carter and George H.W. Bush all suffered at the hands of an electorate pissed off about the economy. Republican pollster Frank Luntz argues in the article that people aren't THAT pissed off about the economy yet, and that may be true. Polls show that people are upset more by the war in Iraq than the economy. But Republican incumbents and challengers have to be worried that the economy, already pretty bad for the majority of Americans, seems to be slowing down just as the midterm election season gets into full swing. Couple that with the Iraq war issue and you can see why Stu Rothenberg and Thomas Mann are predicting a Democratic takeover of the House this November.

Comments:
I just got back from Florida, where people who need to work often need to work two or three jobs. Also, although I make over 50% more than I did when I bought my house 13 years ago, I couldn't afford to buy it on what I make now.

It's simply remarkable that working people can be snookered into voting for Bushes. Or continuing to watch Fox.

I'm constantly reminded of East Berlin. When I was there, they sold Pravda everywhere. Unlike here, though, no one bought it.
 
The New York Times wrote:

"With the economy beginning to slow, the current expansion has a chance to become the first sustained period of economic growth since World War II that fails to offer a prolonged increase in real wages for most workers."

The entire article is crap. However the last sentence makes an important point.

Let's take a quick look at the first sentence -- above.

Check the opening phrase -- "With the economy beginning to slow..."

What does that mean? A slowing economy is defined as one in which real wages are not increasing.

Meanwhile, if real wages are not rising, it's questionable if an economy is expanding.

So rewrite the first sentence using the definition of a slowing economy. It might read as follows:

As we enter an economy in which real wages are not rising, the no-longer expanding economy has a CHANCE to become the first sustained period of economic growth since WWII that fails to offer a prolonged increase in real wages for most workers.

The reporter's (Greenhouse) statement is pathetically vague and it is a tautology.

It boils down to "real wages might not be rising because the economy is failing to increase real wages."

I could deconstruct the entire article, but why bother?

Meanwhile, keep in mind that GM and Ford are in terrible shape because they have saddled themselves with high wage obligations while their unit sales are declining.

Chrysler already bit the bullet and sold itself to Daimler. Ford and GM may not have as easy a time of selling themselves to, say, Toyota, because Ford and GM have labor issues that an acquirer probably cannot solve.

Though bankruptcy isn't likely for either company, it will be avoided when unions agree to wage-and-benefit givebacks.
 
nyc educator wrote:

" Also, although I make over 50% more than I did when I bought my house 13 years ago, I couldn't afford to buy it on what I make now."

I see. And thus you claim rising home values are an economic flaw that should be eliminated.

Based on your disturbance over this benefit of a market economy, it seems you'd feel better if the value of your house had declined over the same period of ownership.

It is irrelevant that a long-term owner of a house would be unable to purchase it at today's market price.

Apparently you disapprove of the point of ownership -- that you bear the risk and therefore enjoy the reward. Meanwhile, if you sold your house you would realize a substantial gain which, when added to savings, would enable you to purchase a bigger house if you wished.

And if you moved to a less expensive area that isn't quite as close to NYC, your real estate gains plus savings would provide you an even more substantial house, if you wanted one.

nyc wrote:
"It's simply remarkable that working people can be snookered into voting for Bushes. Or continuing to watch Fox."

Yeah, I know. It's terrible. Those working-class Irish families who were once my neighbors in Brooklyn who bought their homes for $15,000 are now outraged when they sell them for $750,000 to those offensive buyers. Snookered. Yep, that describes it.

Yeah. I bought my current house from a widow for $500,000. She hates my guts for paying so much. She really wanted less.

I suppose you want government-run housing, like say, you might have seen in East Germany. Or maybe an apartment in any housing project you can name in Brooklyn.
 
I'm sure RBE can well take care of your comments, no_slappz, but I just want to say that a slowing economy is defined by a drop in the rate of growth of GDP (mostly).

Also, the point about housing is that a person who could afford to buy a house 13 years ago can no longer afford to buy the same house. Put simply, wages are not keeping up with housing costs.

RBE, I'm sure you have some more slaps for Mr. no_slappz.
 
This comment has been removed by a blog administrator.
 
My mother was sick for much of her adult life and could not work after she turned 25. She stayed at home and took care of my sister and me while my father worked as a Port Authority cop (and then a sergeant and finally a lieutenant.) My parents owned a house in the Rockaways which they paid off in 13 years. We took vacations every year (although vacationing w/ my parents was a little like a double circumcision - painful and unnecessary.) My parents were able to save money and build a nest egg (as Albert Brooks might say.) My mom passed in 1985, so she never got to enjoy the nest egg, but my point is that my parents successfully worked their way into the middle class, lived a comfortable life and did all this on ONE INCOME.

