Author Topic: How is main street really doing?  (Read 8237 times)

farangster

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How is main street really doing?
« on: March 18, 2016, 08:43:04 PM »
How is the real economy doing where you live???.............I recently heard a short interview with Robert Shiller regarding the markets.  He basically said what most wise economists/investors say, he does not know where the market is going and his CAPE ratio could break 40 before we would see any significant decline.  This is interesting because the only time it broke 40 was during the craziness of the dot.com bubble.  I live in the San Francisco bay area, and there is definitely ridiculous real estate prices with foreign investing and the rise of social media, but I do not see the same fever we were feeling during the dot.com bubble and there is already a lot of talk about private equity starting to pull back a bit. So I find this kind of bubble a very unlikely possibility.

I have not looked at all the major market measurements for a month or so, but last I looked, the q ratio, market to gdp and the shiller p/e were all showing an overvalued market.  Maybe one indicator is not reliable but when we have three indicators saying the same thing it does seem more informative. 

Obviously most politicians (except maybe Trump- lol) and the talking heads on financial television are out of touch with the real economy. Interest rates cannot get much lower to boost the market and it sounds like the fed will not revive qe unless there is some catastrophic event so we really need to depend on the growth of consumer spending which makes up roughly 70% of the market in order to see further long term growth of the U.S. stock market.  From the little I have heard from people living in other places in the U.S., a lot of people are still struggling...........so how are folks doing where you live?  Happy Friday people
« Last Edit: March 18, 2016, 08:44:41 PM by farangster »

Heckler

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Re: How is main street really doing?
« Reply #1 on: March 18, 2016, 10:09:04 PM »
Want to talk real estate? 

Bought our 3 bedroom, 2100 sqft, 1975 townhouse in 2003 for $270k.  Current tax assessment value is $580k ($40 of that is the building), and a unit thats 200 sqft smaller just listed today for $869,9k.  I think its almost rude to ask that much.  TBD if it sells.

Now tell me investments have a better return than real estate.


The best part is that MMM has trained us to invest and save the now paid off mortgage payments instead of spending it. 

randymarsh

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Re: How is main street really doing?
« Reply #2 on: March 18, 2016, 10:30:26 PM »
Some people, like myself, are doing amazing in Denver. Restaurants/bars are packed where customers guzzle down $5.25 beers like they're water. There's a non-stop parade of new BMW/Lexus/Mercedes/Subaru vehicles on the street. $1400 studio apartments are a thing.

If you just ignore the homeless sleeping under the bridges and avert your eyes away from the beggars present at intersections, you could convince yourself that everything is totally fine and awesome.

It's a stark contrast.

My midwest hometown has a much more subtle version of the same thing. Incomes and demographics aren't conducive to flashy BMW parades, but many people have no problem spending on restaurants or driving long distances for work/play (in their F150). The cost of living is so low that it doesn't take much to lead a high end middle class lifestyle. Nice houses can be had for 200K or less. You don't have the in your face homelessness thanks to the low cost of housing, but there's a huge working poor population.


randymarsh

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Re: How is main street really doing?
« Reply #3 on: March 18, 2016, 10:35:29 PM »
Bought our 3 bedroom, 2100 sqft, 1975 townhouse in 2003 for $270k.  Current tax assessment value is $580k ($40 of that is the building), and a unit thats 200 sqft smaller just listed today for $869,9k.  I think its almost rude to ask that much.  TBD if it sells.

Now tell me investments have a better return than real estate.

You got lucky, wouldn't you agree? You clearly bought in a high growth area.

I just mention this because home values are not on a runaway train in many areas. My parents' home is worth only ~20K more than what they paid in 1995, for example.

whodidntante

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Re: How is main street really doing?
« Reply #4 on: March 18, 2016, 10:41:58 PM »
Bought our 3 bedroom, 2100 sqft, 1975 townhouse in 2003 for $270k.  Current tax assessment value is $580k ($40 of that is the building), and a unit thats 200 sqft smaller just listed today for $869,9k.  I think its almost rude to ask that much.  TBD if it sells.

This is a whole heap of luck, and proves nothing. 

Heckler

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Re: How is main street really doing?
« Reply #5 on: March 18, 2016, 10:56:37 PM »
I don't see it as luck. Its a disgusting reality of foreign  investment and supply/demand problems in a city that can only grow vertically.  If I sold and wanted to stay here, we would be homeless.

This recent listing is the highest by $200k at least. Only time will tell if its reality or an over zealous realtor. 

ender

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Re: How is main street really doing?
« Reply #6 on: March 19, 2016, 06:57:48 AM »
I don't see it as luck. Its a disgusting reality of foreign  investment and supply/demand problems in a city that can only grow vertically.  If I sold and wanted to stay here, we would be homeless.

