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Saturday, May 28, 2005

More Data On Housing Doom From NYT

In another housing bubble article by the NYT, we see comparisons in rental and housing values that make up the "rent ratio". In "Is Your House Overvalued?" we use a formula similar to a price-to-earnings ratio as one measures stock company values. Here you:

Take the price of a typical house in an area, divide it by the amount that house would cost to rent for a year and the result is what might be called a rent ratio, an imperfect but still telling measure of real estate.

Many of the major markets have a 20 to 1 or greater ratio. So while housing values may have increased by 20% per year over the past 5 years, the rentals have only increased moderately.

Yet, the NYT hedges their message of doom by stating:

And simply because home values have risen more than rents does not mean there is a bubble waiting to burst. For many reasons - the long-term decline in interest rates, the fall in mortgage costs as the Internet has increased competition and the extension of credit to low-income families - buying a home is easier for many families than it once was. It makes sense that house prices have risen in recent years, economists say.

The most interesting part of the article is to learn that doomsayer economist Dean Baker, recently mentioned in my earlier post WSJ Schizophrenia: Scaring and Reassuring, has sold his house for $440,000 after buying it for $165,000 8 years ago and is now renting (at an estimated cost of $2500 per month in the DC area). Says Baker:

"I felt stupid not doing it," said Mr. Baker, co-director of the Center for Economic and Policy Research, a liberal group. "To me, there's no doubt about the direction. The only question is timing."

Looks like we have a doomsayer (like the famous Paul Ehrlich bet with Julian Simon) putting his mouth where his money is. Many factors will have to be considered in measuring the reults. His rent costs will be $30,000 per year and lost real estate taxes and mortgage interest deductions. There is an immediate real estate gaent commission of say $25,000.

And worst of all, what if his landlord converts his building into condos and baker has to move? There are some psychic and assurance reasons for owning that cannot be quantified. Let's keep an eye on DC housing market for then next 5-10 years. I'll post something then.

Dem Candidate in NJ says "Me too, just not as much" on Tax Cuts

NJ Dem gubernatorial candidate John Corzine announced he will reduce property taxes by 10%. I guess when the state is killing its residents with taxes and the Republican candidates are vowing big tax cuts, you better do something similar. However, Corzine is not talking about the type of spending cuts that his opponents are vowing to pursue. Bret Schundler is vowing to try to pass a NJ Constitutional mandate on spending limts. For us non-elderly homeowners paying around $10,000 in property taxes, Mr. Corzine, thanks for the offer of an additional $69 rebate.

NYT Comes Up With An Interesting Crime Story

The NYT historically has not reported on street crimes. The NY Post and the Daily News have had free reign to report those juicy items. But today the NYT is in competition for its very life and they reported a doozy this morning.

On the NJ shoreline across from Staten Island a man accosted a woman jogger. He was wearing only a condom (I assume in the usual place). It turns out the woman jogger was an off-duty police-woman. She pepper-sprayed him. Then she called in on her cell phone. After he put on his gym shorts, he ran off and got to his car. He covered the license plate with his sweaty T-shirt and drove off. However, the woman got to the car just in time to pull off the shirt and read the license plate.

They did a DNA test on the shirt and a plate check on the car. He is a sales executive at Morgan Stanley. He never touched the woman but held his penis in a menacing manner. He is charged with attempted sexual assault. The LAPD has inquired about the guy. His poor parents live in Scottsdale, Az.

I rarely go jogging with a condom on. Now, why would the NYT avoid this kind of story for so many years? All they need is a full page color picture of the suspect and the Post and News are in trouble.

Friday, May 27, 2005

Schools Micromanaged-Literally

From Joanne Jacobs blog, I have to reproduce the post without comment. Let Joanne Tell it all:

Micromanaging textbook size

California schools couldn't buy textbooks longer than 200 pages under a bill that passed the Assembly yesterday.

Its sponsor, LA Democrat Jackie Goldberg, wants short textbooks with lists of web sites where students can get more information. Publishers warn schools will have to buy several books to cover the same material that's now in a single book.

Does this really have to be decided by state legislators?

