View Full Version : how much was your home/apartment?
Katrine
12-03-2007, 07:45 PM
there never was any point to negative gearing (according to robert kiyosaki) why have an investment that cost you money?! haha
Kiyo-sucki is an idiot. Name me one piece of solid advice he gives on owning real estate that doesn't involve "not paying money for it" or "start a corporation"?
GoldCoastGirl
12-03-2007, 08:57 PM
there never was any point to negative gearing (according to robert kiyosaki) why have an investment that cost you money?! haha
im not really looking to buy a place as an investment, i just want some dogs!!! }:D
I'm paying $320 per week with a place that allows pets (tho' it does have restrictions) .. found it via www.seqrents.com.au ! Just search for "pet friendly" rentals :) this could be the way to go in the meantime ?
(Or find private landlords - there are definately rentals out there for you if you want to own a dog(s) believe me! I looked! They are there!)
As for negative gearing, well, when the tax rates were disastrous for those earning around or over $100K per year it was a way to get a legal tax break (to minimise their tax). Plus some people negative geared as they knew that the property had the potential to became neutral or else positive down the track.
Just that now, there definately is no reason to negative gear regardless of what "Rich Dad, Poor Dad" says.
I also agree with OdyssuesNJ and Mel. Sometimes with all the costs of "owning" a home it is still better off for you to rent and use your excess funds to invest (mutual funds, property, off-shore, etc) and then have the investments as a way to pay for your first home.
I know you know about all the hidden costs of owning a home however are you really truly prepared for them? Water rates, council rates, stamp duty, repairs, renovations, insurance and everything? I personally rather find a nice place to rent whilst I work on investing in property. Then use my property investments since they would all be CF+ (cashflow positive) to fund my actual home.
Plus you have to be smart about the type of loan you take out etc. esp. if you want to re-finance down the track.
I know you know all this however I think you are being duped by the "glamour" of having your own home.
GCG, I didn't say buy new homes. I said buy in those areas because not only are new homes being built, I've gotten plans for huge new malls, cinemas, everything. They all need to be energy rated. If you buy there right now, before it's all built, it'll be great when that new popular strip mall is built down the road then you can sell and run away weeeee
Thank you for clearing that up. You are correct esp. if the house/property is already established and has been since 1985. Believe me, there is good reason why I am saying to buy houses built before or around (NOT AFTER) 1985. Even if you have to renovate a little.
Dirty Ernie
12-03-2007, 09:47 PM
^^^ yes but also factor in the potential decline in property value if you borrow money today to buy a $400k house and the market value of that house falls to $300k in 2-3 years (while you still owe $350k+ in mortgage principal)
This is such a fallacious argument for not buying real estate. It's only relevant if you have to sell while the value is down. Since most of you are young, after the term of your mortgage (20 or 30 years) you will own that asset. Say at 50 you now own your house and for the next 20 years you live there for the cost of property taxes and upkeep. At 70 your house will be worth enough for you to downsize, or even rent, and use the difference for supplemental income, while the renter has had to pay rent for the last 40 years, has no asset to sell, and has to move in with her kids.
I do live in CA, which is an exaggerated market, but I have yet to see a dip fall farther than the bottom of the previous dip. Buy near the bottom and equity is not your piggybank. Owning your home outright and burning your mortgage note used to be a part of the American Dream.
mermaidnz
12-03-2007, 10:01 PM
I know you know all this however I think you are being duped by the "glamour" of having your own home.
lol i dont know where this came from. owening a home has nothign to do with glamour.
i was dogs, i want a cat, i want to be able to have some plants and an outdoor area, i want to be able to sunbath naked in privacy, i want to have space to take in asian students down the track, i want to be able to paint the walls what ever colour i want, and renovate my kitchen to my liking. i want to buy furniture, i want to be making my rent money work for me, not someone else,and i want to show something for 5 years of dancing.
i appreciate your input vee, i really do, but i find it hard to take what you say seriously regarding property ownership, you dont own yourself. it seems weird that you have all this knowledge, but havent done it yourself. im happy to take risks, but the sounds of it,owening a bit of something is better then owening all of nothing.
Wwanderer
12-03-2007, 10:09 PM
^^^ yes but also factor in the potential decline in property value if you borrow money today to buy a $400k house and the market value of that house falls to $300k in 2-3 years (while you still owe $350k+ in mortgage principal)
This is such a fallacious argument for not buying real estate. It's only relevant if you have to sell while the value is down.
I think Mel was not arguing against buying real estate in general but rather in favor of waiting a year or three until prices stop falling before doing so.
I'd say that you are both right in a way. The attached chart shows that there have been brief periods scattered over the last 35+ years when you would have been better off to wait a year or two before moving into the real estate market, and this **could** be one of them. In that sense, Mel is right. But the same chart shows that your point is also correct, in that it makes rather little difference in the long run if you end up holding onto the property for a decade or more (even less would do in most periods). In other words, the down ticks in that curve are so small compared to its overall upward movement that they shouldn't be a major consideration if you are going to stay in the house for a significant portion of your life.
But that brings us back to my original comment in this thread. Buying a house as a residence is at least as much about making a major and long term life-choice as it is about financial issues. "Freedom's just another word for nothin' left to lose." And, if your major asset in life is a house, you've got a lot to lose...and thus not much freedom.
-Ww
FrustratedBunny
12-04-2007, 01:05 AM
Then again these are asking prices - Your agent can tell you what theyre actually selling for which may be WAY different, especially if youre in an area like mine. Like once that house thats asking $257k sells for $245k those homes wanting around $350K are going to be getting offers for $100k under asking because that one house just dropped what all the others are worth.
Yeah, there is a difference between asking prices and what someone is actually willing to pay for it. There is a house down the street from me that is on the market for $550K. It's been on the market for over a year.
GoldCoastGirl
12-04-2007, 04:59 AM
This past year has been disastrous for me financially ok. It has set my plan back big time. I've only JUST started to re-gain my legs financially and be able to start saving again (as well as get re-started on my exit plan). Sheesh!
That's why I have all this knowledge because I was actually going to use it (my plan was to have the money saved up or a decent chunk of it by the end of this year) except life provided me with some major obstacles which were lessons in re property investment themselves.
(Not to mention the huge financial burden my beloved late cat, Bibs, cost me on top of the whole Monaco Street fiasco. Between the both of them I have "lost" alot of money yet both provided me with invaluable priceless life lessons. Not everything in life is about money.)
BTW, the "glamour" with owning a home is exactly what you posted about: the emotional/mental pay off in owning your home. Yes, you might be able to do most if not all of what you posted if you had your own home.. therefore you are dealing with the "glamour" of owning a home. Not the everyday "reality" of owning your own home.
As you said, it takes a lot of cash to be able to put a decent down deposit.
As for having something to show after 5 years of dancing: does your boobs and nose count? Being able to live where you live counts doesn't it? What about all your life experiences you probably wouldn't be able to have had due to not being able to afford to do so (or along similar) lines..??
If you are really concerned about having something to show after 5 years of dancing: why not look at other investment options and not just property?
I'm just saying. I know you probably already have done so. I'm not you, and I don't know if you have done so or not. :)
Melonie
12-04-2007, 05:01 AM
I do live in CA, which is an exaggerated market, but I have yet to see a dip fall farther than the bottom of the previous dip. Buy near the bottom and equity is not your piggybank. Owning your home outright and burning your mortgage note used to be a part of the American Dream
well, this is a mutually exclusive argument these days. Your 'American Dream' requires that a relationship exist between average worker paychecks, interest rates, and the price of houses that will allow the average worker to cover the cost of principal plus interest plus other normal living expenses. As the 'global' cost of labor drives US labor costs down, as food and energy prices continue to rise, as federal / state / local taxes continue to rise, this equation doesn't work anymore ... meaning that the 'American dream' is no longer a realistic possibility for American average workers in areas of bubble real estate prices.