Put simply, I could not do the same today. I could never afford to purchase a house in the Rockaways and pay it off on one salary in 13 years. I couldn't afford to provide for a family of four on just one income the way my father did (even though my teacher's salary is comparable in today's dollars to what my dad's salary was in the late 60's through the 1980 when he retired from the police force.) The lifestyle my family lived in the late 60's to through the mid-80's when I finally left the house would NOT be possible in today's economy. Frankly, even two incomes might not be enough to provide for a family of four the way my father did.

So what has happened in the years between my dad's heyday and mine? Why are middle and working class people falling behind while the top 10% are surging financially ahead (and the superrich 1% are REALLY surging ahead)? What has changed that one income is no longer enough to provide for a family?

Whatever the reasons, you can see why some people who have fallen behind in this economy might be pissed off about it. Nobody likes to have to work longer and harder to make less money, but this is what is happening to many people these days. The party in power can talk about how good the economy is all they want and worry that they are not getting the message out about how good things are. The perception many people have is that their own finances are not as good as they should be or used to be and I think they are going to take that out on the party in power.
 
praguetwin, you wrote:

"...but I just want to say that a slowing economy is defined by a drop in the rate of growth of GDP (mostly)."

praguetwin, how is GDP defined? Based on your preceding comment, you don't know.

There are two standard definitions. The one most likely bouncing around your head is the Value of All Goods and Services.

The other way of expressing that same total is through the Total of All Wages, Interest and Profits.

In other words, if wages are stagnant, the economy -- as measured by GDP -- may be slowing.

It's always a good idea to become familiar with the definitions of words and acronyms that are in regular use.

GDP is a good example. Reporters writing for the business section of the NY Times know the definition. So do those at the Wall Street Journal and a few other similar media venues. But far too many reporters and others jabber on, misusing words and acronyms in public forums, thereby leading others to further the misuse.

praguetwin, you wrote:

"Also, the point about housing is that a person who could afford to buy a house 13 years ago can no longer afford to buy the same house. Put simply, wages are not keeping up with housing costs."

This is pure nonsense. There is no theory of economics that claims wages are not keeping up with housing costs because the wages of SOME people are no longer sufficient to buy SOME homes in SPECIFIC markets.

Homeownership is at record highs. Today, a greater percentage of Americans than ever before own homes.

That fact says it all.

If wages weren't keeping up, then home ownership would decline. It's not. It's increasing. Therefore, you are wrong.

Meanwhile, nyc's claim about not being able to afford to buy his own house today is false.

If he were to sell his house, he would have enough money to buy it back because he would have the profit from the sale in his pocket plus his income, which he said had grown 50% since he bought his house.

In fact, he could probably buy a better house.

It is not relevant the he's unable to finance the purchase based on making a minimum downpayment.

Moreover, you and nyc seem to have no concept of value.

His house gained value because prosperity in the region increased. This is considered extremely good by people with some understanding of economics.

Based on the nature of your comments, you would believe falling home prices are a sign of economic improvement.

You seem to think falling home prices would be evidence of increasing affordability, too.

Are you one of those thinkers who believes New York City is better off because some renters pay very little rent due to the Rent Stablization Program?
 
reality, you wrote:

"Put simply, I could not do the same today. I could never afford to purchase a house in the Rockaways and pay it off on one salary in 13 years."

I've been spending time in the Rockaways lately. Many years ago -- I don't when exactly -- NYC, the state and probably the federal government built low-income -- no income, actually -- housing in the Rockaways and thereby ruined any possibility for real estate values to rise. Under Rudy and Mike, that's changing.

Most of the Rockaways -- from Beach 116 down to Beach 1 -- was a dump. The lower numbered streets became nasty for years. Thank government bureaucrats for putting project housing on some of the finest waterfront property this side of the Hamptons.

Ten years ago property in much of the Rockaways was almost free. No more. Why? Free enterprise and common sense have taken hold. That means values rise.

You wrote:
"I couldn't afford to provide for a family of four on just one income the way my father did (even though my teacher's salary is comparable in today's dollars to what my dad's salary was in the late 60's through the 1980 when he retired from the police force.)"