This recent listing is the highest by $200k at least. Only time will tell if its reality or an over zealous realtor.

The total SP500 dividend reinvested return since January 2003 is 191.7%, which means an investment of $270k in 2003 in the SP500 would be worth about $515k today.




Spork

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Re: How is main street really doing?
« Reply #7 on: March 19, 2016, 07:14:45 AM »
I don't see it as luck. Its a disgusting reality of foreign  investment and supply/demand problems in a city that can only grow vertically.  If I sold and wanted to stay here, we would be homeless.

This recent listing is the highest by $200k at least. Only time will tell if its reality or an over zealous realtor.

The total SP500 dividend reinvested return since January 2003 is 191.7%, which means an investment of $270k in 2003 in the SP500 would be worth about $515k today.

Is that math right?  I would think the RETURN would be $515k... plus the original investment of $270k, making total worth $785k.
I.e: 100% return on $270k isn't 270k.  It's $540k.  (Correct me if I am wrong there.)

ender

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Re: How is main street really doing?
« Reply #8 on: March 19, 2016, 07:18:33 AM »
I don't see it as luck. Its a disgusting reality of foreign  investment and supply/demand problems in a city that can only grow vertically.  If I sold and wanted to stay here, we would be homeless.

This recent listing is the highest by $200k at least. Only time will tell if its reality or an over zealous realtor.

The total SP500 dividend reinvested return since January 2003 is 191.7%, which means an investment of $270k in 2003 in the SP500 would be worth about $515k today.

Is that math right?  I would think the RETURN would be $515k... plus the original investment of $270k, making total worth $785k.
I.e: 100% return on $270k isn't 270k.  It's $540k.  (Correct me if I am wrong there.)

Hah, you're right, it should be considerably higher.

BlueMR2

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Re: How is main street really doing?
« Reply #9 on: March 19, 2016, 07:38:22 AM »
It's a stark contrast.

This.  I've never seen such contrast in our area before.  There's definitely a recovery going on, but there's an entire segment that's not seeing it at all.  Businesses are all booming.  Housing prices have recovered.  However, pay is totally flat.  Professionals in business don't seem to care, they've upped the purchasing again because they had mere shifted to saving more when the economy was down.  However, for the people on the bottom, the flat pay is really hurting them, especially as prices have started to creep up. 

I really don't know how that's going to work out.  There's that push for the higher minimum wage, but so many of those jobs are already in danger of being automated as the cost of automation keeps dropping.  If we bump that minimum wage up, the automation is likely to kill those jobs now instead of a couple years down the road.  Re-training has pretty much reached it's limit now too.  If it's something you can readily be trained for, it's an easy automation target.  The growth jobs are in the creative areas, and unfortunately that's a gift that many people simply don't have and simply can't develop.  Evolution in action?  Have we reached the point where a large segment of the population is no longer has the ability to cope with the current environment?

Heckler

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Re: How is main street really doing?
« Reply #10 on: March 19, 2016, 08:19:33 AM »
But we didnt have $270k to drop in 2003.  Only $20 down and $40 per year added in mortgage payments. 

Anyway, Mainstreet is doing pretty good if you bought real estate more than ten years ago.
« Last Edit: March 19, 2016, 08:38:18 AM by Heckler »

farangster

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Re: How is main street really doing?
« Reply #11 on: March 19, 2016, 09:39:26 AM »
There's a non-stop parade of new BMW/Lexus/Mercedes/Subaru vehicles on the street. $1400 studio apartments are a thing.

If you just ignore the homeless sleeping under the bridges and avert your eyes away from the beggars present at intersections, you could convince yourself that everything is totally fine and awesome.

here is good article on the supposed auto loan bubble- https://www.lewrockwell.com/2016/01/tommy-behnke/auto-loan-bubble/

Retire-Canada

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Re: How is main street really doing?
« Reply #12 on: March 19, 2016, 09:40:33 AM »
This is a whole heap of luck, and proves nothing.

This ^^^. If I could invest my money using a time machine I'd make Buffet look like a chump.

My GF is sitting on a property in BC she can't sell that seemed like a great idea before 2008. On paper at one point her and her ex-hubby were millionaires. Until they weren't.

I'm glad you made money in this case, but it's like someone buying a single company stock that blows up...great for them, but not something you can replicate as an investment strategy.

SwordGuy

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Re: How is main street really doing?
« Reply #13 on: March 19, 2016, 11:04:52 AM »
The growth jobs are in the creative areas, and unfortunately that's a gift that many people simply don't have and simply can't develop.  Evolution in action?  Have we reached the point where a large segment of the population is no longer has the ability to cope with the current environment?