The gov't realized this almost 10 years ago, and responded both by HUD forcing fannie mae and freddie mack to start accepting 'shaky' loans from low income first time homebuyers, and by forcing local banks to accept 'shaky' loans from low income first time homebuyers as a 'community service'. Arguably these gov't mandates quickly inflated real estate prices by lowering the bar as to what sort of income ration / credit rating constituted a 'qualified buyer'. The rising number of 'qualified buyers' (who were really no more qualified than before) and the ensuing rising real estate prices then gave birth to the bank's 'transfer of mortgage risk' mechanisms as a means of writing new mortgages on overpriced properties to more buyers who really couldn't afford those houses.
The homeowner bankruptcies occurring over the past year are the direct result of mortgages having been written to buyers that really couldn't afford their houses i.e. gov't policy to keep the 'American Dream' alive when for many average Americans that dream was actually dead in realistic financial terms. As these bankruptcies proliferate, the number of 'qualified buyers' will be greatly reduced ... and eventually so will the price of houses. So yes if you are thinking of buying property in an area that (still) has unrealistic real estate pricing, you do run the risk of taking a loss on the property value no matter how long you hold the property. For example, there is NO WAY that Detroit property values will ever rise back to bubble levels.
Where California in particular is concerned, that state has also taken action which defers the end of the American dream. It has capped the rate of property tax increase per year. It has also undertaxed re property taxes and income taxes relative to its spending levels, and has (so far) financed the deficit via the sale of huge amounts of new state muni bonds. While these measures help to postpone the inevitable, they will also make it more difficult to recover in the future.
In purely economic terms, the 'fair value' of suburban California housing SHOULD be 33% of the income level of a typical California married couple reflected onto a mortgage at a realistic interest rate. If this means a cop's pay plus a teacher's pay i.e. $100k a year gross, and a 6% interest rate, and hefty property tax levels commeasurate with actual local gov't budgets, then you're looking at a future California median home price that has to be somewhere in the mid $300k range not the $500k plus range in order to be sustainable.
buffie06
12-04-2007, 06:34 AM
I bought my home in dallas suburb, in Fall of 05'. 3260 square feet( and about an hour away from my work-stuuupid!) and brand new in the high 250s, it gained 20 thousand in equity during that time and in just the last few months has dropped to 10 thousand below what I paid for it. GCG and Mel make absolute sense when they suggest you wait. The taxes here are crazy high too and it's hard for me to justify paying uowards of 8,000 a year to the schools when I don't even have kids.
VenusGoddess
12-04-2007, 09:13 AM
As with every other investment, you want to buy low and sell high.
I would like to reiterate that when you purchase a home, you should be looking at long-term (like more than 5-10 years). In the past, people bought and sold homes like hot cakes because the market was there. However, not in this age.
That doesn't mean that you can not/should not buy a home. However, as with everything else, real estate goes through highs and lows. We're going through a low point, but a high point will swing back around. You just need to be able to afford your home until the high point comes back around.
And that's where a lot of people got into trouble. They financed a home they really couldn't afford thinking they would live there for a year or 2 and then sell and make a ton of money...to come the realization that the market will no longer sustain that and now they are stuck.
If you really want to buy a home, it should be a well-thought out plan and you need to keep watching the trends in your area. Knowing what is going on with the market will make you that much more of a savvy buyer than someone who just decides one day to purchase a home and not know anything about the area's trends.
Melonie
12-04-2007, 10:04 AM
We're going through a low point
Many would argue that we have indeed entered a downturn, but are still far from seeing a 'bottom' in real estate markets. They would also argue that any bailout plan for troubled homeowners will only postpone the arrival of that 'bottom' for the duration of the bailout.
but a high point will swing back around
The same people would argue that there is no guarantee that, once a 'bottom' actually arrives, that the supposed upswing in real estate prices that will follow will return real estate market prices to the levels they are at today. Any such assumption is a function of the future economic health (thus desireability of property) in a particular city, and also a function of todays real estate market prices versus the 'affordability' of those prices in terms of average incomes in the same area. For example, it is EXTREMELY doubtful that housing prices in Detroit will ever again approach the levels they were at a year or two ago. Similarly, there is some doubt as to whether housing prices in in California will ever again approach the levels they are still at right now. Of course I'm making this point as measured in 'constant dollars'.
it should be a well-thought out plan and you need to keep watching the trends in your area
total agreement here. I would only point out that any such trend analysis also needs to include the trends in taxation and spending levels by state and local gov'ts, the trends in job expansion versus job losses, the trends in population growth / shrinkage by economic level etc. All of these contribute to the future cost of property taxes / sales taxes / income taxes as well as to future employment rates and average worker pay rates, which in turn will contribute to the future demand for particular 'classes' of housing (or lack thereof).
Wwanderer
12-04-2007, 12:45 PM
Many would argue that we have indeed entered a downturn, but are still far from seeing a 'bottom' in real estate markets. They would also argue that any bailout plan for troubled homeowners will only postpone the arrival of that 'bottom' for the duration of the bailout.
The same people would argue that there is no guarantee that, once a 'bottom' actually arrives, that the supposed upswing in real estate prices that will follow will return real estate market prices to the levels they are at today.
True, but as far as I can tell "many more" would disagree with those "many".
But in any case, I am irresistably reminded of a well known (but probably exaggerated or entirely apocraphyl) story at Oxford University: The Fellows of one of its ancient colleges were discussing possible investments of a large fund left to the College in the estate of a wealthy alum. One Fellow rose to argue that it be used to buy land, pointing out that real estate had been a good investment for the College over the previous 1000 years. At this point, one of the elderly Fellows jumped to his feet to reply, "Yes, but the last 1000 years have been very unusual!"
Mel's "many" could be right of course. The future does not always follow past patterns, and if the plot I posted above just happens to be at (or just past) its all time historical maximum right now, then buying a home would be a bad move even if you hold it for a long period of time. However, if the present is just another one of the occasional and small down turns which have occurred from time to time over the past few decades (or centuries), then continuing to rent would be the big mistake. And, of course, you should keep in mind that many of that same "many" have called those previous little dips in the plot the end of real estate as a good investment.
Btw, the Oxford College story dates from the 1930s. The College bought land, against the advise of the elderly Fellow...and proceeded to lose money on the investment for a decade and then to make it back many many fold over in the decades that followed.
-Ww
AudreyLeigh
12-04-2007, 01:36 PM
I remember - 9 years ago my parents bought their house. 2000sq ft 3/2 on 2 acres. $179K. They sold it during the boom a couple years ago for just under $500K. That house is now in foreclosure.
Im still waiting for all these idiots to realize their houses are NOT WORTH WHAT THEY OWE. And for the houses to come back down to the prices they SHOULD be had the huge boom not have happened here.
It has made it IMPOSSIBLE for first time homebuyers. Im paying $1700 in rent for a townhouse. Had I bought at 19/20 y/o when I was making tons of money in the adult industry I could have bought a nice 3/2 in a nice little suburb for $120K and with all taxes, insurance, etc have a payment around my rent.
If only I could turn back the clocks....
Anyone know when theyre projecting California to hit the LOW i.e. good time to buy? I try to search on google but Mels buch better at finding this stuff... We know well live there at least 5 years so whether we buy in a year or 2 years we wont lose money when we sell I just see no point in buying in a year if in 2 years the house will be $50K less when our rents $20K a year. Wed be $30K ahead to rent...
Wwanderer
12-04-2007, 02:07 PM
Im paying $1700 in rent for a townhouse. Had I bought at 19/20 y/o when I was making tons of money in the adult industry I could have bought a nice 3/2 in a nice little suburb for $120K and with all taxes, insurance, etc have a payment around my rent.
If only I could turn back the clocks....
