Where Does the Global Economy Go From Here?

[Gregmal]

1 hour ago, Spekulatius said:

The next generation will eventually own what the current has, so they can't be poorer in aggregate. it may be more difficult to accumulate wealth from scratch though, if you aren't born in a family with some money.

 

FWIW, the same arguments were made 20 years ago. I think every generation will have opportunities to create wealth but it may not be as easy in some time periods than in others and you may have to pounce on them.

 

For example, if you invested in housing in 2009/2010 in the lost decade, you could have made out like a bandit (I didn't). No stock market knowledge necessary. Generally speaking, a lost decade will occurs when we have a few crisis during this time period and you are starting from a high base. That was the case in the 70's (two oil shocks) and 2000-2010 (dot.com bust and GFC). Every crisis is a huge opportunity to make a lot of money, if you are set up correctly and act accordingly.

 

The current generation also has a strongest labor market since the 1960's going for it. It wasn't as pretty when I started working. Having no risk to stay unemployed is a nice implicit fallback that can be utilized to take more risk, for example.

 

Just a few thoughts and that's how I explain "creating wealth" to my son.

 

 

Tell me about it. I started off in 2010 taking the 11pm train to NYC, walking through drug addicts and hippies during the height of Occupy Wall Street, so I could get to work on the Asia/Europe shift at 2 am. I made dog shit to start. Opportunity is what you make of it. No one wanted to do that shit. 

[Gregmal]

2 minutes ago, Spekulatius said:

The area Santa Barbara simply won't have many first time home buyers. That does not mean that the area dies out. It just means that likely other buyers will move to this very desirable area - think retired people, rich emigrants, tech employees etc.

 

The problem existed forever in CA - there are more people moving out (especially in Uhaul trucks!) than moving in the state, yet CA did not die out. The balance is made up with with emigrants.

Certain areas will never be first time homebuyer markets. They’re status areas. Those don’t go away. 

[Spekulatius]

15 minutes ago, Castanza said:

 

This is only a problem in the most expensive areas. All of the below cities are very reasonable places to live. Plenty to do, plenty of education options, plenty of entertainment and food options. I know people who live in the majority of the cities listed below and most of them have a combined income around 100k + or - 20k. All of them have homes that are probably much nicer than what you would get for 600k+ in pricey areas. 

 

Average home price in...

 

Columbus = 240k

Cincinnati = 230k

Savanah = 278k

Buffalo = 216k

Pittsburgh = 235k

San Antonio = 300k

St. Louis = 177k

Lexington = 285k

Indianapolis = 228k

 

The list goes on. Then you have plenty of cities like Nashville that are mid 3-400k. 

 

There was an OddLots podcast maybe two-three months ago where they discussed housing affordability and how generally it's a myth that housing is "unaffordable" in the majority of areas including tier 2 cities. Usually the divergence from the norm is a couple percent on total price. 

I think people starting out really need to consider where they should start their career. Maybe the job in area where you can get the highest salary, but also incur the highest cost of living and likely highest taxes is not really such a great choice.

 

If you like the city life then maybe it's worth doing, or you do it for a few years and then move into a cheaper area. I never liked living in cities that much so I always chose my job where I could live in smaller cities / more suburban, which tend to have lower cost of living as well. Not being able to afford a home is more of a lifestyle choice than an affordability issue, especially with WFH gaining more traction.

[mcliu]

1 hour ago, crs223 said:

No working person under ~35 can buy a first home within 30 miles of my neighborhood (93101).

 

Even if we assume the younger generation is useless… this imbalance will not last.

 

1. Home prices will fall

2. Incomes will rise

3. Resources will be redistributed

4. No more first time homebuyers ever

 

My bet: (4) will not happen.  Each election cycle without (1) or (2) will bring more (3).

 

Student loan forgiveness is just the beginning.

 

This situation is prevalent in Canada too. ex. In the Toronto region (7m population) average SFH price ($1.3M) vs median household income (70k). Massive disconnect. Many millennials are moving away from Toronto, especially as they form families. Smaller towns/cities are more affordable but lack career opportunities.. Catch-22 for young people.

[TwoCitiesCapital]

1 hour ago, Castanza said:

 

This is only a problem in the most expensive areas. All of the below cities are very reasonable places to live. Plenty to do, plenty of education options, plenty of entertainment and food options. I know people who live in the majority of the cities listed below and most of them have a combined income around 100k + or - 20k. All of them have homes that are probably much nicer than what you would get for 600k+ in pricey areas. 

