The net result of Reaganomics

"based on"
vs
financially leveraged against to define market value...

Housing market

the housing market is not singularly based on the ability of people to pay for the lending they have
thus the real leaning to income is a speculation
... managed risk
managed and speculated by the government and in partnership with other private businesses they speculate by taking a gamble

we could probably test that theory by borrowing one of the super computer computer modeling servers
loading a program to simulate the global stop in house sales
and see how the financial markets and currency values are effected.

it would be very expensive yet possibly very educational for some big businesses to decide to throw 20 million dollars or so at it for future learning and best policy assistance.

 

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"Based on" is more accurate. It is the foundation of the economy.

 

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i wanted to allow room for scope of influence by those wanting to split hairs

currency is probably not based on house prices yet is based on the houses being traded as a form of currency circulation maintaining inflation that continues to back the currency against other currency's valued only with international trade.
the net migration attraction to higher income people serves to facilitate currency value by trending the currency as most desired.
regardless of its comparative worth
pound being higher
yet germany being most desired ...usa 2nd uk third etc etc....
switzerland least(but only because of lack of ability to gain entry) ? yet best possible option etc etc...
access also defines its own sense of perceived value.
the perception of the financial stability is almost equal to its value.
so single entity concepts of the market hold insular value to the political frame work that is projected as ideology. etc...

home ownership is a foundation market pillar by managing compulsory spending avenues to protect long term busines investment into productivity process and market circulation.
i agree

most people have no real idea though

that sense of ownership of land is a critical culture & personality frame work value that all cultures require as a foundation to equality, self esteem, community and value.

it is clearly defined in child abuse & child mental health & developmental issues.
the picture is not blury at all.
thus i do not disagree with the social engineering of private land ownership.
i also strongly support governments pushing to give more access to home ownership as a core policy to culture community & national design and long term sustainability, psychologically and environmentally(as environment comes after the psychology).

 

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?
The criteria for skilled play were almost entirely assessments of probabilities. The skilled player makes it a game of chance - like roulette, only with the wheel biased in known ways.
If the investor is trying to take other factors into account, they are trying to beat the house - the mark of a bad investor, (or one with inside information etc - a house member, so to speak).

It's an observed and explained pattern in the return to capital vs the return to labor, one found in all but a couple of exceptional capitalist economies for limited periods of time (post New Deal US the main one, ending in 1980 or thereabouts) - everything may be based on labor, but that doesn't mean labor gets paid.

 

In a capitalistic economy, having capital is rewarded. So the janitor who puts some money in property or the stock market is likely to leave more to his kids than the higher wage earner who spent heavily throughout his life.

It matters less what you make and more important is what you save.

You can tilt at windmills or you can adapt to the system. I know attorneys who don't own houses in Seattle and I know a guy who is a high school graduate and a masseur (not exactly the quickest path to riches) who bought a house and rented out 2 of the other rooms and now owns a house.

I know a 25 year old public school teacher (in Seattle) who owns her own condo.

You can make excuses and wait for the system to change (so that no one can buy a house) or you can just make it happen as people have always done.

 

It's a numbers game. A few people will be able to buy a house in Seattle by saving the return to middle or lower class labor and building enough capital to buy a house in Seattle. Most will not - the ordinary fortunes of life will wipe out their savings, etc. They might, for example, have children.
That was not true in years past - before Reaganomics.

Disproportionately or proportionately, is the issue.

And less likely - much less likely - than the inheritor of significant capital.
Despite having already beaten significant odds - a janitor with paycheck money left over after providing for children?

In the situation at hand - with the wealth of the US increasingly concentrating in the upper percentiles, and less available to the rest - it matters what you save compared with others. If everybody saves, the ones who save the most win - the rest lose, having scrimped and saved for nothing much.

The system installed in the early 1980s is steadily and fairly rapidly transferring the wealth of the United States into the ownership of a small percentage - those who already have significant capital, and can take most advantage of the larger returns to capital.

The large majority of the citizenry, everyone who relies on the return to labor for most of their income, will continue to fall behind in proportion to their reliance on the smaller returns received by labor. That is because the system that protected their proportion of created wealth was replaced by Reaganomics, which did not.

The "adaptation" available to someone without capital initially would involve acquiring capital fairly rapidly, and avoiding bad luck in investing it. That adaptation is only possible for a small percentage of people without initial capital - one can improve one's odds via moderation in lifestyle, not providing for children or elderly parents, etc, but they will never be other than odds. Increasingly long odds.

