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johnfreiburger

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  • Why Do Americans Think Housing Is Such A Good Investment? [View article]
    I am also a landlord. I have high property taxes on my buildings as they are located next to the University of WI, but the rents are great, around $1900/month.

    Some of you have said owning a house is not worth it because of the improvement, maintenance, tax costs, etc. I pay those same costs on my investment real estate, but the rents pay me back, so actually, all those costs you say are a negative for home owners, are negatives for renters, but I, not they, get the increase in value after they pay the bills with their rent.

    Home ownership is not for those who need to move for jobs every few years (a fast growing group), those who simply cannot gather a down payment or those whose lifestyle does not mesh with cutting the grass and painting the fence. That is an ever growing population, thus I see condo and single family homes becoming a smaller portion of the housing in the US. And those of us who are rentiers, will do well by it.
    Apr 24 09:13 AM | Likes Like |Link to Comment
  • Why Do Americans Think Housing Is Such A Good Investment? [View article]
    Owning a mortgage is enforced savings for most people, the original 401K. I believe home owners actually know this and if asked, would articulate it. They must make a monthly payment, a small portion of which pays down debt and increases their equity and net worth. The use of houses as piggy banks during the bubble is consistent with this theory, the house is a place to save money and when enough is "saved", some can be withdrawn.

    There is also the question of social status. Ownership for many still carries and emotional component of being a member of the middle class, even if they have working class incomes. That's an investment in self perception, accurate or not, that many find worth while.

    Neither of those are irrational, but are both understandable and in the case of enforced savings, utilitarian.
    Apr 23 09:05 AM | 8 Likes Like |Link to Comment
  • Residential Construction Spending Boom [View article]
    Look at the French results from last week's election as well as the rise in nativist votes in places as liberal as Norway. There is a fairly strong move to the right in Europe with "citizens" asking for protection from cheap Romanian labor.

    In the US, we are not as socially or ideologically stable as Europe, where the cultural/intellectual inertia of social democracy is a brake and limit on both left and right fascism. The US is ideologically "slippery" in political/-economy terms. It does not take nearly as much decrease in living standard, social status anxiety, etc, to cause some pretty wild swings. We ended up with the New Deal and capitalism was saved by FDR, but the Huey Longs, Fr Caughlins, etc., if not outfoxed by FDR's experimentation might have swung is into a camp where we would have adopted a fascist political and economic model.

    If Tack thinks Obama is a radical, he knows zero about history. He is to the right of Eisenhower and Nixon both. Obama like Clinton is trying to patch capitalism in a commoditized political society with a soon to be non-white majority and a sinking middle class. If he and the next president fail, watch for an American el Duce.

    The reaction to civil rights in the south, where social anxiety became acute, is another illustration of how nasty we can become. Now we are a well armed society, unlike the 60s where the Panthers were an exception.
    Apr 4 09:45 AM | Likes Like |Link to Comment
  • Duke: Clean-up of ash basins to take time [View news story]
    Coal is not on its way out and will provide the majority of us electrical supply for a few more decades. Clean coal is possible, if we allow rate incases so that the plants can be built and retrofitted. A reduction in coal use will be helpful in reducing greenhouse gases and less fly ash means that we may reach a point where the concrete industry can actually consume all ash produced. Increasing infrastructure replacement rates would also help the fly ash situation.

    The problem in the US is that we do not expect consumers to pay the full price for either energy or infrastructure consumption. Gas taxes are far too low to replace bridges and highways and utility costs are too low to provide clean coal and replacement of century old gas supply pipe systems. Raising prices to cover cost is politically untenable in an economy with decreasing income for the lower 90%.
    Apr 3 09:39 AM | Likes Like |Link to Comment
  • Residential Construction Spending Boom [View article]
    T5
    I'm in Madison WI, small market of apx 500,000 people.

    Agree on Millens. An entirely new employment and habitation pattern appears to be developing where job changes are more frequent due to limited income growth in any one position. I have a friend in medical software who knows she has three more years before she moves. She does the work of a higher paid position, but was given a 50% position so she'd not get a raise. Another with PhD in botany is starting med school due to the lack of opportunities for her.

    I see continued downward pressure on earnings for just about everyone, other than we who are 2%ers or higher. That will put pressure on housing, limit buying and increase the % of people who rent.

