Comments on Stephen Kanitz's articles RSS Syndication from SeekingAlpha.com http://seekingalpha.com/author/stephen-kanitz/articles http://seekingalpha.com/article/110436-record-non-employment-income?source=feed#comment-466483 466483 Fri, 17 Apr 2009 10:35:53 -0400 http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-407254 407254 Sat, 28 Feb 2009 17:32:41 -0500
Nice effort. In my own case, newly married and ready to start a family with my lovely wife, this would drive down home values another 5-10% (or more), push us out and force us to consider whether we can afford to live anywhere near a city where we can both contribute to GDP.

Great idea. Can we send Glaeser to live with you there, Mr. Dumas?]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-329990 329990 Mon, 15 Dec 2008 11:58:40 -0500
In your article "Plano emergencial..." you indicated that in this article one would find "signs that the American recession is reversing its course". There are nothing like that here. Or do you mean that your "predictions" on marriage and divorce rates are indicative that people will start buying houses soon?

And there you mentioned that the mortage aplication were up las month. But did you consider the question "why did the mortgage applications go up in November?" Is it because these Americans are investing, or desperate?]]> http://seekingalpha.com/article/110436-record-non-employment-income?source=feed#comment-328330 328330 Sat, 13 Dec 2008 13:28:15 -0500
What? Don't you mean, "income not related to employment"? It's hard to believe anyone who doesn't bother to proofread his articles.

This analysis probably means nothing, as non-employment income goes mostly to a few people.

"A 10% unemployment rate in 2008, if it should rise to such a number, on a 60% employment income based economy means only 6% less overall cash flow."

The author implies that non-employment income hasn't--and won't--decrease, which flies in the face of what has been happening, as Nan049 said. Indeed, changes in non-employment income may track or even exceed changes in employment income.

Income from employment may drop more than the unemployment rate as people are cut back in hours (especially overtime), lose second jobs, and pick up lower-paying jobs when the lose their primary jobs. They're still "employed," but making less money.]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-328192 328192 Sat, 13 Dec 2008 10:07:31 -0500 I'm with those who see this as a small contributore relative to CRA, loose Fed money, Fannie/Freddie non-oversight, etc. But it's a factor.
BTW, the right way to look at the interest deduction is as a haircut on the interest rate itself, then you end up with a 6% interest rate with a 33% tax rate deduction is really 4% - if you can borrow at 4% you'll take that. So most smart middle-class homeowners would pay of credit cards and car loans but keep the mortgage.

Now may be the wrong time to change this rule, but mortgage interest deduction is bad public policy overall in encouraging over-consumption and over-indebtedness. We need simpler, flatter, fair tax system with lower rates on production and more emphasis on taxing consumption, ie, tax imports from China.]]> http://seekingalpha.com/article/110436-record-non-employment-income?source=feed#comment-327854 327854 Fri, 12 Dec 2008 17:00:50 -0500 http://seekingalpha.com/article/110436-record-non-employment-income?source=feed#comment-327787 327787 Fri, 12 Dec 2008 15:53:13 -0500
The percentage of people who receive most of the non-employment income from investments is very small sociology.ucsc.edu/who...

Also, as I've been saying in my last few posts, economic models are useful and necessary but they are only models. The real world is much more messy than our theories can account for.
]]> http://seekingalpha.com/article/110436-record-non-employment-income?source=feed#comment-327466 327466 Fri, 12 Dec 2008 11:42:53 -0500 http://seekingalpha.com/article/110436-record-non-employment-income?source=feed#comment-327333 327333 Fri, 12 Dec 2008 10:37:50 -0500
So how does this "non-employment income" come about? Does someone just wave their magic wand?