The price of all things reflects the amount of money in the economy. You want a generational dividing line? It's this:

Men AND Women working at the same jobs and getting the same levels of pay. Female doctors, lawyers, business people, etc. Women are no longer relegated to secretarial, nursing and teaching or low-paid editorial work. They're right in there. With two married people working, the marital unit has far more disposable income these days. And the prices of goods and services rise to consume the income available for all expenditures.

You wrote:
"The lifestyle my family lived in the late 60's to through the mid-80's when I finally left the house would NOT be possible in today's economy."

Nonsense. The Rockaways are booming. This fact disproves your claim.

You wrote:
"Frankly, even two incomes might not be enough to provide for a family of four the way my father did."

Again. Not true. People working at Internet jobs are now earning good money doing things that didn't exist 25 years ago. There is no law that says everything must stay the same. Compensation rises and falls in every job category.

Some people once earned a living as elevator operators. They are almost all gone now. There are hundreds of job categories that no longer exist. What of it?

You wrote:

"So what has happened in the years between my dad's heyday and mine?"

A lot. The country is a richer place, and it is richer partly because most women are now in the workforce and, like men, they often earn a lot. The change is hardly for the worse.

When credit is available, interest rates are low and there are two workers in a household, prices tend to rise.

Meanwhile, if every student in the NYC public school system were to graduate from high school and then graduate from college, local prosperity would surge, pushing the prices of everything higher still.
 
You say that because Rockaway is booming this disproves my statement that "The lifestyle my family lived in the late 60's to through the mid-80's when I finally left the house would NOT be possible in today's economy."

How does the boom in Rockaway disprove this? I could not afford to buy the house my father purchased in 1965 in Belle Harbor on a cop's salary nor afford to provide the lifestyle my father provided for his family on one salary. This is simple fact. Many other americans are experiencing similar experiences which is why a recent poll (I think it was Pew but I'd have to go back and look for my post about it) say they expect their children to live less well than they have.

I'm glad you're enjoying the real estate boom and the Bush boom. Keep enjoying it. Not everybody is enjoying it as well as you and poll after poll shows that. It remains to be seen whether they take this out politically on the party in power, but given the right track/wrong track numbers and the political predictions of Charlie Cook, Stu Rothenberg and Thomas Mann, I don't think the current state of the economy is going to help Republicans much this November. And that was the main focus of my post.
 
reality, you wrote:

"You say that because Rockaway is booming this disproves my statement that...How does the boom in Rockaway disprove this?"

New York City was a very different place in 1965. The country was very different. In real terms, household income was much less. In those days, New York City was a renters paradise and there was not much push to actually own the real estate in which you lived.

For decades NYC rent vs own statistics were the opposite of the country. In the US, the majority of families owned the place they lived in. In NYC, the majority rented. That kept local prices LOW.

Residents felt less need to buy because ownership didn't seem to offer enough advantages in NYC, especially starting in the 1960s when White Flight began in earnest.

I have white friends who grew up in East New York. One Irish family of eight kids -- dad was a cop -- who are all friends of mine, grew up a couple of blocks from Yankee Stadium. They were simply driven out by the crime and their house was destroyed by vandals a matter of weeks after they moved. It had been bought by a lumber yard next door that wanted the space.

The population of NYC was about 8 million in 1950. It dropped to nearly 7 million in the 1970s when things were at their worst.

When people are fleeing cities, as whites did in huge numbers from many cities in the 1960s and 1970s, real estate prices slump. That worked to your father's benefit.

You wrote:
"I could not afford to buy the house my father purchased in 1965 in Belle Harbor on a cop's salary nor afford to provide the lifestyle my father provided for his family on one salary. This is simple fact."

You can't define or assess an economy based on only your experience.

You wrote:
"Many other americans are experiencing similar experiences which is why a recent poll (I think it was Pew but I'd have to go back and look for my post about it) say they expect their children to live less well than they have."

There are always people moving up and there are always people moving down. Home ownership is at an all-time high. That is a powerful statistic. And very positive.

You wrote:
"I'm glad you're enjoying the real estate boom and the Bush boom. Keep enjoying it. Not everybody is enjoying it as well as you and poll after poll shows that."

Look, I can easily point to problems in the economy. There are plenty of them. But the items of your focus are not the problem areas.

Moreover, many of these silly polls ask questions like "do you FEEL you are less well off than others?"

I see this repeatedly. By asking questions about how peopel FEEL, an unnecessary anxiety is produced. Most people underestimate how well off they are. They FEEL like they're not doing well when they are.