There may well have been other good reasons that you did not buy then (just not the right time in your life to own a home for whatever reason...), but in strictly financial terms your lament/regret is an excellent example of the risk of being too pessimistic about the economy. To the extent I understand her terms, this is the downside of the advice from the "tinfoil hat crowd" Mel talks about...or from the "many" she mentions above. You can screw yourself financially just as severely by being too risk averse as by being insufficiently cautious. If this were not so, investing would be trivially easy. Imo, such "opportunity costs" of very bearish investing philosophies are often severely underestimated in SW Dollar Den threads. In other words, there is a lot more emphasis on the dangers of losing what you have than on the dangers of failing to obtain what you could have.
-Ww
AlexxaHex
12-04-2007, 10:16 PM
I want to come hang with Melonie in her jacuzzi. We can wear our tin foil hats. :D
Melonie
12-05-2007, 11:21 AM
^^^ climb aboard LOL !!! Of course my personal Jacuzzi is very unusual ... it was paid for in cash instead of an equity extraction re-fi or a second mortgage or a HELOC !!!
Imo, such "opportunity costs" of very bearish investing philosophies are often severely underestimated in SW Dollar Den threads. In other words, there is a lot more emphasis on the dangers of losing what you have than on the dangers of failing to obtain what you could have.
I'm in complete agreement with this. However there is also the matter of attempting to quantify the risk versus reward relationship to avoid taking high risks in exchange for comparatively small rewards. IMHO housing in bubble areas carries a s#@tload of risk right now, and little potential for commeasurate rewards. With home ownership, a lot of the factors that will affect the risk / reward equation are actually political in nature ...
... and many of them are playing out as we speak i.e. Paulsen's federal interest rate freeze with accompanying gov't reapproval of 'red-lining' by lenders in exchange. Schwarzenegger's state interest rate freeze etc. There are also an equally deep s#@tload of politically based secondary factors that could severely affect the demand for 'middle class' housing in the future i.e. California's mandatory reduction in carbon emissions, California's rapidly rising income tax rate etc. potentially resulting in widespread loss of California 'middle class' jobs as businesses and highly burdened taxpayers make plans to exit stage right ! Until the dust settles on some of this stuff, there is just no way that I would consider putting one dollar into California real estate.
~
DylanAngel
12-05-2007, 06:59 PM
Anyone know when theyre projecting California to hit the LOW i.e. good time to buy? I try to search on google but Mels buch better at finding this stuff... We know well live there at least 5 years so whether we buy in a year or 2 years we wont lose money when we sell I just see no point in buying in a year if in 2 years the house will be $50K less when our rents $20K a year. Wed be $30K ahead to rent...
This is why we rent right now. We're making a ton of overtime money and our rent for a two bed, two bath in a beautiful suburb is less than $900. We figured out what we'd be spending on a mortgage and invest the extra money. We're making a nice return without all the costs.
xanfiles1
12-05-2007, 09:35 PM
^^^ climb aboard LOL !!! Of course my personal Jacuzzi is very unusual ... it was paid for in cash instead of an equity extraction re-fi or a second mortgage or a HELOC !!!
I'm in complete agreement with this. However there is also the matter of attempting to quantify the risk versus reward relationship to avoid taking high risks in exchange for comparatively small rewards. IMHO housing in bubble areas carries a s#@tload of risk right now, and little potential for commeasurate rewards. With home ownership, a lot of the factors that will affect the risk / reward equation are actually political in nature ...
... and many of them are playing out as we speak i.e. Paulsen's federal interest rate freeze with accompanying gov't reapproval of 'red-lining' by lenders in exchange. Schwarzenegger's state interest rate freeze etc. There are also an equally deep s#@tload of politically based secondary factors that could severely affect the demand for 'middle class' housing in the future i.e. California's mandatory reduction in carbon emissions, California's rapidly rising income tax rate etc. potentially resulting in widespread loss of California 'middle class' jobs as businesses and highly burdened taxpayers make plans to exit stage right ! Until the dust settles on some of this stuff, there is just no way that I would consider putting one dollar into California real estate.
~
Have you considered the implications of Google, Facebook et al hiring boatloads of people creating a peripheral industry and attracting out-of-state people causing the real estate prices go up?
Melonie
12-06-2007, 04:57 AM
^^^ the problem with this scenario is actually two problems. First, you're back to the after-tax earnings capacity of your average 'white collar' workers in a given area versus the average price of homes that already exists. It doesn't work for California to offer $125k for a professional job and try and attract an out-of-state professional now earning $100k. For starters, when you add California income tax and sales tax versus say Texas income tax (which is zero) and sales tax(which is lower) that $25k pay differential turns into $15k or less. Then if you compare real estate market values, an average house mortgage payment will cost MORE than an extra $15k per year than it did in Texas for the same house. Plus the California business deciding to offer the $125k pay rate still has to successfully compete with businesses in Texas or Vancouver of India for that matter which are paying much lower labor costs. And we won't even throw in higher California costs for workmen's comp and disability / unemployment / energy / business taxes etc. - all of which contribute to a conclusion that the California job offer is less stable than the Texas job the 'white collar' worker already has !\
Basically, any 'white collar' worker who decides to move to California for the SAME pay rate is either a surfer or woefully underinformed ! And where New York is concerned, we have all of the taxes and most of the housing bubble, but no surf or sunshine !
xanfiles1
12-06-2007, 06:01 AM
^^^ the problem with this scenario is actually two problems. First, you're back to the after-tax earnings capacity of your average 'white collar' workers in a given area versus the average price of homes that already exists. It doesn't work for California to offer $125k for a professional job and try and attract an out-of-state professional now earning $100k. For starters, when you add California income tax and sales tax versus say Texas income tax (which is zero) and sales tax(which is lower) that $25k pay differential turns into $15k or less. Then if you compare real estate market values, an average house mortgage payment will cost MORE than an extra $15k per year than it did in Texas for the same house. Plus the California business deciding to offer the $125k pay rate still has to successfully compete with businesses in Texas or Vancouver of India for that matter which are paying much lower labor costs. And we won't even throw in higher California costs for workmen's comp and disability / unemployment / energy / business taxes etc. - all of which contribute to a conclusion that the California job offer is less stable than the Texas job the 'white collar' worker already has !\
Basically, any 'white collar' worker who decides to move to California for the SAME pay rate is either a surfer or woefully underinformed ! And where New York is concerned, we have all of the taxes and most of the housing bubble, but no surf or sunshine !
So, How do you explain Google's working force going from 500 to 15000. How do you explain lots of Microsoftees working in Seattle moving to Google in CA? How do you explain the mass inflow of white-collar jobs in the past five years?
Melonie
12-06-2007, 11:26 AM
^^^ the explanation is extremely obvious ... stock options in lieu of salary ! As to Google's remarkable growth, you may also want to account for the former employees of Excite and a host of other ailing / defunct search engine marketers who were put out of a job as a result of Google's success. And in regard to the profitability of Microsoft and Google, the largest single contributing factors are their registration of copyrignts in Ireland, and the continued US congressional support for 'offshore' corporate earnings being exempt from US taxes (i.e. yet another stealth subsidy by the US taxpayers). How convoluted is it that the royalty paid to Microsoft upon the sale of a new Windows equipped computer at your local WalMart is considered to be 'Irish' income subject to a single digit Irish corporate tax rate but exempt from US taxes ?
I would also add that as businesses (even Microsoft and Google) become more 'mature', and as corporate control slowly trickles out of the hands of the original 'inventors' and into the hands of stockholders and bean counters, there will be less and less likelihood that those stockholders and bean counters will tolerate premium labor and operating costs being paid to maintain high cost operations in California. Just as was the case with computer hardware, where California was dominant for 20 years but how has virtually no mainstream computer hardware manufacturing left versus lower cost Asia, the same thing will happen to computer software. When the new software being written for Microsoft in Bangalore eventually gets up to speed, the California 'white collar' computer software jobs will go the same route as previous California 'white collar' computer hardware jobs.
