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Wednesday, March 28, 2012
Signs of recovery? 5% increase in personal income in 2011
WSJ: States Post Uneven Gains in Income
Tuesday, March 20, 2012
Another example of California holding the middle class hostage
"Another 20,000 to 25,000 qualified students could be barred from attending CSU in the 2013-14 academic year if voters reject a proposed tax [increase] measure that hasn't yet qualified for the November ballot."
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/03/19/BAPL1NN1KR.DTL#ixzz1pciyGrH1
"CSU officials said they don't yet know how much they'll save by canceling spring admissions but say it will be significant because the tuition each student pays is less than the cost to educate them. The exceptions are out-of-state students, who are not subsidized by the state and pay the full cost of their education...."
"The tax proposal most likely to qualify for the ballot is a combination of what had been called the Millionaires Tax, backed by labor unions and students, and a competing plan by Brown.
The collaboration would raise sales tax by a quarter cent, expiring after four years. Personal income tax would rise for people earning at least $250,000, depending on whether they are single or a couple. The more they earn, the more they would pay, up to a 3 percentage-point increase, all expiring after seven years."
Riiiight. Lawmakers rarely let tax increases expire. They get hooked on the extra dough. But exodus of mid-to-upper-middle class earners - the folks with the job skills and money to leave and big state tax bills that leave us scratching our heads every April, wondering where all that money went - has California's legislature jonesing for a cash fix. Warning to the folks who stay - when the rest of the middle class is gone, YOU will be "the rich" you keep voting to tax. Not because you're rich (and neither are most of the folks who get ensnared in these tax increases), but because you're there.
Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/03/19/BAPL1NN1KR.DTL#ixzz1pciyGrH1
"CSU officials said they don't yet know how much they'll save by canceling spring admissions but say it will be significant because the tuition each student pays is less than the cost to educate them. The exceptions are out-of-state students, who are not subsidized by the state and pay the full cost of their education...."
"The tax proposal most likely to qualify for the ballot is a combination of what had been called the Millionaires Tax, backed by labor unions and students, and a competing plan by Brown.
The collaboration would raise sales tax by a quarter cent, expiring after four years. Personal income tax would rise for people earning at least $250,000, depending on whether they are single or a couple. The more they earn, the more they would pay, up to a 3 percentage-point increase, all expiring after seven years."
Riiiight. Lawmakers rarely let tax increases expire. They get hooked on the extra dough. But exodus of mid-to-upper-middle class earners - the folks with the job skills and money to leave and big state tax bills that leave us scratching our heads every April, wondering where all that money went - has California's legislature jonesing for a cash fix. Warning to the folks who stay - when the rest of the middle class is gone, YOU will be "the rich" you keep voting to tax. Not because you're rich (and neither are most of the folks who get ensnared in these tax increases), but because you're there.
Monday, March 19, 2012
Food, not finance: blue cheese salad and onion skins
I previously posted a tidbit about nutritious veggie scraps, and I thought I'd share a sort of full-circle recipe I've been using. Living in storage while we wait for our home, we lack full kitchen provisions, especially space, our fussy kitchen tools, a real stove, and the cabinet full of spices that make our kitchen magic. Our "kitchen" is, essentially, a wet bar with a mini-stove. So we eat out far too much, and we discovered an easy, tasty salad at Macaroni Grill (but their takeout entrees haven't made us eager to head back anytime soon). We're not dinner-salad people, but this salad has enough going on to make a satisfying meal alongside plain chicken or a leftover protein course.
The salad is yummy, and also requires very little perishable food storage, perfect for temporary lodging.
Ingredients: lettuce, and 1 teaspoon to 1 tablespoon (to your taste) each: blue cheese dressing, blue cheese, bacon crumbles, walnuts, pickled red onion, and the fried onion things that Americans use on Thanksgiving green bean casseroles.
For lettuce, the restaurant uses Bibb, but we use baby butter leaf lettuce, because we can buy it bagged and washed (no salad spinner here). I prefer to thin the salad dressing with a bit of water. For the pickled red onion, we're sufficiently addicted to flavor that we broke down and bought raspberry vinegar, so we use that, but a mild wine vinegar would work as well, and plain white vinegar is acceptable, too. To make: throw lettuce in the bowl, top with a sprinkle of each ingredient, drizzle with salad dressing, crack a little black pepper over top and Enjoy.
Pickled red onion instructions: Cut red onion (as you like it - short, thin strips, or small-to-medium dice), put in a non-acid-reactive container, cover with vinegar, refrigerate. Best to make it at least a day early. In a pinch, substitute finely diced fresh red onion for pickled, but do try the pickled! Pickling takes the "bite" out of the red onion.
