Janet Yellen says equity market valuations are quite high

[Picasso]

I was running some figures today and thought this pretty much sums up the situation.  Maybe someone else has run it more extensively than I have, but I think it gets the point across.

 

The estimated deficit for the U.S. runs about $500 billion annually for the next four years.  Given the current $18 trillion of debt at a 1.6% cost of capital and 5 year average weighted maturity, you add $500 billion a year to that and compound out 2-3% rates and normalize at 5% in ten years.  You would have around $27 trillion of debt costing between $1.1 and $1.35 trillion or 40-45% of the current budget.  So just paying the debt eats up almost half of the budget.  How are the bonds still even close to AAA at that point?

 

Rates can't normalize unless we somehow can magically grow out of this.  The market will throw little fits about rates once in a while as it gets nervous but this game is going to need to go on for a long time or it will make 2008 look like a game of patty cake.

 

I think you just have to invest in the same prudent manner (finding absolute bargains with high imbedded returns regardless of macro) and maybe hedge out with a small percentage of your assets if you think the value is attractive in the hedge.  Who knows what that hedge is.

 

Edit: I know future revenue to the Treasury will be higher but it seems like going from 10% of budget expense to 30-40% is a killer.

[james22]

Greenspan "irrational exuberance" moment? http://en.wikipedia.org/wiki/Irrational_exuberance

 

And of course after Greenspan's comments the dot-com bubble promptly burst...four years later.

 

That was one of the implications in my comment.  ;)

 

Then six years later the Nasdaq was actually cheaper than where it was when initially made that comment.

 

Is it a reasonable plan to hold cash until valuations are recognizably attractive? Given it make take another six years?

 

Or is such patience inhuman?

[wescobrk]

Good comments Picasso, don't forget there are other issues as well, the most frightening it seems (after costs of rates normalizing is medicare) over a 50 year time frame I believe it'll consume more than 50% of the annual budget. Of course, the country will do something about it at some point but it is frightening as well.

Another thing I'm concerned about is the lack of productivity. Is anyone else conncerned about this?

I think the FT had an article today about averaging .6% a year since I think around 2003. This is very concerning as well. Instead of the long-term rate of 2%.

As far as Yellen, I think stock valuation calls are a bit outside her job description. She talked about biotech and social media being too high a few months back, as Buffett and Gates said, if rates stay low for a few more years, stocks are actually quite cheap.

We all know the Fed has been too optimistic on growth for the past 5 years. Their forecasting skill is not that good. As Gundlach put it, they haven't added any value when you compare with the futures markets over the past several years, of course, no one else can forecast as well it isn't just the Fed, it always pains me to see the conviction they have when their record is so poor.

I remember Bullard called for starting up QE again in Nov then he said we should raise rates in March. Some people on the Fed are almost nuts, but I digress.

[Ham Hockers]

We all know the Fed has been too optimistic on growth for the past 5 years. Their forecasting skill is not that good. As Gundlach put it, they haven't added any value when you compare with the futures markets over the past several years, of course, no one else can forecast as well it isn't just the Fed, it always pains me to see the conviction they have when their record is so poor.

 

It's probably good that the best forecaster at the Fed is the chairwoman.

 

http://graphics.wsj.com/fed-predictions/#c%5B%5D=Janet+Yellen&c%5B%5D=Charles+Plosser&d=0

 

[bargainhunter]

Good comments Picasso and wescobrk. A couple of thoughts:

- I think the "normalized" Fed funds peak of the future is going to be closer to 3% than the historical 5%. Demographics, slowing productivity, etc all argue for a lower potential growth rate and lower interest rates in the future. Interest payments will probably make up a smaller chunk of the budget than normalized projections suggest.

- I worry about slowing productivity too (this is a global phenomenon). Have we already harvested most of the gains from the IT revolution? Despite all the hype about big data, etc, that is what the macro data would suggest. Robert Gordon is a good source on this stuff.

- I also share the concern that in the US we are near peak earnings/margins and peak multiples. The only way to go is down. That said, rates are not going to go up in a hurry, and I have a hunch this economic upcycle still has a couple more years to run.

 

Thinking about this stuff is fun, but I share the view of many on this board that trying to pick the turning point is a fool's errand. At the end of the day it's all about insisting on a solid margin of safety...

[Jurgis]

Have we already harvested most of the gains from the IT revolution?

 

No.

 

Self driving cars will eliminate a huge number of human employees from tons of industries in one swoop.

