Friday, May 12, 2006

The Declining Dollar

The dollar has been declining against a basket of foreign currencies over the past few months.

How will a declining dollar affect the US housing market?

109 comments:

  1. OT - Ad for Mica condos in today's Post Express. Prices are now from the upper $200's. Wasn't it the low $300's just a couple of weeks ago? Also, "up to $20k towards closing costs" and "free plasma."

    Looks like the $1,500 in gift cards just wasn't cutting it.

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  2. John, how much do you pay to rent in Clarendon?

    bryce

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  3. Weaker dollar means higher prices, for all asset classes, including homes.

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  4. Weaker dollar means the Chinese Central Bank will re-consider buying those US dollars. Fewer currency purchases from foreign banks mean serious trouble for the economy. Interest Rates will climb steadily for mortgages and non-housing loans. Liquidity will begin to dry up for investment and mortgages. Housing prices will take a further tumble.

    It's beautiful!!!!

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  5. I suspect that these folks don't read this blog:

    http://money.cnn.com/2006/03/22/pf/millionaire/turner/index.htm

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  6. I suspect that those folks didn't use an interest only loan consuming 40+% of their income to purchase their upgraded home...

    My $0.02.

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  7. So, do bubbleheads feel a twinge of jealousy or hatred when they see people like those at money.com; those who make sound financial decisions, have an admirable positive net worth, own a home and STILL seem to enjoy life? (and are young to boot)

    Can't be many people like that in the world, can there? Nah. 'specially not in the DC area....

    bryce

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  8. I'm done with this blog. All it focuses on now is the obsessive desire to see the real estate market crash and the misery that would cause to people. There are enough sour grapes here to open up a fruit store. Goodbye. Thanks, but no thanks, for all the desires for economic misery. I'll take my browser elsewhere for less biased and more informed housing opinions.

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  9. weak dollar has bernanke running for cover..of course that means he has to raise rates..of course that means the new home owners w/ ARMS as well as helocked ones will be rammed even more..
    and that will reduce import bill..and that will reduce trade deficit..and that will bolster dollar..So recession---->cure excess ----->stabilize dollar. End Game.

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  10. Off topic, but I love people who announce to everyone they have "quit" reading the blog. As though it matters. There are millions of blogs out there, and you should read the ones you like.

    So read it. Don't read it. No one effing cares.

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  11. Tom is stuck with a flop ( a spec home that won't flip) so he is rightously bitter.

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  12. Although I enjoy engaging in Schandenfrued (sp?) as much at the next guy...I think some folks are going to get really burned including some friends. I had a friend who just walked away from a $5000 deposit on 1 bedroom condo. Good move that he cut his loses but the fact is I warned him. I must say though that being able to say "I told you so" doesn't feel as good as one might think.

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  13. Weaker dollar means higher prices for everything we import.
    From Oil to Chinese goods. Will increase inflation.
    Bernanke raising interests will most likely not help
    stabilise the dollar. It will break the back of the US
    economy though.
    That combined with housing bubble busting, a weakening
    economy. Could prompt foreign investors to pull back from
    the stock market and other US/USD assets. That will
    only accelerate the unwinding.

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  14. Bryce,

    Jealousy of a successful couple has more to do with the individual that's jealous. It's not an issue that rising or sinking home values will fix...

    My $0.02.

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  15. Dumbass from above wrote:

    "So, do bubbleheads feel a twinge of jealousy or hatred when they see people like those at money.com; those who make sound financial decisions, have an admirable positive net worth, own a home and STILL seem to enjoy life? (and are young to boot)"

    A pharmceuticals sales rep and a software engineer. Of course that charming young Republican, corporate couple is going to make boat loads of money. They should make enough money to donate funds for future Republican campaigns.

    You know what's funny? You don't read Money magazine articles about struggling working class couples trying to save and invest their dollars. You can add public sector employees to the equation as well.

    Money magazine chooses to ignore the fact that a significant portion of American families are struggling with housing costs, medical bills, education costs, and tons of taxes heaped on everything.

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  16. Are you saying there is nothing here that points to Envy?

    Do you recall about a week ago when a bitter renter was trying to impress us with stories of eating lobster and creme brule on a regular basis? (yuck, and yuck.)

    Someone invoked Schaudenfreud today in another thread on this site; saying they "enjoy it".

    I submit that Envy/Schaudenfreud is an underlying motivation for many who are cheering for a national economic disaster. If you are here for strictly academic purposes (a perfectly reasonable expectation), I suggest transfering to another academic community - because the cheerleaders here have lost their objectivity.

    It is one thing to recognize a problem or three with the economy (including over-inflated housing price increases) but it is quite another to lose one's objectivity and then devote emotional energy to hope of future suffering on the part of other people.

    Full disclosure: I practice Schaudenfreud when it comes to people who's lives revolve around cars. Can't gain access to food or a salary without driving? HAHAHAHA! I love it. Gas prices climbing? I love that too. Living a sedentary life with high bloodpressure because you are trapped in your car? I LOVE IT SO MUCH THAT I INVEST IN HEALTHCARE COMPANIES. The obesity epidemic is an economic engine. (pun intended).

    So, in a sense, I'm speaking from practical experience. :-)

    bryce

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  17. MyTwoCents,

    My problem with Money.com articles is that they paint money with happiness. Affluence brings joy! Flipping properties for a quick profit is bliss!

    Unbelieveable.

    I'm happy that I am still renting in this bubblicious market!

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  18. "Money magazine chooses to ignore the fact that a significant portion of American families are struggling with housing costs"

    You are preaching to the choir, sonny. I'm a bonafide blue-collar working class rust-belt kinda guy. The first in my family to go to college, and I'm going to finish paying off my student loans this year. I paid for grad school *out of my own pocket by working while attending*. Imagine that.

    Welcome to America. The good, the bad, the ugly, and the indifferent. Optimize your own life instead of whining about what woulda/shoulda/coulda happen if only "The Man" wouldn't keep you down all the time.

    Oh, and tell your relatives to give their homes back to the working class Italians and Irish who owned them originally. M'kay?

    bryce

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  19. my rent in Clarendon was $634/mo last year, the landlord upped it $100/mo this year but that increase is split between 3 people sharing a 4 bedroom/2 bath house in Lyon Village. Good stuff, beats throwing 3Xs that amount away in interest "renting" a mortgage for an asset that won't appreciate for another 7 years.

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  20. Bryce - You post on this site regularly. You point out that a lot of folks here engage in schedenfreude..well duh!...are you just figuring this out. I think everyone has financial interest in how this plays out and no one is really objective. At least the agenda of folks on the blog is out in the open as opposed to the MSM.

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  21. interesting about the rent increaes.

    rents seem to be going up.

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  22. Bryce thinks we should act like a submissive sheep while the country is falling apart around us.

    "Ba..aa..aaaa.aaaa.aaaa".

    Your sheepherder (George W. Bush) is calling you Bryce. "Baaaa.aaaa.aaaa".

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  23. bacon,

    you're living the dream buddy! I bet you can't wait until you grow up and live like a self-actualized adult, can you?

    Now go put one of your baseball hats on backwards and talk with your buddies about next year's basketball season.

    bryce

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  24. DC Bubble,

    Rents are definitely going up! Why? Because people are scared of investing in condominiums and townhomes in this inflated asset market. More people are choosing renting for now. Supply & demand calls for the apartment management companies to jack up rents.

    Also, electric utility rates are about to be de-regulated for Maryland. I live in a utilities-included apartment building and my rent up 8 percent. The PEPCO bills are being passed down to the tenants. Ouch!

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  25. Ha! I really am laughing out loud. I have a visceral dislike for George W.

    I didn't vote for him. I honestly think that he is the worst president. ever. period.

    But you go on beleiving that I'm a cookie-cutter yuppie republican if that makes you feel better about yourself.

    now go tell your relatives to give their property back to the Native Americans who owned it originally. M'kay?

    bryce.

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  26. "bacon said...
    my rent in Clarendon was $634/mo last year, the landlord upped it $100/mo this year but that increase is split between 3 people sharing a 4 bedroom/2 bath house in Lyon Village. Good stuff, beats throwing 3Xs that amount away in interest "renting" a mortgage for an asset that won't appreciate for another 7 years.
    "

    LOLOL! Yeah, you live with 3 other people because you prefer not to own your own home. Ok, buddy! Maybe I'll move back in with my parents because I'm afraid of the bubble monster!