Yes, Americans have a history of inventing most new technologies. So yes as Microsoft 'matures', some other newer technology will come along with a dominating presence in California. But these days such newer technology businesses have already realized the cost burden involved in trying to conduct full scale business operations in California. Case in point ... Tesla Motors. Yes there is a core of engineers and business wheeler/dealers who chose to locate in California. But ALL of the production operations involved with the new Tesla Roadster are being outsourced from day one ! Tesla's patents are registered in Ireland too, with a similar royalty payment structure learned from Microsoft. Thus less than 20% of the revenues generated by the sale of a $100,000 Tesla roadster are considered to be US taxable income ... basically only dealer sales commissions and California engineers' salaries (which will soon be moving !).
To counterbalance this, US and California taxpayers not only threw R&D subsidy money at Tesla motors in the first place to allow their business to get started, and not only are US and California taxpayers now throwing subsidy money at Tesla motors on the sale of every car (via an electric vehicle tax credit for the buyer), but various states are also throwing taxpayer funded subsidy offers at Tesla motors in an attempt to convince the company to expand employment in the USA. The winner appears to be Michigan, who will get 76 new 'white collar' jobs in exchange for $700,000+ in Michigan taxpayer subsidy money plus undisclosed future tax breaks.
Circling back to your point about the growth of 'white collar' jobs in California, before this becomes a legitimate point somebody needs to clarify whether those new 'white collar' jobs are fully funded by the private sector, vs partially funded by taxpayers in the form of subsidies / tax breaks to the employer, or totally funded by taxpayers as was the case with Der Governator's recent 3 billion dollar stem cell research initiative. Arguably, taxpayer funding of 'white collar' jobs amounts to little more than financial masturbation, because these jobs simply do not 'pay their own freight'.
As the first link points out, this taxpayer funded subsidy phenomenon is by no means limited to one company. NanoSolar played the same game as Tesla, starting the company based on gov't subsidies for research. However, unlike Tesla who chose to bail out of California as the research phase was winding down and the production / support phase was taking off, NanoSolar and many other 'politically correct' industries will do some manufacturing in California. But what sort of 'financial motivation' did this actually require / involve ?
(snip)" When you're a small, venture-funded company, as most of these firms are, it's also important to be close to the cash.
"The investors are right here, and they see real equipment and real films being made," said Dave Pearce, chairman and former CEO of Miasolé , which employs 150 people in Santa Clara and just began limited production at its 110,000-square-foot plant there. Pearce recently closed a $50 million round of VC funding and got another $20 million from the U.S. government."(snip)
from
^^^ translation ... federal taxpayers in other states are subsidizing the 'white collar' jobs created in Santa Clara ! Federal taxpayers in other states are also subsidizing the production tax credits provided to the uber-rich California investors in these companies, which in turn allows those uber-rich California investors to reduce their de-facto tax obligations from other sources of income. Santa Clara taxpayers are also subsidizing these 'white collar' jobs via tax abatements, grant money etc. Additionally, federal taxpayer money is also being used to subsidize the sale price of the products these companies manufacture via yet more tax credits to the buyers of these products.
If this counts as 'growth', it should be under the heading of a malignant tumor sucking energy from it's host ! And therein lies the truth of California's 'white collar' economy. Pray that the rest of the country never takes the time or makes the effort to figure out why these solar subsidies and ethanol subsidies and wind farm subsidies and electric vehicle subsidies etc. are SO important to California politicians. But why should they worry ... they haven't figured out that the interest rate freeze deal also disproportionately benefits California property owners either.
AudreyLeigh
12-06-2007, 12:43 PM
So, How do you explain Google's working force going from 500 to 15000. How do you explain lots of Microsoftees working in Seattle moving to Google in CA? How do you explain the mass inflow of white-collar jobs in the past five years?
:banghead:
Do you not know better than to argue with Mel?
Melonie
12-06-2007, 02:31 PM
^^^ sorry I really didn't mean to hammer the point home quite so strongly ... but for a fact that California 'white collar' economy Xan was attempting to tout is little more than a form of 'white collar' welfare ... paid for in significant part by the taxes of residents of other US states that earn far less than the 'white collar' California researchers / engineers / scientists whose paychecks their federal tax money is subsidizing. This whole subject is a 'dirty little secret' that seems to get extremely little media attention.
Along the same lines, it would appear that a formal Fed ARM Bailout Plan is going to be announced tomorrow. From the bits and pieces showing up in financial media, it would appear to include the following
- eligible ARM mortgage homeowners will have their 'teaser' interest rates frozen for 5 years
- eligibility requires that the ARM mortgage homeowners be current on their mortgage payments, that their credit score be 620 or less, and that their mortgage be originated between January 2005 and July 2007.
- eligibility does NOT seem to depend on income level of the mortgage holder or the size of the mortgage
- HUD and other gov't regulators will officially 'tighten' lending standards policy, essentially rescinding previous directives that lenders must write a certain number of 'shaky' mortgages to help increase 'low income' home ownership as a matter of gov't policy.
- some sort of concession will be made to the investors who own the mortgage backed securities into which these 'shaky' ARM mortgages were repackaged. This will be done to avoid lawsuits against the federal gov't by these investors for altering their 'financial contracts' after the fact i.e. forcing them to accept lower interest earnings due to gov't intervention in the interest rate terms of those 'contracts'. No details are yet available, but it sure smells like a tax credit scenario where the mortgage bond investors will be allowed to claim their 'lost' interest earnings to offset other tax liabilities.
- tax regulations will be rewritten to eliminate the IRS treating delinquent mortgage holders who accept short sales / writedowns as being recipients of taxable income on the amount the sale is short / amount of the writedown of the outstanding loan balance. In effect, this means that any money extracted via home equity and already spent by the mortgageholder that will now be 'written off' will be treated as tax free money instead of taxable earnings as is the case under existing IRS regulations.
the reason that I mention these points in a discussion about California's 'white collar' economy is that the terms of this bailout seem perfectly tailored for 'white collar' California ARM mortgage holders, as well as for uber-rich California mortgage bond investors - and also for California state / local gov't tax revenue pools and state / local gov't pension funds that are chock full of mortgage bonds and derivatives of mortgage financing that are taking heavy losses !!!
minnow
12-06-2007, 04:03 PM
So, How do you explain Google's working force going from 500 to 15000. How do you explain lots of Microsoftees working in Seattle moving to Google in CA? How do you explain the mass inflow of white-collar jobs in the past five years?
In addition to Mel's treatise, these caveats:
1) Past performance does not guarantee future results: Do you expect Google w/f to grow from 15k to 30k next 5yrs ?
2) Is Googles entire workforce/ headcount increase in CA, or is it in call/tech support centers (or program designers/writers )in foreign countries? Anymore, be it tech support, rental res, or credit card cust. support, I'm hearing a lot of difficult to decipher foreign accents.
3) How much of Googles headcount increase is US citizen? I understand "Green Carders" don't have to pay SS taxes. A certain % of green carders are sending $$ earned overseas to relatives in home country. Also, a compensation package that sucks for US citizen may seem very attractive to someone a few yrs removed from jungle hut or big city crowded slum. All this adds up to decreased tax base- maybe all this of scale of dropping a brick off Santa Monica pier won't cause a tidal wave @ Waikiki Beach, but may create just a wisp of breeze to cause some to put on windbreaker at certain temperature.
No readily defined balance point, but stuff to consider....
minnow
12-06-2007, 04:12 PM
well, this is a mutually exclusive argument these days. Your 'American Dream' requires that a relationship exist between average worker paychecks, interest rates, and the price of houses that will allow the average worker to cover the cost of principal plus interest plus other normal living expenses. As the 'global' cost of labor drives US labor costs down, as food and energy prices continue to rise, as federal / state / local taxes continue to rise, this equation doesn't work anymore ... meaning that the 'American dream' is no longer a realistic possibility for American average workers in areas of bubble real estate prices.