 

Automatization and robotization of other professions is ongoing. It's not a smooth process, but rather a stepwise process: you can't replace humans with machines until you suddenly can.

 

"Big data" is a lot of hype. There's probably over 50% places where it won't matter at all. But in some other places it will matter a lot. Once again, probably not in a smooth way, but rather stepwise.

 

If you talk about productivity in USA, it's likely the productivity increases from IT have moderated because most of USA jobs are in the categories where productivity won't increase much without a radical shift.

[bargainhunter]

Have we already harvested most of the gains from the IT revolution?

 

Automatization and robotization of other professions is ongoing. It's not a smooth process, but rather a stepwise process: you can't replace humans with machines until you suddenly can.

 

 

All good points. I don't disagree, but I would argue that outdated regulatory frameworks and the litigious nature of our society are going to hamper some of the potential productivity gains. Think of all the pushback on Uber/Airbnb, etc from vested interests hiding behind the cloak of "safety concerns." As for driverless cars, the technology may be there but I can't imagine how we are going to get around the inevitable legal morass surrounding their adoption. (What happens when a driverless car hits a child crossing the road?) At the end of the day people are far more forgiving of mistakes made by humans than machines. I realize I have veered slightly off topic here...

[Jurgis]

As for driverless cars, the technology may be there but I can't imagine how we are going to get around the inevitable legal morass surrounding their adoption. (What happens when a driverless car hits a child crossing the road?)

 

This is a common argument and I believe people keep repeating it without really thinking about it. Perhaps you should ask yourself what happened when GM had faulty ignition switches and work from there.

[Uccmal]

As for driverless cars, the technology may be there but I can't imagine how we are going to get around the inevitable legal morass surrounding their adoption. (What happens when a driverless car hits a child crossing the road?)

 

This is a common argument and I believe people keep repeating it without really thinking about it. Perhaps you should ask yourself what happened when GM had faulty ignition switches and work from there.

 

The exercise of building driverless cars will have lots of spinoffs.  As for driverless cars in mass usage, I am doubting it more and more.  Not ever, but in the medium to long term.  I can see their use in less complex systems such as one way highways, where the cars join a "train" and exit on an off, and go back under human power.  At this point and in the foreseeable future humans are simply much better at handling tasks with multiple layers of complexity and feedback.  One weak wireless connection, or one single blue screen of death and all hell would break loose on the Average urban street.  When they can negotiate one day without accident in an Indian, Bolivian, or Nepalese city I will be convinced.  No one has found the disappered Malaysian Jet, so far - my faith in technology is limited. 

[Jurgis]

At this point and in the foreseeable future humans are simply much better at handling tasks with multiple layers of complexity and feedback.

 

I believe that you are overestimating humans and underestimating the technology. So we disagree.

 

We will see pretty soon though.

 

 

[Guest Schwab711]

As for driverless cars, the technology may be there but I can't imagine how we are going to get around the inevitable legal morass surrounding their adoption. (What happens when a driverless car hits a child crossing the road?)

 

This is a common argument and I believe people keep repeating it without really thinking about it. Perhaps you should ask yourself what happened when GM had faulty ignition switches and work from there.

 

Completely agree with Jurgis. There is some interesting court cases (can't recall names - I'll update with links if I do) from the 1910's and 20's when cars first became used in mass. Similar type arguments about machines causing deaths were used (as opposed to the safer mode of travel - horseback/carriage). Honestly, if Tesla were to sell automated cars to everyone in the world then they would settle the case with the child's family with the trillions in the profit they make.

 

I think a bigger problem would be if automated cars took off too quickly and patent protection caused problems down the line with bad/inefficient standards that are expensive to retrofit. This is not the biggest problem, just pointing out what I see as real issues with automated cars. A limited number of deaths are to be expected.

 

 

Also, to your point about Uber/Airbnb running into legal issues that you imply are unfair. Uber is acting as a taxi company while officially registered as a pickup service company. The regulations are night and day which gives them a huge advantage. Judges have ruled that Uber's app constitutes as soliciting a future car ride as opposed to hailing a car (which is what they are actually doing). Others have tried what Uber is doing, Uber is the first to be successful in court. That is where a lot of the pushback is coming from. A few judges basically awarded a HUGE competitive moat (cost, brand, and first-mover) to Uber when their idea/operations were not novel or new. A lot of folks are justifiably annoyed.