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  27. I live in a utilities paid building, and there is no way my rent was raised enough to cover utilities. My rent is up only 20 bucks this year. They are offering great deals to new tenants as well. The real cost of renting in my building is definitely down.

    A Redskins fan

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  28. "I live in a utilities paid building, and there is no way my rent was raised enough to cover utilities. My rent is up only 20 bucks this year. They are offering great deals to new tenants as well. The real cost of renting in my building is definitely down."

    It will be WAY up next year.

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  29. Please folks. Don't do macroeconomic analysis about what other countries will do with their currency reserves using blanket statements.

    Simple fact is that the only country driving the world economy right now is the United States. A hint of a recession will NOT automatically result in China and other Asian nations buying less dollars. They export to the US to drive their economies. Without US markets they are net importers. China cannot afford to allow the Yuan to rise against the dollar otherwise they lose that advantage and manufacturing will shift to Vietnam/Cambodia/The next dirt cheap country with worthless currency and cheaper labor. Shift the manufacturing to other countries and that reduces China's GDP growth. As a result, millions of rural peasants looking for city jobs start getting even more pissed about the economic disparity between them and the communist party elite.....

    Stick to the local observations. Trying to figure out the timeline for real estate market decline is tough enough. Trying to figure out macroeconomic policies of other countries that have different objectives and mentality to your own? That is an exercise in folly.

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  30. "Stick to the local observations. Trying to figure out the timeline for real estate market decline is tough enough. Trying to figure out macroeconomic policies of other countries that have different objectives and mentality to your own? That is an exercise in folly. "

    And if gives quite an indication of the minds at work on the bubble hypothesis. Everything on this blog should be taken with a major grain of salt.

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  31. $634 is a steal in DC. I'd take that in a second. Not because I can't afford more, but because I have no intention of staying in DC more than 4 years, and I hate to spend too much on a place to live.

    But rent is going up. My last landlord, upped the rent $100 because she said housing prices were increasing. I bailed on her and found a cheaper place to live. She also told me she had trouble renting the place out after I left, but she finally found a nice couple to take my place.

    My take: until housing starts to depreciate, and until all these speculative condo owners start renting out their condos, rent in DC is going to continue to rise.

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  32. Redskins Fan,

    Where do you live?

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  33. "My take: until housing starts to depreciate, and until all these speculative condo owners start renting out their condos, rent in DC is going to continue to rise. "

    You mean unless. Those condo owners can, by in large, afford them. Contrary to myths perped on this site, yuppies make a lot of money and need places in the city to live. There will always be more than enough buyers for that sort of thing in DC.

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  34. In response to PTT:

    The United States is the world's consumer of last resort. Guess what? That ain't gonna last forever. If the American economy sinks into recession, China and India are in trouble. That means fewer Americans can buy their manufactured goods. American corporate revenue takes a hit and Chinese workers get laid off.

    I think our negative account balance speaks for itself. We consume more than what we produce. It's that simple.

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  35. "Affluence brings joy!"

    Health brings joy, kiddo. If you don't beleive me, step in front of a moving bus today and then come back here to tell me all about how happy you are despite being hit by a moving bus.

    Everything else, including money and a roof over your head, takes a back seat to health.

    That goes for emotional health, too, ihateyuppies. So will your folks ever join the ranks of distinguished ethnic groups like the Italians or the Irish - those who tended to work their way into the middle class en masse? Or is the "The Man" always gonna keep ya down?

    bryce

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  36. Very true. Yuppies in DC make boat loads of money. The bulk of yuppies come from the legal profession in DC. Overpaid lawyers. Bleh.

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  37. "Baaaaa.aaaaaaa" Bryce is saying something. What are you saying Bryce?

    "Baaaa.aaa.aaaa.aaaa, there's no housing bubble".

    Oh.

    "Baaaa.aaa.aaaa.aaaa, everything is great because we live in America where everyone can be rich"

    Bryce, your sheep herder wants you back in your expensive, over-valued barn.

    "Baaaa.aaaa.aaaa, you bubble heads are ruining my property value!"

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  38. another update on rents rising...

    Sheffield Court is now charging approx 1600/mo for 1BR, but they're one of the few true pet-friendly rentals so they have a nice emotionally-attached niche to exploit. that's up about 400/mo from when i last checked them out 2 years ago.

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  39. "Very true. Yuppies in DC make boat loads of money. The bulk of yuppies come from the legal profession in DC. Overpaid lawyers. Bleh. "

    Yep, and god bless us everyone. I'm 29 and I make enough for 2 overpaid lawyers. Hahahaha!!

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  40. My rent in 2001 was $863.

    My rent in 2006 is $1,193. An increase of 38 percent over five years. That's definitely more than the CPI. It's more than my salary increase in five years.

    Still. Renting is better deal than buying a condo right now.

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  41. Very poorly stated and un-persuasive, ihateyuppies. You don't even appear to comprehend what I've written, yet it upsets you.

    That fact that you are upset by what I've written is a sign of your own shortcomings, not mine. Maybe someday you'll understand that, and you'll be a better person for it. :-)

    bryce

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  42. Once again another blanket statement from a welfare liberal.

    Let me see, in the last US recession, what happened to China's GDP growth? Was it growing? Yes. Why? Because Americans love their cheap goods from Walmart. Why were those goods cheap? Because the Chinese government propped up the US dollar with their billions in reserves in order to sustain growth.

    Will it happen this time around? Who knows? I'd open an everbank currency account if I knew the dollar was going to plummet like a rock. Double my money with a couple clicks of the button.

    Stick to just hating yuppies, your macroeconomic analysis is shoddy at best.

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  43. I know a lot of lawyers and only a few are lucky (or unlucky if you don't like putting in a lot of hours) enough to work for blue chip law firms that pay the big bucks. Those firms are pretty selective and I don't think they are driving condo prices. Easy credit and the expectation of future price increases is driving prices more than anything else IMHO.

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  44. I can't wait until the rents increase 60-80% in the next few yeas. All economic indicators show big, big rent increases. Nobody will be able to afford their rent anymore. All the bubbleheads will be homeless, cold, and hungry. Then the bankruptcies will start. Yea! I hope that the government will let them suffer, I don't want any of my tax dollars going to anyone who made bad financial decisions. I'm shivering in anticipation to see all of this suffering.

    Oh wait, I'm sorry, I forgot, nobody here takes joy in human suffering here.

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  45. "I know a lot of lawyers and only a few are lucky (or unlucky if you don't like putting in a lot of hours) enough to work for blue chip law firms that pay the big bucks. Those firms are pretty selective and I don't think they are driving condo prices. Easy credit and the expectation of future price increases is driving prices more than anything else IMHO."

    But, oddly enough virtually every lawyer I know makes what I make (or more, if they're senior). There are many many such lawyers in DC:

    http://www.infirmation.com/shared/insider/payscale.tcl?state=DC

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  46. There have always been highly paid lawyers in DC. So that doesn't explain why housing has appreciated so much in the last 5 or 6 years. What has changed in DC in that time to cause the increase?

    The answer is low interest rates, loose mortgages and speculative buying. Can this continue?

    Honestly, no one really knows. But having watched the Tech Bubble burst... I'm betting it doesn't last.

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  47. "There have always been highly paid lawyers in DC. So that doesn't explain why housing has appreciated so much in the last 5 or 6 years. What has changed in DC in that time to cause the increase? "

    The local economy has grown exponentially, and lawyers' salaries (particularly young lawyers like me who have a need for condos in the city) have grown substantially during that time.

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  48. "Honestly, no one really knows. But having watched the Tech Bubble burst... I'm betting it doesn't last. "

    Same dopey reasoning that drives this whole site. "The NASDAQ collapsed, therefore housing prices will collapse." That's some analysis, boy!

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  49. Same dopey reasoning that drives this whole site. "The NASDAQ collapsed, therefore housing prices will collapse." That's some analysis, boy!

    True.

    But you're not convincing that it won't. I guess we'll see.

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  50. Rents have gone up recently as apartments were converted to condos or older apartments were bought out by speculators who sough to pass on their acquisition costs onto their tenants.

    Maybe it happens in cycles. When renting 2.5 years ago, renting was quite reasonable. Then rate increases kicked in about a year ago. Now, as speculators start having to put units back on the market, the floor may drop out (especially if there's a feedback loop with rents going down causing more speculators to put their units on the market due to a lack of buyer interest, etc.)