I think the following is more accurate:

The growth jobs are in the creative areas, and unfortunately that's a gift that many people simply don't have and simply can't have chosen not to develop.  Evolution in action?  Have we reached the point where a large segment of the population is no longer has a clue that they possess the ability to cope with the current environment?



Abe

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Re: How is main street really doing?
« Reply #14 on: March 19, 2016, 12:01:58 PM »
I live in a relatively wealthy area of Chicago and it seems my wife and I are the only ones who haven't bought a luxury SUV and goes to eat out every single dinner. Similar in other wealthy areas of the city. I work in the South Side where there's lots of run-down buildings that probably should be condemned, but people live in them so the city may sell to them for a few hundred dollars. 40-60% of those neighborhoods' adults are unemployed, and there are almost no businesses in the area.

Tyson

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Re: How is main street really doing?
« Reply #15 on: March 19, 2016, 01:57:38 PM »

I think the following is more accurate:

The growth jobs are in the creative areas, and unfortunately that's a gift that many people simply don't have and simply can't have chosen not to develop.  Evolution in action?  Have we reached the point where a large segment of the population is no longer has a clue that they possess the ability to cope with the current environment?

I partly agree.  We really are shifting from a service based industry/society toward an information based society.  And for some parts of the country it's a pretty jarring shift that they can't keep up with.  Same thing happened with textiles and such during the industrial revolution, and also happened with manufacturing jobs during the shift to automation and concurrent change toward a service based economy.  I think the main difference is that the time between the industrial revolution and the shift to a service based economy was much longer (several generations) than the shift from a service based economy to an information economy (2 generations). 

LaineyAZ

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Re: How is main street really doing?
« Reply #16 on: March 19, 2016, 04:24:43 PM »
In Phoenix I'm seeing some of what Abe said.  The Scottsdale-type areas are booming with people spending like crazy.  Housing overall has increased in value almost back to 2007 levels. 
But - I'm also seeing the good middle-class jobs with benefits continue to disappear, and the proliferation of dollar stores and thrift stores like Goodwill in area that would never have imagined it just 5-6 years ago. 
Good points about the jobs that are quickly being lost to technology.  Martin Ford's book, The Rise of Robots, says this is happening more quickly than we anticipate.  After that, it's a complete guess what the next generation is going to be doing to maintain a middle-class lifestyle.

farangster

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Re: How is main street really doing?
« Reply #17 on: March 19, 2016, 05:10:18 PM »
interesting discussion with the PIMCO investment guru Mohamed El Erian about the wall street main street devide- http://money.cnn.com/2016/01/28/investing/mohammed-el-erian-cash/index.html

Tyson

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Re: How is main street really doing?
« Reply #18 on: March 19, 2016, 05:30:56 PM »
Cash is a horrible long term investment strategy.  You lose out to inflation, always and forever.  Investing in the stock market - maybe it goes up, maybe it goes down (historically always up, eventually).  Keep cash and you lose money, guaranteed. 

Now, keeping some cash on hand as an emergency fund (like 3 to 6 months of expenses) is probably a good idea.  But keeping large amounts of cash as an investment strategy is not too smart.


farangster

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Re: How is main street really doing?
« Reply #19 on: March 19, 2016, 05:47:02 PM »
Cash is a horrible long term investment strategy.  You lose out to inflation, always and forever.  Investing in the stock market - maybe it goes up, maybe it goes down (historically always up, eventually).  Keep cash and you lose money, guaranteed. 

Now, keeping some cash on hand as an emergency fund (like 3 to 6 months of expenses) is probably a good idea.  But keeping large amounts of cash as an investment strategy is not too smart.
ahh he was not talking about staying in cash long term and definitely not 100% in cash, I do not think he would have made it to ceo of pimco and chair of the president's global development council without being a pretty smart guy

Tyson

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Re: How is main street really doing?
« Reply #20 on: March 19, 2016, 06:35:57 PM »
Cash is a horrible long term investment strategy.  You lose out to inflation, always and forever.  Investing in the stock market - maybe it goes up, maybe it goes down (historically always up, eventually).  Keep cash and you lose money, guaranteed. 

