Friday, December 2, 2016

The See-Saw of Housing Prices

Housing prices fluctuate due to more than supply-and-demand and inflation.   Monthly costs can make prices swing wildly.

Houses are like any other commodity, subject to the ordinary pressures of supply and demand and inflation.   Some folks like to say they are "different" somehow, in that the supply of land is finite.  This may be true, but the supply of oil, bauxite, and pork bellies is also finite, and yet these things have commodity prices and are not deemed "unique" in any way.   Saying houses are "unique" is just another bullshit argument Real Estate Agents use to sell houses.

The quote, supposedly attributed to Mark Twain (among others ) of "Buy land! They aren't making any more of it!" has bankrupted more amateur investors than anything else.   Yes, they might not be "making any more of it" but if you pay too much for any commodity, no matter whether it is finite or not you can lose your shirt.

If you pay too much for a house, to the point where you will never make your money back or spend decades hemorrhaging cash trying to pay a mortgage, you will never come out ahead.   In addition to land, our lives are also finite, in particular our working lives.

So what affects the price of houses - or more precisely, how do housing prices get to where they are?   Well the most obvious reason is supply and demand.   Again, the idea that the cost of something is equal to the cost of raw materials "plus a modest profit" is naive thinking.   Any commodity is worth what the market says it is worth, and this could be ten times the underlying cost - or one-tenth of it.   As a result, people can make huge profits or go bankrupt, based on supply-and-demand.

Market demand for houses is driven by a number of factors - demographics being one of them.  Whenever a new generation of 20-somethings comes of age, demand for "first time" buyer homes will spike.   People reach a certain age, usually the late 20's or early 30's and decide they need to nest.   It may be a biological urge.   Women want a place to settle down and give birth.  Men want a fancy cave to show off to their fellow cave-men.   It probably goes as far back as that.

Similarly, we are seeing a generation of oldsters die off.  When baby boomers drop in droves, the cost of housing in retirement communities may plummet.   It remains to be seen.   Here on our retirement island, a lot of houses are coming on the market - and being snapped up not by retiring 60-somethings, but vacationing 50-somethings.   It is an interesting change in demographics, to say the least.

In addition to demographics, there is also economics.   When an area expands economically and jobs are created, the demand for housing booms.  When demand slackens, you have a bust.   My brother once wrote an article about the oil-shale development in Parachute, Colorado during the Carter years.  It was a precursor to the fracking boom we have today, but run by the government.  Overnight, houses went up and prices skyrocketed.   When Reagan took office, he cancelled the program (and took the solar panels off the roof of the White House) and Parachute became a ghost town in short order.

We see similar things in fracking towns and oil sands towns today.  Compounding this problem is overbuilding by developers - each hoping to be the one seated when the music stops.  If you don't overbuild, the other fellow will - and reap all the profits.   Capitalism is not an exact science.

But regardless of which factor or combination is at work, it boils down to supply and demand and even small changes in supply or demand can cause huge swings in prices which is why, in a real estate bubble, prices skyrocket so quickly and then plummet just as fast.  These prices may reflect market value, but the value is transitory - while the 30-year mortgages are not.

To begin with, understanding how prices are affected by demand is important. Even a small drop in demand or a small increase can cause prices to fluctuate wildly.

For example, suppose in a small town there are 100 homes for sale and 99 buyers. Well, clearly, someone's home is not going to sell. So that homeowner will drop his price. As a result, perhaps one of the buyers will buy his house instead. This in turn will cause another homeowner to drop his price. Perhaps if prices drop enough, another buyer will appear to snatch up a bargain.

Conversely, if there are 99 homes for sale and 100 buyers, one buyer is not going to get a house. He might bid up the prices in an attempt to buy a home, which in turn can cause a bidding war.

If the median home price in our mythical town is $100,000, it is not hard to see how a small bidding war, between even a few buyers, can increase home prices by as much as 5-10%, as the incremental monthly cost of ownership is not that great. Similarly, it is not hard to see how even a small discrepancy between the number of sellers and buyers can drop prices dramatically - again by as much as 5-10% without effort. And all this because of a ONE PERCENT difference between buyers and sellers!

So you see, our "housing bubble" was not due to huge demand and the collapse was not due to a huge drop in demand. People still want houses, just not as much as before. If demand drops 5-10%, housing prices can drop 20-30% easily.