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  51. Whoever posted that money.cnn.com article obviously doesn't read their articles on a regular basis. Money.cnn.com is one of the sites that has been warning of a housing bubble in recent years. It is one of the best sites for financial news.

    A falling dollar doesn't mean recession, it means inflation. When the dollar falls, American made goods become cheaper to foreigners, so they buy more of them. At the same time, foreign made goods become more expensive to Americans, so we buy less of them.

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  52. "There have always been highly paid lawyers in DC. So that doesn't explain why housing has appreciated so much in the last 5 or 6 years. What has changed in DC in that time to cause the increase? "

    Nice try Catalyst. But responder above is correct. Lawyers' salaries have doubled during this time, and there are tens of thousands of lawyers working in DC.

    The legal market in DC is one of the biggest if not the biggest economic private sector engine in DC. I'm not suggesting that real estate appreciation is the direct result of the massive increases in lawyers' take home pay, but any serious analysis of the current real estate narket would have to consider the impact of the continual and substantial pay to the tens of thousands of lawyers working in DC. Dismissing this, as you did, is right in line with much of the *analysis* that is characteristic of this blog, i.e., focusing only on information that supports the desired bubble burst, and ignoring-or dimissing-all other information.

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  53. "The local economy has grown exponentially, and lawyers' salaries (particularly young lawyers like me who have a need for condos in the city) have grown substantially during that time."

    How many condos do you own? Most lawyers I know own at least too or three....if they're succesful that is.

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  54. "lawyers' salaries (particularly young lawyers like me who have a need for condos in the city) have grown substantially during that time."

    That's not true. The last time firms really raised salaries was during the dot.com era. I'm a lawyer, 5 years out. When I graduated in 2001, starting salaries were 125 (and had been since 2000). They were still 125 until just a year or two ago, and then only at the very top firms were they raised to 135. The bonuses were pretty good, for the most part, but salaries did not only NOT grow substantially, but barely. Just this year, some major law firms raised salaries, but in doing so stated that bonuses would be lower, and that they no longer wished to operate their bonus systems like investment banks. So, a first year at a place like Skadden now makes 145 - 20 K more than 5 years ago, less than a 5% raise per year, but with the bonus decreasing, effectively makes the same as they did last year. The overall payout for the associate is about the same. Stagnation is what best describes legal salaries since 2000. And salary stagnation is certainly no reason for lawyers to be contributing to 200% price appreciation anywhere.

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  55. Lawyers' salaries have doubled during this time, and there are tens of thousands of lawyers working in DC.

    I simply don't believe that lawyer's salaries have doubled in the last six years.

    And there has to be tens of thousands more lawyers working in DC to explain the higher appreciation rates.

    But again. Who knows? Maybe you're right. No amount of arguing on this blog is going to change housing appreciation.

    Only increased inventory and decreased demand can do that...

    ....oh wait... that's what's happening.

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  56. Post express article on tuesday quoted median salary for starting lawyer was $55K. I am thinking this was nationwide.

    Private sector average was $80K

    Public sector jobs $41K

    Very high-end starting out was $150K

    For those in the public sector they could not even afford their law school debt...

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  57. PTT,

    Keep believing that Kool Aid propaganda that comes out of the Bush White House and the American Enterprise Institute.

    The American economy is more vulnerable than you think and Wal-Mart won't save China's behind. Wages for Chinese workers will inevitably climb. More and more Chinese are getting college degrees and professional jobs. Manufacturing will begin to shrink and move elsewhere regardless what the central bank does in China.

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  58. Since 2001, the number of registered lobbyists have doubled in Washington, DC. With a Republican Congress and a Republican White House, the corporate lobbying has reached new heights. Big business is showering tons of money on attorneys who do heavy lobbying on the Hill.

    The lobbying industry is one reason why lawyers salaries are so attractive in the DC area. The salaries and bonuses for the partners have far exceeded the income growth for associates slaving away with the grunt work.

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  59. Regarding the money magazine couple, they are doing what they should - saving money. It is a little sad that people like these are so rare that it gets published in a national magazine.

    We are their same age and have less in savings (just under $150K) but my household operated on one salary for three years out of the 7 we have been married (2 of which were while my husband attended B-school), so I feel that we have done okay, but not incredible. We are fully aware it is our own retirement we are funding. (And don't even mention college tution etc.)

    Regarding the couple's home equity - they have equity because they did what was smart - they SOLD when prices were high and I comend them for it. It served them well. It does not make them financial geniuses - they simply took advantage of an existing trend. And it was a wise thing to do.

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  60. "That's not true. The last time firms really raised salaries was during the dot.com era. I'm a lawyer, 5 years out."

    The problem with your conclusion is that you're only looking back 5 years, and you're not considering what happened 5-7 years ago.

    When I graduated from law school (7 years ago) most large firms were paying 60-80k year, and the bonuses were about 5-10k per year. During 1999-2001, the time you aren't considering, firms had "salary wars." During those few years, salaries at many local large firms when from 60-80k to 110-120k, and bonuses went up as well, to 20-30k. Now salaries start at 135k.

    It's true that salaries have stagnated during last few years, but if you look at the salaries during the relevant time, the time of real estate property appreciation, you'll see that salaries have in fact doubled or nearly doubled, depending upon your particular firm's bonus policy.

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  61. Disclaimer: This is not any financial advice to anyone.

    Most of you have no idea about what money or wealth is.

    Martin Wolf, in a recent article wrote thus..

    "Where prices have risen far faster than underlying incomes, only two possibilities exist.

    Either prices have moved to a higher equilibrium level, in which case future purchasers will have to save more and consume less. That would itself have significant economic implications. Or they have reached an unsustainable level, in which case they will fall in real terms. That would have far more significant economic implications."

    Now think about that. Think more about that. You think you can make your million flipping and live happily?

    Money is just not pieces of paper, my friend. Money is a claim against production. When Dick and Tom haggle about $100 in a trillion dollar economy, the outcome does not affect anyone else - but when a lot of Dicks and Toms argue about thousands, adding upto half a trillion, the outcome is not going to affect everyone.

    And those who are prepared for the outcome will fare better

    House prices are going to fall in _real_ terms. Whether you lose or not is going to determined by what price you bought. In general, I would say beware if you are using your house as a your main income or only retirement saving.

    Even if you are cashed out, unless you are super rich, there are no guarantees. Whats going to happen to the economy (via Toms and Dicks) is what will determine whether your cash/investment is worth something later.

    Going forward, other investments are going to rise _against_ _housing_.

    Rents simple cannot rise faster than income (cant get 30 yr loan to pay rent).

    If indeed rents rise, people will cut other spending, which will bit back via less economic growth. You might ask - does not the landlord get the money and spend it? Maybe - but it wont have the same economic effect. (Or in other words - why does Bill Gates getting a billion and 10000 Mac workers getting $100 have different economic effects)
    Rents will track income in real terms, if supply and demand keeps pace. If there is an oversupply, they WILL fall in real terms. If there is an undersupply, they WILL rise in real terms. The landlord's cost has nothing to do with it - other than as a corrective mecahnism. Landlords who run losses will go bankrupt and 2 things can happen - either someone else buys the rental at a lower price which makes the low rent profitable, or the house gets pulled down, thus reducing supply and raising market rates.
    Rents are determined by the market.

    Real wealth is not money, it is not gold. Real wealth is owning something that produces a positive cash flow. Real wealth is investing in yourself, to keep upto date in a fast changing world.

    Everyone is going to learn a few hard lessons. Wolf will be proved right.

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  62. Again,

    I would love to see Money magazine featuring a working class couple saving money.

    Oops...between the housing costs, taxes, and health care bills...there goes the take-home pay. So much for a feature article on REAL married couples struggling to save and invest this crazy economy.

    It's easy to save money when you have a couple working two high-paying professions.

    Spare me the yuppie worship.

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  63. Ok, so since 1999 law firm salaries may have doubled, but the crazy run-up in housing prices didn't start until 2003 (2002 at the earliest), by which time lawyers salaries were already stagnant. There is no reason then, based on lawyer's salaries at least, for the run up.

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  64. "Ok, so since 1999 law firm salaries may have doubled, but the crazy run-up in housing prices didn't start until 2003 (2002 at the earliest), by which time lawyers salaries were already stagnant. There is no reason then, based on lawyer's salaries at least, for the run up. "

    First, nobody said that lawyer salaries was *the* cause of real estate price appreciation. The point was that this salary increase could be a factor, and that all such factors should be considered as part of any serious analysis of what has happened to real estate prices (and also as to what will happen to real estate prices).