 

With Airbnb, you have similar problems with tax invasion. Previously, if you advertised your homestead for rent than you were a landlord and get everything that comes with. I'm not as well versed with Airbnb issues but I would imagine only a small minority of those renting their homestead pay the proper taxes or use the one-time event as a reason to take tax deductions. You add in the fact that most cities count on hotel tax for a lot of major municipal investments and I'd imagine nearly all leasers are not contributing (even though they probably should). The tax code needs to be updated for temporary hotel/motel usage.

 

Just trying to give you the other end of the spectrum. The pushback is not necessarily due to a conspiracy or holding back change. A lot of it has to do about unfair competitive environment created. There is a very small minority of wealthy person/company with ill-intent (like every classification of humans). Hopefully I didn't overly read into your post but animosity towards the wealthy only causes more problems. In my opinion, the income/wealth gap is due to prolonged low interest rates more than any other single cause (as unlikely as this may seem).

 

 

To get back OT, the market is really expensive! Count me as +1 for a ~20% [real] correction. I don't care whether it's 3 years of -5% - 0% returns or 1 terrible year; we really need one. It looks like it won't happen until equity yields become less attractive relative to bond yields so let's start raising rates now!

[Uccmal]

At this point and in the foreseeable future humans are simply much better at handling tasks with multiple layers of complexity and feedback.

 

I believe that you are overestimating humans and underestimating the technology. So we disagree.

 

We will see pretty soon though.

 

We see, or we dont see.  I never said impossible.  I have seen some amazing technological advancements in my short life.  I just dont think the technology is anywhere near reliable enough, and wont be for a long time.  From my perspective, only you can win this bet, as there is always tomorrow.  Kind of like making a bet on if there is an afterlife. 

[TwoCitiesCapital]

As for driverless cars, the technology may be there but I can't imagine how we are going to get around the inevitable legal morass surrounding their adoption. (What happens when a driverless car hits a child crossing the road?)

 

This is a common argument and I believe people keep repeating it without really thinking about it. Perhaps you should ask yourself what happened when GM had faulty ignition switches and work from there.

 

Completely agree with Jurgis. There is some interesting court cases (can't recall names - I'll update with links if I do) from the 1910's and 20's when cars first became used in mass. Similar type arguments about machines causing deaths were used (as opposed to the safer mode of travel - horseback/carriage). Honestly, if Tesla were to sell automated cars to everyone in the world then they would settle the case with the child's family with the trillions in the profit they make.

 

I think a bigger problem would be if automated cars took off too quickly and patent protection caused problems down the line with bad/inefficient standards that are expensive to retrofit. This is not the biggest problem, just pointing out what I see as real issues with automated cars. A limited number of deaths are to be expected.

 

 

Also, to your point about Uber/Airbnb running into legal issues that you imply are unfair. Uber is acting as a taxi company while officially registered as a pickup service company. The regulations are night and day which gives them a huge advantage. Judges have ruled that Uber's app constitutes as soliciting a future car ride as opposed to hailing a car (which is what they are actually doing). Others have tried what Uber is doing, Uber is the first to be successful in court. That is where a lot of the pushback is coming from. A few judges basically awarded a HUGE competitive moat (cost, brand, and first-mover) to Uber when their idea/operations were not novel or new. A lot of folks are justifiably annoyed.

 

With Airbnb, you have similar problems with tax invasion. Previously, if you advertised your homestead for rent than you were a landlord and get everything that comes with. I'm not as well versed with Airbnb issues but I would imagine only a small minority of those renting their homestead pay the proper taxes or use the one-time event as a reason to take tax deductions. You add in the fact that most cities count on hotel tax for a lot of major municipal investments and I'd imagine nearly all leasers are not contributing (even though they probably should). The tax code needs to be updated for temporary hotel/motel usage.

 

Just trying to give you the other end of the spectrum. The pushback is not necessarily due to a conspiracy or holding back change. A lot of it has to do about unfair competitive environment created. There is a very small minority of wealthy person/company with ill-intent (like every classification of humans). Hopefully I didn't overly read into your post but animosity towards the wealthy only causes more problems. In my opinion, the income/wealth gap is due to prolonged low interest rates more than any other single cause (as unlikely as this may seem).

 

 

To get back OT, the market is really expensive! Count me as +1 for a ~20% [real] correction. I don't care whether it's 3 years of -5% - 0% returns or 1 terrible year; we really need one. It looks like it won't happen until equity yields become less attractive relative to bond yields so let's start raising rates now!