    All in all, the housing evolution may be a good thing. Downtown Madison is booming with new high rise, well designed rental towers, sprawl is down, cost per citizen will decrease with concentration and the retail and entertainment businesses are growing with the population density. Young people are smart enough to provide themselves with a livable environment, even with reduced income compared to their parents.

    But at some point, with decreasing middle class membership (now down to 44%), we may see a radicalization of society as we are witnessing in the EU.
    Apr 3 09:29 AM | 1 Like Like |Link to Comment
  • Residential Construction Spending Boom [View article]
    I can tell you that in my areas we are constructing 20 residential income properties for every single/duplex home, so there is a rental boom here, not a housing boom, if by that term, we mean traditional owner occupied housing. We have decent prosperity here, but with little net job growth and churn in the types of jobs. Manufacturing is falling while service and software is increasing. Those types of employees need rental housing as they will be with a firm for a few years and then move. What I am hearing from young friends is that raises and promotion are a thing of the past and one moves to increase income or position.

    If our Midwestern situation were national, I'd project a continued strength in residential income and a long slow decline in single family due to stagnant wages and the need for mobility for a peripatetic workforce. That's not so much a recovery as a change in ownership/rent percentages.
    Apr 2 04:14 PM | 2 Likes Like |Link to Comment
  • Momentum With Israel ETFs [View article]
    I am not sure all geopolitical risk has been priced in. The development of an apartheid state and the risk of another wave of native terrorism plus the issues in the Golan are are risks that need to be considered. There are discussions of boycotts of Israeli firms/export similar to the S African boycott of decades ago. As Europe recovers, calls to force Israel to deal with Palestine may increase. The Golan may not be stable. The original concern was over Syria loosing control of the area, but with the roadside bomb and over reaction by Israel, the situation there could have destabilized with Assad still holding the the Syrian Golan. Israel sits in an area with tremendous risk. There is a reason why the military exemption for the Hasidim is being ended. Israel may need more troops to face a very uncertain future.
    Mar 22 09:53 AM | Likes Like |Link to Comment
  • Duke Energy coal ash spill stirs grand jury, potential EPA action [View news story]
    I believe the state of NC will do all it can to protect DUK and EPA action will take years. The current law in NC is that the waste piles are fine as long as they are contained and the subsoil water monitored. As pollution has spread underground, the state has expanded the allowable boundaries so that remediation was not required.
    I suspect NC will provide rate increases for such clean-up as is required as well as tax breaks. They may even use my fly ash idea and require that all roadwork use, and pay DUK, for fly ash.
    Regulatory environment is factor in utility investment. The refusal of many states to allow infrastructure replacement (PA, NY) paid for by rate payers was a factor in the gas blast in NYC. 120 year old cast iron pipes leak! Look at the Phil gas pipe replacement program, scheduled to be completed in 2100! Those utilities are faced with huge gas leak losses as well as litigation, but cannot replace the corroded infrastructure because the rates cannot be raised to pay for it.
    NC on the other hand, while not owned by utilities, has their voice heard, just as the Koch Brothers and Amer Trans can ask about anything they want of WI.
    Where you invest makes a difference in reducing risk, as socializing of risk while privatizing profits is the American Way, as is the commoditization of public policy. I'm holding my DUK and SO stock and just purchased more. That makes me a part owner of the State of NC as well.
    Mar 20 09:42 AM | Likes Like |Link to Comment
  • Duke Energy coal ash spill stirs grand jury, potential EPA action [View news story]
    Crank; Check the NY Times for an article. Not sure, but I think that's where I got the number.

    The fly ash in concrete was a real comment. It actually improves the performance of concrete and if government worked with utilities, I suspect we could reduce the ash inventories. Unfortunately, NC is so remarkably dumb, that they take the easy route. They have expanded the area of allowed soil pollution as the underground plumb gets bigger and bigger, rather than coming up with a solution. As Reagan didn't say: "Good government is the answer, dumb government is the problem."
    Mar 19 10:59 AM | Likes Like |Link to Comment
  • Duke Energy coal ash spill stirs grand jury, potential EPA action [View news story]
    frosty states exactly what the Gov of NC said when he signed the bill that reduced regulation of the ash dumps. Duke spent $95,000 on the legislature to get the bill passed. Fortunately for we DUK stockholders, NC is a cheap state to buy because they actually believe most regulation is evil. I suspect if we give them enough in donations, they will let us dump coal ash in the basement of the capital.
    What will make more sense is to have the NC DOT use DUK coal ash in all roadway concrete. 30% ash content strengthens the concrete and reduces aggregate requirements for crushed stone. Duke just has to out bribe the quarry industry.
    Mar 18 09:58 AM | Likes Like |Link to Comment
  • Investors Move Into Ukraine, Out Of Russia [View article]
    Public debt in U is owed mostly to Russia. Before this upheaval it was rated CCC-. The west will pump in money, but where will it go? The corruption level in U is intolerably high, one of the main reasons for the demonstrations, but will this change with a new government. Western U may be capable of true middle class populism, but the east is as corrupt as Rus and I see no catalyst for reformation into a market economy with the rule of law.