Of course not. The income results from people doing work. And if they do not work, then POOF! That income disappears too, magic wand notwithstanding.]]> http://seekingalpha.com/article/110436-record-non-employment-income?source=feed#comment-327295 327295 Fri, 12 Dec 2008 10:17:37 -0500 http://seekingalpha.com/article/110436-record-non-employment-income?source=feed#comment-327226 327226 Fri, 12 Dec 2008 09:35:06 -0500 http://seekingalpha.com/article/110436-record-non-employment-income?source=feed#comment-327068 327068 Fri, 12 Dec 2008 07:14:59 -0500 :)]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-320057 320057 Stephen, this is not a classroom. this is the second article you > wrote which has taken a lot of liberties with the truth. i did not > comment last time after fred bank's comment. but this one really > was not good. > > "Once Americans realize that the prices of housing have stopped falling, > houses will be bought for their tax benefits once again if nothing > else." - prove to me you can make money simply by owning a house. > as a real estate investor, i can tell you that you only make money > on appreciation. > > you really must hone your articles before submission. > ]]> Wed, 03 Dec 2008 13:56:58 -0500
In Canada, mortgage interest on a principal residence is considered personal expense and hence not tax deductible. This spurs homeowners to pay off the mortgage as soon as possible. This is why there was no such mortgage bubble bursting and bank failures in Canada. Perhaps it is time to remove the tax break on interest expense for personal expenditure and keep it only for interest outlays to earn business income.


On Dec 03 01:19 AM The hand wrote:

> Stephen, this is not a classroom. this is the second article you
> wrote which has taken a lot of liberties with the truth. i did not
> comment last time after fred bank's comment. but this one really
> was not good.
>
> "Once Americans realize that the prices of housing have stopped falling,
> houses will be bought for their tax benefits once again if nothing
> else." - prove to me you can make money simply by owning a house.
> as a real estate investor, i can tell you that you only make money
> on appreciation.
>
> you really must hone your articles before submission.
> ]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-319480 319480 Wed, 03 Dec 2008 01:19:40 -0500
"Once Americans realize that the prices of housing have stopped falling, houses will be bought for their tax benefits once again if nothing else." - prove to me you can make money simply by owning a house. as a real estate investor, i can tell you that you only make money on appreciation.

you really must hone your articles before submission.

]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-319471 319471 Wed, 03 Dec 2008 00:49:47 -0500 http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-319451 319451 People who want to blame "greedy" bankers, etc. should first define > what they mean by greed and then provide an example. That's easy. Greed is the selfish pursuit of personal aggrandizement above and beyond need, and characteristically at the expense of others. From Wikipedia: "Some desire to increase one's wealth is nearly universal and acceptable in any culture, but this simple want is not considered greed. Greed is the extreme form of this desire, especially where one desires things simply for the sake of owning them... [and] entails acquiring material possessions at the expense of another person's welfare " Example: The packaging and securitizing of mortgages of questionable quality, and selling them to the next bigger fool (yes, the buyers were just as guilty of greed as the sellers). Then compounding the damage of that avaricious (and immoral) undertaking by taking out insurance for many times the value (via credit default swaps) on the fictitious security. Home buyers who lied to get a house they couldn't afford were greedy. Mortgage brokers who encouraged this and complicitly presented false information to the mortgage underwriters were greedy. Mortgage underwriters, who, with a lack of due diligence, and with a wink at protocol, put "making the sale" above proper underwriting criteria were greedy. The evidence of all of this greed and its ramifications? Countrywide, Indymac, Bear Stearns, AIG, et. al. and a financial sytem in crisis. That is why greed is different from a simple profit motive. Greed causes people to bend the rules, ignore the social contract, and sometimes break the law in the pursuit of inordinate profits. Greed is the pursuit of profits without regard to moral or legal conventions.]]> Wed, 03 Dec 2008 00:04:06 -0500
> People who want to blame "greedy" bankers, etc. should first define
> what they mean by greed and then provide an example.

That's easy. Greed is the selfish pursuit of personal aggrandizement above and beyond need, and characteristically at the expense of others.