Most people will lose a game played at long odds - that's what long odds means.

 

https://fred.stlouisfed.org/series/MEPAINUSA672N

 

Nope. Mutual and indexed funds gain value with time - with very rare exceptions. Thus someone with zero skill will "win" because it's not really a game of chance. I certainly started investing 30 years ago with zero skill, and the only real mistakes I made was in putting some 401k money in "stable value" funds (i.e. guaranteed 1-2% return via bonds.)

The skill lies in matching risk to financial situation.

No, the skilled player does not play roulette because he knows he will not win in the long run. The skilled investor DOES invest because he knows he will win in the long run.

So an investor that takes into account his tolerance for risk is a bad investor?

Have you ever invested in anything? Ever?

 

What seems to be described is a speculator and not an investor. Real estate and (as was mentioned) index funds, over the long run are generally good investments.

Just match your available dollars to invest with your investment timeline (don't invest money that you will need soon).

 

Not at all. I clearly and explicitly stated that such skillful tactics - beginning with recognizing that this is a game of chance, so balancing probabilities against risk sensitivity is necessary - mark a good player.

Yep. Similar skills are involved in other games of chance, such as poker.

Nobody knows whether or not they will win in the long run - most do, many don't.
He knows the odds are in his favor, and keeps them that way by moderating his behavior. That is a difficult and uncommon skill.

And the skilled investor knows - can put a number on - how "rare" those exceptions are, how to compare those odds with the odds of other strategies and investment tactics, etc.

Look at this, for example, from the somewhat less skilled:

In my region, real estate investment bankrupted thousands of people - and blighted the lives of tens of thousands. They have not recovered yet - more than a decade after their decade of real estate investments blew up in their faces. That's a two or three decade investment loss - about as "long term" as a human life allows.

So?
What's with the unanalyzed (and therefore meaningless) numbers?

Another source of risk: nobody except the very rich has money they know they will not need soon.
They are taking a risk, is all. Playing the odds. Entering a game of chance with as much skill as they can muster.
And the lower the capital stock to begin with, the worse the odds.

 

Most people in the U.S. who bought a house now have a house that is worth much more than when they bought it.

If someone bought a house in a town with high crime and no jobs then they will have a harder time of it. There are exceptions to everything. You seem to be arguing that only the rich own houses, have any net worth. That's just not the case.

Wealth being more concentrated at the very top is true. No argument there. Fix that problem if you want to.

The rest of your argument is just not valid. Your argument is that most people are idiots, don't have any money, any education, can't help themselves in the least and nothing that they do will work or have any effect on their lives. Incomes also aren't as stagnant as you have indicated since the 1980's.

Your panacea is to turn back the clock to pre-1980 but all of your complaints applied then as well as now. Everyone wasn't economically equal then either. People who help themselves have more under any economic system.

Most people in the old USSR were poor. Those that were industrious and creative had more. The rest were either well off (party elite) or poor. The party elite had much more than just salary would indicate. The top 1% had much of the goods even in that system.

Sweden has been much better in the capitalist years where higher taxes tend to come back to the tax payer either in later years or currently in the form of benefits. The socialist years weren't as good as the present.

In the U.S. the problem is that we don't raise enough taxes for current expenditures but what we spend money on is an even bigger problem. People pay taxes but it just goes to the inflated military, prison system and not to help the average person in the form of education, medical care and a livable retirement.

The solution isn't to argue against, or make more difficult, personal investments.

 

You already knew that your odds were better with certain investments, and you had the skill of moderation and prudence. That is not "zero skill" - that is above average skill in this particular game.

That's pretty much how I managed to not lose money - even made a little - by investing in stocks for a while. I didn't churn, I avoided various pitfalls, and I got out when I saw trouble despite locking in less gain than the fluctuations made possible. So good for me, eh? But I don't kid myself about the luck factor - not needing the money for long enough, not falling for brokers's pitches, etc.

Most small investors lose money in the stock market, in part because they are small.
As any poker player can tell you, a short stake usually loses even when the long term odds favor it - it can't ride out a setback.

As any good poker player also can tell you, it is almost impossible to identify skill in oneself by tracking performance in a game like poker over intervals of less than ten or fifteen years - the role of chance is both subtle and large.