The gov't realized this almost 10 years ago, and responded both by HUD forcing fannie mae and freddie mack to start accepting 'shaky' loans from low income first time homebuyers, and by forcing local banks to accept 'shaky' loans from low income first time homebuyers as a 'community service'. Arguably these gov't mandates quickly inflated real estate prices by lowering the bar as to what sort of income ration / credit rating constituted a 'qualified buyer'. The rising number of 'qualified buyers' (who were really no more qualified than before) and the ensuing rising real estate prices then gave birth to the bank's 'transfer of mortgage risk' mechanisms as a means of writing new mortgages on overpriced properties to more buyers who really couldn't afford those houses.
The homeowner bankruptcies occurring over the past year are the direct result of mortgages having been written to buyers that really couldn't afford their houses i.e. gov't policy to keep the 'American Dream' alive when for many average Americans that dream was actually dead in realistic financial terms. As these bankruptcies proliferate, the number of 'qualified buyers' will be greatly reduced ... and eventually so will the price of houses. So yes if you are thinking of buying property in an area that (still) has unrealistic real estate pricing, you do run the risk of taking a loss on the property value no matter how long you hold the property. For example, there is NO WAY that Detroit property values will ever rise back to bubble levels.
Where California in particular is concerned, that state has also taken action which defers the end of the American dream. It has capped the rate of property tax increase per year. It has also undertaxed re property taxes and income taxes relative to its spending levels, and has (so far) financed the deficit via the sale of huge amounts of new state muni bonds. While these measures help to postpone the inevitable, they will also make it more difficult to recover in the future.
In purely economic terms, the 'fair value' of suburban California housing SHOULD be 33% of the income level of a typical California married couple reflected onto a mortgage at a realistic interest rate. If this means a cop's pay plus a teacher's pay i.e. $100k a year gross, and a 6% interest rate, and hefty property tax levels commeasurate with actual local gov't budgets, then you're looking at a future California median home price that has to be somewhere in the mid $300k range not the $500k plus range in order to be sustainable.
Melonie; Exactly what would constitute "typical CA couple? Would it be someone looking to buy first home, or someone that already has a home and is sitting on top of a six figure capital gain?? Or somewhere between these 2 examples. A $100- $150K capital gain, vs renter that must "scratch" for d/p $$$ can make up a lot, if not all the difference between mid 300's and $500K.
xanfiles1
12-06-2007, 05:18 PM
In addition to Mel's treatise, these caveats:
1) Past performance does not guarantee future results: Do you expect Google w/f to grow from 15k to 30k next 5yrs ?
Absolutely Not. But, I expect another thousands of Startups from Ex-Googlers who will inturn hire more White Collar Workers
2) Is Googles entire workforce/ headcount increase in CA, or is it in call/tech support centers (or program designers/writers )in foreign countries? Anymore, be it tech support, rental res, or credit card cust. support, I'm hearing a lot of difficult to decipher foreign accents.
Work creates Work and for efficiency you have to outsource. Even with outsourcing, Silicon Valley now has more White Collar jobs than the Peak bubble of 2000
3) How much of Googles headcount increase is US citizen? I understand "Green Carders" don't have to pay SS taxes. A certain % of green carders are sending $$ earned overseas to relatives in home country. Also, a compensation package that sucks for US citizen may seem very attractive to someone a few yrs removed from jungle hut or big city crowded slum. All this adds up to decreased tax base- maybe all this of scale of dropping a brick off Santa Monica pier won't cause a tidal wave @ Waikiki Beach, but may create just a wisp of breeze to cause some to put on windbreaker at certain temperature.
A Couple of corrections.
i) Green Card Holders pay SS taxes.
ii) They definitely have to buy houses (which was the main point of the thread anyway)
ii) They send money to their native countries so they can buy Coke, Intel, Dell, HP, Microsoft, Apple, Motorola and of course Google products
According to your logic, there would have been a decrease in Median Income due to all the outsourcing and green carding. Yet USA has produced more self-made millionaires in the last decade than any other decade. Of course, if you sat on your lazy ass and ridiculed your nerdy classmates who went on to work at Microsoft/Google/Sun/Apple then you are on your own
No readily defined balance point, but stuff to consider....
......
Lysondra
12-06-2007, 05:58 PM
Haha I like how mermaid bailed on this thread ages ago.
xanfiles1
12-06-2007, 08:45 PM
:banghead:
Do you not know better than to argue with Mel?
I readily accept Mel is much more knowledgable than me. But, I'm extremely frustrated by her Application of Knowledge. She uses a lot of Advanced concepts and explains the peripherals and fine nuances of lot of things.
But, sorry. She forgets or deliberately ignores the basic core principles that guide the universe. My argument with Mel is not about how taxes and govt hand outs affects everyone, but in the midst of all this argument she forgets a massive important detail like America's (and the World's) productivity growing in real terms.
Any analysis ignoring the core basics will almost always be useless in the long run. Sure, in a perfect world we should probably grow at 10% real rates, but due to government interventions we only clock 4-5% GDP growth.
But, pretty much all her analysis assumes that we have -4 to -5% real growth in the future.
She is focused on rounding errors while ignoring the real numbers.
Katrine
12-06-2007, 11:01 PM
Green card holders ABSOLUTELY pay into SS. As long as they are legally employed and reporting income.
I can guaranfuckingtee you that more HB1 visa holders are paying more into SS tax that most strippers. Its not good or bad, just how it is.....
Yeah, us immigrants are eeeeeeeeevil!
Samba
12-07-2007, 12:35 AM
Yeah Katrine GTFO. And take all your hotness with you.
This thread makes me sad because I have EXCELLENT credit but can't buy a house in California, which is where I was raised and would like to live.
eagle2
12-07-2007, 01:14 AM
^^^ the problem with this scenario is actually two problems. First, you're back to the after-tax earnings capacity of your average 'white collar' workers in a given area versus the average price of homes that already exists. It doesn't work for California to offer $125k for a professional job and try and attract an out-of-state professional now earning $100k. For starters, when you add California income tax and sales tax versus say Texas income tax (which is zero) and sales tax(which is lower) that $25k pay differential turns into $15k or less. Then if you compare real estate market values, an average house mortgage payment will cost MORE than an extra $15k per year than it did in Texas for the same house. Plus the California business deciding to offer the $125k pay rate still has to successfully compete with businesses in Texas or Vancouver of India for that matter which are paying much lower labor costs. And we won't even throw in higher California costs for workmen's comp and disability / unemployment / energy / business taxes etc. - all of which contribute to a conclusion that the California job offer is less stable than the Texas job the 'white collar' worker already has !\
Basically, any 'white collar' worker who decides to move to California for the SAME pay rate is either a surfer or woefully underinformed ! And where New York is concerned, we have all of the taxes and most of the housing bubble, but no surf or sunshine !
Technology companies in California can afford to pay a lot more than $25,000 extra a year to attract out-of-state professionals. Out-of-state workers in technology fields can earn double or triple the money they are making by moving to California. That is why the cost of housing is so high there. Also, workers can earn large amounts of money through stock options in addition to their salary. Technology companies, such as Google, want the best technology workers and they are willing to pay for them. There are many factors besides the cost of labor that determine a business’s ability to compete. Business that are able to come out with innovative, high-quality products can sell their products for more than their competitors' products and still get people to buy them. Apple’s I-pods and I-phones are much more expensive than their competitors’ products, yet they’re still able to outsell them.
mermaidnz
12-07-2007, 01:19 AM
Haha I like how mermaid bailed on this thread ages ago.
haha its over my head now. ill just skim read and nod,agree,and smile :D lol
Melonie
12-07-2007, 01:59 AM
Melonie; Exactly what would constitute "typical CA couple? Would it be someone looking to buy first home, or someone that already has a home and is sitting on top of a six figure capital gain?? Or somewhere between these 2 examples. A $100- $150K capital gain, vs renter that must "scratch" for d/p $$$ can make up a lot, if not all the difference between mid 300's and $500K.