From Wikipedia:

"Some desire to increase one's wealth is nearly universal and acceptable in any culture, but this simple want is not considered greed. Greed is the extreme form of this desire, especially where one desires things simply for the sake of owning them... [and] entails acquiring material possessions at the expense of another person's welfare "

Example: The packaging and securitizing of mortgages of questionable quality, and selling them to the next bigger fool (yes, the buyers were just as guilty of greed as the sellers). Then compounding the damage of that avaricious (and immoral) undertaking by taking out insurance for many times the value (via credit default swaps) on the fictitious security.

Home buyers who lied to get a house they couldn't afford were greedy. Mortgage brokers who encouraged this and complicitly presented false information to the mortgage underwriters were greedy. Mortgage underwriters, who, with a lack of due diligence, and with a wink at protocol, put "making the sale" above proper underwriting criteria were greedy.

The evidence of all of this greed and its ramifications? Countrywide, Indymac, Bear Stearns, AIG, et. al. and a financial sytem in crisis. That is why greed is different from a simple profit motive. Greed causes people to bend the rules, ignore the social contract, and sometimes break the law in the pursuit of inordinate profits.

Greed is the pursuit of profits without regard to moral or legal conventions.]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-319433 319433 Tue, 02 Dec 2008 23:26:20 -0500 http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-319380 319380 Tue, 02 Dec 2008 21:53:51 -0500 http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-319281 319281 Tue, 02 Dec 2008 18:35:50 -0500
What if there were no Fannie May to buy, package, and resell mortgages with the implied guarantee of Federal bailout, which has become a reality?

What you're really talking about is a tax code that was designed by Keynesians and Fabian Socialists in the 1930's that was designed to prevent you from acquiring wealth and to discourage you from saving.

Would there be a capital crisis if interest earned from any source and dividends were not taxed at all?

Burton A. Johnson, MD, JD. President, Burton A. Johnson Portfolio Management, Inc.

]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-319180 319180 Tue, 02 Dec 2008 15:57:32 -0500 http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-319048 319048 Tue, 02 Dec 2008 13:14:59 -0500
First, that the author regards the mortgage income tax deduction as "a little known fact" seems odd -- every real estate agent hypes this benefit.

Second, as noted above, the math is wrong -- the total interest paid on a $1M loan would be about $1.15M, not $1.8M as referenced by the author.

Third, the author disregards the economic distortion of the much larger tax subsidy provided by the up to $500,000 exemption on gains from the sale of a qualifying residence (yes, I realize that $500,000 is nominally lower than $1.15M and the applicable rate would be LTCG, not ordinary income, but the tax benefit is available in the current year, not stretched out over 30 years, and has a much larger emotional component (i.e., "I just got $500,000 tax free!!!!")).

Fourth, although it is often suggested that the tax tail always wags the economic dog, but -- as many of the comments above suggest -- tax implications are but one (often small) factor in determining whether a particular deal makes sense (the prevalence of the rent versus buy calculators available on the internet suggest that people are actually doing the math) -- factors such as equivalent rent and expectations of future asset appreciation or depreciation or rent increases or decreases are far more important.

Fifth, the economic value of the mortgage deduction tax benefit decreases every year as the annual interest paid decreases and inflation increases the spread between the fixed tax benefit and inflation adjusted taxable income (e.g., in 2038, the final year of the hypothetical 30 year mortgage, the borrower would pay only $2000 in interest but presumably (hopefully) would have income far greater than $200,000 -- the deduction would only be worth $800 that year assuming a 40% marginal bracket).

There are many good reasons to buy a house, but anyone who does so based solely on the mortgage interest deduction (to the exclusion of other, more important, factors) is in my view misguided.

Also, in reference to a comment above, mortgage interest isn't a preference item for purposes of the AMT. ]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-319000 319000 Tue, 02 Dec 2008 12:37:44 -0500
1. Creative unscrupulous lending practices to sell and finance real estate. Why does it take hundreds of different types of mortgages to finance real estate? Like automobile sales the pitch is how much one can afford monthly not what the item is worth. Lower interest rates just inflated the sales price of a home. Therefore, hundreds of types of mortgages. Qualifying for a mortgage became a game of how not if one could qualify.