Small changes in supply and demand result in huge swings in prices.   Most people, including myself, didn't "get" this - until they experience a few bubbles of their own.   When prices go up 30% in a year, it doesn't mean demand has gone up 30%, but rather only a few percentage points.   Conversely, when demand goes up 1%, it can mean a 10% increase in prices, when supply is limited.  And in housing, usually supply is limited, as it takes months if not years to build more houses.   There is a lag between demand and supply, which in turn causes problems as builders end up chasing phantom demand, years after the fact.

But what sets the actual price of a house?  And this is where it gets tricky.   For most working class people, their only option in buying a home is to pay what you can afford to pay on a monthly basis.   We are not like the folks buying $30 million apartments in New York - they don't do the math on the monthly overhead cost and whether it would be cheaper to rent.  They want a penthouse with a view of Central Park and pay what it costs - and probably pay cash.

The rest of us have to get a mortgage.   And how much we pay for a house is based on how much we can afford.   And for most people, particularly first-time home buyers, the question is, can I afford this, or would it be better to rent?

And it isn't hard to figure out the answer, with a pencil and piece of paper.  Add up the cost of your rent, utilities (if any) and other rental expenses, and you have the monthly cost of renting.   And hopefully, this is a smaller number than your monthly paycheck (but in many cases, 1/3 to 1/2 of it - sometimes more!).

Then add up the costs of home ownership - the mortgage, the utilities, taxes, insurance, condo fees or HOA fees, repairs costs, etc. and then subtract any tax benefit (home mortgage interest deduction) and possible appreciation over time.   My calculations show that a home doesn't "make money" for you over time in a normal market, but rather the expenses of living there mean that every dollar you spend on your house you might get back when selling it, if you stay there for at least 5-10 years.

This is, of course, better than renting, in the long-term, as when renting, you get nothing back.

But if you stay in a house for less than five years, you may not make back your closing costs - and actually lose money on the deal.  If you buy at the height of a bubble and sell when it bursts, you may lose your life's savings.   It is a serious thing to consider, and yet so many people buy houses for emotional reasons and based on the most superficial criteria.

In a normal market, the monthly cost of owning a home (for middle-class and starter homes) often tracks rental costs.   Usually home ownership costs may be slightly higher, as people "buy ahead" of the market, realizing that rents do indeed go up over time, but a 30-year fixed mortgage may stay the same.   But for the most part, in a normal market, the monthly cost of owning a home (with a typical down payment) is not 2-4 times or more the cost of renting.

Markets where it is cheaper to buy than to rent rarely exist, as such houses are snapped up fairly quickly and prices stabilize.  Renters are not fools, and would prefer to pay less to live.   But bubble markets can expand rapidly in pricing, and this is often due to the use of "funny money" mortgages as well as people signing papers ("liar's loans") and not realizing the consequences, which can take months or years to materialize.

Even if the monthly cost is "affordable" the resale price of the house can vary considerably, leaving the home owner "upside down" on his house.

Florida was a classic example, where all of these factors came into play - at once - and caused prices to drop dramatically.  A big part of the Florida debacle in 2008 was over-supply.  In Ft. Lauderdale, a number of condo projects "topped out" at the same time, dumping hundreds, if not thousands, of unfinished condos on the market at the same time.   There was far more supply than demand, and the market tanked.

Compounding this was the "perfect storm" of higher property taxes, insurance rates, condo fees, and interest rates.   If you bought a condo for $500,000 back then (which was not an unusual price!) it may have been "affordable" based on the "promotional" interest rate on an payment-optional loan.   The condo fee was low (set artificially low by the developer to encourage sales) and the property taxes seemed reasonable.   Insurance in Florida was never cheap, but at $2000 a year, not a deal breaker.

Four hurricanes later and insurance is now $4000 a year.   And when you bought the condo, you failed to realize that Broward County would re-assess the unit based on the sales price YOU paid, and your taxes are now a sticky $8000 a year.   The Condo fee jacks up as the Board realizes there are no reserves (in violation of State law - whatya gonna do, sue the developer?) and major repairs are due.   Oh, and that "funny money mortgage" which had low, low monthly payments, has "reset" and now you actually have to pay the bill - at a much higher interest rate.

Suddenly, your monthly payments have doubled and you can't afford to live there.  

