General Investing and Economics Discussion - No Politics

[Northeast Stinger]

Wall Street Journal had a pretty comprehensive article about the economy a couple of days ago. Sorry I don’t know how to link from my phone.

Lots of data points. Paraphrasing from memory. Pandemic caused lots of companies and workers to seek alternatives. Computer chip makers lost the car market during pandemic and now have new clients. Car manufacturers are now running again but can’t get chips and other parts. Costs of cars have gone up almost 30% as a result. Supply chain problems in the economy will cause inflation for the rest of this year most likely.

Warehouse workers are tired of living in middle of nowhere without good internet, without access to health care and poor wages, and are moving to more urban areas. Again, the pandemic changed the pattern for workers and wages are now going up in a currently vain attempt to find workers.

Something like 70% of people looking for new jobs were in restaurants and hospitality. (I can vouch from my travels that getting servers in a restaurant is a challenge in many places) Many say they will never work in a restaurant again for low pay and long hours, especially when they were left high and dry during the pandemic.

Lots of office workers will only work jobs now where they can connect by zoom for their work, at least part of the time. Pandemic showed them they could get more done without office meetings and they saved a couple of hours commuting time every day.

Entire economy is shifting. Many people want more flexibility about where they live and want to be able to visit family more often. Pandemic caused major reassessment of values and what is important.

Another inflation factor not in this article but in previous WSJ articles prior to the pandemic is that we are no longer receiving new immigrants at a rate sufficient for a growing economy. We have pockets of communities around the country that literally do not have a work force for the available jobs.

 

[RonJohn]

Wall Street Journal had a pretty comprehensive article about the economy a couple of days ago. Sorry I don’t know how to link from my phone.

Lots of data points. Paraphrasing from memory. Pandemic caused lots of companies and workers to seek alternatives. Computer chip makers lost the car market during pandemic and now have new clients. Car manufacturers are now running again but can’t get chips and other parts. Costs of cars have gone up almost 30% as a result. Supply chain problems in the economy will cause inflation for the rest of this year most likely.

Warehouse workers are tired of living in middle of nowhere without good internet, without access to health care and poor wages, and are moving to more urban areas. Again, the pandemic changed the pattern for workers and wages are now going up in a currently vain attempt to find workers.

Something like 70% of people looking for new jobs were in restaurants and hospitality. (I can vouch from my travels that getting servers in a restaurant is a challenge in many places) Many say they will never work in a restaurant again for low pay and long hours, especially when they were left high and dry during the pandemic.

Lots of office workers will only work jobs now where they can connect by zoom for their work, at least part of the time. Pandemic showed them they could get more done without office meetings and they saved a couple of hours commuting time every day.

Entire economy is shifting. Many people want more flexibility about where they live and want to be able to visit family more often. Pandemic caused major reassessment of values and what is important.

Another inflation factor not in this article but in previous WSJ articles prior to the pandemic is that we are no longer receiving new immigrants at a rate sufficient for a growing economy. We have pockets of communities around the country that literally do not have a work force for the available jobs.

If you can find that article and provide a link, I am interested in reading it. From a previous WSJ article in late April, they stated that people are overwhelmingly moving away from urban areas into suburban areas:

Suburbs are emerging as the winners from these changes, marking the end of a decadelong growth trend for big cities. Companies intent on lowering overhead and retaining talent are opening offices there, and developers are adding amenities to keep entertainment dollars local.

 

[Deleted member 2897]

Wall Street Journal had a pretty comprehensive article about the economy a couple of days ago. Sorry I don’t know how to link from my phone.

Lots of data points. Paraphrasing from memory. Pandemic caused lots of companies and workers to seek alternatives. Computer chip makers lost the car market during pandemic and now have new clients. Car manufacturers are now running again but can’t get chips and other parts. Costs of cars have gone up almost 30% as a result. Supply chain problems in the economy will cause inflation for the rest of this year most likely.

Warehouse workers are tired of living in middle of nowhere without good internet, without access to health care and poor wages, and are moving to more urban areas. Again, the pandemic changed the pattern for workers and wages are now going up in a currently vain attempt to find workers.