If, in fact, someone has taken a home equity loan and spent all the money on a silly expensive SUV and vacations, and has maxed out the credit cards, well, that person needs some financial counseling. But most of us haven't been so improvident.

You wrote:
"It remains to be seen whether they take this out politically on the party in power, but given the right track/wrong track numbers and the political predictions of Charlie Cook, Stu Rothenberg and Thomas Mann, I don't think the current state of the economy is going to help Republicans much this November."

That may be all true. That's how the political system works. But what are your favorite politicians going to do to changes things?

I think you engage in what's known as the Fallacy of Composition.

It goes like this. If you're in the stands at a football game and you stand up to look over the heads of those in front of you, you can see the field clearly. But if all the fans in front of you do the same thing, you're back where you started -- unable to get a clear view of the field.

The economy is like this. You might spot an opportunity and act on it, like your father did in 1965. But if the general population did the same thing at the same time, the opportunity would disappear.

We're talking about supply and demand here.

In his case, the general population began to seek the same opportunity of home ownership in the Rockaways in the past few years as evidenced by soaring prices.

It's not relevant that YOU can't afford a house out there. What's relevant is there's been a buying frenzy in recent years among those who CAN afford to buy there.

As always, the person with less money has to look elsewhere. Many NYC municipal workers have looked in the Poconos. There's still lots of affordable housing out there.

But hey, New York City is NEW YORK CITY and that means something to a lot of people. I was born here. I like it a lot and I've lived around the country.
 
ns, you wrote:

"Homeownership is at record highs. Today, a greater percentage of Americans than ever before own homes.

That fact says it all."

No, that only says half of it. Foreclosures are also up. Also, as you said in a later comment, most homes have two wage earners today, meaning it takes two full-time jobs to sustain a family these days, where it used to take one back a generation ago.

You can write as many 10-inch comments as you like, but it doesn't change the fact that wages have remained stagnant in the last few decades.
 
abi, you wrote:

"No, that only says half of it. Foreclosures are also up."

Really? Compared with when? Since this is an interesting point, I'd like you to provide credible evidence of your claim.

You wrote:
"Also, as you said in a later comment, most homes have two wage earners today, meaning it takes two full-time jobs to sustain a family these days, where it used to take one back a generation ago."

Not true. And by the way, I don't know of more than a handful of families from those glory days you're referencing where the wives stayed home and never held jobs.

My Irish friends from the Bronx -- family of eight kids, dad a NYC cop AND mom worked as an administrator for a local college which almost all eight kids attended.

My mother became a real estate agent as did many other moms.

Then there's the divorce issue. The divorce rate climbed for many years creating many new single-earner households. There are 3 million single adults in New York City. They have roofs over their heads. There are more single women living in homes they own than ever before.

You wrote:
"...it doesn't change the fact that wages have remained stagnant in the last few decades."

Decades? Where do you get your information? Check a reliable source.

Even if your statement were true -- which it isn't -- since home ownership is up, those stagnant wages would be sufficient to permit home purchases.

Builders don't build homes they don't expect to sell, and sellers of homes intend to sell them. If properties never changed hands, you'd have a point. But they do. In big numbers.

Maybe real estate sales will slow down for the next twelve months. Sales have been hot for a long time.

Some people have speculated in real estate, buying condos and co-ops intending to flip them within a year at higher prices. Maybe they'll take a little hit. Big deal.

But as long as mortgage rates remain low -- they are low now -- sales will occur. If sellers have to trim their prices to complete the sale, well, that's a free market for you.
 
On foreclosures:

http://www.washingtonpost.com/wp-dyn/content/article/2005/05/29/AR2005052900972.html

http://www.businessweek.com/the_thread/hotproperty/archives/2005/08/foreclosures_on.html

http://www2.townonline.com/stoughton/opinion/view.bg?articleid=367734

http://www.lakelandtimes.com/news.php?story=1324

http://www.boston.com/business/articles/2006/07/25/foreclosure_filings_in_mass_jump_66/

http://denver.bizjournals.com/denver/stories/2006/08/07/daily27.html

http://www.boston.com/news/local/massachusetts/articles/2006/01/15/home_foreclosures_on_the_rise/

http://www.npr.org/templates/story/story.php?storyId=5255718

http://realtytimes.com/rtcpages/20060216_foreclosures.htm

http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/08-08-2005/0004084233&EDATE=
 
anonymous helpfully provided some links to stories about people who defaulted on their mortgages.

You should learn to read what's really written.