Well, no problem, you think.  You paid $500,000 for the place, and that was three years ago, so by now, it must be worth $600,000 or more, right?

No.   You see, the problem is, the next buyer can't afford much more in monthly payments than you can.   And since taxes, condo fees, and insurance are taking a bigger bite out of the monthly pie, that leaves less to service a mortgage.

And how much you can get in a mortgage for $X a month is going to depend on available interest rates.  When rates go down, people can borrow more.  When rates go up, people can only afford to borrow less.   So prices are directly affected by mortgage interest rates and these other ancillary monthly costs.

Cranking the numbers, for the same monthly payment you were making initially, you could service only a mortgage for $250,000, which with a $25,000 down payment, means your $500,000 condo is only worth $275,000. 

You're screwed.   And there is not much you can do about it.   You can try to rent the condo, but since the monthly cost of owning is far higher than the rent, you hemorrhage cash every month.  A friend of mine in Atlanta did this - losing $1000 a month to "own" a condo he rented out, for five years, before selling it for what he paid for it.

How to make money in Real Estate!  NOT!

So what does this mean about this market?   Well interest rates are at an all-time low.   What direction do you think they will go?  Will we see 2% 30-year fixed-rate mortgages?  I doubt it.  If interest rates rise - which the Fed has been telegraphing for years now, then mortgage rates will go up.   As rates go up, the amount of house a buyer can buy for each $1000 of mortgage payment becomes less

So, for example, if Cindy Lou Who buys a $100,000 condo in Whoville, and rates rise from 4% to 5%, the cost of paying the P&I on that mortgage goes from $477 to $536.  If Cindy has an ARM, she's kind of screwed.   But suppose in our mythical town of Whoville, where people can only afford to pay $477 a month for a house, interest rates rise from 4% to 5%?   The amount a buyer could borrow would drop accordingly - and using the numbers from that chart, you can calculate the exact amount - $88,992.   Cindy Lou Who has lost over $10,000 in the resale price of her Who-Condo, if rates go up one percentage point.

Buying a condo at the Trump Whoville might not be such a good bargain.

And like clockwork, Cindy and all the other Who's of Whoville, stage a protest at the Grinch's bank, because after all, it has to be his fault they signed the loan papers, right?

Now throw in a huge property tax increase, insurance hikes, and a whopping condo fee, and you can see that Cindy might be upside-down on her Who-Condo in short order.

But bear in mind that interest rates alone are not the entire picture.   Indeed, today in many parts of the USA, interest rates are at an all-time low and so are housing prices.   This is more a factor of lack of demand in areas where there are few jobs and incomes are low.   You can buy a nice house in many parts of the country for under $100,000.   The same house, near a populated metro area could fetch $500,000.

 Interest rates are not the only thing affecting home prices.

As this article illustrates, during the bubble of 2008, interest rates were higher than they are today, and yet prices skyrocketed.   The article does have a few "caveats" and one they didn't address was during that bubble, a lot of people were getting mortgages they weren't entitled to.   I myself got a "liar's loan" by merely stating income and assets while the bank officer did an "appraisal" by typing in the zip code into a computer.  Today, they want copies of your tax returns, asset statements, and so forth.

In addition, there were the "joke" interest rates that were even lower than today's rates - the catch being that the rates reset after a few years, and the lost interest was folded into the balance of the loan.  These were loans designed for the buy-and-flip mentality.  Because in addition to interest rates, the easy availability of money as well as tax incentives also affects the home buying decision matrix. 

But to look at the chart above and say, "Well, housing prices plummeted in 2009 as interest rates dropped!" is to look at only half the picture.   I was buying properties in the 1990's when rates were high.  In the early 2000's rates dropped from the 8-9% range (indeed, what I was paying at the time) to the 6-7% range.   Again, a small change in interest rates dramatically affects what people can afford.   And these lowering rates caused prices to rise.

And rise they did - and then over-shot, as economic conditions (or indeed, any feedback-loop system) tends to do.  People lost their shirts, and like with the bubble of 1989 (conveniently missing from this graph!) in the ensuing years (1990-1996) people became very risk-averse about investing in Real Estate.  Hmmmm..... maybe I should buy that duplex I saw for sale the other day.  With the low interest rates we have today, I could rent that out and..... nah!  Too risky!