    Second, DC real estate price appreciation began in about 1999. You can check the data on this here or many other places. Ihttp://localmarketmonitor.com/Sample/WashingtonPMSA.pdf In DC the price appreciation has been fairly even year over year since about 1999 to 2005, thus there wasn't any "crazy" price run up in 2003 much more than 2001 or 2004.

    So what does this all mean? I suppose nothing to people who just dismiss this data because it does not support the presumption that real estate appreciation was nothing but speculation, and therefore there has to be a crash by 60%.

    On the other hand, you could conclude that in about 1999 DC real estate began to appreciate, and during the same year, lawyers' salaries began to also increase significantly (more or less doubling since then). Again, nobody said that the lawyers were the cause of the big real estate price increase, but considering the number of lawyers here in DC, there may be a relationship.

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  65. Ihateyuppies:

    If you actually read Money magazine, you will find that they have had many articles like the one that you would love to see. They have focused on working class folks and how they scrimped and saved.

    Perhaps you should actually read the magazine before commenting on the kinds of articles you'd love to see in it.

    Similarly, Money has had an article in almost every issue for the past year looking into real estate prices and whether these prices can last.

    Once again, these are the kinds of articles you say you'd love to see in Money. If you went out and read the magazine, you'd see that they have been doing these very kinds of articles for quite some time.

    In other words, read before you rant.

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  66. It's pretty stupid to say that lawyers are the cause of the property runup. Are lawyers all across the country causign the price spikes as well?

    Here's a better guess:

    1. Low mortgage interest rates.
    2. All sorts of new mortgage creations.
    3. Tech bubble meltdown frightened people out of the stock market and into something more "secure" like real estate.

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  67. "On the other hand, you could conclude that in about 1999 DC real estate began to appreciate, and during the same year, lawyers' salaries began to also increase significantly (more or less doubling since then). Again, nobody said that the lawyers were the cause of the big real estate price increase, but considering the number of lawyers here in DC, there may be a relationship."

    Ok, now I want to know this - just how many lawyers are there in DC, making that money, and what is their percentage population wise? I just can't imagine that they have much of anything to do with home prices, especially if you assume that the younger lawyers spend a minimum of a year or two paying off their debt (most much longer),which even at a big firm does not leave much extra cash for purchasing a home.

    The argument just seems akin to the "Wall St. money" argument people in NYC make.

    ReplyDelete
  68. There are a number of fundamental factors that drive the housng market prices in DC:
    - All the lawyers in DC make a bunch of money
    - They are not making anymore land in DC (any land that is available is much too expensive to develop)
    - All the government workers make a bunch of money too
    - The Federal Government is there can never be an economic downturn
    - Everyone loves the weather (wait that's FL nevermind)

    Am I missing any factors?

    ReplyDelete
  69. bibba said... Even if you are cashed out, unless you are super rich, there are no guarantees. Whats going to happen to the economy (via Toms and Dicks) is what will determine whether your cash/investment is worth something later.

    Couldn't agree more. There may be a few dim bulbs who are actually hoping for a crash-- most of us are watching it like a hawk precisely because we know it will affect us-- cashed out or not. Prices don't disconnect from reality for long without ugly consequences.

    ReplyDelete
  70. "My problem with Money.com articles is that they paint money with happiness. Affluence brings joy! Flipping properties for a quick profit is bliss!"

    Affluence doesn't bring joy, financial security does. Now, that could mean making a jillion dollars, or it could just mean living within your means. If a couple both got college degrees from state schools, paid off their student loans and held off having kids, does that make them yuppies, or just wise? Do you hate them then? If so, why?

    Look, poverty is pretty terrible, don't get me wrong, but it's not like most people in the country don't have a way to get out of it.

    When one talks about "what are the 25-year-old single mothers with 3 kids supposed to do?", well maybe they shouldn't have had 3 kids so young.

    ReplyDelete
  71. "Look, poverty is pretty terrible, don't get me wrong, but it's not like most people in the country don't have a way to get out of it."

    Dude, very few people can turn it around once they've entered into poverty. Some do but most don't. It takes money to make money. It takes money to go to college. It takes money to buy clothes for interviews. In addition, if you're in poverty chances are you were never put into a situation to develop the necessary social skills that most people from middle class families learn from their parents. Don't pretend that you don't owe the sucess you had to your parents and others in society that were gracious enough to give you a leg up.

    ReplyDelete
  72. KoolAid? Please. You spout nonsense like you are some economic genius but you are nothing but a babe in the woods wondering where is your mommy. You sound lost.

    Quotes from the welfare liberal:
    "If the American economy sinks into recession, China and India are in trouble. That means fewer Americans can buy their manufactured goods. American corporate revenue takes a hit and Chinese workers get laid off. "

    "The American economy is more vulnerable than you think and Wal-Mart won't save China's behind. Wages for Chinese workers will inevitably climb. More and more Chinese are getting college degrees and professional jobs. Manufacturing will begin to shrink and move elsewhere regardless what the central bank does in China."

    What is your point? If workers get laid off doesn't that mean wages get depressed so that it remains competitive? If there are more and more professionals doesn't that mean they have higher income and as a result generating domestic demand thereby insulating their economy from the US economy? So they won't be in trouble if the US goes into a recession? You wander around like a drunk hoping that eventually you'll make it to the bathroom. Are you sure you aren't drinking that spiked Koolaid?

    I wonder if you are that same fool I met at a summer job many years ago. He kept telling me he was a financial advisor, but couldn't explain to me what area was his specialty. All he did was babble that he was a financial advisor while standing next to me in the assembly line. All you do is regurgitate crap and hope that one of the noodles in the vomit hits the mark and impresses your drunk buddy.

    I'm pretty sure that the local real estate market is overpriced, but I'm also sure you aren't going to benefit from any price correction. You're too much the puffer fish, all air no substance.

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  73. Fritz,

    Money magazine is in the business of promoting participation in the capitalist system. Invest in housing. Invest in stocks. Invest in bonds. Unfortunately, only certain socio-economic groups can fully enjoy the benefits of investing.

    Money is no different from other business/finance magazines.

    BTW...the Money magazine "Best Places to Live" guide is the most useless study of regional living standards.

    How much of Money magazine is dedicated to promoting capitalism versus non-editorial news coverage of business and finacial trends?

    ReplyDelete
  74. A reoccuring asserrtion by bubbleheads on this blog is that DC real estate appreciation cannot be explained by a rise in DC residents' income. Someone explained that lawyers working and living in DC have had huge salary increases. I always thought it was clear to everyone that there are a lot of lawyers here. But now people are saying, no, there aren't enough lawyers in DC to have any impact on the real estate market. What? So everybody knows there are a lot of lawyers living and working in DC, but this is forgotten when it doesn't fit your bubble model.

    At any rate, if you work and live in DC (which I presume those of you "experts" on DC real estate do), I am sure you know there are a lot of lawyers here. How many? I don't know for sure, but I read in a reputable publication that (don't have time to provide link) that 1/3 of white males who live in NW DC are lawyers. That's a large percentage of the potential home buyers here, and a group of buyers that could influence the market.

    ReplyDelete
  75. PTT,

    Frankly, your posts about macroeconomics look very amateurish.

    Pot...Kettle...Black.

    Bye.

    ReplyDelete
  76. I dont own here I rent. So it makes complete sense for me to hope the realestate market tanks. That would be in my best interest. Am I a jerk for wanting the realestate to tank so I can buy a home. I am no more a jerk than the people who were rubbing it in everyones face about how much equity they have.
    The plain facts are this, if you stretched to buy a home, you have noone to blame but yourself. If the market crashes, you deserve to take a hit because you treated a property as an investment instead of a home. Anyone who could afford to buy a home at recent prices without stretching wont have any problems weathering a 50% decline in home values, cause they have a large enough salary to compensate for their actions.

    It just wouldnt make sense for me to root for home prices to increase, just as it wouldnt make since for a homeowner to root for home prices to decrease. Neither sides are "jerks", or should have their "children molested", as one genious quote I read put it. What a idiot.

