Kaulapi World

For what its worth, I thought I’d make it a point to make more regular posts at least for my crazy finals prep week(s) It sort of allows a mental break from reading case law. I’ve been fortunate enough to have a few days advanced leave from work due to my trip going over the weekend. I usually plan to take some leave around this time of year months in advance, but it seems like more often than any extra time to prepare is welcomed.

Looking back to my political compass and mindset from the last presidential election a couple things haven’t changed at all. I’m still looking for a truly anti-war candidate, pro-civil liberties, and pro-fiscal responsibility and pro-social responsibility. What has changed since 2004 is my opinion on the way to achieve populist goals, and to what extent the “noise” in the political discussion has confused us to which party or which ideology promotes the values that I believe in. Sometimes its better to keep a healthy level of skepticism whenever ideas are reduced to sound bites and one-liners. The party who speaks about limited government in actuality becomes the big government spenders, the party of civil liberties becomes the party of pro-war party, and the party of warrant-less domestic spying.

Close to the end of March and things are picking up as usual, both on the school and work ends. Looking like I’ll be attending a few conferences for work in the upcoming months, should be good to get out of the office for a change. On the school front I’m coming up on my last push month before finals, looking like it’ll be pretty busy from here on out. Doing some independent research on my own, have to say that I enjoy it a lot more than classes, although it is a lot more challenging since a lot of its well, independently driven. I think maybe after so many semesters of being force fed law its a different change of pace trying to find different angles and theoretical solutions to legal problems. In doing the literature review I’ve been pretty impressed with the level of legal analysis and arguments that have already been made and been published, a lot of them show the amount of time and effort that was probably put into coming up with them.

This has been a tough reminder about the costs and benefits of working on a degree during the evening while holding a full time job. I’ve gotten the full dose of the argument that getting real-world experience simultaneously is irreplaceable, but I think its every once in a while I get more than 4 hours of sleep I wonder whether it puts you in a position of being too stretched out. The main factor that has made me convinced that this has been all worth it is the financial situation and forecast, I’ll be coming out of school well below the average debt load, both the reported average and some of the estimates I’ve heard anecdotally. I don’t envision that I’ll be bound by any golden handcuffs so to speak, no 6 figure debt estimates like I’ve heard from some old classmates that decided to go into other fields like academia or medicine.

Knowing that these plans worked out more or less is worth some peace of mind, or relatively speaking at least. I’ve been keeping a cautious eye on the state of the financial markets and housing bubble/crash ever since moving out here back in 2004 when the market was really taking off and everyone I knew was saying buy, buy, buy before you get priced out. partly out of the reality of my situation, being right out of school, with little savings to boot, other part of my sense of the situation that it isn’t smart to take on interest-only, adjustable rate loans on a $600,000 condo or $900,000 3 bedroom townhouse, no matter what the expected appreciation rate was, and no matter the assurances from an industry expert that I could qualify with current credit and modest government salary. After crunching some numbers, I decided it was better to rent, save, and wait to see what happened. My gut said that the prices would eventually have to come down, at least to a historical average, although I had no idea when it would happen. I also reasoned that the low interest rates were temporary, as with any monetary cycle, and then when they did increase, the shocks to the holder of the mortgage would be pretty steep. an increase from 2% to 4% would represent a doubling of a monthly interest only payment, and unless my income was likely to double on a monthly basis, this was a very stupid financial deal to accept. In the meantime I reasoned that if prices didn’t come down, then the new reality is that nobody can afford to own without continue to rent and save until a combination of our salary and savings would increase to a point that we could buy something outright, or with at least a hefty down payment.

Somewhere around 2006 I starting coming across various blogs and websites that are out there that were offering an alternate opinion to what I was hearing in the main stream media about all the middle class, self-made tycoons of real estate investments, more along the lines of what I was thinking, that all of the appreciation and speculation was imaginary, and doomed to fall eventually, and maybe fall hard. They were all really good about poking holes in what were mostly absolute statements, and raising good questions about the economics of these business transactions, many of which were never raised by the mainstream media.

Now the latest trend in news stories revolve the ongoing proposals to bail out people who are stuck in depreciating real estate assets and resetting mortgages despite all of the paper-success of recent memory. I often feel like I’m in Econ 101 again reading about the pitfalls of moral hazards and individuals ignorant of their own risk curves, many of the recent news reports have talked about “average” Americans who are finding themselves suddenly in hard times financially in the recent downturn. There are a few things that are similar in each of these stories, first is that the individuals are living paycheck to paycheck, even making a salary that is well above the national average when some event comes along (sickness, layoff, mortgage reset) and they are unable to cope because of their lack of any savings whatsoever. Secondly there is this inability or unwillingness to face the shitty reality of the situation and make some tough financial decisions (sell the house, get another job, go on a budget), and finally there is always this call to the government to bail them out, as if they had no control over the situation.

Unfortunately it seems like too many of us have gotten so used to the assurance that a lifetime of debt is normal and sustainable both on the personal and macro levels that when it comes around and bites us in the ass it really hurts and we are unwilling to deal with it without some reflection and self sacrifice. Don’t know for sure what is around the corner, but I’m not too optimistic overall. The volume of the message that all of this is unsustainable in the long run is getting louder with each multi-bullion dollar bailout of a bank, each FED rate cut, each report of housing prices crashing and industry layoffs.