And as the average math teacher can verify for you, dealing with probabilities is among the, if not the, most difficult matters for human brains to handle. We are not very good at it. We are lousy at it, as a species. Afaik the only competition it has for least possessed skill by a human is blind navigation. Compare the baby step simplicity of something like Bayes's Theorem with the difficulty most people have using it, the comparative sophistication of real analysis theorems a student of similar status can handle, the famous examples like the three doors and tiger question, and the situation becomes immediately clear - confidence in one's handling of risk and probability is almost always misplaced.

 

The way that you are going about investing is not the best way to do it. Stock timing is more like gambling. You have to time it right twice. You have to be right about when you get out and you also have to be right about when to get back in.

You are likely to give up large gains by getting out early and you are likely to give up large gains by getting back in too late and then maybe even deciding to get out right after getting back in, if the market corrects, and taking a loss.

Add in stock commissions, being taxed at short-term cap gains rates and it's hard to make money that way.

The way to do it is to put in money that you don't have to use now. You might want to use it but you don't absolutely have to use now.

Buy index funds with low fees, very low trading so you aren't paying short-term cap gains each year and when you do cash out you will only have the much lower long-term cap gains taxes to pay.

Dollar cost average the money you put in. In down markets your fixed amount will buy more and it will buy less in expensive markets near the top of the market. Don't time the market. Just leave it alone.

Don't buy a house unless you can stay there for 5 years at least. If it's a crazy (high) market be sure to buy a modest fixer upper rather than a fancy top of the market house.

If you do those two things you will do fine in most any area of the country over time. You will do better if you happen to live in a very good economic market but even in a lesser market you will do OK because your initial investment will be much less.

In a smaller market there is more of a variety of house prices so more economic classes can buy a house. In a large market there generally isn't that range and even the smallest house is still expensive.

The cheapest older, small house in Seattle is probably about $500k at the moment. You can buy a condo of similar size in Glendale Az for $80k.

 

And many don't - especially if they bought it recently, within the past twenty years.

? I know for a fact, as as research number, that the net worth of the lower working classes has declined even in absolute terms since the 1980s - in relative terms it's tanked.
Otherwise, I said nothing even tangentially related to such an "argument".

Not a clue what you are raving about there. Nothing that has anything to do with my posts, obviously, but it's addressed to me, and like most replies from the wingnut crowd it goes out of its way to deal insults, so I know it's not addressed to me by accident. So - - ?

Again: You guys can't paraphrase my posts. Quit trying - it's not in your skill set, and it makes a lot of work for everybody.
Ok: For the tenth time, at least:
It's the level, not the fact, of inequality that I have explicitly and repeatedly and quite clearly focused on. I have stated, repeatedly, that some economic inequality is good and beneficial. I am in favor of a good level of economic inequality. Economic inequality, market forces allocating capital, all good, all favored by me. All favored by me repeatedly, on this forum, in plain English.

How about: Me like market. Me like wealth. Wealth good, work good, market good. Some rich because work hard - very good. Me happy. All better when good rich. All better when save money. Save money good, waste money bad. Some poor because waste money - nobody else's business.

Is that easier for you to comprehend? Because I can use that model whenever replying to the bandarlog cadre - whatever works.

I'm not.

I'm not doing anything like that, never did, and never will.

That's what I did.
You've been warned about making ignorant assumptions about personal stuff without information - but as we both know, you can't post any other way.
But you could try reading the posts. It won't stop you from trying to turn every single reply into a spew of insult and clueless presumption, but it might focus the spew on something relevant.
- - - -

There is no such certain knowledge in this world. There is risk. Some will lose.
Not as many as lost in the Crash, of course. That was something like half the homeowners in the US - they are still digging out.

The problem in the US is that we quit taxing the rich enough to avoid cumulative inequality, and we fought entire wars on credit, and we deregulated the bankers - who promptly did what every unregulated banker in the history of the world has done, which is crash the economy through greed.

That and we all agreed to pretend that market forces would efficiently allocate medical care to the old, young, sick, injured, pregnant, and otherwise without money - so we could turn over the entire medical care system to be run by private, for profit insurance corporations, counting on the sick and injured and young and old to impose market discipline on corporate behavior and make wise, informed choices about their medical needs of the future.

To return to the discussion: The US economy was better set up before 1980 than it is now. It had a much better level of economic inequality, for example, whereas now it has a damaging level of economic inequality - enough to cripple the economy as a whole, and blight the lives of everyone but the wealthy in general. To correct this, Reaganomics is going to have to be revoked - taxes on the wealthy are going to have to be restored, at minimum, and probably raised to 1960s levels (we have a war to pay off, recall).