 

I can provide insight to Airbnb as I am a host. Airbnb provides the IRS (and you) with documentation on how much income you received via the service through the year. It's up to the individual to claim the income on their tax paperwork and pay the amount owed, but the IRS has all of the information they need to identify those who are skipping out on the tax and put them away. I paid several thousand dollars in taxes from the Airbnb income I made if that changes your opinion of us at all.

 

Also, I can understand the regulations preventing you from purchasing an entire building and renting out the empty rooms on airbnb. That would be a hotel. I can't understand the pushback from renting out an individual room in your apartment/house while you're presently staying there as this isn't too much different than having friends/family/friends of friends etc. stay with you.

[rmitz]

We see, or we dont see.  I never said impossible.  I have seen some amazing technological advancements in my short life.  I just dont think the technology is anywhere near reliable enough, and wont be for a long time.  From my perspective, only you can win this bet, as there is always tomorrow.  Kind of like making a bet on if there is an afterlife.

 

I'll bet on <6 years at this point.

[Guest Schwab711]

We see, or we dont see.  I never said impossible.  I have seen some amazing technological advancements in my short life.  I just dont think the technology is anywhere near reliable enough, and wont be for a long time.  From my perspective, only you can win this bet, as there is always tomorrow.  Kind of like making a bet on if there is an afterlife.

 

I'll bet on <6 years at this point.

 

That the automated cars exist or they are common place? How automated? 6 years seems impressively short. What about all the folks like me who prefer cheap cars? I think the hardest part for automated cars is adapting to non-automated/connected cars already on the road. Once we get the 90's civics off the road then we will likely see some incredible innovation.

[Guest Schwab711]

As for driverless cars, the technology may be there but I can't imagine how we are going to get around the inevitable legal morass surrounding their adoption. (What happens when a driverless car hits a child crossing the road?)

 

This is a common argument and I believe people keep repeating it without really thinking about it. Perhaps you should ask yourself what happened when GM had faulty ignition switches and work from there.

 

Completely agree with Jurgis. There is some interesting court cases (can't recall names - I'll update with links if I do) from the 1910's and 20's when cars first became used in mass. Similar type arguments about machines causing deaths were used (as opposed to the safer mode of travel - horseback/carriage). Honestly, if Tesla were to sell automated cars to everyone in the world then they would settle the case with the child's family with the trillions in the profit they make.

 

I think a bigger problem would be if automated cars took off too quickly and patent protection caused problems down the line with bad/inefficient standards that are expensive to retrofit. This is not the biggest problem, just pointing out what I see as real issues with automated cars. A limited number of deaths are to be expected.

 

 

Also, to your point about Uber/Airbnb running into legal issues that you imply are unfair. Uber is acting as a taxi company while officially registered as a pickup service company. The regulations are night and day which gives them a huge advantage. Judges have ruled that Uber's app constitutes as soliciting a future car ride as opposed to hailing a car (which is what they are actually doing). Others have tried what Uber is doing, Uber is the first to be successful in court. That is where a lot of the pushback is coming from. A few judges basically awarded a HUGE competitive moat (cost, brand, and first-mover) to Uber when their idea/operations were not novel or new. A lot of folks are justifiably annoyed.

 

With Airbnb, you have similar problems with tax invasion. Previously, if you advertised your homestead for rent than you were a landlord and get everything that comes with. I'm not as well versed with Airbnb issues but I would imagine only a small minority of those renting their homestead pay the proper taxes or use the one-time event as a reason to take tax deductions. You add in the fact that most cities count on hotel tax for a lot of major municipal investments and I'd imagine nearly all leasers are not contributing (even though they probably should). The tax code needs to be updated for temporary hotel/motel usage.

 

Just trying to give you the other end of the spectrum. The pushback is not necessarily due to a conspiracy or holding back change. A lot of it has to do about unfair competitive environment created. There is a very small minority of wealthy person/company with ill-intent (like every classification of humans). Hopefully I didn't overly read into your post but animosity towards the wealthy only causes more problems. In my opinion, the income/wealth gap is due to prolonged low interest rates more than any other single cause (as unlikely as this may seem).

 

 

To get back OT, the market is really expensive! Count me as +1 for a ~20% [real] correction. I don't care whether it's 3 years of -5% - 0% returns or 1 terrible year; we really need one. It looks like it won't happen until equity yields become less attractive relative to bond yields so let's start raising rates now!