 

Average home price in...

 

Columbus = 240k

Cincinnati = 230k

Savanah = 278k

Buffalo = 216k

Pittsburgh = 235k

San Antonio = 300k

St. Louis = 177k

Lexington = 285k

Indianapolis = 228k

 

The list goes on. Then you have plenty of cities like Nashville that are mid 3-400k. 

 

There was an OddLots podcast maybe two-three months ago where they discussed housing affordability and how generally it's a myth that housing is "unaffordable" in the majority of areas including tier 2 cities. Usually the divergence from the norm is a couple percent on total price. 

 

As someone who moved from NYC to StL, I can confirm the cost of living in StL is VERY affordable relative to NYC. I can also confirm that my ex-girlfriend who moved from Maryland to St Louis took a 40% paycut because most jobs in St Louis pay quite a bit less than the jobs in the more costlier districts. 

 

Unless if you're able to arbitrage and keep the higher wages (like I did from NYC), the lower cost doesn't really help you. This should be more manageable NOW in a post-covid/remote work environment, but that was NOT the case when I moved in 2017.

 

But, I'll add you're definitely giving stuff up by living in these cheaper cities. The selection of bars/restaurants/nighlife/entertainment matters a little less to me now that I'm 33 vs 23. But as someone who has been single here for a year now, the dating market in StL is a lot more limited than in NYC. As is the job market. So you're definitely giving stuff up to obtain those lower prices. 

Edited September 7, 2022 by TwoCitiesCapital

[crs223]

36 minutes ago, Spekulatius said:

I think people starting out really need to consider where they should start their career.

 

This is a good point.

 

Young professionals have moved in droves from California to Colorado and Texas.  But that is more the “demand side” of finding an affordable lifestyle. I imagine the more enterprising types are moving to Silicon Valley to strike it rich on the “supply side”. Maybe this is nothing new.  However…

 

We now have cities full of young people who have their own “exodus” to a new lifestyle that doesn’t want what the “boomers” are offering.  Right now they’re content to just want trigger warnings, preferred pronouns, no plastic straws… eventually they will want something more … tangible.  Maybe I’m just paranoid.

[Dinar]

1 hour ago, crs223 said:

 

I stand corrected.  Yes someone making $750k/year can still afford a first home.

 

Your example leaves me even more convinced that the present imbalance will not last.

 

 

Instead of making absurd assertions, why don't you do a simple search of how many properties under $2MM there are for sale within 30 mile zip code of 93101?   I found over a hundred.   There is no reason why  a couple of doctors/lawyers/computer programmers cannot live in that area. Why do you expect that someone who works at McDonalds should be able to afford to live in a very nice area?

Edited September 7, 2022 by Dinar

[crs223]

The only thing “absurd” here is using two extreme examples (McDonalds worker and $750k/year professional) to try to invalidate my point.

 

https://en.m.wikipedia.org/wiki/Straw_man

 

 

Edited September 7, 2022 by crs223

[changegonnacome]

Broadly speaking when I think about housing - I think like this.......nominal house prices & interest rates change all the time up and down........but over time the socioeconomic PROFILE of the people who own those houses doesn't change much at all, certainly in lets call them developed stable metro areas (think NYC).......a posh neighborhood populated by doctors & lawyers, 50 years later is populated by doctors & lawyers.......then the other thing that doesn't or isn't supposed to change is prudent lending standards that use debt service ratios against disposable income thresholds.......and so over time one can figure out based on the socioeconomic profile of a neighborhoods historical residents, the prevailing wages certain careers command, income tax rates and interest rates what house X should broadly sell for.......one could determine using these criteria whether a particular house or neighborhood is cheap or expensive relative to its historical mean.

 

Gentrification is a bet at the margins that an area is transitioning over time to have a very different socioeconomic profile than it did in the past and hence permanently higher nominal house prices.

 

Smaller estate taxes/dynastic wealth distort my mental model of course too.

Edited September 7, 2022 by changegonnacome

[scorpioncapital]

How do you tell if redistribution is demanded due to some wrong factor with the system or a new, unusual generation of laziness/aimlessness? Of course a cynic might say the system is broken unless everything I want can be gotten out of it.