Badgers make a sweet 16 run, and are matched up with the tourney’s cinderella 10-seeded Davidson, who knocked out area favorite 2-seeded Georgetown for a shot at the elite 8, and final 4. Seems like de ja vu from the last time Wisconsin made it this far, there was talk about them lucking out playing lower seeded teams all due to a lot of upsets in the bracket.

Been about a month between actual entries, once again life gets busy and there hasn’t been too much time to stop and actually write something down. Had a good trip out west, will have to write about that with some pictures when I get around to it. Meanwhile life goes on I suppose, I’m getting pretty tired of the daily grind, especially when lately it seems like its much ado about nothing at all. Its an ongoing struggle seeing and learning one thing in school, and then seeing the opposite at work, sometimes vice versa, either way it can be either uplifting or discouraging. The study of law is a different animal, in some ways its hyper theoretical, studied in a vacuum, just like other ivory tower disciplines. In other ways its quite real and hard hitting, when it comes to basic procedure and due process. At the same time work has the theoretical process on how work is supposed to go, contrasted with the imperfect reality of how things play out and how people actually interact. I have to say that I’m quite proud of how I’ve been able to balance both day work and night school, so far neither has really intruded into the other one in a negative way, mostly because there has been so much overlap between the two. It is discouraging sometimes when it feels like I’m the only one that really sees it though.

There is something worth mentioning that my generation has been the beneficiary of the one of the longest bull markets, by some estimates since 1982, meaning that we’ve never had a period of economic slowdown, never had a tough period for finding jobs, never had anything major barriers to access to credit. Both have contributed to a decent and increasing quality of life, either from actual income, or more perceived quality of life from cheap credit at low interest rates. As businesses start tightening their belts and laying people off, as banks stop giving out loans without ample capital or credit ratings, this will ultimately result in a shift in the American way of life as we currently know it, a shift that I wonder we are all adequately prepared for, both financially and psychologically.

Busy month/week/days, just a few observations and and some linkes for now:

The DOW shot up 250+ today on news of the federal reserve rate being cut from 5.25% to 4.75% - good news for stockholders and people with a lot of debt……bad news for everyone in long run in terms of inflation and the overall strength of the dollar (The Euro is already at an all time high against the dollar) There is also talk about the overall strength of the economy being in bad shape, and there is a recession looming around the corner. It might prove to be a temporary fix and ignoring a much much larger problem.

Meanwhile just today the soda machine at work just went from $1.25 to $1.35 coincidence?

Linkes for 9/18/2007:
Obama Tax plan iteresting ideas
Gold at $718/ounce and climbing
Glen Grant Threads and Obake stories starbulletin | wiki | hawaiistories

For the several months now I’ve been following the coverage of several housing related blogs and informational websites that present a very compelling list of arguments why it might be a very bad idea to buy real estate in the current market conditions. Although many of them are focusing on the San Francisco bay area, I think the rationale can be applied to other metro areas that have seen exponential rises in housing prices since 2000. I think the authors have to have laid out very well reasoned yet painfully simple economic analysis which I have yet to see sufficient evidence on the other side to present a compelling case. One author addresses just about every sales pitch that has been thrown around by real estate agents and mortgage brokers about why everyone should be buying a house, and its always a good time to buy.

Anyone who has taken a high school class in economics, or even glanced at an Econ 101 book should be able to understand why many of the pro-housing advocates in this current market make no sense at all in their sales pitches. Unfortunately emotion and fear of market exclusion is a very effective tool at getting people to stop using their heads and make very poor financial decisions that could haunt them for the rest of their lives. In many ways I liken the current state of the real estate industry a lot like the diamond industry, the luxury sports car industry, selling overpriced, over-marketed consumer goods that are suck up a substantial amount of the average person’s disposable income, guaranteed to depreciate in value, and ultimately amount to nothing more than another meaningless status symbol when it really should be something more practical: a roof over your head and land to maintain and maybe pass on to your heirs one day.

The subprime stock implosion and mainstream media coverage of toxic/exotic loans that sound a lot like credit cards with their low introductory rates that double or quadruple after a couple of years is all troubling. Especially since a lot of these loans were apparently given to all being given to people who normally could not qualify for a standard, fixed rate loan. They were banking on the fact that their houses would appreciate at 25%, 50% a year or something, and they would eventually sell it for a profit, or refinance the mortgage and take more cash out on the equity. Unfortunately now that the real estate market is tanking, it looks like it’ll just get worse as more and more mortgages reset to the higher rates, and more foreclosures go through. In the next couple of years there might be a lot of broke homeless people with bad credit finding it hard to find someplace to even rent.

I think that everyone who is thinking about buying a house or condo should at least read and digest the wealth of information available online before taking the debt plunge. The housing market is so out of whack right now that it could be financially fatal to buy in the current inflated market conditions.

Housing Blog Linkes:
The Bubble Meter
Housing Panic
Marin Bubble
Hawaii Real Estate bubble
DC housing blues