A Canadian reader writes that in order to "solve" the housing inflation in Toronto, the government is talking about giving first-time home buyers tax credits to help pay closing costs - as well as other incentives to buy. Not only will this not solve the problem of runaway home prices, it will be like throwing gasoline on the fire and the first-time buyers will be the ones burned by the blow-back.

When the government offers monetary incentives to do things, people do them, whether it is buying homes or keeping jobs at a Carrier factory in Indiana.   Whether the things you are incentivizing people to do are worthwhile - or even cost-effective - is another story.   And whether the incentive just alters prices is another.

For example, if you offer a 10% home buyer credit for first-time buyers, guess what happens to home prices?  Yup, they go up 10%.  Incentives tend to increase demand (as indeed they are designed to do) and thus drive up prices.  And since prices are based on monthly costs, you can raise prices accordingly - almost tracking the incentive exactly.

A lot of folks think the government should just step out of the way and stop meddling in the housing business.   This isn't likely to happen anytime soon.   During these peaks and valleys, real people get hurt, or the cost of housing temporarily peaks or valleys.   Voters petition the government for relief.   Home builders petition the government for relief.   So we end up with rent control, home mortgage interest deductions, tax incentives for first-time home buyers (which we had during the dark days of 2009-2010) and so forth.

What would really stabilize the housing market, though, is stable conditions.  If interest rates were predictable, people would be able to lock in low rates and predict housing costs.  If property taxes were rational (and not distorted by homestead exemptions and whatnot) people could budget accordingly.  If insurance rates were stable, the same is true.

Unfortunately, none of these things is likely to happen anytime soon.   And that makes buying a house a little more risky.

UPDATE:  A Canadian reader sends these interesting links:

This sounds all so familiar to me.  The only difference, the weather was nicer in Ft. Lauderdale!

Thursday, December 1, 2016

Upside Down on a Car?

Nelson:  "That's our shooting car.  Three more payments, and it's ours!"

I wrote a while back about comments made by Bill Ford, who runs a small car company in Detroit. His concern was that the financial debacle of 2008 - in which easy credit on onerous terms caused people to borrow more than they should - was being repeated all over again.

He was a little nervous that car loans were now being extended to seven years and that this would ultimately backfire, as people would hang on to their cars longer and not trade in as often, which in turn would eventually hurt sales.   Even if people wanted to trade in, the negative equity in their car loans would mean they would have to fold that negative equity over into a new car loan - at a higher interest rate - and the credit industry would once again systematically destroy people.

It's call predatory lending.

Negative equity in vehicle loans is problematic.  But it is a game that anyone can play.   In RV and Boat loans, it was epidemic.   To make these largely unnecessary vehicles (luxury items) "affordable" to the average Joe, the finance companies would extend the terms of the loans to ten years or more - sometimes 20 - which was far longer than the purchaser intended to keep the vehicle, or indeed, far longer than it would last.

The problem is, throughout the life of most of the loan, they were "upside down" and would have to come up with cash to pay off the loan, if they decided they no longer wanted the vehicle.  And often these owners had no cash, so they kept making payments on a rotting boat or RV parked in the back yard.  Or like one friend of mine, end up getting a home equity loan and spend their retirement years paying off debt instead of enjoying retirement.

RV and Boat loans are a special case though.  These are loans for very expensive toys - often over $100,000 or even $200,000 or more.   And they are things that you don't need to get by on a daily basis.   You can afford to walk away from them.

Auto loans are a slightly different beast - or at least were.   In this era of $70,000 pickup trucks and $100,000 SUVs, the auto industry is heading to where the RV and Boat industry were a decade ago.   You don't "need" to spend that sort of staggering amount of money for transportation to and from work.   And no, most of these dudes in these fancy trucks are not hauling loads of sand or cinder blocks - they are merely commuting to a job.   But people want fancy things - it is indeed human nature.

The problem is, lenders are all-too-willing to lend you money to buy things like this, and not tell you that no, you really can't afford this.   And so people buy this stuff, convinced they can afford the monthly payments, even if it means delaying funding their 401(k) or IRA or doing without health insurance.  

That's bad enough.   What's worse is that down the line, with these extended loan terms, the vehicle will always be worth less than the loan amount, until only a few months from the end of the loan.

It is a double-whammy screw-job of a loan.