 

I can provide insight to Airbnb as I am a host. Airbnb provides the IRS (and you) with documentation on how much income you received via the service through the year. It's up to the individual to claim the income on their tax paperwork and pay the amount owed, but the IRS has all of the information they need to identify those who are skipping out on the tax and put them away. I paid several thousand dollars in taxes from the Airbnb income I made if that changes your opinion of us at all.

 

Also, I can understand the regulations preventing you from purchasing an entire building and renting out the empty rooms on airbnb. That would be a hotel. I can't understand the pushback from renting out an individual room in your apartment/house while you're presently staying there as this isn't too much different than having friends/family/friends of friends etc. stay with you.

 

Thanks! Good to know and my opinion of hosts is slightly higher haha.

 

The problem I see with hosts is you are still undercutting local hotels anywhere there is hotel taxes (state or local). Although a random guest seems equivalent to family/friends, in most states/localities you are generally only exempt from the tax if it's a family member or if a non-related person is staying with you for free. So technically every person should be responsible for a hotel tax anytime a friend stays with them and compensates them in more than a trivial manner. In most states it seems like even an expensive steak dinner in return for the couch should technically trigger the tax (although this seems ridiculous in practice).

 

The problem with Airbnb is their intent which is to act as a quasi-hotel (with millions of non-standardized and ever changing locations run by owner-operators). Not necessarily for hosts like yourself but I do think Airbnb should be forced to build this cost into all prices where necessary (although you seem to do pretty well :) - in general it seems unreasonable for hosts to be responsible for such nuanced state/local law when Airbnb acts as the broker/agent).

 

Consider the recent BRK AGM. If all visitors used Airbnb instead of hotels (booked through any avenue) then the city of Omaha could have potentially lost out on (2 days * 10.5% of revenue * ~$100 hotel/night * ~10k rooms(?))  ~$200k in tax revenue in just 2 days!

 

It's not that I personally care and Airbnb provides a significantly cheaper alternative to hotels but it does hurt local economies/governments and creates an unfair business environment. In effect, it becomes a small additional "tax" paid by all tourists staying in hotels to random residents.

 

[ERICOPOLY]

Good, then let's rid ourselves of the hotel tax in order to level the playing field. 

 

Probably cutting the vice squad personnel from the police department payroll would offset the drop in revenue.

 

This way your city would be a more fun place to travel to, and your tourist revenue would soar.

[rmitz]

That the automated cars exist or they are common place? How automated? 6 years seems impressively short. What about all the folks like me who prefer cheap cars? I think the hardest part for automated cars is adapting to non-automated/connected cars already on the road. Once we get the 90's civics off the road then we will likely see some incredible innovation.

 

I would bet that they exist, are commercially available, and they are fully autonomous, at least in some cases.  At least 50% of the time, the cars could provide people with an unassisted door-to-door travel experience. 

 

I don’t know about commonplace, but that probably won’t take much longer.  The car upgrade cycle hasn’t seen a significant feature upgrade in a very long time.

[TwoCitiesCapital]

As for driverless cars, the technology may be there but I can't imagine how we are going to get around the inevitable legal morass surrounding their adoption. (What happens when a driverless car hits a child crossing the road?)

 

This is a common argument and I believe people keep repeating it without really thinking about it. Perhaps you should ask yourself what happened when GM had faulty ignition switches and work from there.

 

Completely agree with Jurgis. There is some interesting court cases (can't recall names - I'll update with links if I do) from the 1910's and 20's when cars first became used in mass. Similar type arguments about machines causing deaths were used (as opposed to the safer mode of travel - horseback/carriage). Honestly, if Tesla were to sell automated cars to everyone in the world then they would settle the case with the child's family with the trillions in the profit they make.

 

I think a bigger problem would be if automated cars took off too quickly and patent protection caused problems down the line with bad/inefficient standards that are expensive to retrofit. This is not the biggest problem, just pointing out what I see as real issues with automated cars. A limited number of deaths are to be expected.

 

 

Also, to your point about Uber/Airbnb running into legal issues that you imply are unfair. Uber is acting as a taxi company while officially registered as a pickup service company. The regulations are night and day which gives them a huge advantage. Judges have ruled that Uber's app constitutes as soliciting a future car ride as opposed to hailing a car (which is what they are actually doing). Others have tried what Uber is doing, Uber is the first to be successful in court. That is where a lot of the pushback is coming from. A few judges basically awarded a HUGE competitive moat (cost, brand, and first-mover) to Uber when their idea/operations were not novel or new. A lot of folks are justifiably annoyed.