 

 

 

 

 

[Castanza]

1 hour ago, TwoCitiesCapital said:

 

As someone who moved from NYC to StL, I can confirm the cost of living in StL is VERY affordable relative to NYC. I can also confirm that my ex-girlfriend who moved from Maryland to St Louis took a 40% paycut because most jobs in St Louis pay quite a bit less than the jobs in the more costlier districts. 

 

Unless if you're able to arbitrage and keep the higher wages (like I did from NYC), the lower cost doesn't really help you. This should be more manageable NOW in a post-covid/remote work environment, but that was NOT the case when I moved in 2017.

 

But, I'll add you're definitely giving stuff up by living in these cheaper cities. The selection of bars/restaurants/nighlife/entertainment matters a little less to me now that I'm 33 vs 23. But as someone who has been single here for a year now, the dating market in StL is a lot more limited than in NYC. As is the job market. So you're definitely giving stuff up to obtain those lower prices. 

Yeah that’s understandable, but St Louis is still magnitudes better than towns between 20-80k people. And even there you will find opportunities etc. I think if you’re willing to give up on top 5 city living you probably have an idea of what to expect. You probably aren’t focused on having a 1% career etc. My neighbors are good examples. She went to U of M then Grad at Harvard. He went to University of Stanford for Mech Eng. Both are probably making close to 120k+ each. Both grew up in Chicago and come from money. But the town I live in is like 40k in pop and you can find McMansions for 250k-300k. They seemed to have loved life here. 
 

Different strokes for different folks I guess. 

[Gregmal]

Nice things arent for everyone and I am not sure when as a society folks decided they were. Housing is totally affordable; housing in happening areas though is getting much more expensive. 

 

Other than that its basically what Castanza just mentioned. You wanna work like a dog until you're 60? K. Keep up with the Joneses. You wanna have control of your life by 40/50? Sacrifice a little of that ego and just invest it and you'll get there in no time. 

[thepupil]

3 hours ago, Dinar said:

Instead of making absurd assertions, why don't you do a simple search of how many properties under $2MM there are for sale within 30 mile zip code of 93101?   I found over a hundred.   There is no reason why  a couple of doctors/lawyers/computer programmers cannot live in that area. Why do you expect that someone who works at McDonalds should be able to afford to live in a very nice area?

agreed. our neighborhood is not expensive as SB, but pretty expensive. it's practically an Uppababy showroom and teeming with an increasing % of "young" (early to late 30's) first time homebuyers/families. 

 

in no world should Santa Barbara (a paradise by all accounts) be affordable. 

 

 

Edited September 8, 2022 by thepupil

[CorpRaider]

5 hours ago, TwoCitiesCapital said:

 

As someone who moved from NYC to StL, I can confirm the cost of living in StL is VERY affordable relative to NYC. I can also confirm that my ex-girlfriend who moved from Maryland to St Louis took a 40% paycut because most jobs in St Louis pay quite a bit less than the jobs in the more costlier districts. 

 

Unless if you're able to arbitrage and keep the higher wages (like I did from NYC), the lower cost doesn't really help you. This should be more manageable NOW in a post-covid/remote work environment, but that was NOT the case when I moved in 2017.

 

But, I'll add you're definitely giving stuff up by living in these cheaper cities. The selection of bars/restaurants/nighlife/entertainment matters a little less to me now that I'm 33 vs 23. But as someone who has been single here for a year now, the dating market in StL is a lot more limited than in NYC. As is the job market. So you're definitely giving stuff up to obtain those lower prices. 

Wait, one of the Two Cities is St. Louis!?!? 

 

Why don't you guys just build staff housing for the workers like (almost) on Sea Island, HHI, or Kiawah.  Silly western yankees.

Edited September 8, 2022 by CorpRaider

[ERICOPOLY]

I spoke to a guy on Monday who just retired and bought a boat for the purpose of renting it out at $400 a day for people to use out on the local lake.  

 

I just don't understand how a boat of such comparatively small value commands that much money compared to what people rent houses for.

[Gregmal]

27 minutes ago, ERICOPOLY said:

I spoke to a guy on Monday who just retired and bought a boat for the purpose of renting it out at $400 a day for people to use out on the local lake.  

 

I just don't understand how a boat of such comparatively small value commands that much money compared to what people rent houses for.

Perceived liability. I know shops that buy used pontoon boats for $10k and rent them for similar amounts. The spread has come down. But you used to be able to buy and rent a boat and make your money back in 2-3 months. 