Here's the most important statement made in the first article:

"They have low incomes and little or no health insurance -- 40 percent of those who sought emergency foreclosure help cited medical costs as the cause of their distress."

In other words, they should not have borrowed as much as they did.

Moreover, lenders, by giving money to these people, have demonstrated their willingness to drop credit standards way too low.

People without health insurance are not good credit risks as the reported showed.

Thus, if you're goal is to reduce foreclosures, insist that lenders stop giving money to people without health insurance.

But that scenario would lead to less credit going to black and hispanic home-buyers and that would lead newspaper reporters and race activists to claim that lenders were discriminating illegally against minority borrowers.

Meanwhile, virtually all the stories about people facing foreclosures involved people who got sick and couldn't pay their mortgages; got divorced and couldn't pay their mortgages; or lost their jobs and couldn't pay their mortgages.

Those people, rather than selling their homes -- even if it meant taking a loss -- chose the most irresponsible route of all and simply told their creditors to drop dead. Then they waited till they were thrown out. Sorry, that shouldn't arouse your sympathy.

In additon, some of those with mortgage problems were identified as having taken home equity loans which they used to purchase big SUVs and take expensive vacations.

That's too stupid for words. I have ZERO sympathy for people who have acted so foolishly.

None of the problems cited in the news articles were CAUSED by home ownership. The problems occurred because the owners either suffered some very bad luck or acted irresponsibly.
 
anonymous,

I took a quick look at a couple of the articles.

A couple of points jumped right out. First, many contain NO statistics other than the claim that Foreclosures are Rising.

Second, any article showing numbers of foreclosures compares 2005 with 2004. Big deal.

What can you learn from that?

The stock market goes up and down. But the long-term trend is up. After the 1987 Market Crash, fear of stocks was everywhere. But the Dow Jones Industrial Average closed 1987 ABOVE its close for 1986. And its quite a bit higher today.

There were many many foreclosures during the Savings & Loan Crisis of the late 1980s and early 1990s. Banks and S&Ls failed in many parts of the country. Huge numbers of homeowners defaulted.

Do you remember that? It's just an historical fact now. The same homes that owners abandoned in the 1980s now sell for many times their prices back then. Does it matter?
 
ns, I'll be glad to provide cites as soon as you substantiate your tomes.

In the meantime, spend a little less time spanking your keyboard and a little more time reading.
 
abi, you wrote:

"ns, I'll be glad to provide cites as soon as you substantiate your tomes."

I have no idea what the preceding means. Do you?

You wrote:
"In the meantime, spend a little less time spanking your keyboard and a little more time reading."

Reading what? Nonsense from biased reporters with a limited grasp of basic math?
 
NS,

I am rather familiar with the nomenclature, thank you.

What you describe is not two differnt figures but instead two ways of arriving at the same number, so take your pick. GDP is a fixed number, and today Q2 came in a bit softer than expected, but still, 2.9% isn't a bad number. Do you have a different number based on a different calculation? LOL!

My point was simply that by the broadest measure available, the economy is slowing. Would you like to counter that with some facts instead of a critique of the mass media, and a personal attack on my level of knowledge?

My second point about housing was not attached to any pejorative assesment of today's GOP leadership, but was simply a clarification of what NYC ed. was saying.

But while we are on the subject, yes, home ownership is at an all-time high, but the amount of equity that these "owners" have as a whole is at an all time low.

You made the case that wages must be supporting home-ownership, but I would argue that creative mortages and a williness to go deeper into debt is what is truly fueling it. That and speculation by anyone who can borrow enough to buy a home is what is driving the real estate market.

Interestingly enough, a slowing economy and reduced consumer spending (the latter the Fed is trying quite hard to bring about) will serve those with ARMs quite well, as the Fed will not need to tighten further. However, if inflation doesn't come under control, it is about to get ugly.

We are at the crossroads, as Dallas Fed Chairman Fisher said today, and inflation is still a danger. It is unlikely that the Fed will raise again, but if the CPI data is there, it could still happen.

Also, the average increase of the mortgage payment for those refinancing this year will be 25%. Again, not criticising anyone, just stating facts.

You might try that sometime.
 
praguetwin, you wrote:

"What you describe is not two differnt figures but instead two ways of arriving at the same number, so take your pick. GDP is a fixed number..."

I didn't describe two different figures. I gave you two approaches for calculating the same figure.

You wrote:
"We are at the crossroads, as Dallas Fed Chairman Fisher said today, and inflation is still a danger."