    Full disclosure, BSME University of Wisconsin, MSE Johns Hopkins, gg-14 federal employee, no debt. I cant afford to comfortably buy a home anywhere within 40 miles of dc. I say afford, which is 3X my income cause anymore than that is not affording, its stretching. If prices dont come down I will just leave, like many others I work with said they would do. One other note, our agency is having trouble feeling engineering positions due to the high cost of living. People are turning down 14/10 offers to come here. FYI.

    ReplyDelete
  77. I hate yuppies

    money magazine has had more misses then hits- sold to the sheep and dumb followers

    as far as capitalism solving the ills of society- I would suggest you look at Communism the opposite extreme, which might mean

    disaster.

    if you are smart enough to see the paralells you might have a brain. The US economy is on the brink-

    ReplyDelete
  78. I went to Detroit on a business trip. During a lunch I asked one of my Detroit associates about real estate. He said real estate in Detroit had increased a lot because everyone in Detroit is in the auto industry and has large salaries. Sound familiar? Every town has its own myth to why prices have increased. Today's myth seems to be lawyers in DC drive housing prices. Tomorrow we will be back to not making anymore land or federal government workers. All these explanations are tired and don't address the root cause, which is lending standards and credit availability.

    ReplyDelete
  79. Anonymous Engineer,

    Well stated.

    btw...Can you find other federal engineering/technical jobs that suit your experience and knowledge outside of the Washington, DC region? For some people, their jobs are so specialized that it's tough to find new employment opportunities outside of the federal government.

    ReplyDelete
  80. With regard to the possiblity of tens of thousands more lawyers in recent years, that is exactly what happened. The number of registered lobbyists (lawyers) has increased from around 10,000 to over 30,000 in the last 5 or 6 years. All these lawyers have assistant lawyers who are not registered as lobbyists, but noneless relatively highly paid. While not all are necessarily based in DC the majority are.

    (my source for this info has been all of the articles about Tom Delay and his K Street Project)

    ReplyDelete
  81. Skytrekker, I believe in a third way when it comes to economics. You can't have complete Communism but you can't have unbridled capitalism either.

    ReplyDelete
  82. Anon at 12:02,

    That's a good post. I know there will be a correction in real estate prices. And I'd like you to afford a home you like too. I'm a homeowner, bought five years ago, and consequently have a lot of equity. Of course I don't want my home value to decrease, but over the long run I don't think it matters that much, so I'm not too worried.

    This is off topic, but what amazes me is that so many people on this blog say things like "I want to buy a home, not an investment." Obviously this is an attempt to distinguish themselves from the flippers they vilify. But it’s total BS. The truth is that everybody wants to buy a house that is also a good investment. That's why many of the people on this blog have decided not to buy, because it doesn't make economic sense (in other words it’s not a good investment).

    So please stop the double standards and the moral superiority, don't condemn flippers just because they purchased property as an “investment," and then attempt to cast yourself as superior to flippers because you want to buy a "home" rather than an investment. The truth is that everybody wants to buy property that’s a good investment.

    ReplyDelete
  83. Anon 12:21,
    There is a distinct difference between some on who is buying a home to make money or someone who is buying a home to live in.

    You are correct in stating that,
    "The truth is that everybody wants to buy property that’s a good investment."

    However, my intention is not to make a killing, just to not lose alot of money and have more personal freedom than apartment living affords.

    Ihate yuppies,
    There are many federal jobs around the country that I kind transfer to, but I unfortunately started dating someone here! But, we both have talked about leaving the area if things stay out of whack as they are now.
    The funny thing is that federal wages are only a few thousand dollars less in other areas. I thought the cola would be huge here, it is not.

    ReplyDelete
  84. Anon at 12:21 p.m.

    It pains me to agree with you. Even bubbleheads like myself want a decent return on my property some day.

    ReplyDelete
  85. "Today's myth seems to be lawyers in DC drive housing prices. Tomorrow we will be back to not making anymore land or federal government workers. All these explanations are tired and don't address the root cause, which is lending standards and credit availability."

    Thanks for sharing your undoubtedly accurate assesement of the problem. Certainly your myths are more accurate than any of the others.

    Wait, is everybody here color blind, real estate analysis is only black and white, there's no possibility of a combination of a number of various factors driving the real estate market? Apparently not. Its only credit and lenders. Well at least the banks can take the blame instead of the lawyers (finally!).

    Perhaps somebody tell David the blog can take a holiday, Anon 12:11 has solved all of the bubble mystery.

    ReplyDelete
  86. "There is a distinct difference between some on who is buying a home to make money or someone who is buying a home to live in"

    I find this distinction to be an artificial construct, created by by bubbleheads, and utilized to further their agenda.

    ReplyDelete
  87. "I find this distinction to be an artificial construct, created by by bubbleheads, and utilized to further their agenda."

    What is the bubblehead agenda? Just so I know...I must have missed the memo.

    ReplyDelete
  88. Flippers and landlords buy a home as an "investment". They don't buy it to live in. They buy it for someone else to live in.

    However, I strongly suspect that the cap rates are too low in the DC area to make much money as a landlord. That's why so many apartment buildings are being converted to condos. That leaves just the flippers, most of whom probably don't even know what a cap rate is.

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  89. D in DC (proper)May 12, 2006 4:07 PM

    Re agenda, read a few posts, it should become apparent. But I'll try to summarize it for you:

    1. Renters deserve respect.

    2. The real estate market will crash (this is not open to debate).

    3. Anyone who questions no. 2 is a flipper, bagholder, or someother variation of a homeowner.

    4. Bubbleheads do not question other bubbleheads' assertions re real estate market. For example, if a Bubblehead states that condo prices will drop at least 80%, only flippers or bagholders will be critical of such assertion.

    5. Although all renters deserve respect for their choice to rent (see no. 1) renters may opt to buy real estate, but only in the future after the market crashes (see no. 2).

    6. In the event a bubblehead owns real estate, or intends to purchase real estate, said bubblehead is to be distinguished from the flippers and other scum referenced in no. 3 because bubbleheads buy real estate as homes not investments.

    7. Bubbleheads have superior analysis skills, thus they correctly predicted the real estate market crash before anyone else.

    8. Bubbleheads may not discuss their failure to buy property during 1999-2001(and thus proft from the real estate run-up) because this failure would tarnish their self-described analysis and prediction skills described above.

    9. Bubbleheads may take enjoyment in other peoples' suffering. Foreclosures, bankruptcies, ruined credit, and other suffering is accepted in the bubblehead society as certain people (see no. 3) getting what they deserve.


    I may update as further details of agenda become known

    ReplyDelete
  90. Everyone wants to get rich quick.

    If that were possible, everyone would be rich.

    When "the next new thing" rolls around, really lucky people are already there and make lots of $$$$$. Really, really, really, smart people were likely also there and make lots of $$$$$.

    Normal smart people, see the developing pattern and get in quickly. They make a lot, but not lots, of $$$.

    When everyone else starts paying attention, they want to make $$$$$ too. So they give it a go until $$$ declines to $$, goes down to $, and finally is no more...

    This has happened in the past, is happening now, and will happen again.

    My blog related opinion now:

    I think we're on the turning point (the single $) in real estate because I observe people all around me, in the office, at the bar, in the airport, at a cocktail party, all discussing their latest strategy in housing. These are people who likely 3 years ago knew nothing about the industry, and today, still have full time jobs doing something else. They're far from dedicated to a job in the RE industry, they're novices all trying to cash in.

    What concerns me are the every day people caught up in the frenzy. There are plenty of people who do only want to buy a house for the long haul. Will they pay too much? Will lenders convince them they are fine? That they can refinance for lower in 2 years with 40% appreciation? 20% YOY growth is just not sustainable...

    My $0.02.

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  91. To all the bubbleheads who hate money.cnn.com and all the house-prices-can't-fall types who love it, today's headline article is "If you're a speculator ... get out now". The picture next to the headline is of a house inside a bubble.

    ReplyDelete
  92. Found this interesting post on another blog:

    "For all the property owners on this blog who are lucky enough to purchase your properties years earlier (good for you), just want to ask you 2 simple questions:

    1. Can you afford to purchase your house, at its current value?
    2. Would you repurchase your house, at its current value?

    If "no" for either, how can you expect the housing price to keep at present level?

    I'm so tired of the cliche name of "bitter (mean) renter", or the same-old assumption of being chicken 3 years ago not buying when price was low. Were the property price at the same level as three years ago with moderate appreciation (about 5-6% per year), I would buy in a heart beat.