In line with the central point of this thread, I was speaking of of a 'young' married couple ... both 'skilled workers' ... who have recently secured 'professional' jobs ... and who are looking to buy their first house !
but in the midst of all this argument she forgets a massive important detail like America's (and the World's) productivity growing in real terms.
I never denied this point. However, your position assumes that the 'fruits' of productivity increases are shared by everyone in the company ... or to use an old analogy that 'a rising tide raises all boats'. I would point out that, with the exception of the tiny minority of company persons who are in upper management or who are direct contributors to technlology / productivity advancements, the vast majority of company workers do NOT personally share in the 'fruits' of this increased productivity. Your reference to the Apple I-Pod is a perfect example btw. Yes there are a few thousand upper echelon and highly technically talented American Apple employees that will benefit handsomely. However, the former Apple employees who used to manufacture Apple hardware in the USA now share nothing, as they have been 100% replaced by outsourcing.
Technology companies in California can afford to pay a lot more than $25,000 extra a year to attract out-of-state professionals. Out-of-state workers in technology fields can earn double or triple the money they are making by moving to California. That is why the cost of housing is so high there. Also, workers can earn large amounts of money through stock options in addition to their salary.
Arguably this is an old paradigm that is already changing. A major factor in that change was a long needed change in accounting standards which removed the de-facto gov't subsidy given to certain corporations who were previously allowed to use stock options in lieu of salaries to avoid tax burden for both the corporation and the employee. Also, this paradigm only works for industries that are in the most rapid wave of new technology growth - because as any industry 'matures' their venture capital funding must be replaced by actual profits, which means attention to costs.
Also, this paradigm only works for American industries if the technological capabilities of lower cost offshore competitors hasn't caught up. Arguably, this last issue is causing the greatest amount of damage to your paradigm, because Bangalore or Beijing are now becoming capable of producing top-notch software along with top-notch hardware. In the end this will lead to a California corporate headquarters for senior management + top level R&D + marketing / sales + accounting, with virtually all of the more 'mundane' elements of both software and hardware having been outsourced or moved to new corporation offshore facilities. In essence this will do to software what has already been done to hardware, i.e. all of the mid-level jobs requiring bachelor's degrees and average levels of talent plus all of the 'production' jobs not requiring a degree will no longer be located in California.
So yes somebody does benefit from these productivity increases - the uber-rich investors, upper level management, and the technical elite. But the 'middle class' American workers will wind up being gutted. And as to unskilled and semi-skilled American workers, fugeddaboudit ! Hmmm, sure sounds like a third world economy scenario to me ! And if the displaced 'middle class' workers from a 'maturing' company cannot catch a ride on the next great (subsidized) tech company, they also can't earn enough to afford to stay current with their mortgage payments - which will eventually lead to the collapse of local real estate prices. Unless of course their mortgage is 'bailed out', in which case the 'inevitable' will be postponed for 5 years !!!
So to a degree I accept your point ... that as long as continued gov't subsidies are available for R&D, and as long as continued gov't subsidies available for uber-rich investor tax breaks, and as long as there are tax loopholes / credits to promote the sales of their new products at somewhat reasonable prices, there will be a continuing stream of new companies springing up in California giving birth to cutting edge new products. The birth and high growth rate of these new companies will soak up skilled American employees that are 'cut loose' from older technology companies as they 'mature' thus must start to worry about costs. However, my point still remains that this entire setup is essentially dependent on gov't subsidies i.e. the transfer of federal tax money collected from taxpayers in other states to support these California tech businesses and the venture capital investors in those businesses. If and when those tax breaks are removed, either by the company 'maturing' or by legislative action, a large measure of the company's apparent profitability will disappear - and so will the bloated salaries !
~
Melonie
12-07-2007, 04:40 AM
I'll also interject some 'professional' opinion on the subject of California home affordability ...
(snip)"One final thought. How can any of this get repaired unless home values stabilize? And how will that happen? In Northern California, a household income of $90,000 per year could legitimately pay the minimum monthly payment on an Option ARM on a million [dollar] home for the past several years. Most Option ARMs allowed zero to 5% down. Therefore, given the average income of the Bay Area, most families could buy that million dollar home. A home seller had a vast pool of available buyers.
Now, with all the exotic programs gone, a household income of $175,000 is needed to buy that same home, which is about 10% of the Bay Area households. And, inventories are up 500%. So, in a nutshell we have 90% fewer qualified buyers for five-times the number of homes. To get housing moving again in Northern California, either all the exotic programs must come back, everyone must get a 100% raise or home prices have to fall 50%. None, except the last sound remotely possible.
What I am telling you is not speculation. I sold BILLIONs of these very loans over the past five years. I saw the borrowers we considered ‘prime’. I always wondered ‘what WILL happen when these things adjust is values don’t go up 10% per year’."(snip)
from
also, if you have the time to read it, Greenberg's article covers a whole lot of detail regarding other aspects we have been discussing throughout this thread.
minnow
12-07-2007, 10:42 AM
RE: xf1 TP#76:
"Decrease In Median Income"- According to W-pedia, Inflation Adjusted US Median Household Income in 2006 was lower than peak in 2000 ($48.2K vs nearly $50K), and only slightly higher than 2001-2003 trough.
"More s/m Millionaires", "More White Collar Jobs": True, but there are also more houses costing 7 figures, or more, than any other decade. Also, white collar job isn't what it used to be. More to point, will increase in total compensation in aforementioned jobs (salary, bonus, stock options, etc) in next 2-5 yrs match/exceed prior period?
Even if every "light" turns green, an increase in 15000 "good" homebuyers in a state with 36M population and 13M housing units would have an effect on CA housing values akin to pouring a tall glass of pink Koolaid into Mels jacuzzi, and expecting it to turn into a giant pink bubble bath.
Lastly, you have no more of an idea what my income, net worth, work habits, or classmate interaction history is than I do if you're a hot dancer who just got her MBA, or a nerdy financial analyst who spends a lot of his time in a computer cubicle churning out reports & forecasts, or whatever.8)
xanfiles1
12-09-2007, 03:53 PM
RE: xf1 TP#76:
"Decrease In Median Income"- According to W-pedia, Inflation Adjusted US Median Household Income in 2006 was lower than peak in 2000 ($48.2K vs nearly $50K), and only slightly higher than 2001-2003 trough.
"More s/m Millionaires", "More White Collar Jobs": True, but there are also more houses costing 7 figures, or more, than any other decade. Also, white collar job isn't what it used to be. More to point, will increase in total compensation in aforementioned jobs (salary, bonus, stock options, etc) in next 2-5 yrs match/exceed prior period?
Even if every "light" turns green, an increase in 15000 "good" homebuyers in a state with 36M population and 13M housing units would have an effect on CA housing values akin to pouring a tall glass of pink Koolaid into Mels jacuzzi, and turning it into a giant pink bubble bath.
Lastly, you have no more of an idea what my income, net worth, work habits, or classmate interaction history is than I do if you're a hot dancer who just got her MBA, or a nerdy financial analyst who spends a lot of his time in a computer cubicle churning out reports & forecasts, or whatever.8)
Again, you are talking about short term horizons, while I'm talking long term. I have no friggin clue how the housing market will look like within the next two years. But, if California clocks positive GDP growth in the next 10 years making the state wealthy, it should invariably translate to Real Estate growth.
Here's why California's real estate will grow in the long run
* It is the Weather, stupid
* California's real GDP growth
(The above two will explain 90% of the next 30 years of California's real estate).
I'm sorry with all the advanced knowledge, Melonie is totally ignoring the core 90% and wasting all her energy in the remaining 10% and thinking short term.
Personally, all those discussions focusing on the 10% are essentially useless
Melonie
12-09-2007, 07:05 PM
all I can add without getting 'circular' is ...