The economy is always at a crossroad and it isn't until after the corner has been turned that most people realize what's happened.

You wrote:
"It is unlikely that the Fed will raise again, but if the CPI data is there, it could still happen."

I see. The Fed won't raise rates again, unless it raises rates again. Since you seem to have a budding interest in Wall Street, you should keep in mind the following:

Anything could happen. Including oil at $35 a barrel by election day.
 
NS,

So what were you jabbering on about then?

Two simple points. The economy is slowing and it is more difficult for a working family to own a home.

You didn't take up my point about equity because you know it is true.

And on your last past, sure, anything could happen, including thermonuclear war and the end of the world, or the Rapture or the rising of the 12th Imam, but it is unlikely.

It is also UNLIKELY that the Fed will raise rates again, and it is extremely unlikely that we will see oil at $35 a barrel by election time or at any time in the near or distant future.

However if oil did lose half it's value by election time, I guess that would be a hellavan October surprise.

By the way, do you have any opinions of your own or do you just crap on everyone else's? Oh, just checked your blog, apparently it is the latter.
 
praguetwin, you wrote:

"Two simple points. The economy is slowing and it is more difficult for a working family to own a home."

The economy is slowing. That's not news. As for home ownership becoming more difficult for a "working family", well, that's hard to prove.

You noted:
"You didn't take up my point about equity because you know it is true."

That's not the reason. As usual, financial matters are more complex than your soundbite statements suggest.

Homeowners' equity is around $11 billion, which is about double the figure of five years ago. It's hard to argue that homeowners' equity is shrinking when it's increased as much as it has over the last several years.

However, if you section the data in a fashion that favors your conclusion, you can make it work for you.

Yes, about 10% of homeowners have very little equity in their homes. Meanwhile, homes in some areas of the country have not appreciated as fast as homes in other areas. Is this news?

Moreover, some people, including a few who live in high-appreciation areas, have spent their equity. Some may have financed some college educations. But others bought SUVs and took interesting vacations. Those with carefree spending habits deserve no sympathy.

Many people have tons of equity in their homes. But recent buyers don't. Is this news? Recent buyers are always in the hole for a couple of years after moving in. These items that have caught your attention are simply not news. But alarmist reporters have got you thinking otherwise.

In major markets, US real estate prices rose during the 1950s. Went flat for a few years in the late 50s into the 1960s, then climbed through the second half of the 1960s as the stock market rose. Went into free-fall in the 1970s while the stock market was sinking and bottomed around 1980-81 as mortgage rates hit 15%.

Boomed in the 1980s as mortgage rates -- interest rates -- dropped. Fell after the 1987 stock market crash. Stayed low into the early 1990s and began climbing around 1993. Climbed slowly and quickly since then and today the real estate market is cooling.

You wrote:
"And on your last past, sure, anything could happen, including thermonuclear war..."

That is possible.

You wrote:
"...and the end of the world..."

Nope. Not happening.

You wrote:
"...or the Rapture or the rising of the 12th Imam..."

Nope. This ain't happenin' either.

You wrote:
"It is also UNLIKELY that the Fed will raise rates again..."

Yes. Unlikely.

You wrote:
"...and it is extremely unlikely that we will see oil at $35 a barrel by election time..."

Yes. Unlikely.

You wrote:
"...or at any time in the near or distant future."

The "experts" held equally mistaken beliefs in the early 1980s when oil was rising due to issues relating to the middle east and increasing consumption. Oil peaked in 1983 at an adjusted price not much different from today's.

Then it headed down. Many companies in the oil industry were forced into bankruptcy or fire-sale mergers because falling oil prices left them unable to meet financing obligations.

Drilling companies were unable to cover the debts on rigs. In the early 1980s there were over 4,000 drilling rigs operating on land in the US. That number collapsed to about 500. Today it's probably 1,100.

Oil prices churned downward until bottoming in 1991-92 at $9 a barrel. A similarly dramatic decline is possible again because we have abundant untapped domestic supplies. Meanwhile, if Mexico were to develop a real oil industry, its production would substantially lessen OPECs potential for threat.

You wrote:
"However if oil did lose half it's value by election time, I guess that would be a hellavan October surprise."

Yes it would.

You asked:

"By the way, do you have any opinions of your own or do you just crap on everyone else's?"

Plenty. Meanwhile, it is not required that posters on message boards or blogs agree with the blogger or other posters.

You wrote:
"Oh, just checked your blog, apparently it is the latter."

What blog? I didn't know I had one.
 
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