Something like 70% of people looking for new jobs were in restaurants and hospitality. (I can vouch from my travels that getting servers in a restaurant is a challenge in many places) Many say they will never work in a restaurant again for low pay and long hours, especially when they were left high and dry during the pandemic.

Lots of office workers will only work jobs now where they can connect by zoom for their work, at least part of the time. Pandemic showed them they could get more done without office meetings and they saved a couple of hours commuting time every day.

Entire economy is shifting. Many people want more flexibility about where they live and want to be able to visit family more often. Pandemic caused major reassessment of values and what is important.

Another inflation factor not in this article but in previous WSJ articles prior to the pandemic is that we are no longer receiving new immigrants at a rate sufficient for a growing economy. We have pockets of communities around the country that literally do not have a work force for the available jobs.

Met some neighbors tonight. Moved down from New Jersey (everyone is from somewhere else). They went from paying $25,000/year in property taxes to $1,500. Basically living for free now. So many people have heard and then realized they don’t have to live their lives paying everything they own to just survive but instead can gain back time and freedom.

 

[Northeast Stinger]

If you can find that article and provide a link, I am interested in reading it. From a previous WSJ article in late April, they stated that people are overwhelmingly moving away from urban areas into suburban areas:

Suburban = urban in this latest definition. At one point they indicated that people no longer want to live in rural areas just to have a job and they want the amenities of being near a city.

 

[orientalnc]

The money supply in 2019 was 20% higher at EOY 2019 and 18% again by July 2019. This has been going on for a while.

 

[Technut1990]

The money supply in 2019 was 20% higher at EOY 2019 and 18% again by July 2019. This has been going on for a while.

I think that’s the concern with the inflation issue becoming larger

 

[Deleted member 2897]

The money supply in 2019 was 20% higher at EOY 2019 and 18% again by July 2019. This has been going on for a while.

Yep. That's why inflation has been a big problem for a long time. But then money supply increased 125% last year, from $4 Trillion to $9 Trillion. It made already bad problems even worse. All the major items people spend money on (rent, utilities, healthcare, food) have increased substantially over the last decade+.

 

[orientalnc]

There are conflicting opinions about inflation in the coming months and whether any of that is due to the money supply increases. The supply chain disruptions are a bigger factor right now in both transportation and housing.

 

[Deleted member 2897]

There are conflicting opinions about inflation in the coming months and whether any of that is due to the money supply increases. The supply chain disruptions are a bigger factor right now in both transportation and housing.

I agree with most of that (there are indeed conflicting opinions), but I'd say the disagreement is on how much is from the money supply increases, not if its any at all. To say there is $9 Trillion of money in circulation compared to $4 Trillion last year is not just some number on a sheet of paper (not saying you implied that, this is just a general comment into the air), its actual physical money that people have in their hands that didn't exist before. Anybody who has tried to buy a house or book a vacation and looked for a hotel or AirBnB or whatever has seen that its incredibly difficult at any price. And those items have nothing to do with supply chain issues - its about how many people are flush with cash and trying to spend it. There's a massive overdemand issue on one side of the house and then on the other side of the house a massive undersupply issue (supply chain) hitting at the same time.

We recently sold our boat. In the process of figuring out what it might be worth, we noticed they stopped making the model. We paid $50k for it 8 years ago and the current brand new model has more bells and whistles and lists for $125k (no kidding). When the guy who bought it came to look at it, he said he's been to boat shows and things and the local boat store said even then, here is their 1 boat they have in that model. The supply chain is janked so they can't get delivery on any additional boats even if they pre-pay until they sell the 1 they have on site. Every dealer is limited. They said $125k take it or leave it, but decide quick, because it will be gone tomorrow. My guy laughed like 'what a bunch of BS', called them back the next day and they said it was already sold. The supply chain is messed up, resulting in extremely limited supply of a bunch of goods, serving to drive the price up. People have so much money coming out of their ears, they're willing to pay obscene amounts of money for things, well beyond what they're traditionally worth. As I have posted here before, we recently sold our house in May - for $475k/40% more than it appraised for last summer. Multiple offers the first day and that was it. Its insane.

 

[Technut1990]

If you sold your house then you know that the upside to what you got was quickly lost when you bought your new place. That’s the problem on a small scale. inflation, supply, production are producing really high sell points but once you sell you have to buy so in the end you make nothing. Right now, with the exception of the really large companies which can supply themselves at cost, the market is costing value as much as it’s producing Value.