    Homeowners, assume yourself just finish your college study and find a decent job, or just get married, or simply want to upsize because of growth in family size now, and suddenly face with such out of basic property prices, would you buy? So because some people were born 3 years later, or got married 3 years later, or had child 3 years later than you, they got punished for unreasonbale property prices? Isn't that what you are indicating? Speaking of mean spirit, isn't homeowners' wish of sustaining current property price sort of mean spirit also?"

    Guess it at least means:

    1. Not all Bubbleheads are Chicken Little 3 years ago as assumed by HousingHeads.
    2. HousingHeads also take enjoyment in other peoples' suffering.

    This kind of debate can go on and on, and only time will tell.

    ReplyDelete
  93. great posts today...

    what i've gleaned is that for prices to drop we need:

    1) tightened lending standards
    2) a killer virus that only attacks lobbyist-lawyers

    and the only immutable truth is BH and HH get along like jews and muslims in the middle east.

    coincidentally, the above 2 factors will stop moral decay in America and cure rickets in Hungary.

    ReplyDelete
  94. I am glad to see ihateyuppies hijacking the housing bubble blog into a discussion of the ills of capitalism. Of course, the irony is that the housing market will, in fact, fall, if free markets are allowed to operate unfettered and will only be propped up with governemnt support. I believe this leaves some of you with some good ol' cognitive dissonence.

    Daivd, I love your blog and agree with the bubble, but you do yourself no service by having most of the action take place on the comment threads like this. I have sent a couple of people here to check it out and their uniform reaction has been, intersting posts but the commentors are verging on sociopathy.

    ReplyDelete
  95. I agree with anonymous 1:37PM. The free market is self-correcting. Also, there is a lot of stupid stuff being said on both sides in this comment thread, but that is no reason to stifle free speech.

    By the way, while we're all busy discussing whether house prices will fall, has anyone noticed the stock market today?

    ReplyDelete
  96. ___________________________________

    9/11 truth movement details academic research on the controlled demolition of the WTC 1,2 and 7 buildings on 9/11 as a pretext for a long petrodollar warfare to be carried out over many years (probably because of "Peak Oil"). It's implications are far reaching in that they show that the current Iranian issue is more about oil that it is about nuclear weapons. While it's still unclear who orchestrated these events it's clear the parties which benefited include oil companies, the military industrial complex, and the central bankers (or some small secret combination of them who are pulling the political strings).

    As a result of these and other related events (and most importantly) I believe the US stands on the edge of an economic crisis. Specifically it is a dollar currency crisis . Consider the following, 1) As of March 23, 2006 the Fed made the unprecedented move of halting the publishing of M3 which is M2 + Eurodollars. And this they did very quietly. The Fed could have the printing presses running 24/7 and we wouldn't know it. Governments around the world (including China) are moving away from the dollar in their currency reserves. Sweden is the latest central bank to dramatically reduce it's holding of the dollar. 2) Gold, Silver, and other commodities are hitting all-time highs and many experts have advised to shift a portion of assets towards hard assets 3) Ben Bernanke (the new Fed) is a world expert in (of all things) the Great Depression. This might just be coincidence. 4) Iran is set to open their oil bourse this week to be traded in Euros instead of dollars; the first of it's kind and an open attack on dollar hegemony in oil trading.

    In case the economy goes south people are loading up on hard assets, and rightly so. Maybe this whole thing will just blow over, but after reading the following quote I thought I would run it by 911blogger.com to see what you guys thought:

    "The pending economic crisis that now faces America is painfully obvious. If even a fraction of potential foreign claims against our gold supply were presented to the Treasury, we would have to renege on our promise. We would be forced to repudiate our own currency on the world market. Foreign investors, who would be left holding the bag with American dollars, would dump them at tremendous discounts in return for more stable currencies, or for gold itself. The American dollar both abroad and at home would suffer the loss of public confidence. If the government can renege on its international monetary promises, what is to prevent it from doing the same on its domestic promises? How really secure would be government guarantees behind Federal Housing Administration loans, Savings and Loan Insurance, government bonds, or even social security?

    "Even though American citizens would still be forced by law to honor the same pieces of paper as though they were real money, instinctively they would rush and convert their paper currency into tangible material goods which could be used as barter. As in Germany and other nations that have previously traveled this road, the rush to get rid of dollars and acquire tangibles would rapidly accelerate the visible effects of inflation to where it might cost one hundred dollars or more for a single loaf of bread. Hoarded silver coins would begin to reappear as a separate monetary system which, since they have intrinsic value would remain firm, while printed paper money finally would become worth exactly it's proper value--the paper it is printed on! Everyone's savings would be wiped out totally. No one could escape.

    "One can only imagine what such conditions would do to the stock market and to industry. Uncertainty over the future would cause the consumer to halt all spending except for the barest necessities. Market for such items as television sets, automobiles, furniture, new homes, and entertainment would dry up almost overnight. With no one buying, firms would have to close down and lay off their employees. Unemployment would further aggravate the buying freeze, and the nation would plunge into a depression that would make the 1930s look like prosperity. At least the dollar was sound in those days. In fact, since it was a firm currency, its value actually went up as related to the amount of goods, which declined through reduced production. Next time around, however, the problems of unemployment and low production will be compounded by a monetary system that will be utterly worthless. All the government controls and so-called guarantees in the world will not be able to prevent it, because every one of them is based on the assumption that the people will continue to honor printing press money. But once the government itself openly refuses to honor it--as it must if foreign demands for gold continue--it is likely that the American people will soon follow suit. This in a nutshell is the so-called 'gold problem.' (An Enemy Hath Done This, p. 218.)" (The Teachings of Ezra Taft Benson p 639-640.)

    ". . .it is even possible that some of the government manipulators who have brought us into this economic crisis are hoping that, in panic, we, the American people, literally will plead with them to take our liberties in exchange for the false promise of 'security.' As Alexander Hamilton warned about two hundred years ago: 'Nothing is more common than for a free people, in times of heat and violence, to gratify momentary passions by letting into the government principles and precedents which afterward prove fatal to themselves' (Alexander Hamilton and the Founding of the Nation, p. 21.) Let us heed this warning. Let us prepare ourselves for the trying time ahead and resolve that, with the grace of God and through our own self-reliance, we shall rebuild a monetary system and a healthy economy which, once again, will become the model for all the world. (An Enemy Hath Done This, pp. 220-21.)" (The Teachings of Ezra Taft Benson p 640.)

    What I've sent is just the tip of the iceberg, but it's enough to get the idea. Thanks for consideration.


    P.S. Links related to the above comment.

    Fed halts M3

    Iranian Oil Bourse (supposed to open in March but was delayed until this week)

    Latest Iranian Oil Bourse update

    Precious Metal Prices

    1-year gold prices

    A couple of random support articles:

    G7 sees dollar decline

    Dollar to bottom out

    Bill Gates bets against the dollar

    The Sickly Dollar

    Europe simulates financial meltdown

    Swedish Central Bank Shuns the Dollar

    The Endangered US Dollar

    The Federal Reserve: A Fraud?

    ReplyDelete
  97. >"There is a distinct difference between some on who is buying a home to make money or someone who is buying a home to live in"
    >
    >I find this distinction to be an artificial construct, created by by bubbleheads, and utilized to further their agenda.
    >

    There is a distinction. You are wrong.

    Housing is a consumption good. And in fact, housing returns, in real terms have been pretty low for all history, except for manias.

    People who do not buy now are not making an investment decision - they just think that the service the house provides - housing - is not worth the price.

    Cost of housing = carrying costs/yr - amortized(sale price - purchase price)yr

    See the last part i.e. (sale price - purchase price)/yr. The amortized increase or decrease in housing cost?

    You think that's an investment factor.

    But in reality it is a cost factor for those who look at housing as an expense - that is those who need to live in their house.

    There are those who dont want to live in their house (and also for some who live in their house), or who think they'll make money off the house. They just think that the cost of housing will be negative, that they'll get money living in a house or buying and keeping/renting the house

    To do that, you'll have to have
    --negative carrying costs ie. rent > expenses
    --profit on sale (until you sell, there's none of it)

    The first is way most landlords make most of the money. And since carrying costs are based on interest ( a % on purchase price) and rent, buying at the right price and market value of rent is key.

    The second is hard, in real terms, and is mostly driven by purchasing low. Temporary aberrations can cause the second to generate money too. But mostly that just means that someone else got screwed. And these aberrations will extract their cost. You might have a lot of "money" for a short time, but the economic hemorrage will bite you. Money does not have meaning outside of the claims on production it can make.