    There is an element in U of fascism, just as there is in Norway, The Netherlands, etc., but it is a small group as it it in multiple European democracies and the US. AL overstates their size and influence.

    This will be interesting to watch. Can external western support promote a middle class, rule of law revolution or must U go the way of Rus in 1918, with left state fascism taking over with a corrupt central power, even worse than the regime that just fled to Moscow.
    Mar 13 12:19 PM | Likes Like |Link to Comment
  • The Housing Recovery Is Not At Risk [View article]
    The comments on "2.7% rise in disposable income" are correct. That number is non-supportable in reality. When Bill Gates visits a homeless shelter, we can say the average income in the shelter is around $50,000,000, or we can take statistics 101.

    Looking at drygoods and appliance sales is suggestive. The sale of middle class appliances is flat while the high end is up 30%. Walmart profits are down 21%, while high end retailers are up. The former middle class is going to Dollar General because they can't afford Wal-Mart. They are not going to be buying a new home anytime soon.

    Income inequality in the US is rising rapidly as our political system has been commoditized, with a small fraction of the top 1% providing the majority of campaign funds. That inequality picks winners and losers, one of which is the housing market in general. But I have this $22,000,000 condo in NYC that may sell quickly.
    Feb 26 11:29 AM | 2 Likes Like |Link to Comment
  • Harley-Davidson Is Expensive For All The Right Reasons [View article]
    Jaggers makes an excellent point, and it isn't just Harley. A local dealership for a HD competitor went under with $2m in inventory sitting in the dealership! Those "sales" looked good on the company report, but were subsidized by the bankruptcy court.

    We need to watch any stock that depends on disposable income for relatively expensive toys.
    Dec 22 03:59 PM | Likes Like |Link to Comment
  • The Market Is Scandalous And We Have To Deal With It [View article]
    The conviction this week for the SAC broker came after a weak case well presented, basically saying to the jury: "the evidence is weak but we all know these Wall Street guys are thieves". That strategy suggests the unending parade of thievery, manipulation, inside deals, etc. has soured the general public and we smaller investors (2.7m$). Our assumptions are now negative, trust is lost, honor is unknown.

    Tom is correct in all he says, and says it well, but increase the threat of criminal convictions for these malefactors of great wealth as well to stop the seep of corruption.
    Dec 20 10:46 AM | Likes Like |Link to Comment
  • Harley-Davidson Is Expensive For All The Right Reasons [View article]
    I believe the eastern production and sales are battling in a very competitive market and I do not expect the income stream from Asian sales to be terribly helpful. If it makes the sale of the large, high margin, bikes increase, that may be the game plan. In any case, the growth market there is both essential and tricky for HOG.

    In the US, I'm interested in demographics and income changes for base buyers. Like Goldwingers, HD big bike buyers tend to be well off, older, upper middle class riders. But we are getting old, including my cousin Dick and his wife who where HD driver couple of the year a decade ago. He and wife have given up their bikes. As the boomers age out of the market, who replaces them?

    The relative long term decrease in middle class income, anything below the top 10%, decreases purchasing power and the market for anything bought with disposable income. When we are looking at the sales of the high end/margin bikes, I don't believe long term demographic or economic trends are on the side of HD. Perhaps the move to the smaller bikes will help, but again, that field is competitive.

    The company has done a great deal of cost cutting in the last few years, pushing the unions in York and Milwaukee for give backs. I don't see any fat to trim, so margins will likely remain where they are and cost cutting not realistic. I'm not buying.
    Dec 20 10:34 AM | Likes Like |Link to Comment
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