My wife and I pushed around the idea of selling, while getting the price we want would be easy it’s very hard to find any market where we would get another house at it’s true value. We’ve decided to reduce our debt. Paying off the cars and other bills in prep for market normalization seems the best option right now. Unsure how to handle student loans given there’s a looming possibility Biden forgives them, which he would do as soon as we paid them off.

I think the bottom line is that nobody really knows where we are heading with the economy. We’ve decided that when whatever comes comes, it’s better to be as debt free as possible when it gets here.

I never really understood the concept of loaning into inflation given the very definition of inflation means my buying power is decreasing, makes more since to me to simply not owe anyone

 

[Deleted member 2897]

If you sold your house then you know that the upside to what you got was quickly lost when you bought your new place. That’s the problem on a small scale. inflation, supply, production are producing really high sell points but once you sell you have to buy so in the end you make nothing. Right now, with the exception of the really large companies which can supply themselves at cost, the market is costing value as much as it’s producing Value.

My wife and I pushed around the idea of selling, while getting the price we want would be easy it’s very hard to find any market where we would get another house at it’s true value. We’ve decided to reduce our debt. Paying off the cars and other bills in prep for market normalization seems the best option right now. Unsure how to handle student loans given there’s a looming possibility Biden forgives them, which he would do as soon as we paid them off.

I think the bottom line is that nobody really knows where we are heading with the economy. We’ve decided that when whatever comes comes, it’s better to be as debt free as possible when it gets here.

I never really understood the concept of loaning into inflation given the very definition of inflation means my buying power is decreasing, makes more since to me to simply not owe anyone

To get value out of selling house, indeed you have to either rent, leave the area, or significantly downsize. Our oldest kid is in college and our other has a couple years left of high school. We were not going to live in that house after they were gone because its too much for having no kids - it was on the water and was going to require a lot of maintenance over time too. We just decided to sell early because prices were absolute bananas. We had thought about buying a smaller house, like a townhome, because we could end up with the same payment plus a million dollars in the bank. But we realized that we may physically leave the area when our son graduates, so we didn't want to buy knowing we might be selling in 2 years. So we're renting a place. We added up the costs of maintenance, upkeep, mortgage, etc. in our house and we're able to rent for a couple hundred dollars less a month. So for now we have zero debt of any type and plan to keep renting for a couple years until we figure out where we want to be next. We're in our 40s and all of this also gives us the ability to stop working as soon as we want if it ever comes to it. We could now quit and retire today if we had to or if it came to it.

 

[Technut1990]

To get value out of selling house, indeed you have to either rent, leave the area, or significantly downsize. Our oldest kid is in college and our other has a couple years left of high school. We were not going to live in that house after they were gone because its too much for having no kids - it was on the water and was going to require a lot of maintenance over time too. We just decided to sell early because prices were absolute bananas. We had thought about buying a smaller house, like a townhome, because we could end up with the same payment plus a million dollars in the bank. But we realized that we may physically leave the area when our son graduates, so we didn't want to buy knowing we might be selling in 2 years. So we're renting a place. We added up the costs of maintenance, upkeep, mortgage, etc. in our house and we're able to rent for a couple hundred dollars less a month. So for now we have zero debt of any type and plan to keep renting for a couple years until we figure out where we want to be next. We're in our 40s and all of this also gives us the ability to stop working as soon as we want if it ever comes to it. We could now quit and retire today if we had to or if it came to it.

yall doing good then, excellent money management. My brother n law hit the lottery. He is military and just sold his house to move back on the base. He just got back from Afghanistan also and will have essentially tripled his debt to income ratio because while in country his medical insurance (covers him and his family) was essentially free. Thats about the only way to pocket the entire proceeds of a house sale. Time to move back in with mom, it’s only been 35 years since I’ve been living there.