Save the onion skins as they're rich in quercetin (boiling them creates a liquid that gives a mild onion-y flavor, and extra nutrients). I typically use one of two ways, both start by simmering the onion skins in enough water to cover them. Option 1: boil the liquid down to a rich reduction and add to another recipe like a fresh or canned cream of potato soup, giving a flavor more akin to potato leek soup. Option 2: Use onion water in place of water in a recipe.
The salad is yummy, and also requires very little perishable food storage, perfect for temporary lodging.
Ingredients: lettuce, and 1 teaspoon to 1 tablespoon (to your taste) each: blue cheese dressing, blue cheese, bacon crumbles, walnuts, pickled red onion, and the fried onion things that Americans use on Thanksgiving green bean casseroles.
For lettuce, the restaurant uses Bibb, but we use baby butter leaf lettuce, because we can buy it bagged and washed (no salad spinner here). I prefer to thin the salad dressing with a bit of water. For the pickled red onion, we're sufficiently addicted to flavor that we broke down and bought raspberry vinegar, so we use that, but a mild wine vinegar would work as well, and plain white vinegar is acceptable, too. To make: throw lettuce in the bowl, top with a sprinkle of each ingredient, drizzle with salad dressing, crack a little black pepper over top and Enjoy.
Pickled red onion instructions: Cut red onion (as you like it - short, thin strips, or small-to-medium dice), put in a non-acid-reactive container, cover with vinegar, refrigerate. Best to make it at least a day early. In a pinch, substitute finely diced fresh red onion for pickled, but do try the pickled! Pickling takes the "bite" out of the red onion.
Save the onion skins as they're rich in quercetin (boiling them creates a liquid that gives a mild onion-y flavor, and extra nutrients). I typically use one of two ways, both start by simmering the onion skins in enough water to cover them. Option 1: boil the liquid down to a rich reduction and add to another recipe like a fresh or canned cream of potato soup, giving a flavor more akin to potato leek soup. Option 2: Use onion water in place of water in a recipe.
Friday, March 16, 2012
What happens when the Boomers retire?
When I was a teenager, I read an article about investing for retirement. Then I read an article about how huge the Baby Boomer generation was, and how their retirement would create massive changes. And I thought, what happens to the stock market when all those Boomers withdraw their savings?
Now the first Boomers are retiring. Some are downsizing their homes. Some are selling their stocks. Some are selling their Lexuses (lexi?). As more Boomers retire and face the reality of retirement shortfalls, it will deeply impact everything from healthcare to rents, even divorce
Interesting article on WSJ. Bad News for Boomers "The problem in a nutshell: The ratio of retirees to active workers in the U.S. will balloon. As retirees sell stocks and then bonds to support themselves, there will be fewer younger investors to buy those securities, keeping a lid on prices. Meanwhile, strong demand from boomers and a limited supply of workers will boost the prices of goods and services the boomers need."
For us younger folk, we may need to tap dance a bit to keep our 401ks ahead of Boomer moves, but, ultimately, it may be better to shift to self-directed IRAs where we can invest in means of production rather than just trading stock certificates. As I house-hunt, I avoid "move-up" houses because I don't have a confident view of where future "move-up" buyers will come from. Boomers consolidating households with adult children, perhaps, but those adult children come burdened with high student loan debt while Grandma and Grandpa are burdened with low savings. Right now, I would rather own a duplex than a McMansion.
The inflation/deflation debate probably oversimplifies. Population growth, currency devaluation, and international trade will likely create inflation in basic necessities ($5/gallon milk) while creating deflation in low-end luxuries and, curiously, inflation in high-end luxuries as the burgeoning super-rich class competes for the gauchest status symbol. French Laundry is raising prices, and the haute couture fashion houses remain in business. But middle luxury is more dependent on an optimistic middle class. Baby Boomers with a ways to go before retirement feel pretty rich - a half-million-dollar portfolio feels pretty wealthy, until you learn about the 4% withdrawal rule and realize it's only $20,000 a year to live on, safely. But facing layoffs and realizing that employers discriminate based on age takes away a lot of optimism. Saving for your kids' college while paying off your own student debt is a downer, too.