    Houses dont generate wealth. Its that simple. Otherwise all we have to do is buy a house, live in it, and sell it every 2 years. Or to make more money, buy more houses. [In fact we as a country are going to realize this idiocy soon - instead of investing in R&D or production, which generate wealth down the line, we have invested in houses]

    What asset manias do is tranfer wealth between people. (ala Ponzi)

    And the people who got in and got out first take money from those who did last.

    And given the economic cost of the mania, unless you are a very, very big fish, even if you got in and got out first, you would not make anything. It can make you feel wealthy temporarily - just temporarily.

    Really, you guys need to get educated. You need to _understand_ the word "wealth"

    TANSTAAFL

    ReplyDelete
  98. Anon 1:37 p.m.

    Last time I checked, we have freedom of expression in this country. The commentators will go off on tangents. Some commentators have zany ideas about real estate or the economy in general. So what? If you want hard-core analysis of real estate economics, go read an academic journal.

    Furthermore, the fact that I cannot afford a decent place to live in the Washington, DC metro area, is an emotional issue. I am tired of housing heads denying that there is a fundamental problem with the real estate market.

    ReplyDelete
  99. "Daivd, I love your blog and agree with the bubble, but you do yourself no service by having most of the action take place on the comment threads like this."


    Thanks for the compliments. The amount of comments have exploded on this blog.
    Still trying to figure out what to do regarding comments.


    "I have sent a couple of people here to check it out and their uniform reaction has been, intersting posts but the commentors are verging on sociopathy."

    A few of the commentators are 'verging on sociopathy." Agrees

    ReplyDelete
  100. The bubblehead agenda above is absolutely PRICELESS!!

    It really does sum up a lot of the childish commentating on this site.

    ReplyDelete
  101. ihateyuppies said

    "[t]he fact that I cannot afford a decent place to live in the Washington, DC metro area, is an emotional issue. I am tired of housing heads denying that there is a fundamental problem with the real estate market."

    Methinks the poster doth protest too much. If you actually believed in your arguments, why would it be an emotional issue? Instead, you should be thankful that you rent, and await the correction with the certainty of the true believe. That you get so worked up over it makes it appear as if, instead, you are worried that the train has left the station without you on it, at best, or are a deranged lunatic, at worst.

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  102. epictetus is so wrong for so many reasons, I could never get to all of them. I will point out that the U.S. is not on the gold standard, so foreigners can't go to the U.S. Treasury and say "give me gold in exchange for my dollars." Besides, even if we were on the gold standard, they'd be going to the wrong building. Our currency is printed by the Federal Reserve Bank, not the Treasury Department.

    Regarding the real estate market, everybody knows that to invest wisely you need to "buy low and sell high". So I ask everyone, are housing prices today low or high?

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  103. >If you actually believed in your arguments, why would it be an emotional issue? Instead, you should be thankful that you rent, and await the correction with the certainty of the true believe. That you get so worked up over it makes it appear as if, instead, you are worried that the train has left the station without you on it, at best, or are a deranged lunatic, at worst.

    Thats right. Most of the myths about owing are just that - myths.

    Rent a place for your needs. Renting is not throwing away money. Not at current house prices. Let the landlord pay your housing costs. After all if houses are really worth these prices, and rents are not in line with owning costs, making the landlord pay the difference is a good deal.

    Really, in this market the landlord is paying you. That's what my landlord is doing for me. I'm happy :-). I'll renew the lease for yet another year - maybe I'll let home tack 3% this year, last year I only agreed for 2%. Its a competitive market.

    And I can buy cash down - but I dont see why.

    ReplyDelete
  104. James is right that we are not on the gold standard. The above quote was misleading in this regard. However since James mentions the Federal Reserve Bank I thought I would just add a few quotes he might not be aware of:


    Louis T. McFadden, Congressman and Chairman of the Committee on Banking and Currency, 10 June 1932, in a speech to the House of Representatives, Congressional Record, pp. 12595–12603; see also Congressman Louis T. McFadden on the Federal Reserve Corporation: Remarks in Congress, 1934, reprinted by the Arizona Caucus Club, 1978

    Mr. Chairman, we have in this Country one of the most corrupt institutions the world has ever known. I refer to the Federal Reserve Board and the Federal Reserve Banks, herinafter called the Fed. …
    This evil institution has impoverished and ruined the people of these United States, has bankrupted itself, and has practically bankrupted our Government. It has done this through the defects of the law under which it operates, through the maladministration of that law by the Fed and through the corrupt practices of the moneyed vultures who control it.
    Some people think that the Federal Reserve Banks are United States Government institutions. They are private monopolies which prey upon the people of these United States for the benefit of themselves and their foreign customers; foreign and domestic speculators and swindlers; and rich and predatory money lenders. In that dark crew of financial pirates there are those who would cut a man’s throat to get a dollar out of his pocket; there are those who send money into states to buy votes to control our legislatures; there are those who maintain International propaganda for the purpose of deceiving us into granting of new concessions which will permit them to cover up their past misdeeds and set again in motion their gigantic train of crime.
    These twelve private credit monopolies were deceitfully and disloyally foisted upon this Country by the bankers who came here from Europe and repaid us our hospitality by undermining our American institutions. Those bankers took money out of this Country to finance Japan in a war against Russia. They created a reign of terror in Russia with our money in order to help that war along. They instigated the separate peace between Germany and Russia, and thus drove a wedge between the Allies in the World War. They financed Trotsky’s passage from New York to Russia so that he might assist in the destruction of the Russian Empire. They fomented and instigated the Russian Revolution, and placed a large fund of American dollars at Trotsky’s disposal in one of their branch banks in Sweden so that through him Russian homes might be thoroughly broken up and Russian children flung far and wide from their natural protectors. They have since begun breaking up of American homes and the dispersal of American children. …
    The Wilson administration, under the tutelage of those sinister Wall Street figures who stood behind Colonel House, established here in our free Country the worm-eaten monarchical institution of the “King’s Bank” to control us from the top downward, and to shackle us from the cradle to the grave. …
    Every effort has been made by the Fed to conceal its powers—but the truth is—the Fed has usurped the Government. It controls everything here and it controls all of our foreign relations. It makes and breaks governments at will. No man and no body of men is more entrenched in power than the arrogant credit monopoly which operated the Fed. …
    Mr. Chairman, when the Fed was passed, the people of these United States did not perceive that a world system was being set up here … and that this country was to supply the financial power to an “international superstate.” A superstate controlled by international bankers, and international industrialists acting together to enslave the world for their own pleasure?

    Louis T. McFadden, 9 March 1933, in his Speech to the House of Representatives, Congressional Record
    Mr. Chairman, I see no reason why citizens of the United States should be terrorized into surrendering their property to the International Bankers who own and control the Federal Reserve.

    Louis T. McFadden
    It was not accidental [the 1929 stock-market “crash”]. It was a carefully contrived occurrence. … The international bankers sought to bring about a condition of despair here so that they might emerge as rulers of us all.
    Charles A. Lindbergh, Sr., U.S. Senate, Nov. 1912
    When the President signs this act [Federal Reserve Act of 1913], the invisible government by the money power—proven to exist by the Monetary Trust Investigation—will be legalized. The new law will create inflation whenever the trusts want inflation. From now on, depressions will be scientifically created.

    Franklin D. Roosevelt, U.S. President, 1941
    In politics, nothing happens by accident. If it happened, you can bet it was planned that way.

    Congressman Wright Patman, Congressional Record (29 Sep. 1941)
    We have what is known as the Federal Reserve Bank System. That system is not owned by the Government. Many people think that it is because it says “Federal Reserve.” It belongs to private banks, private corporations. So we have farmed out to the Federal Reserve Banking System that which is owned exclusively, wholly, one hundred percent to the private banks—we have farmed out to them the privilege of issuing the Government’s money!

    Robert Reich, former Secretary of Labor under Bill Clinton, in USA Today (7 January 1999)
    The dirty little secret is that both houses of Congress are irrelevant. … America’s domestic policy is now being run by Alan Greenspan and the Federal Reserve and America’s foreign policy is now being run by the International Monetary Fund. … When the president decides to go to war, he no longer needs a declaration of war from Congress.