Global Terror: Outsourcing Teaching!

A fascinating proposal by James D. Miller in TCS for outsourcing: Teaching.

Miller suggests there are so many qualified and under-employed people in India who could assist Americans with their study of science and mathematics by way of the internet that the cost would be quite low. Their qualification and their probable low salary requirements could reduce the student to teacher ratio down to 5:1.

Other areas that outsourcing could assist is in grading papers. His reason:

Because U.S. teachers find grading so mind-numbingly boring, outsourcing grading would make teaching a far more attractive profession, thereby allowing high schools to recruit better teachers without necessarily having to increase salaries.

These Indian teachers could also act as tutors or teaching assistants. Math tutors can be available from 5-10 each night. Spanish speaking teachers can tutor in Spanish. (Miller never mentions French teachers doing the same because it is unlikely an unemployed Frenchman can be prodded to do any work).

Miller even suggests that outsourcing teaching could enhance home schooling. Miller concludes:

Some of the best minds on the planet are trapped in poor countries, currently doomed to a miserable standard of living. But through educational outsourcing U.S. schools could directly tap these minds employing them to teach our children. Such outsourcing would not only lift many third world people out of poverty but also help the U.S. grow her 21st century knowledge economy.

Thursday, May 26, 2005

Tax Anyone Whose Picture Appears In "People"

P.J O'Rourke has come up with a brilliant revenue producer that all free market, Laffer-curve libertarian-Republican/Republican libertarian/Austrian economists can agree on. He suggests a celebrity tax or what can be called a "ValueSubtracted Tax". It would be a tax on all celebrities starting with Oprah. He suggests it start at a low end base rate of 100% and be made progressive to get Democrats on board.

Says P.J.:

A... problem with an excise on infamy is the possible economic effect. The media and entertainment industry is an important factor in America's GDP. Our best economists tell us that increasing the taxes on any enterprise decreases the enterprise's productivity. But in this case--and this case only--I'll argue against Milton Friedman.

The fallacy of accepted economic theory that taxes destroy the incentive to produce is that there can never be a scarcity of celebrities in America. The incentive to become one exceeds the destructive effect of the tax. Every cab driver, school teacher, insurance executive, Boca retiree, and everyone else not mentioned wants to be a celebrity. My dog has told me she'd like to be on Fear Factor (and she'd win any of those eating contests paws down). There is no downside to this proposal. If it does destroy the entertainment industry, who cares?

The Gore-y Truth

The liberal answer to conservative success in talk radio, the blogosphere and cable TV news, is Air America, Arianna Huffington's blog and now a TV network with Al Gore as its President. The liberals really are good at wasting money. But, at least it is Soros' money and not yours and mine.

Ned Rice in NRO provides a sharp review of this train-wreck. Says Rice:

(T)hese ham-fisted Democratic attempts to hijack the new media share a common flaw: the false premise that what’s held Democrats back the last few Election Days was their inability to “get their message out.” Attention Democrats: the American people have heard your message loud and clear, and the more they hear of it the less they like it.

Maybe the liberals really are being intentionally funny.

Vicente Fox Was Wrong?

Mexican president Vicente Fox was forced to “apologize” for his recent comment regarding Mexican immigrants (legal and illegal). Fox said, “There is no doubt that Mexicans, filled with dignity, willingness and ability to work are doing jobs that not even blacks want to do there in the United States.”

Lee Harris wrote an interesting essay in Tech Central Station discussing how Fox was stating a fact that held no racial insult. As a group moves up the hierarchy, Harris writes:

“there is what might be called a flight from hard labor, until the point is reached where a person automatically prefers even a low-paying white collar job to a higher paying blue collar one.”

The plantation labor conditions in America were brutal. Originally, Indians were sought to do the work but they either died or escaped. Africans blacks who were part of an existing Muslim slave trade were chosen as they next likely labor source. The hearty African who survived the trip from interior Africa to the coast, survived the trans-Atlantic crossing and survived the initiation to the brutal Southern heat of South Carolina and Georgia (and many died at each juncture) were superior workers.