 

With Airbnb, you have similar problems with tax invasion. Previously, if you advertised your homestead for rent than you were a landlord and get everything that comes with. I'm not as well versed with Airbnb issues but I would imagine only a small minority of those renting their homestead pay the proper taxes or use the one-time event as a reason to take tax deductions. You add in the fact that most cities count on hotel tax for a lot of major municipal investments and I'd imagine nearly all leasers are not contributing (even though they probably should). The tax code needs to be updated for temporary hotel/motel usage.

 

Just trying to give you the other end of the spectrum. The pushback is not necessarily due to a conspiracy or holding back change. A lot of it has to do about unfair competitive environment created. There is a very small minority of wealthy person/company with ill-intent (like every classification of humans). Hopefully I didn't overly read into your post but animosity towards the wealthy only causes more problems. In my opinion, the income/wealth gap is due to prolonged low interest rates more than any other single cause (as unlikely as this may seem).

 

 

To get back OT, the market is really expensive! Count me as +1 for a ~20% [real] correction. I don't care whether it's 3 years of -5% - 0% returns or 1 terrible year; we really need one. It looks like it won't happen until equity yields become less attractive relative to bond yields so let's start raising rates now!

 

I can provide insight to Airbnb as I am a host. Airbnb provides the IRS (and you) with documentation on how much income you received via the service through the year. It's up to the individual to claim the income on their tax paperwork and pay the amount owed, but the IRS has all of the information they need to identify those who are skipping out on the tax and put them away. I paid several thousand dollars in taxes from the Airbnb income I made if that changes your opinion of us at all.

 

Also, I can understand the regulations preventing you from purchasing an entire building and renting out the empty rooms on airbnb. That would be a hotel. I can't understand the pushback from renting out an individual room in your apartment/house while you're presently staying there as this isn't too much different than having friends/family/friends of friends etc. stay with you.

 

Thanks! Good to know and my opinion of hosts is slightly higher haha.

 

The problem I see with hosts is you are still undercutting local hotels anywhere there is hotel taxes (state or local). Although a random guest seems equivalent to family/friends, in most states/localities you are generally only exempt from the tax if it's a family member or if a non-related person is staying with you for free. So technically every person should be responsible for a hotel tax anytime a friend stays with them and compensates them in more than a trivial manner. In most states it seems like even an expensive steak dinner in return for the couch should technically trigger the tax (although this seems ridiculous in practice).

 

The problem with Airbnb is their intent which is to act as a quasi-hotel (with millions of non-standardized and ever changing locations run by owner-operators). Not necessarily for hosts like yourself but I do think Airbnb should be forced to build this cost into all prices where necessary (although you seem to do pretty well :) - in general it seems unreasonable for hosts to be responsible for such nuanced state/local law when Airbnb acts as the broker/agent).

 

Consider the recent BRK AGM. If all visitors used Airbnb instead of hotels (booked through any avenue) then the city of Omaha could have potentially lost out on (2 days * 10.5% of revenue * ~$100 hotel/night * ~10k rooms(?))  ~$200k in tax revenue in just 2 days!

 

It's not that I personally care and Airbnb provides a significantly cheaper alternative to hotels but it does hurt local economies/governments and creates an unfair business environment. In effect, it becomes a small additional "tax" paid by all tourists staying in hotels to random residents.

 

 

The problem with Airbnb is their intent which is to act as a quasi-hotel (with millions of non-standardized and ever changing locations run by owner-operators). Not necessarily for hosts like yourself but I do think Airbnb should be forced to build this cost into all prices where necessary (although you seem to do pretty well :) - in general it seems unreasonable for hosts to be responsible for such nuanced state/local law when Airbnb acts as the broker/agent).

 

Airbnb takes each geographical locality and treats it differently due to differences in laws and regulations so I can't speak for everywhere. I know that in NYC, they offered to collect income taxes on behalf of the hosts and hotel taxes due from tenants and pay out a regular distribution to the local treasury. For some reason probably due to subtleties of tax law, the government said no. So I have to file my own income taxes and it's the responsibility of the tenants to pay the hotel tax - of course, there's little ability of the government to be able to enforce tenants from foreign countries pay the hotel tax so it's the local governments ineptitude that is preventing them from collecting and not Airbnb.