Nice weather is not legitimate grounds for corporate bean counters to justify significantly higher labor costs / tax rates / energy costs of a California facility to the corporation's stockholders.
California's 'real' GDP is a function of not only private sector business profits from the open market, but also of public sector subsidies, favored corporate tax treatments, protective tariffs and quotas, tax credits against end sale of product etc. Except for open market competitive conditions, ALL of the other public sector policies that have a great effect on a particular corporation's bottom line are open to sudden changes as the result of the next national election results, the next state / local gov't budget shortfall etc ! Arguably, this is not a sound basis for projecting long term state GDP trends.
xanfiles1
12-09-2007, 08:23 PM
all I can add without getting 'circular' is ...
Nice weather is not legitimate grounds for corporate bean counters to justify significantly higher labor costs / tax rates / energy costs of a California facility to the corporation's stockholders.
California's 'real' GDP is a function of not only private sector business profits from the open market, but also of public sector subsidies, favored corporate tax treatments, protective tariffs and quotas, tax credits against end sale of product etc. Except for open market competitive conditions, ALL of the other public sector policies that have a great effect on a particular corporation's bottom line are open to sudden changes as the result of the next national election results, the next state / local gov't budget shortfall etc ! Arguably, this is not a sound basis for projecting long term state GDP trends.
Nice Weather => Attracts Young Talent => More productive than average (White Collar if you may) => Higher GDP growth than average
It is really as simple as that
Also Larry Page, Sergie Brin, Steve Jobs are not bean counters.
For Technology companies, the biggest problem isn't saving 25K on the payroll, but attracting talent. All things equal you can lure somebody to work in California than Minnesota. On average, you find better talent in high tax democratic regions (North East + West Coast)
eagle2
12-10-2007, 01:00 AM
all I can add without getting 'circular' is ...
Nice weather is not legitimate grounds for corporate bean counters to justify significantly higher labor costs / tax rates / energy costs of a California facility to the corporation's stockholders.
California has had higher labor costs / tax rates / energy costs for the past 30 years and their economy has still grown rapidly. How do you explain this?
California's 'real' GDP is a function of not only private sector business profits from the open market, but also of public sector subsidies, favored corporate tax treatments, protective tariffs and quotas, tax credits against end sale of product etc. Except for open market competitive conditions, ALL of the other public sector policies that have a great effect on a particular corporation's bottom line are open to sudden changes as the result of the next national election results, the next state / local gov't budget shortfall etc ! Arguably, this is not a sound basis for projecting long term state GDP trends.
Many of the above factors apply to the whole country, not just California.
eagle2
12-10-2007, 01:41 AM
To counterbalance this, US and California taxpayers not only threw R&D subsidy money at Tesla motors in the first place to allow their business to get started, and not only are US and California taxpayers now throwing subsidy money at Tesla motors on the sale of every car (via an electric vehicle tax credit for the buyer), but various states are also throwing taxpayer funded subsidy offers at Tesla motors in an attempt to convince the company to expand employment in the USA. The winner appears to be Michigan, who will get 76 new 'white collar' jobs in exchange for $700,000+ in Michigan taxpayer subsidy money plus undisclosed future tax breaks.
The funding to allow Tesla Motors to get started was provided by it's co-founders Martin Eberhard and Marc Tarpenning, not taxpayers.
http://www.siliconbeat.com/Tesla.pdf
"Eberhard and Tarpenning provided the early funding for the company, and were joined
in 2003 by Musk, CEO of SpaceX, who is the major investor in the company and serves
as Chairman of Tesla Motors."
In addition a significant amount of funding has been provided by billionaire Elon Musk and Google co-founders Larry Page and Sergey Brin.
Circling back to your point about the growth of 'white collar' jobs in California, before this becomes a legitimate point somebody needs to clarify whether those new 'white collar' jobs are fully funded by the private sector, vs partially funded by taxpayers in the form of subsidies / tax breaks to the employer, or totally funded by taxpayers as was the case with Der Governator's recent 3 billion dollar stem cell research initiative. Arguably, taxpayer funding of 'white collar' jobs amounts to little more than financial masturbation, because these jobs simply do not 'pay their own freight'.
If treatments/cures for various diseases are found as a result of the stem cell research, the investment will result in significant revenue and great benefits to society in addition.
BrunetteGoddess
12-10-2007, 02:04 AM
And speaking of the stagnant market, you knew that bubble had to burst someday. People buying their homes for the normal mid 200's to the low 300's and then, within one year, they're worth in the high 400's?
Unfortunately, many people I know took out loans based on that inflated value only to see it slide right down the tubes. Those needing to sell their houses are now in the serious negative.
That's exactly what happened to our AZ house :(
Melonie
12-10-2007, 04:42 AM
The funding to allow Tesla Motors to get started was provided by it's co-founders Martin Eberhard and Marc Tarpenning, not taxpayers.
the state of California AND the federal gov't also put up a bunch of R&D grant money ... the source of which was taxpayers !!!
California has had higher labor costs / tax rates / energy costs for the past 30 years and their economy has still grown rapidly. How do you explain this?
I already have ... and much of it is related to collecting federal tax money in other states and transferring it to benefit California tech companies and their uber-rich California investors who need production tax credits to reduce the taxes due on their other earnings ! Practially every one of California's 'booming' businesses are knee deep in local / state / federal subsidies ... solar gets huge R&D grants and tax credits ... ethanol gets 54 cent/gal tariff protection plus tax credits ... wind farms get 2 cent/kWh mandated price premium charged to everyone's electric bills plus tax credits ... software gets the 'offshore copyright registration' loophole which allows companies to avoid paying huge amounts of taxes to the USA. Hell even vegetable growers / food processors get stealth subsidies in the form of mandatory non-enforcement of illegal alien labor laws plus sub-minimum wage in American Samoa.
If treatments/cures for various diseases are found as a result of the stem cell research, the investment will result in significant revenue and great benefits to society in addition.
true, but most of the significant progress is being made by private labs not ones funded by taxpayer dollars. Gov't labs don't have the same incentive to make significant discoveries, because the longer they can plod along making minimal progress the longer they will continue to receive grant money / paychecks.
xanfiles1
12-10-2007, 06:06 AM
the state of California AND the federal gov't also put up a bunch of R&D grant money ... the source of which was taxpayers !!!
I already have ... and much of it is related to collecting federal tax money in other states and transferring it to benefit California tech companies and their uber-rich California investors who need production tax credits to reduce the taxes due on their other earnings ! Practially every one of California's 'booming' businesses are knee deep in local / state / federal subsidies ... solar gets huge R&D grants and tax credits ... ethanol gets 54 cent/gal tariff protection plus tax credits ... wind farms get 2 cent/kWh mandated price premium charged to everyone's electric bills plus tax credits ... software gets the 'offshore copyright registration' loophole which allows companies to avoid paying huge amounts of taxes to the USA. Hell even vegetable growers / food processors get stealth subsidies in the form of mandatory non-enforcement of illegal alien labor laws plus sub-minimum wage in American Samoa.
Once again you explain California's GDP of 1.7 Trillion Dollars with frivolous rounding error contribution from minor things. At some point that is going to lose credibility.
Maybe you should include the towels and soaps those californians steal when they visit Las Vegas hotels. Surely, that must add a couple of percentage points to their GDP
Melonie
12-10-2007, 10:41 AM
If you consider $50 million in venture capital, plus $20 million in gov't grant money for NanoSolar's startup i.e. their total capitalization consisting of about 30% taxpayer subsidy money as 'rounding error', then I can see why you perenially recommend buying the S&P.
xanfiles1
12-10-2007, 04:27 PM
If you consider $50 million in venture capital, plus $20 million in gov't grant money for NanoSolar's startup i.e. their total capitalization consisting of about 30% taxpayer subsidy money as 'rounding error', then I can see why you perenially recommend buying the S&P.
I can see why you perennially are pessimistic about all government actions.
Here are massive flaws in your argument.