2. Where were all the government regulators during this time?
They seem to be the Monday morning quarterback's - with too little too late (Enron and WorldCom for example). Then to cover themselves want more regulation when they did not enforce current regulation.

3. Tax write off bull. Look at the actual cash flow it takes when one borrows. One dollar of income at a thirty 35% tax rate only saves the 35% in taxes when written off. The dollar is still spent. Add up all the interest paid and see what a motgage cost you on a cash flow basis.

4. The creation of all the derivatives, so called hedging and smoke and mirror terminology resulted in no one wanting to appear ignorant and saying "the king has no clothes". The hot potatoes can only be passed so many times until the taxpayers end up footing the bill. To reward those that earn money and pay their way the government answer is to tax more?

5. Property taxes have become rediculous. A whole new subject to be looked at by the American public. Once your home is paid for - you just rent it from the government via property taxes. Don't pay and you lose your home.

The fact is when it comes to real estate there is always some type of residual value ( 100%, 90% etc.). The straight lender is not going to lose 100% of the value. In times like this a realignment of values occur one way or another. Besides the hard asset remains in our country.

As far as pointing to the rich as culprits - why? In this country don't we strive to be successfull and financially independent? The rich invest there money and help create liquidity and jobs in the market places. Why should they be singled out versus those with their hands out unwilling to try to better themselves? Keep taxing them to death and money and jobs will continue moving overseas. Government needs to be held more accountable and tranparent for spending your tax dollars not the so called rich.

Wishing the best for our great nation and future generations.

Old Guy not a Rich Guy



]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-318923 318923 Tue, 02 Dec 2008 11:33:29 -0500 http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-318909 318909 Tue, 02 Dec 2008 11:23:07 -0500
NO 1040's, No 1099's, NO RETURNS...or we stop paying completely!]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-318906 318906 Tue, 02 Dec 2008 11:19:04 -0500 http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-318846 318846 Tue, 02 Dec 2008 10:30:43 -0500 http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-318840 318840 Tue, 02 Dec 2008 10:25:19 -0500
Truth is, our tax code is Frankenstein's monster. Not only does it favor some and penalize others, but it has taken many of our brightest and best minds and mired them in an "industry" that produces nothing other than tax dodges.

We need a flat tax with NO deductions whatsoever. None. Flat rate taken from every income source at time of distribution. NO 1040's, NO 1099's. No tax returns. No tax attorneys.... which means it'll never happen.]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-318827 318827 Tue, 02 Dec 2008 10:14:07 -0500
In addition to that you failed to recognize that the primary problem was making loans to people who were lying about their incomes and had no money to put down. As the mortgage lenders played the role of the little monkeys with their hands over their eyes, their ears and their mouths we continued to sell homes to people who could not afford the payments.

By the way your numbers on available inventory are staggeringly wrong.]]> http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-318792 318792 Tue, 02 Dec 2008 09:39:10 -0500 http://seekingalpha.com/article/108727-a-little-known-fact-and-good-news-about-this-crisis?source=feed#comment-318774 318774 Tue, 02 Dec 2008 09:18:44 -0500 Now, if people didn't have to get a home equity line of credit to purchase consumer goods in order to get a deserved tax deduction, the problem would certainly be less acute.
Second, it is the job of the banks to allocate the money. A key rule when lending is the ability of the borrower to pay back, not the collateral given as a guarantee. If banks respect that rule, you don't have this problem.
Third, the second point doesn't matter if banks don't keep the loan in their books. Nobody cares, only collateral matters and it's hell when collateral values drop.
Fourth, if I take your example with a TI of $ 200k and a rate of 40% you'd pay $ 80K in taxes. Now if you drop your TI to $140K by borrowing and maybe you also drop you tax rate to 30% you'd pay only $ 42K in taxes. A tax saving of $ 38K against an interest payment of $ 60K which brings your cash flow down with $ 22K.
Now the question you should ask is; is my investment going to yield more than $ 22K a year?]]>