Compounding this even further is the fact that a lot of people don't take care of their vehicles and thus long before the loan is paid off, the vehicle is basically junk.   We see this a lot in the country here, where some redneck will be driving a three-year-old pickup truck that looks like it has been though a small war.  At this point, they can't trade it in, as the dealer will give them nothing for it.  So they keep it, making matters worse with some ill-conceived "mods" until it is hardly a vehicle at all.

Pretty soon, it is out in the back yard, the new shooting car.   Three more payments and it's all ours!

You laugh and think that is a joke.  When I grew up in Central New York in Madison County (home of the largest number of sketchy financial advisors!) there was a nearby town called Erieville.  It was a depressed area and a friend of mine grew up there.  His parent's house was covered with tar paper and looked like a scene out of deliverance.   On the hill behind the house were a number of scrawny goats, a couple of chickens, and a very sad-looking cow - along with several old cars.

One day, we were in the living room, and his Dad, taking a pull off a fifth of cheap bourbon, picked up a rifle, flung open the kitchen window and started shooting at one of the cars in the back yard - a mid-60's Plymouth, I believe.   When our ears stopped ringing, everyone laughed like hell.   Well, his family did, anyway.  That's what passed for entertainment in their home.  That and the eight-foot satellite dish in the front yard.

Three more payments and it's all ours!

Such folks are prime fodder for sub-prime lending, which is the practice of giving shitty deals to the folks who can least afford them.  A reader directed me to this article about the latest trend - increased delinquency in these loans.  And it is frightening how people get suckered into these bad deals:

Violette Morin, of Pulaski, N.Y., a 74-year-old grandmother, said she did not need or particularly want to buy a car. But after receiving a mailing from a local dealership promising a prize of a pearl necklace and a fishing rod, she visited the used car lot in May 2015.

The dealer qualified her for a $20,350 loan, according to her lawyer, to purchase a 2011 Ford Fusion. Earlier this year, she stopped making the payments. “I eventually had them come and get the car because I couldn’t pay for it,” said Ms. Morin, who lives on Social Security, receives food stamps and lives in subsidized housing.

That's a lot of money for a used Fusion, to be sure.  Ms. Morin probably can walk away from the deal, be hounded by creditors for years.  Or she will die long before she can pay it off.  Fortunately, she was able to wiggle out of the mess, only because the lender screwed up the paperwork:
Ms. Morin, the borrower from New York, said that when she asked for a copy of her loan application, she noticed that the document listed her monthly income as more than $3,300, which was false. She collects about $850 a month in Social Security.
Ms. Morin worked with the consumer law clinic at the Syracuse University law school, which contacted the lender, a credit union, on her behalf. Ms. Morin’s loan was forgiven and her default was scrubbed from her credit report.
“I wasn’t car smart, I was just an average person,” Ms. Morin said. “I am car smart now.”
Others are less fortunate:
Nashua Moore, 28, gets up at 2 a.m., takes two buses, and reaches her office in Las Vegas by the time her shift as a medical dispatcher starts at 5 a.m. She schedules plenty of time to avoid being penalized for being late. By car, her commute takes about 20 minutes, she said.
“I was desperate to get a car,” said Ms. Moore, who went back to work this spring after her daughter was born.
She borrowed $6,580 at a 30 percent interest rate to purchase a 2008 Chevrolet Impala. Her car was repossessed this fall, after she got in a dispute with the dealership. She is now working with a legal aid lawyer to get her down payment back and other damages.
30% interest rates are, of course, scandalous.   But when someone offers you a loan at this interest rate, it is a sure sign you shouldn't be taking the loan.

But why would lenders even offer such deals?   Surely the high delinquency rate of these loans - and the high default rate - would mean that they would lose money on each loan.   If enough people default and declare bankruptcy, the lenders will lose money and stop making these shitty, unethical deals, right?

Enter bankruptcy "reform."

Yes, in the olden days, when I grew up, people didn't loan money to folks who couldn't pay it back.   And the simple reason was, if you did, you were a fool.   The borrower could declare bankruptcy, wipe out the debts, and often end up keeping their car and "tools of the trade" and end up better off than they were before bankruptcy.

And yes, a lot of people abused this.  So they changed the law.  Maybe too much.   Today, you have to "work out" the debt over a period of years, with a judge deciding how much you can afford to pay every month.

What this means is the borrower, at 30% interest, often makes enough payments before the car is repossessed to actually pay for such a car.   The lender then repossesses the car and sells it, which is now pure profit.   Then in bankruptcy, they get another bite at the apple when the borrower is forced to "work out" the debt.