Californian's Balance of payment with the Federal Government is more than $50 Billion dollars
http://www.calinst.org/pubs/balance2003.htm
Despite all those hand-outs Fed is screwing California out of $50 Billion dollars.
The $50 Million is 0.001th of that amount, which pretty much proves my point of the kind of details that you focus on
a) Usually in the order of 0.001 and useless to the overall scheme of things
b) Massively biased.
Those $50 Million is not used to flush the money down the toilet but to provide employment, public good solutions and more importantly attract talent from the Rest of the World, a far cry from the $300 Billion or 6000 times the money spent on Iraq War
Melonie
12-10-2007, 05:33 PM
there is a huge flaw in your argument (which is my tactful way of avoiding a call of bullshit). The state gov't of California may run a deficit versus federal taxes collected, but that figure does not count the $20 million R&D grant to NanoSolar or any other direct federal grant money paid to a California corporation. It also does not count the 54 cents per gallon ethanol kickback paid directly to California ethanol refiners. It also does not count the billions of dollars worth of tax credits the federal government directly 'pays' to uber-rich California investors as a result of their tax favored investments into Wind Farms, Solar, Ethanol etc. It also does not count the thousands of dollars worth of tax credits paid by the federal gov't to individual consumers who purchased electric / hybrid vehicles i.e. a de-facto rebate on the retail price of Tesla Roadsters. If you count these direct payments of federal tax money collected from the residents of other states to California businesses and individuals that are not routed through California state gov't coffers, you get a massive imbalance in the opposite direction.
eagle2
12-11-2007, 12:53 AM
I already have ... and much of it is related to collecting federal tax money in other states and transferring it to benefit California tech companies and their uber-rich California investors who need production tax credits to reduce the taxes due on their other earnings ! Practially every one of California's 'booming' businesses are knee deep in local / state / federal subsidies ... solar gets huge R&D grants and tax credits ... ethanol gets 54 cent/gal tariff protection plus tax credits ... wind farms get 2 cent/kWh mandated price premium charged to everyone's electric bills plus tax credits ... software gets the 'offshore copyright registration' loophole which allows companies to avoid paying huge amounts of taxes to the USA. Hell even vegetable growers / food processors get stealth subsidies in the form of mandatory non-enforcement of illegal alien labor laws plus sub-minimum wage in American Samoa.
Most of the industries you mentioned are very small scale, such as solar power and wind power, compared to California's high-tech industry and make up a very small part of California's economy. Midwestern farm states benefit a lot more from ethanol subsidies than California.
It seems to me that that the success of California's booming businesses has a lot more to do with the fact that they come out with world-leading products, rather than any subsidies they get from government. Google developed the best search engine, Apple produces some of the best computers, mp3 players and cell-phones, Oracle produces the best database products, just to name a few. I would guess that this has a lot more to do with the success of California's economy than any federal subsidies.
true, but most of the significant progress is being made by private labs not ones funded by taxpayer dollars. Gov't labs don't have the same incentive to make significant discoveries, because the longer they can plod along making minimal progress the longer they will continue to receive grant money / paychecks.
There are some fields where most of the progress comes from government research or government funded research. Government researchers have to justify their funding just as privately funded researchers do. A significant portion of research in the healthcare industry is done by the government or funded by the government. Many advances made in medicine and healthcare have come about as a result of government research. From:
http://nihrecord.od.nih.gov/newsletters/2006/05_05_2006/story01.htm
"Over the years, NIH scientists have invented hundreds of vaccines and therapeutics, diagnostics, instruments and devices as well as research materials that have been successfully delivered to the public via commercial development."
The site also lists recent medical breakthroughs.
Private industry does not have the resources of our federal government and many private investors are not willing to invest in research that might not payoff for decades. It is necessary for the government to fund this type of research.
xanfiles1
12-11-2007, 09:37 AM
there is a huge flaw in your argument (which is my tactful way of avoiding a call of bullshit). The state gov't of California may run a deficit versus federal taxes collected, but that figure does not count the $20 million R&D grant to NanoSolar or any other direct federal grant money paid to a California corporation. It also does not count the 54 cents per gallon ethanol kickback paid directly to California ethanol refiners. It also does not count the billions of dollars worth of tax credits the federal government directly 'pays' to uber-rich California investors as a result of their tax favored investments into Wind Farms, Solar, Ethanol etc. It also does not count the thousands of dollars worth of tax credits paid by the federal gov't to individual consumers who purchased electric / hybrid vehicles i.e. a de-facto rebate on the retail price of Tesla Roadsters. If you count these direct payments of federal tax money collected from the residents of other states to California businesses and individuals that are not routed through California state gov't coffers, you get a massive imbalance in the opposite direction.
As a staunch Libertarian, I'm 100% against any Government intervention and a rabid supporter of free markets.
But, what you say above is ridiculous to even me.
There are certain projects that are really very long term and corporations have no incentives to invest in it. The government (or any organization that can pool money) has to step in to invest in that.
And $50 Million is 0.000002 of the US economy.
Melonie
12-11-2007, 12:18 PM
There are certain projects that are really very long term and corporations have no incentives to invest in it. The government (or any organization that can pool money) has to step in to invest in that.
Agreed, at least to some extent ! However, this is not what's occurring. For example federal tax money is directly paid to NovaSolar in the form of research grants. For example, federal tax money is 'paid' directly to uber-rich PRIVATE INVESTORS in the form of production tax credits based on the fact that the uber-rich private investor put their own money into NovaSolar shares. It would be a different story if the federal tax money was used to directly purchase NovaSolar shares, such that future profits were paid back to gov't coffers to replace the federal tax money NovaSolar and NovaSolar's uber-rich investors received from the federal taxpayers in the first place. But what's really occurring is that NovaSolar management will get paid huge bonuses from those profits, and the uber-rich private investors in NovaSolar will pocket their share of those future profits, on top of the production tax credit money they began to receive as soon as they purchased the NovaSolar stock, while federal taxpayers get nada ! This means that, by definition, federal taxpayers are not 'investing' they are subsidizing !
Professor Roubini described this phenomena in a single sentence 'privatizing profits but socializing losses'
As to the decisions by corporations and/or private investors not to commit huge amounts of money 'on their own' towards the research and development of certain products, on the basis that their return on investment will be tiny or nonexistant, didn't it ever occur to you that there might be damned good reasoning behind this ? It would scare the wits out of me to ever see a total on the amount of federal tax money that has been poured down the 'rat-hole' of solar power, wind power, ethanol etc. The reason that none of these ever developed beyond the curiosity stage 'on their own' was the fact that the basic economics behind them simply doesn't pay its own way. But our gov't leaders are so determined that these alternative energies must be pursued that they force the US taxpayer to subsidize both sides of the equation (generally without the US taxpayer's knowledge to boot) ... subsidies on the production side as well as subsidies on the consumption side ... in order to provide the pretext of economic viability. California of course excels at inserting itself squarely in the middle, thus profiting from subsidies on both ends ! The California real estate bubble is in essence a side effect of this culture of subsidies.
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eagle2
12-13-2007, 12:39 AM
It would scare the wits out of me to ever see a total on the amount of federal tax money that has been poured down the 'rat-hole' of solar power, wind power, ethanol etc.
I hardly consider spending money to develop energy sources with an unlimited supply, such as solar, that gives off no pollution, to be pouring it down a 'rat-hole'. I don't see why you would be against this. Significant advances have been made with solar and wind power and the cost has been coming down for both. If anything, we're not spending enough money developing alternative energy sources. The government of Brazil invested a significant amount of money in developing ethanol as a fuel source and today they are self-sufficient in energy. We're very far from it.
California of course excels at inserting itself squarely in the middle, thus profiting from subsidies on both ends ! The California real estate bubble is in essence a side effect of this culture of subsidies.
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As I said before, the main reason for California's prosperity is because of the first-rate companies located there, that come out with world-leading products, rather than any government subsidies.