Harris writes:

“Hence it was no wonder that they were able to succeed where the Indians failed, and no wonder that, even after the abolition of the slave trade and of slavery, African blacks continued to do the hard labor tasks that others would not touch. For example, at the end of the Civil War, plantation owners in the former Confederacy tried to get Europeans to work in the cotton fields; but, at best, the Germans or the Swedes hired for such jobs simply lacked the stamina to perform them, and would walk off after only a few days -- the heat, the backbreaking work, they were all too much for them. Indeed, the African blacks could and would do work that even the much despised Irish refused to touch.”

Thomas Sowell discusses the history of cultures in “Race and Culture” . When a people reach a certain level of wealth, they tend to pursue easier careers. For instance, the first few generations build up the family wealth so the young ones can get college educations. They then study the humanities and get government jobs while the country must then get immigrants to build the bridges and do the hard engineering work. Today in America, citizens of even the poorest level, white and black, will choose the softer modes of earning money because, relative to Mexican immigrants, they are wealthy and do not need to work in the brutal agriculture jobs. (Actually, America’s “poor” do as well materially as Europe’s middle class).

It is, therefore, no surprise that hard labor is refused by Americans. The option of remaining in Mexico with no job or sneaking into America at incredible peril for back-breaking but well-paid jobs is an easy choice. How the comment by Fox can be deemed an insult is difficult to fathom. But, today in America, merely mentioning an ethnic group or race by name warrants an apology. As such, I apologize for everything I have written in this post.

Wednesday, May 25, 2005

Dem "No" Votes Would Have Killed Their Future

The flaw in the filibuster compromise agreement on judicial appointments is that an actual vote would not have resulted in any of the nominees being denied judgeships. The Republicans should have forced the vote so all Senators would be on record where they stood on each nominee. In that circumstance, I doubt there are enough brave Senators willing to deny the nominees their positions.

It would have been interesting to see which Republicans were willing to vote "No" on any of the nominees. Highly unlikely. Equally interesting would be to see which Democrats, who have Presidential aspirations (and, other than Byrd, which one is not a Presidential aspirant?), would be willing to sell their future "postured centrist" image by voting "No". With a country currently at 34% Democrat and 34% Republican, the unaffiliated 32% is largely conservative-leaning. And growing. Others in this unaffiliated group (not a "middle") just want the judges chosen, period.

Therefore, the 60 votes were likely available to all nominees. McCain and Company have weakly succumbed to their friends requests on the other side of the aisle with this save face approach. maybe it is a power-play by the 14 compromisers to create their own super-committee. If there were a sure-fire way to increase the Republican majority in Congress, it would have been to force these stalwarts to announce their votes officially for posterity. Now, they can say we gave in on the big 3 judges for the sake of greater control of the whole process. That is a Democrat victory. The loss of more Congressional Democrats in the next elections would have been their price for obstinance.

Quoting Thomas Sowell today in "A Compromised Party":

Unity often beats disunity, even when the side that is unified is smaller.

Tuesday, May 24, 2005

Idiot or Psychopath? Not the latest Dean Reference to GW

Is it better be considered and idiot or a psychopath? Apparently, taking a page from the Democratic playbook, the leaders of the EU are claiming that a failure of the electorate to vote for the proposed EU Constitution is an endorsement of the second coming of the Holocaust. No, overstatement there.

Mark Steyn provides the quotes and commentary in the UK Telegraph. He say the elite's view is "Continent's peoples are basically a bunch of genocidal whackoes champing at the bit for a new bloodbath."

Their constant referral to the Holocaust may be "because that's the only genuine pan-European topic."

He then says, "the concentration-camps-around-the-corner argument is at least a useful glimpse into how the Eurocrats regard the citizenry. "

And again, much like our Democrats look upon citizens here as idiots who could not possibly handle their own money for retirement, we see similar views from our European friends of their own citizen.

RINOS Wimp Out

Bill Suda provides this link:

The deal to avoid the "nuclear option" is called a betrayal by RINOS to the GOP in an article by Carol Devine-Molin.