[bizaro86]

52 minutes ago, ERICOPOLY said:

I spoke to a guy on Monday who just retired and bought a boat for the purpose of renting it out at $400 a day for people to use out on the local lake.  

 

I just don't understand how a boat of such comparatively small value commands that much money compared to what people rent houses for.

 

Maintenance costs are a big factor, aside from liability mentioned above. My uncle has named his ski boat "about a grand" because he figures he spends close to that on fixing stuff every few uses.

[TwoCitiesCapital]

1 hour ago, CorpRaider said:

Wait, one of the Two Cities is St. Louis!?!? 

 

That's right.

[ERICOPOLY]

I have been trying to figure out what the fattest return is with virtually zero liability.  It may be Home Depot with the carpet blower

 

Home Depot rents these things for $50 per day

https://www.homedepot.com/p/B-Air-VP-20-1-5-HP-Air-Mover-for-Water-Damage-Restoration-Carpet-Dryer-Floor-Blower-Fan-Home-and-Plumbing-Use-in-Blue-BA-VP-20-BL/303793378

[TwoCitiesCapital]

5 hours ago, Castanza said:

Yeah that’s understandable, but St Louis is still magnitudes better than towns between 20-80k people. And even there you will find opportunities etc. I think if you’re willing to give up on top 5 city living you probably have an idea of what to expect. You probably aren’t focused on having a 1% career etc. My neighbors are good examples. She went to U of M then Grad at Harvard. He went to University of Stanford for Mech Eng. Both are probably making close to 120k+ each. Both grew up in Chicago and come from money. But the town I live in is like 40k in pop and you can find McMansions for 250k-300k. They seemed to have loved life here. 
 

Different strokes for different folks I guess. 

Agreed it's better than smaller towns which would have even less opportunity (but also lower cost of living). 

 

I live like royalty here. I own a 2,500 sq ft penthouse condo for what I paid in rent for a 700 SQ ft mediocre apartment in NY.

 

But that opportunity wouldn't have been available if not for starting out in NY and getting pedigree at Bridgewater and Pimco prior to moving to StL IMO. Plenty of people working for my same company making a lot less. I was just able to successfully arbitrage the wage/CoL discrepancy. If I had just started here I probably wouldn't have done that and would have started at significantly lower wages. 

 

There's cost to be considered outside of the cost of living is the only point in making.

Edited September 8, 2022 by TwoCitiesCapital

[thepupil]

9 hours ago, ERICOPOLY said:

I spoke to a guy on Monday who just retired and bought a boat for the purpose of renting it out at $400 a day for people to use out on the local lake.  

 

I just don't understand how a boat of such comparatively small value commands that much money compared to what people rent houses for.

I looked into buying a boat recently. For a center console that I could fish the bay with, whether i spent $20k or $200k on the boat, fuel maintainance, winter storage, slip fees, insurance m, etc would be $10-$20k/year in my area. Decided to forget about it and charter/rent from other owners for $500-600/day. Do it 20x / year, it’s still cheaper. 

Edited September 8, 2022 by thepupil

[longlake95]

What’s the old saying….” If it flies, floats or f&%@s - rent it”

[Gregmal]

Its of tremendous value being a blue collar-lite type where you can launch/trailer your own boat and do basic engine maintenance. If you can, your cost is little more than the boat and basic cost of supplies/fuel. That is not me, so I own the boat and the slip, and just pay for winter storage up north. In the Keys the boat basically just sits in the carport all year. 

[thepupil]

8 minutes ago, Gregmal said:

Its of tremendous value being a blue collar-lite type where you can launch/trailer your own boat and do basic engine maintenance. If you can, your cost is little more than the boat and basic cost of supplies/fuel. That is not me, so I own the boat and the slip, and just pay for winter storage up north. In the Keys the boat basically just sits in the carport all year. 

yea, I don't have a garage / side yard that could fit a boat (or a car capable of towing something > aluminum jon boat [not chesepeake bay worthy] for that matter)....or the maintenance skills. I'm a useless suburban millennial 

[Castanza]

18 minutes ago, thepupil said:

yea, I don't have a garage / side yard that could fit a boat (or a car capable of towing something > aluminum jon boat [not chesepeake bay worthy] for that matter)....or the maintenance skills. I'm a useless suburban millennial 

You’re only as useless as your ability to search YouTube for “How To” vids