The wildcard is inheritance. Americans are notoriously bad at teaching their kids about finances. If Boomers aren't teaching their kids about the sacrifice necessary to accumulate a nest egg, dropping a quarter mil in the kids' laps when you die is a great way to get the kids a new car, but not such a hot way to get them financially secure. I've talked before about the psychology of money. Money is just a bunch of numbers until you have a frame of reference for it. Saving gives us a frame of reference - i.e., I have $500 in the bank, it took me 6 months to save that much, therefore $500 is a lot and $5,000 is a whole lot. Without savings, our frames of reference are more arbitrary - our annual income, our credit limit, the median salary, a Trillion dollars in new debt. Those frames of reference are disconnected from consumption. A $50k salary is not $50k in spending money - it is $50k minus taxes, commute costs, work clothes, food, shelter, tuition, etc. If Grandma leaves me $10,000 and I think $5,000 is a whole lot, I can blow $4,000 and still have a whole lot. If Mom leaves me a quarter million and I have $50k in my 401k, I can blow $100k on a kitchen remodel and still have "a lot" left. I may be 55 and woefully underfunded for retirement, but I don't know it and I do know I hate my kitchen. So we may see pockets of luxury spending due to inheritance.
It's not all gloom and doom, though. Us smarty-pants might find better job opportunities as mandatory retirement ages, failing health, and voluntary retirements create a brain shortage in the workforce. Then again, we may find immigration growing to fill that gap. Now may be a great time to learn another language or three.
I think we're facing a new frontier in finance-ku, the art of economic self-defense. For us younger old folks, following the old rules may just stampede us off a cliff. But I'll tell you one thing - my house hunt includes a lot of independence provisions. Room for a garden (grocery-fu), space for an accessory residence or a floorplan that allows for duplexing (rent-fu), proximity to transit/services (gas-fu), and, above all, affordability (savings-fu). I get why people are anti-home-buying right now, but, for me, the crystal ball is a little murkier.
Now the first Boomers are retiring. Some are downsizing their homes. Some are selling their stocks. Some are selling their Lexuses (lexi?). As more Boomers retire and face the reality of retirement shortfalls, it will deeply impact everything from healthcare to rents, even divorce
Interesting article on WSJ. Bad News for Boomers "The problem in a nutshell: The ratio of retirees to active workers in the U.S. will balloon. As retirees sell stocks and then bonds to support themselves, there will be fewer younger investors to buy those securities, keeping a lid on prices. Meanwhile, strong demand from boomers and a limited supply of workers will boost the prices of goods and services the boomers need."
For us younger folk, we may need to tap dance a bit to keep our 401ks ahead of Boomer moves, but, ultimately, it may be better to shift to self-directed IRAs where we can invest in means of production rather than just trading stock certificates. As I house-hunt, I avoid "move-up" houses because I don't have a confident view of where future "move-up" buyers will come from. Boomers consolidating households with adult children, perhaps, but those adult children come burdened with high student loan debt while Grandma and Grandpa are burdened with low savings. Right now, I would rather own a duplex than a McMansion.
The inflation/deflation debate probably oversimplifies. Population growth, currency devaluation, and international trade will likely create inflation in basic necessities ($5/gallon milk) while creating deflation in low-end luxuries and, curiously, inflation in high-end luxuries as the burgeoning super-rich class competes for the gauchest status symbol. French Laundry is raising prices, and the haute couture fashion houses remain in business. But middle luxury is more dependent on an optimistic middle class. Baby Boomers with a ways to go before retirement feel pretty rich - a half-million-dollar portfolio feels pretty wealthy, until you learn about the 4% withdrawal rule and realize it's only $20,000 a year to live on, safely. But facing layoffs and realizing that employers discriminate based on age takes away a lot of optimism. Saving for your kids' college while paying off your own student debt is a downer, too.
The wildcard is inheritance. Americans are notoriously bad at teaching their kids about finances. If Boomers aren't teaching their kids about the sacrifice necessary to accumulate a nest egg, dropping a quarter mil in the kids' laps when you die is a great way to get the kids a new car, but not such a hot way to get them financially secure. I've talked before about the psychology of money. Money is just a bunch of numbers until you have a frame of reference for it. Saving gives us a frame of reference - i.e., I have $500 in the bank, it took me 6 months to save that much, therefore $500 is a lot and $5,000 is a whole lot. Without savings, our frames of reference are more arbitrary - our annual income, our credit limit, the median salary, a Trillion dollars in new debt. Those frames of reference are disconnected from consumption. A $50k salary is not $50k in spending money - it is $50k minus taxes, commute costs, work clothes, food, shelter, tuition, etc. If Grandma leaves me $10,000 and I think $5,000 is a whole lot, I can blow $4,000 and still have a whole lot. If Mom leaves me a quarter million and I have $50k in my 401k, I can blow $100k on a kitchen remodel and still have "a lot" left. I may be 55 and woefully underfunded for retirement, but I don't know it and I do know I hate my kitchen. So we may see pockets of luxury spending due to inheritance.