Today, making loans to insolvent people isn't unprofitable - it is often more profitable than making loans to solvent people.   After all, folks like me would demand the lowest interest rate possible and never rack up any late fees or whatnot.

I have written about this before - in today's economy, you make more money by ruining people than by doing business with them.   A young person starts out in life, gets screwed by college loans.  With a ruined credit rating at age 21, they are forced to take on odious deals - which are dangled out like candy.  Rent-to-own furniture!  Get a new credit card!  Buy-here, pay-here used cars!   Before long, they are in bankruptcy court, where the fun is just getting started.

The problem with this model of absolutely destroying people is that you run out of people after a while.

Either the number of fools (motley or otherwise) is finite, or they start wising up and say "no" to payday loans and other shitty deals.

Oh, what am I saying?  There's a sucker born every minute - its the motto of our country.
Democrats have tried, in vain, to rein in this sort of thing.  They created a Consumer Protection Agency to weed out the worst of these deals and try to warn people about them as well (more on that in a coming post).   The problem with this approach is threefold:
1.  As I have noted in the past, the people who will shout the loudest to protect predatory lenders are their victims.   The efforts of the Democrats to help the poor and working class avoid these raw deals were clearly shouted down by the election of Donald Trump.  Well, not shouted down, but a combination of people shouting and other people just not caring enough to even vote.

2. The Republicans have hampered the Consumer Protection Agency at every turn, from its inception, limiting what it can do.

3.  In a few short months, the Consumer Protection Agency will be a vague memory, as the GOP wipes it out of existence.
This illustrates the problem in trying to protect people from themselves.   Not everyone will end up like the lady in Pulaski, NY, with a legal aid attorney helping her unwind the debt (which probably still cost her a lot of money, in terms of car payments, down payment, lost trade-in, etc.). 

When it comes down to looking out for your own best interests you are basically on your own, 99% of the time.

And what most of these raw deals have in common is emotional thinking.   People don't need a new car so much as want one for status reasons.  People buy houses at the height of the market for emotional reasons - they want the status of owning a home (the most expensive purchase of their life - one that could ruin them - and all over a sun-nook and a fancy kitchen impress friends!).   The poor get payday loans so they can order take-out food.

It's all about self-indulgence and weak thinking.  We can try to pass laws against this sort of thing - the predators just find new ways around them, such as "leasing" secondhand cars .

The shit just never ends.   Your only option is to look out for yourself!

Wednesday, November 30, 2016

Ho Ho Hokum

This would be considered so politically incorrect today.  But she does look good in it!

One of the great things about Netflix, is that for less than $10 a month, you can watch programs  - without commercials - and save over $100 a month over the cost of cable.  Not only that, Netflix doesn't induce the compulsive channel-surfing behavior that cable TV does.

If you are on Netflix, you no doubt are aware of the television series "Longmire" which has some good acting, some decent writing, but paper-thin plot lines.  Whatever, it is escapism.  And that is what entertainment is for.

One of the actors is the very underrated Lou Diamond Phillips, who is mostly Phillipino and one-eighth Cherokee (which Cher also claims to be, but in fact, she is Armenian).  Mr. Phillips is a great actor, but he is given the lamest sort of lines by the writers, who think for some reason that Indians can_not say contractions.  So instead of "don't" he says "do not".  As in "I do not think that is wise, Kemosabe!"

The show is basically a reboot of The Lone Ranger with Phillps playing the role of Tonto, updated for a new era.

But it begs the question.  Does it really matter if Mr. Phillips is of Indian ancestry or not?  Being born in the Philippines, I am not sure he has a deep connection with his Cherokee roots.   But apparently in our politically correct age, you have to at least allege such roots in order to wear a headdress or to play an Indian role.

I thought we had moved beyond that.

Crying Eyes Cody claimed to be part Indian, but was actually Sicilian.  Does it matter?
While racial stereotypes can no doubt be offensive, perhaps we take offense too seriously these days.  Every minority group is or was subject to some sort of stereotype humor.  Today, it is only "acceptable" if you are a member of that group.  So Jon Stewart can mock his own Jewishness, and it is OK.  He can also do gay jokes - so long as he is pretending to be gay.  It is, as I noted, the new blackface.