 

[Northeast Stinger]

To get value out of selling house, indeed you have to either rent, leave the area, or significantly downsize. Our oldest kid is in college and our other has a couple years left of high school. We were not going to live in that house after they were gone because its too much for having no kids - it was on the water and was going to require a lot of maintenance over time too. We just decided to sell early because prices were absolute bananas. We had thought about buying a smaller house, like a townhome, because we could end up with the same payment plus a million dollars in the bank. But we realized that we may physically leave the area when our son graduates, so we didn't want to buy knowing we might be selling in 2 years. So we're renting a place. We added up the costs of maintenance, upkeep, mortgage, etc. in our house and we're able to rent for a couple hundred dollars less a month. So for now we have zero debt of any type and plan to keep renting for a couple years until we figure out where we want to be next. We're in our 40s and all of this also gives us the ability to stop working as soon as we want if it ever comes to it. We could now quit and retire today if we had to or if it came to it.

Us too. We have zero debt, no mortgage, car payments or anything. We’ve also downsized.

Housing inventory in our area is insufficient for number of people seeking housing. Our house can currently sell for $100,000 over valuation. Two issues are currently impacting that -supply chain with building materials and fewer construction crews. The latter issue in our area is also about fewer guest workers, as well as others who have moved on to find other work.

You are absolutely correct, in my opinion, about liquidity in the economy. I read somewhere that personal debt is at a 40 year low. Everyone I know is flush with extra spending money.

Went to buy a second car yesterday. Only three new cars on the lot. Lots of good used cars on the market but many commanding the price of new cars. Car prices were up 10% in April, another 8.5% in May, and another 10.5% in June. One car we looked at went up $3000 in two days.

 

[orientalnc]

To get value out of selling house, indeed you have to either rent, leave the area, or significantly downsize. Our oldest kid is in college and our other has a couple years left of high school. We were not going to live in that house after they were gone because its too much for having no kids - it was on the water and was going to require a lot of maintenance over time too. We just decided to sell early because prices were absolute bananas. We had thought about buying a smaller house, like a townhome, because we could end up with the same payment plus a million dollars in the bank. But we realized that we may physically leave the area when our son graduates, so we didn't want to buy knowing we might be selling in 2 years. So we're renting a place. We added up the costs of maintenance, upkeep, mortgage, etc. in our house and we're able to rent for a couple hundred dollars less a month. So for now we have zero debt of any type and plan to keep renting for a couple years until we figure out where we want to be next. We're in our 40s and all of this also gives us the ability to stop working as soon as we want if it ever comes to it. We could now quit and retire today if we had to or if it came to it.

While it's certainly possible to make money when buying and selling your residence, it should not be treated as an "investment" only. You have to live somewhere and a rational market will negate potential profits in this case.

 

[orientalnc]

Us too. We have zero debt, no mortgage, car payments or anything. We’ve also downsized.

Housing inventory in our area is insufficient for number of people seeking housing. Our house can currently sell for $100,000 over valuation. Two issues are currently impacting that -supply chain with building materials and fewer construction crews. The latter issue in our area is also about fewer guest workers, as well as others who have moved on to find other work.

You are absolutely correct, in my opinion, about liquidity in the economy. I read somewhere that personal debt is at a 40 year low. Everyone I know is flush with extra spending money.

Went to buy a second car yesterday. Only three new cars on the lot. Lots of good used cars on the market but many commanding the price of new cars. Car prices were up 10% in April, another 8.5% in May, and another 10.5% in June. One car we looked at went up $3000 in two days.

This is very temporary. If you can get by with the vehicles you now own, hold tight.

 

[Deleted member 2897]

This is very temporary. If you can get by with the vehicles you now own, hold tight.

While I would certainly never be one to play or predict the market, this can only go on for so long. We are way overdue for a big market correction and an economic slowdown. Doesn't mean it will happen next week or even next year, but valuations of everything from equities to bonds to commodities to pretty much every asset class are beyond absurd. Just like there is so much emotion in the 'it will never end' camp, it also does the same thing when things turn and everybody runs for the door. Car prices, home prices, equity prices, and most other things could make big moves the other way when demand dries up, then what is a tiny undersupply issue today becomes an enormous oversupply rather quickly. You never know when a 2009 or a 2001 or a 1992 or a 1984 will happen, but they always happen at some point.