Ultimately, Republicans caved and 214 years of Senate tradition have been cast out the window. It appears that "judicial filibuster" is here to stay. In a deal struck with Senate Republicans, Democrats will be permitted to engage in filibuster of future judicial nominees under "extraordinary circumstances". Well what does that mean?.

Whatever it means, the Dems will rue this deal if they ever get back into power.

People Are Young When They Get Old Today

Men who retired in 1940 at the age of 65 could expect almost 12 years of retirement (women 13.4 years). Today, a man retiring at 65 can expect 16 years more retirement life (women 19). Bruce Bartlett analyzes the increased life expectancies for people worldwide since 1900 and suggests that extending retirement is not an unreasonable proposal. This is true especially when the "contributions" to social security cannot actuarially cover the costs of retirement.

Says Bartlett:

The nature of work and compensation has also changed so as to encourage earlier retirement than the nation can afford. As economist Eugene Steuerle pointed out in recent congressional testimony, in the 1940s the average worker didn’t begin drawing Social Security until age 68—three years above the normal retirement age. At that time, the option of early retirement at age 62 didn’t even exist.

Today, a majority of workers begin drawing Social Security benefits at age 62. If they waited as long as their parents, they would have to wait until age 74. Because people are drawing benefits earlier and living longer, Mr. Steuerle estimates that total Social Security and Medicare benefits for a typical two-earner couple have risen from $195,000 in 1960 to $710,000 today. He estimates that without reforms, this figure will rise to $1.1 million in 2030 (all in 2005 dollars).

Now that I am nearing 50 (still younger than Mick), 62 seems too young to quit working. People today are vibrant well into their 70's with improved working conditions and the wonders of our unfairly maligned pharmaceutical industry. However, I cannot understand why people believe this partially-paid vacation (early retirement) should be largely borne by their children and grandchildren. There should be private investment accounts so people can amass and own their savings with growth and can then decide to retire when they see fit. As Bartlett shows, the current system is financially, actuarially and demographically untenable.

Monday, May 23, 2005

It Is Sounding More Like 1936 In Europe These Days

In "The Rise of German Revisionism" by Manfred Gerstenfeld, we see more code words for Jews these days than ever before. Now they are couched in denunciation of globalization or businessmen by demagogues in Germany. Instances recited by Gerstenfeld are ;

*Franz Muentefering, chairman of the German Socialist party, compared certain foreign investors to damaging insects. The weekly Stern listed seven "locust firms"; several were recognizably Jewish by their names. When historian Michael Wolffsohn pointed out the similarity to Nazi language, he was severely attacked by several prominent Socialists.

*The program of the German Open tennis championships for women in 2005, sponsored by the Qatar Tennis Association, included an article about the organizers, LTTC Rot Weiss, which explained that the club had blossomed when it had expelled its Jewish members in 1936 and included a photo of Nazi leader Hermann Goering during a visit to the club.

*Polls indicate that the majority of Germans consider Israel's attitude toward the Palestinians as similar to that of the Nazis toward the Jews. A profound process is underway involving anti-Semitism disguised as anti-Israelism.

*Germany's democratic postwar governments have made great efforts to make the country again acceptable in the civilized world. There are increasingly signs, however, of shifts in German attitudes toward rewriting its past under the Hitler regime. These express themselves both directly and indirectly. Some concern the sanitizing of history by stating that many others behaved or are behaving as the Germans did.

Contributor Bert Arwas says the real anti-Jewish sentiment is couched in anti-Israel terms:

Rumsfeld has been prescient all along! It is my hope that the party of JFK (my youthful hero) will cease to be in denial; cease calling George W. stupid, a liar, etc., and sabotaging his policies at every opportunity, and start generating ideas and formulating alternative policies as befits a party in opposition in a democracy!"Old Europe", was, to a greater or lesser extent, an active participant in the Nazis' "Final Solution" of the Jews. To alleviate its guilt ridden conscious, what can be more tempting than for "Old Europe" to "show" that the Jews of Israel are themselves equally capable of perpetrating some of the most henious crimes against humanity.