But what is behind all these "cultural" stereotypes, and do these cultural identities really mean anything, or are they are, in fact, partially made-up?

During the recent protests of the pipeline project in North Dakota, National People's Radio has been running appropriately somber pieces where Indians are interviewed - often invoking the great spirit or whatnot and basically feeding the white man that Indian mojo that we all love to lap up.

In case you were late for class, the narrative runs like this:  Indians are more spiritual and somehow better than us because they respected the land and wildlife more than we did.   Yet there is little evidence to point to this.  Native Americans or Indigenous Peoples or whatever - they are and were just like you and me.  They exploited the natural resources of a given area until the resources ran out, and then moved on.

And long before the white man committed cultural and actual genocide (the latter being a whole lot worse) on the Indian tribes, the Indians were slaughtering each other, with great regularity.  As in Western Society, going on the warpath was a form of population control.  They were not especially peace-loving people, despite how they are portrayed today.

When we showed up, our diseases and superior weaponry were no match for bows and arrows.   But many Indians adapted to this new environment - settling down to live in towns, farm, and try to become part of the new civilization that Europeans had brought to the Continent.   Sadly, racism and poor choices of allies sealed their fate.   When Indians in New York State sided with the French, they found themselves on the losing side of a European battle.  When many of them later sided with the British, they were trounced a second time.   After the end of the revolution, most of New York State was "cleared" of Indians in order to make room for new settlers - even though Indians had "settled" in towns and had built up farms just like white settlers.

Sadly, even as Indians tried to adapt to a new reality, the white folks weren't about to let them in to their little club.

What to do with Indians became a real problem.   Massacring them all was one solution - and one applied with regularity.  Putting the pitiful remnants of tribes into inhospitable reservations thousands of miles from their native homes was another. 

In later years, attempts were made to wipe out Indian culture itself, by snatching children from Indian tribes and sending them to boarding schools to learn English and Western culture.   Our politically-correct Canadian friends were even more aggressive about this than our ancestors were. "Kill the Indian, save the Man" was the motto.  The net result was an entire generation who had no idea of what their cultural values were, or even their own language.

In the intervening years, attempts have been made to reconstruct these cultures, from memories, documentation, and whatnot.   Indians today arguably have greater cultural values than in the near past.  However, some of this culture is created culture or reconstructed culture which is suspect.  For one Western tribe in Canada, cultural dances are being reconstructed from archival films.

And Indians are not alone in this.  Creating culture is a game any race can play.   When Israel was formed in 1949, Hebrew was chosen as the official language.  The problem was - and is - that Hebrew ceased to be used as a spoken language centuries ago.   While the pronunciation of some words was known, many others had to be reconstructed or invented.

Similarly, in Scotland and Wales, more people today are learning to speak their "native" languages than have in the past.  It is part of a cultural movement to distinguish and separate themselves from British culture.  The funny thing is, of course, that we are talking about regions or countries about the size of the State of New Jersey.  Of course, one could argue New Jersey has its own language and culture as well.

Black culture in America is wholly manufactured.  Yes, some traditions in black families do date to the days of slavery (Juneteenth being one of them).  Other cultural values, such as Kwanzaa or Ebonics were manufactured from whole cloth, or are of recent derivation.

White people are not immune from cultural manufacturing either.  The so-called "Patrician" accent made so famous in the movies of the 40's and by actresses like Katherine Hepburn, is not an accent based on any particular country or culture, but in fact is unique to upper class white Americans in a certain time period in history.  It was created - in part - by the movie industry itself.

Other white cultural values include affecting Scottish ancestry (wearing of kilts, plaids and whatnot) which is also popular in England, provided you are affecting only a partial Scottish ancestry and not claiming to be wholly Scots. 

Oddly enough, another white cultural value is to claim partial Indian ancestry (my Mother used to do this - it was likely false) as Iron Eyes Cody did.  I guess everyone wants to claim they have some deep spiritual connection to the land or whatnot.  And like with Scottish ancestry, it was cool to be partially Indian, but not wholly so, if you wanted to fit into white society.

And it goes without saying that every "ethnic" group in America will claim to be of true (fill-in-the-blank) ancestry for certain events or parties.   On St. Patrick's day, everyone with an Irish-sounding name will claim to be 100% from Cork, even if they are sixth-generation American and interbred with five other ethnicities.  On Columbus day (before it became politically correct) we are all Italian, of course!