For perspective, the stock market's valuation is around $46 Trillion. That's up over $20 Trillion from a year ago. Based on 100 million households and an even spread across them, that represents $200,000 more wealth from a year ago. The total value of all homes in the US is also about $40 Trillion, up $10 Trillion from a year ago. That's another $100,000 more wealth from a year ago, per household. This is on top of the existing wealth that Americans already had. And of course this is heavily weighed to the upper middle class and beyond, so multiply these numbers by 2-5x for most people you know. If things go the other direction, even just returning to where they were a year ago (which is still way overvalued compared to historical metrics), thats a massive loss of wealth which will cause significant emotional reactions.

Again, I'm not predicting any of this will happen. But to oriental's point, I wouldn't overspend on anything major right now if you don't have to. Money spigots are easing up and supply chains are catching up.

 

[Northeast Stinger]

This is very temporary. If you can get by with the vehicles you now own, hold tight.

I heard it might be December before car market shakes out.

While I would certainly never be one to play or predict the market, this can only go on for so long. We are way overdue for a big market correction and an economic slowdown. Doesn't mean it will happen next week or even next year, but valuations of everything from equities to bonds to commodities to pretty much every asset class are beyond absurd. Just like there is so much emotion in the 'it will never end' camp, it also does the same thing when things turn and everybody runs for the door. Car prices, home prices, equity prices, and most other things could make big moves the other way when demand dries up, then what is a tiny undersupply issue today becomes an enormous oversupply rather quickly. You never know when a 2009 or a 2001 or a 1992 or a 1984 will happen, but they always happen at some point.

For perspective, the stock market's valuation is around $46 Trillion. That's up over $20 Trillion from a year ago. Based on 100 million households and an even spread across them, that represents $200,000 more wealth from a year ago. The total value of all homes in the US is also about $40 Trillion, up $10 Trillion from a year ago. That's another $100,000 more wealth from a year ago, per household. This is on top of the existing wealth that Americans already had. And of course this is heavily weighed to the upper middle class and beyond, so multiply these numbers by 2-5x for most people you know. If things go the other direction, even just returning to where they were a year ago (which is still way overvalued compared to historical metrics), thats a massive loss of wealth which will cause significant emotional reactions.

Again, I'm not predicting any of this will happen. But to oriental's point, I wouldn't overspend on anything major right now if you don't have to. Money spigots are easing up and supply chains are catching up.

I think this is all true.

The caveat is that sometimes you need a car like sometimes you need a house and what is overpriced for the market is not overpriced for your particular circumstances. I think that is where we are.

 

[Deleted member 2897]

The caveat is that sometimes you need a car like sometimes you need a house and what is overpriced for the market is not overpriced for your particular circumstances. I think that is where we are.

this is why I think there is no such thing as price gouging. Something is worth whatever another person is willing to pay. This is also why I’m not out here predicting that the housing market is going to crash or anything like that. But you start seeing changes in the price of commodities, equities, other asset classes, and you’ll see the value that people are willing to pay for things will also change.

 

[orientalnc]

this is why I think there is no such thing as price gouging. Something is worth whatever another person is willing to pay. This is also why I’m not out here predicting that the housing market is going to crash or anything like that. But you start seeing changes in the price of commodities, equities, other asset classes, and you’ll see the value that people are willing to pay for things will also change.

Georgia, like NC, has price gouging laws that are currently in place due to Covid. I do not think they apply to houses or cars. "Whatever the market will bear" is fine for most things most of the time, but not during a hurricane or other emergency situation.

 

[Deleted member 2897]

Georgia, like NC, has price gouging laws that are currently in place due to Covid. I do not think they apply to houses or cars. "Whatever the market will bear" is fine for most things most of the time, but not during a hurricane or other emergency situation.

Well, this discussion could go down a big rathole. I'll just use generators as one example. Whenever a large hurricane tracks towards us and we're in the 5-day cone, people buy-out every generator at every home improvement store within hundreds of miles. You'll see them going for $1000 instead of $500. But in order to keep them stocked, the suppliers are having to charge more money to be able to afford the expedited overnight shipping charges on the next replacements. So its easy to say that this is price gouging, but there's always 2 sides to every story. Same thing with gas - when gas stations are running empty while everyone stores up, if they can charge a lot more money, they can afford special order tankers to expediate refills. If people and companies are restricted in what they can charge, all it will do is ensure that supplies run out and people suffer.