"Old Europe", therefore, is too ready to give credence to the most outrageous accusations against Israel: remember the so-called massacre in Jenin? Up to relatively recently, it was convenient to ascribe the worst sins possible to Israel, rather than to the dreaded Jews. "Old Europe", these days, feels less constrained to cast those accusations directly at the Jews!

Concludes Gerstenfeld:

All of this indicates that there are profound processes underway in Germany that must be watched carefully, involving both anti-Americanism and anti-Semitism, this time disguised as anti-Israelism. What is most worrisome is that these attitudes seem to have made major inroads among the younger generation.

Another Goes to Dodge Ball Heaven

London pubs are ending Happy Hours due to over-drinking, per link supplied by Bill Suda. Those happy hours were the best part of the day for me when I was poor and in my 20's. I used to catch a buzz cheaply, grab a slice around 8:30 and would be home asleep by 9:30 P.M. I got plenty of sleep and developed my business skills on the cheap. So now, we've lost Happy Hours and Dodge Ball. What's next? Cap guns for kids?

Tillman's Death was Misreported

Pat Tillman's family is rightly upset with the Army regarding its misreporting of the circumstances in his death. He died from friendly fire in Afghanistan. Whatever the circumstances, friendly fire is not uncommon. The Army did not need to go there though I can see the mileage at that time of creating a hero. I see him no less of a hero for dying under friendly fire though that winds up normally due to mistakes in the field. Thanks, to Bill Suda for the link to the story.

WSJ Schizophrenia: Scaring and Reassuring

The free market conservative WSJ editorial page advises us that tax revenues to the federal government increased 13.6% over last year, dropping the estimated deficit for this year from $412 billion to $350 billion. How does this happen with significant tax cuts on individual income, dividends and capital gains? A growth economy where smaller tax rate percentages hit higher incomes. Sounds like supply-side economics at work. WSJ grants Robert Rubin a pass for his incorrect prediction of economic disaster.

Now, the politicians in Congress have spent higher amounts that are largley due to the costs of the War on Terror and the War on Medicine, oops Medicare. And, students, that produces a deficit. However, even that is back to normal levels of 17% of GDP.

Many congressmen refuse to make the tax cuts permanent. They seem to want to bypass economic growth, higher federal revenues for the sake of, of, of, what?

Meanwhile, the liberal WSJ front page has quit the class war rhetoric for a while to advise us that the housing bubble ia about to burst. Today's real estate market shows absolute recklessness akin to the 1920s speculation by investors that led to the stock market crash and the Depression. Not to be hysterical, but the article turns to Dean Baker of the CEPR who predicted a housing market, hell, an economic crash 2 years ago in his article "Bursting Bubbles- Why the economy will go from bad to worse". CEPR is the "non-partisan" DC Think Tank that regularly republishes Krugman. A scan of the CEPR website shows they are against CAFTA, social security privatization, and other free market initiatives.

This article spoke to no economist who felt the housing market was on a sure footing. The other people interviewed were people who lost money speculating on property, who leveraged their equity on additional investment purchases, and who are doing very "risky" things. Homeowner equity as a percentage of the market value of all homes declined to 56% at the end of 2004 from 57% at the end of 1999.

That 1% plunge is scary! In other words, owning 57% of a $500,000 home is better than owning 56% of an $800,000 home? Try again. By my math, the decrease in equity is, wait a second, it is not a decrease. It is an increase of $163,000 in equity.

Dean Baker concludes his paper, linked above, with the following:

The triple bubble economy of the late ’90s presents the most difficult set of economic problems since the Great Depression. The solutions are neither simple nor painless, but—just as was the case with the New Deal—big problems can open the door to big solutions.

"Big solutions"? Where do you think he is heading? I bet he has the solution and we'd better follow it.

Sunday, May 22, 2005

Leaving the City

With condescension in full view, "Is It Worth It?" looks at the seeming pitfalls facing NYC families who trade in an apartment in Manhattan for a home in the suburbs. They could wind up in towns or locations that make them feel too isolated or with poor school systems or other draw-backs. Teri Karush Rogers asks,"Will the suburbs be populated by like-minded transplants or insular unsophisticates?" Well, if you blow it on a $1 million investment, who is the unsophisticated one?

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