    William Lyon Mackenzie King, Prime Minister of Canada, 1935
    Once a nation parts with the control of its currency and credit, it matters not who makes the nations laws. Usury, once in control, will wreck any nation. Until the control of the issue of currency and credit is restored to government and recognized as its most sacred responsibility, all talk of the sovereignty of parliament and of democracy is idle and futile.

    Henry Ford, founder of Ford Motor Company
    It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.

    Andrew Jackson, U.S. President, to Congress in 1836, closing the second Federal Bank
    The bold effort the present [central] bank had made to control the government … are but premonitions of the fate that await the American people should they be deluded into a perpetuation of this institution or the establishment of another like it.

    James Madison, 4th U.S. President
    History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling the money and its issuance.

    Horace Greeley, editor of the New York Tribune, who ran against Ulysses Grant for presidency, speaking in 1872 in reference to the National Bank Act of 1863
    While boasting of our noble deeds we’re careful to conceal the ugly fact that by an iniquitous money system we have nationalized a system of oppression which, though more refined, is not less cruel than the old system of chattel slavery.

    John Sherman, protégé of the Rothschild banking family, in a letter sent to New York bankers, Morton, and Gould, in support of the then proposed National Banking Act, 25 June 1863
    The few who could understand the system will either be so interested in its profits, or so dependent on its favors, that there will be no opposition from that class, while on the other hand, the great body of the people mentally incapable of comprehending the tremendous advantage that capital derives from the system, will bear its burdens without complaint, and perhaps without even suspecting that the system is inimical to their interests.

    Reginald McKenna, Secretary to the Treasury (1903), President of the Board of Education (1907–08) First Lord of the Admiralty (1908–1911), Home Secretary (1911–1915) and Chancellor of the Exchequer (1915–1916), and Chairman of the Midland Bank (1918), speaking in 1924.
    I am afraid the ordinary citizen will not like to be told that the banks can, and do, create money. … And they who control credit of the nation direct the policy of governments and hold in the hollow of their hands the destiny of the people.
    Putting It Simply, a publication of the Boston Federal Reserve Bank
    When you or I write a check there must be sufficient funds in our account to cover the check, but when the Federal Reserve writes a check there is no bank deposit on which that check is drawn. When the Federal Reserve writes a check, it is creating money.

    J. P. (John Pierpont) Morgan, one of America’s wealthiest financiers and international bankers, in a private communiqué to leading U.S. Bankers only, 1934
    Capital must protect itself in every way. … Debts must be collected and loans and mortgages foreclosed as soon as possible. When through a process of law the common people have lost their homes, they will be more tractable and more easily governed by the strong arm of the law applied by the central power of leading financiers. People without homes will not quarrel with their leaders. This is well known among our principle men now engaged in forming an imperialism of capitalism to govern the world. By dividing the people we can get them to expend their energies in fighting over questions of no importance to us except as teachers of the common herd.

    Major L. L. B. Angus
    The modern Banking system manufactures money out of nothing. The process is perhaps the most astounding piece of sleight-of-hand that was ever invented. Banks can in fact inflate, mint and unmint the modern ledger-entry currency.

    Ralph M. Hawtrey, Former Secretary of the British Treasury
    Banks lend by creating credit. They create the means of payment out of nothing.

    Josiah Charles Stamp, President of the Bank of England
    Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits.

    Thomas Jefferson, U.S. President, in a letter to Albert Gallatin, Secretary of the Treasury, 1802
    If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that grow up around them will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.

    John Foster Dulles, former Secretary of State
    Somehow we find it hard to sell our values, namely that the rich should plunder the poor.

    Andrew Jackson, U.S. President, in a letter to T. H. Colman, 26 April 1824
    I am one of those who do not believe that a national debt is a national blessing, but rather a curse to a republic; inasmuch as it is calculated to raise around the administration a moneyed aristocracy dangerous to the liberties of the country.

    Thomas Jefferson
    I believe that banking institutions are more dangerous to our liberties than standing armies. Already they have raised up a monied aristocracy that has set the government at defiance. The issuing power should be taken from the banks and restored to the people to whom it properly belongs.

    John C. Calhoun, American statesman, 27 June 1836
    A power has risen up in the government greater than the people themselves, consisting of many and various powerful interests, combined in one mass, and held together by the cohesive power of the vast surplus in banks.

    John Adams
    All the perplexities, confusion and distress in America arise, not from defects in their Constitution or Confederation, not from want of honor or virtue, so much as from the downright ignorance of the nature of coin, credit and circulation.

    Robert Hemphill, Credit Manager of Federal Reserve Bank, Atlanta, Ga.
    This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.

    Vladimir Ilich Lenin
    The surest way to destroy a nation is to debauch its currency.

    Abraham Lincoln, shortly before his assassination
    I see in the near future a crisis approaching that unnerves me and causes me to tremble for the safety of my country; corporations have been enthroned, an era of corruption in High Places will follow, and the Money Power of the Country will endeavor to prolong its reign by working upon the prejudices of the People, until the wealth is aggregated in a few hands, and the Republic is destroyed.

    President Franklin D. Roosevelt, in a letter written 21 Nov. 1933 to Colonel E. Mandell House
    The real truth of the matter is, as you and I know, that a financial element in the large centers has owned the government of the U.S. since the days of Andrew Jackson.

    John Jay, American statesman and first Chief Justice of U.S. Supreme Court
    Those who own the country ought to govern it.

    President Woodrow Wilson, speaking in 1916 in reference to signing the Federal Reserve Act in 1913
    I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world—no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominant men.

    Louis Brandeis, U.S. Supreme Court Justice
    We can have democracy in this country, or we can have great wealth concentrated in the hands of a few, but we can’t have both.

    Archibald E. Roberts, Lt.Col. AUS, ret., Committee to Restore the Constitution, testimony at a public hearing, Wisconsin State Legislature’s House of Representatives, Why America is Bankrupt, 1971
    A significant portion of the American public is yet to become aware of the “Invisible Government of Monetary Power,” although this knowledge is common in Europe. Americans still believe that they are working toward a better way of life. Surreptitiously, however, social customs and forms of administration in the United States are being carefully and gradually modified. The change from one type of culture to another is thus accomplished without arousing serious public challenge. The stark truth is that America is now passing from a Constitutional Republic into a totalitarian, world-wide government. World dominion is the ages-old dream of the mattoids who have mastered the science of control over people. Their success in the United States is directly related to two central issues: (1) transfer of money control from the people into the hands of an international banking combine, and (2) creation of a complex and confusing judicial system designed to frustrate justice.

    Ramsey Clark, former U.S. Attorney General, interview in The Sun, August 2001
    But we’re not a democracy. It’s a terrible misunderstanding and a slander to the idea of democracy to call us that. In reality, we’re a plutocracy: a government by the wealthy.

    Professor Carroll Quigley, Tragedy and Hope: A History of the World in Our Time (1966)
    For the first time in its history, Western Civilization is in danger of being destroyed internally by a corrupt, criminal ruling cabal which is centered around the Rockefeller interests, which include elements from the Morgan, Brown, Rothschild, Du Pont, Harriman, Kuhn-Loeb, and other groupings as well. This junta took control of the political, financial, and cultural life of America in the first two decades of the twentieth century.

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  105. Oh boy here we go. The housing bubble is the fault of the Fed, and the Rothschilds....bubblemeter.blogspot.com, meet Mr. Shark.

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  106. Epictetus, I'm not going to read all that!

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  107. "
    Ok, now I want to know this - just how many lawyers are there in DC, making that money, and what is their percentage population wise? I just can't imagine that they have much of anything to do with home prices, especially if you assume that the younger lawyers spend a minimum of a year or two paying off their debt (most much longer),which even at a big firm does not leave much extra cash for purchasing a home."

    My loan payments are $1400/month. I take home $3300 every two weeks (not counting 401k contributions). I am typical.

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  108. "I cant afford to comfortably buy a home anywhere within 40 miles of dc."

    pwn3d

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  109. >I'd be astonished to learn that you aren't a eunich.

    Sorry, my friend. I am not going to enagage with you on that here. I dont feel that its any of your business. You can talk all you want about that .. please do to your heart's content. (Although david may not like it.)

    If you feel like a winner if you conclude that I'm an eunuch ... go ahead, be my guest. ;

    You see, none of your words can hurt me, neither can my words hurt you.

    Whatever you did to yourself is what will hurt you.

    Winners are people who learnt from their past losses.

    Perhaps, your irritation is because your math does not work out? Dissing me is not going to change the principles of arithmetic, you know.

    Good luck. :-)

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