Kaulapi World

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.

This entry was posted on Thursday, March 27th, 2008 at 12:46 am and is filed under city life, economics, wonkish policy stuff. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.