 

Except that the numbers don't show that everyone but the wealthy have not done well since the Reagan years. The very wealthy have done exceedingly well (of course). The poor have not done well. The educated middle class have done well. Most people who have bought a house in the last 20 years aren't underwater as you have suggested.

The real estate market has done well as has the stock market. The middle class has benefited from that.

Spare me the replies about name calling.

Deregulation has also benefited the economy and our pockets (airlines).

The medical system didn't really change under Reagan. It was too expensive both before and since Reagan.

 

Yes, they do - if "wealthy" means the upper 20% of wealth holders.

Much of the middle class is still trapped in bubble priced housing and its heavy debt, and is incurring a new round of questionable debt in consequence.
The idea that the real estate market has done well because prices have gone up under easy credit, growing demand, and collusive willingness by all agents to lend and borrow to pay them, is bizarre - did we learn nothing from the bubble and crash?

The wealthy benefit much, much more from stock market gains than anyone else. Most people own little if any stock. Even most households own little stock (and the households with stock are not the ones with lots of people): http://money.com/money/5054009/stock-ownership-10-percent-richest/

Then quit posting projections and innuendo and insult about it - its a term and concept you use, not me, and something you complain about, not me.

Reagan reversed the existing trend to single payer or some other assurance of universal insurance coverage. He deregulated and privatized both care delivery and insurance, blocked the attempts to change from an employer based insurance system, and set in motion the continuing trend to further deregulation and privatization - with easily predicted consequences:

The US medical care and insurance started its still continuing rapid cost growth under Reagan - and at the same time began sliding in outcome stats, relative to First World systems. In a few years the US had the worst outcome stats as well as the highest costs of any modern medical care system on the planet.
https://www.salon.com/2015/07/26/ro...ve_ideologies_reshaped_the_healthcare_debate/
https://www.nytimes.com/2018/06/04/...as-exceptional-rise-in-health-care-costs.html
https://www.newsrust.com/2018/06/reagan-deregulation-and-americas.html

 

I did not. Indeed, I chose the worst possible investment for my situation.

Nope. Most small investors do indeed make less money than they could (average 5.2% vs an S+P 500 return of 9.9%) - but the vast majority make money.

 

When you mature and quit being a dick, I'll lend you a few bucks.

You don't consider the real estate market to be a good market when it goes up, you don't like it when it goes down. Something tells me you might be hard to please.

If you don't put money in real estate or stocks, what do you suggest that anyone do with any savings that they might have? Your answer to this seems to just be that no one has any money, as if that is a satisfactory answer.

Do you have a problem with deregulation of the airline industry because without it most people (especially all the poor people you talk about) would never be able to afford to fly.

 

That doesn't add up - the arithmetic doesn't work:

https://www.creditdonkey.com/average-stock-market-return.html

Note that large investors - who do much better on average than small - are averaged in to those numbers. Clearly the small individual investor is not actually receiving 5% on their money - and that is before the disproportionate effects of forced timing of sales, fees and commissions, etc, are figured in.

And that's just the gross returns - the net, after fees and inflation and opportunity cost, would be much smaller.

So we are imagining a lower or middle class person with a few thousand in ready cash socked away (to cover a car breakdown, emergency room visit, storm damage, etc) and then some more saved for investment? The most urgent and by far the highest return available to most people would be retirement of their credit card debt. After that, pay off the student loans - a small return, but they are high risk; they cannot be retired via bankruptcy, and the New Deal protections against crashes have been revoked - so you know there's one coming.
Only a small minority of middle and lower class people have enough money saved and enough skill to provide good odds in the real estate or stock market. The US economy of the non-wealthy is in bad shape. If you find that reality unsatisfactory, you are going to be either unsatisfied or delusional - nothing I can do about it.

I paid attention the past thirty years.
When the real estate market has corrected for the Republican bubble that effectively bankrupted (took their net worth below 0) so many of the non-wealthy, I will like it. That means prices restored to the normal trend lineMeanwhile, a lot people are getting hurt and going to get hurt, again - almost all of them lower and middle class, driven to real estate in desperation from swelling rent.

 

No one is being driven to real estate from swelling rent. If you can't afford the rent, you can't afford to buy a house.