Now, keeping some cash on hand as an emergency fund (like 3 to 6 months of expenses) is probably a good idea.  But keeping large amounts of cash as an investment strategy is not too smart.
ahh he was not talking about staying in cash long term and definitely not 100% in cash, I do not think he would have made it to ceo of pimco and chair of the president's global development council without being a pretty smart guy

He's basically talking about trying to time the market.  Which is an even worse strategy than keeping cash.  At least with cash you only lose 3% per year.  Market timing losses can be much, much worse.  Seriously DO NOT listen to people like this, they are not your friend and they will not help you.  They sell fear and greed, which are the 2 biggest obstacles to being able to do well with your investments. 

mrpercentage

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Re: How is main street really doing?
« Reply #21 on: March 19, 2016, 09:07:14 PM »
If I was Main Street:

We gross about $90k
Im stuck in a house I purchased in 2007 its worth about 178 and I paid 240.
Im investing but stuck in a job I would not otherwise work.
I avoid eating out but get Dominos once a week and occasionally Chik-fil-a
I have two cars-- a Ford Focus and a Subaru Forrester (we both work too far for alternative travel she 20 minutes and me about 45 minutes)
I have two kids and am struggling with the decision to continue to invest for college. I don't think college is worth it. Didn't do a damn thing for me except cost a lot. The tuition is ridiculous due to the legalized slavery of student loans that bankruptcy doesn't protect you from. Everyone is spending money they don't have so tuition goes crazy
I don't really budget any spending money. I have not done any major purchases for myself (except my car and my iPhone in maybe 3 years)-- xbox 360 maybe 5 years ago and a mac mini 2 years ago. And a garage gym a 3 years ago. I haven't got any clothes in 3-4 years except work related stuff.
Doing a lot of house repair that is needed but that is being paid for by inherited money otherwise I wouldn't be investing and would be going into debt instead.

I do invest over 20% of my income. I also have a pension that takes 9%.

I also received two inheritances that given me a cushion most do not have. I have a government job so my insurance doesn't hurt me like most. Although, arguably I would be paid a third more without it. So you could say that Healthcare is 1/3 of my salary (not including hers). Seriously

I have a supportive practical spouse (except she really likes expensive cable) and supportive grandparents

Thats how I am doing.

SwordGuy

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Re: How is main street really doing?
« Reply #22 on: March 19, 2016, 10:12:29 PM »
Restaurants are always full in my neck of the woods.   I don't go to the mall so I can't say about that.

As for stock prices, I think that the sale of 401k stocks as boomers age and retire will act as a depressant to stock prices down for a number of years.   

Whether growth will overcome that effect or not I have no idea.

But we're using our stock holdings as one of our reserves so hopefully it won't matter.   (Delaying SS to age 70 for me is another.)  If stocks do great we'll siphon some of the earnings off into rental property.


Zikoris

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Re: How is main street really doing?
« Reply #23 on: March 20, 2016, 12:23:13 AM »
People in Vancouver whine a lot about struggling, but it doesn't seem to stop them from going out drinking at expensive craft breweries, eating out frequently, and going shopping. Meh, it hasn't changed in the 11 years I've lived here, so I guess it's doing as good as it always has.

nobodyspecial

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Re: How is main street really doing?
« Reply #24 on: March 20, 2016, 12:52:39 PM »
People in Vancouver whine a lot about struggling, but it doesn't seem to stop them from going out drinking at expensive craft breweries, eating out frequently, and going shopping.
Well if you are only earning 2-3x the average salary then you know you can never afford to buy. Transit is good enough and downtown is concentrated enough, that if you rent you don't need a car. So you have a lot of disposable income.

Almost mustachian - except you then spend it !

Zikoris

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Re: How is main street really doing?
« Reply #25 on: March 20, 2016, 02:00:58 PM »
People in Vancouver whine a lot about struggling, but it doesn't seem to stop them from going out drinking at expensive craft breweries, eating out frequently, and going shopping.
Well if you are only earning 2-3x the average salary then you know you can never afford to buy. Transit is good enough and downtown is concentrated enough, that if you rent you don't need a car. So you have a lot of disposable income.

Almost mustachian - except you then spend it !

You know, it's not even that difficult to buy a condo here if you're a couple making at least average income. You just don't get to buy a house with a yard that's also close to downtown. But that's not really any different than most major cities around the world. Renting beats buying here, in any case, by a long shot.

farangster

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Re: How is main street really doing?
« Reply #26 on: March 20, 2016, 05:08:57 PM »

[/quote]

You know, it's not even that difficult to buy a condo here if you're a couple making at least average income. You just don't get to buy a house with a yard that's also close to downtown. But that's not really any different than most major cities around the world. Renting beats buying here, in any case, by a long shot.
[/quote]

agreed homeownership is not an investment decision for most and most do no keep track of maintenance, insurance, prop taxes when they say they have 100k equity in their home.  this is why most economists call it a terrible investment unless you get lucky and bought before a real estate market became really hot.  here isa good buy or rent and invest the difference calculator.http://michaelbluejay.com/house/rentvsbuy.html