It's not all gloom and doom, though. Us smarty-pants might find better job opportunities as mandatory retirement ages, failing health, and voluntary retirements create a brain shortage in the workforce. Then again, we may find immigration growing to fill that gap. Now may be a great time to learn another language or three.
I think we're facing a new frontier in finance-ku, the art of economic self-defense. For us younger old folks, following the old rules may just stampede us off a cliff. But I'll tell you one thing - my house hunt includes a lot of independence provisions. Room for a garden (grocery-fu), space for an accessory residence or a floorplan that allows for duplexing (rent-fu), proximity to transit/services (gas-fu), and, above all, affordability (savings-fu). I get why people are anti-home-buying right now, but, for me, the crystal ball is a little murkier.
House prices - the news ignores condition
The media likes to say that houses are at 2005 prices or 1998 prices (or whichever year applies to your locale). That is not exactly true. They're taking average selling prices, comparing them against previous average selling prices, and making claims. What they're neglecting to mention, though, is that home conditions are at their lowest level in history. A whole generation of homebuyers who knew nothing about homeownership are now short-selling the results of 5-7 years' deferred maintenance.
Relocation has driven me into the housing market. What I am finding are three tiers of sales and, essentially, two markets. Sales are, generally, one of the following: purchased during the bubble, priced at last purchase price + realtor commission/remodeling/profit; Terrible condition, priced low as short sale or REO; or Average to good condition, presented reasonably well, priced at early bubble prices (and sold within days).
There are basically two markets: distressed inventory, and decent-condition inventory. The distressed inventory in the Pacific Northwest is especially distressed - lack of maintenance in a rainy climate leads to rapid decay. A great number of houses here have mold and dry rot. I am seeing homes with compromised foundations - possibly caused by something as simple as not cleaning gutters, causing water to pool close to the foundation, undermining the soil stability under the foundation. Decent condition inventory, on the other hand, sells quickly, even generating bidding wars if priced competitively and presented well. Flippers are active in the local area. They are taking risks, as we're seeing some flipped homes languish on the market, but with the serious defects repaired (or masked), flippers are enjoying some success. I have no idea what their repair costs are, but we're seeing a general trend of flippers flipping properties for $100k above prior selling price.
There is a serious lack of good-condition inventory in the areas closest to employment growth here. The long, slow slog and relative gamble to close a short sale puts most decent-condition short sales in the distressed inventory camp. But price concessions on short sales are pretty wimpy, as distant banks seem to look at average sale prices (rather than condition) to judge the fairness of a short sale offer.
So, affordability hasn't really returned, it has just converted into an ala carte menu. You can have a house. Perhaps you'd like a waterproof roof with that? Maybe you like your windows not to leak? Perhaps you like appliances with your home? We have a special today on homes with 40 year old HVAC. Maybe you'd like something without a leaking oil tank in the yard? You can have all that, and more, for a price. It may be time to buy some Home Depot stock.
Relocation has driven me into the housing market. What I am finding are three tiers of sales and, essentially, two markets. Sales are, generally, one of the following: purchased during the bubble, priced at last purchase price + realtor commission/remodeling/profit; Terrible condition, priced low as short sale or REO; or Average to good condition, presented reasonably well, priced at early bubble prices (and sold within days).
There are basically two markets: distressed inventory, and decent-condition inventory. The distressed inventory in the Pacific Northwest is especially distressed - lack of maintenance in a rainy climate leads to rapid decay. A great number of houses here have mold and dry rot. I am seeing homes with compromised foundations - possibly caused by something as simple as not cleaning gutters, causing water to pool close to the foundation, undermining the soil stability under the foundation. Decent condition inventory, on the other hand, sells quickly, even generating bidding wars if priced competitively and presented well. Flippers are active in the local area. They are taking risks, as we're seeing some flipped homes languish on the market, but with the serious defects repaired (or masked), flippers are enjoying some success. I have no idea what their repair costs are, but we're seeing a general trend of flippers flipping properties for $100k above prior selling price.
There is a serious lack of good-condition inventory in the areas closest to employment growth here. The long, slow slog and relative gamble to close a short sale puts most decent-condition short sales in the distressed inventory camp. But price concessions on short sales are pretty wimpy, as distant banks seem to look at average sale prices (rather than condition) to judge the fairness of a short sale offer.
So, affordability hasn't really returned, it has just converted into an ala carte menu. You can have a house. Perhaps you'd like a waterproof roof with that? Maybe you like your windows not to leak? Perhaps you like appliances with your home? We have a special today on homes with 40 year old HVAC. Maybe you'd like something without a leaking oil tank in the yard? You can have all that, and more, for a price. It may be time to buy some Home Depot stock.
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