So what is the harm in all of this?  

Maybe nothing.  Maybe something.

It just seemed to me that a protest over the location of a pipeline should be based on the merits of the case, not on the ethnicities of the people involved, or whether certain ethnicities have a "more spiritual bond with the land" or whatnot, which is plainly false, if you've every driven through a reservation and seen all the shit on people's lawns - just like outside the reservation.

When I hear an Indian giving the white man that Indian mojo - speaking as if English were a foreign language and blathering on about the spirit of water and snow. I get the feeling we are being snookered here.  It is irrelevant to the underlying issue whether you think you have a more spiritual connection to the land than other people do.

And liberals, particularly on NPR, just eat this shit up.  They want to believe that ethnic groups are somehow more in touch with spirituality, religion, the land, emotions, or whatever.  They want to believe that city-dwelling folk are somehow out of touch with their spiritual side, and only someone growing up in poverty in a trailer park - either on or off the reservation - really understands spiritual matters.

It is a common trope on television and in the movies.  The poor are more noble than us and often have magical powers.   As I noted in an earlier posting, the movie The Green Mile is an example of this, where poor people have spiritual powers by dint of being poor.

I guess that is the booby prize for not being rich.

But sorry, I don't buy into this ho-ho-hokum.   Form as many drum circles as you want, it doesn't make the underlying facts any different.
A map of all the existing oil and gas pipelines in the USA.   I think the Indians are a little late to the game here.

Timing the Market - Revisited

How can I time the market?

Two e-mails from readers ask two different questions which are really the same question:  How can I time the market?

The first, from a reader in Canada, asks whether there will be a housing bubble in Toronto and whether it is a good time to buy or not.  I have had the same question (and detailed discussion) with a reader in Vancouver, where prices are even more dramatic.

Another reader writes that her retired father has all his investments in bonds as he thinks the market could crash.  Should she do the same thing at age 45?   Is the Trump "Bull" market bound to end up a "bullshit" market and crash?

Both questions ask the same thing - how can I time the market and do I have any insight as to when the market will crash or take off?

If I could answer the second question, I would be the richest man alive, as I could take one dollar and parlay it into billions within a decade.   Sadly, this is not possible, as I don't have a working time machine.  I cannot go back in time and make all those strategic trades and always come out ahead.

It just isn't possible.

Why is this?   Well for starters, it is true we all have inklings that markets will go up or down.   When the market crashed in February 2009, people were talking about it as early as August 2008.   Similarly, we all had inklings that the Real Estate market was overheated in 1989 and really overheated in 2008 - and knew this years in advance.   People have been talking about a real estate market in Canada for years now, but it has yet to pop.   Hey, we all expected Sears to be bankrupt by now, too.   It doesn't mean these things aren't going to happen, they just haven't happened yet.

We all knew the market was headed for the shitter in late 2008, but we didn't know three things:
1.  Exactly when this would happen

2.  How far the market would drop

3.  Which stocks or investments would be affected.
Since none of us had any of this data, most of us just "hung on" to our investments and rode out the storm.  Within a year, our losses from February were wiped out by gains.  Within two years, we were far ahead.  After eight years, well, it has been slow but steady growth.

Now in retrospect, I should have sold all my stocks in September of 2008 or earlier and bought gold and then sold the gold in March of 2009 and bought back the stocks.  I would be twice as wealthy as I am now.

But if the timing is off, well, you're sunk.   In March of 2009 an oldster came to our house for a party and he told me that he sold off all his stocks and bought government bonds "before it went down any further!"

But the problem was, he sold at the bottom of the market and he ended up buying back several months later when the market was almost 100% recovered.  By churning his account, he cut his retirement savings in half.

The reason the second reader's father has most of his investments in bonds (I assume government bonds) is that when you are retired it is a good idea to have your money in "safe" investment, so it doesn't tank like it did in 2008 and leave you penniless and eating cat food.

A rule of thumb that financial planners use is to use your age as a percentage of your "safe" investments.  At age 70, 70% of your investments should be in "safe" harbors such as government bonds or other things that should not go down in value.  At age 45, maybe only 45%, as your time-line is longer and you can "wait out" market disruptions and take advantage of long-term gains.   You can afford risk when you are younger, not so much as you age.

The timing problem is a little different in Real Estate.   When should you buy and when should you walk away from an overheated market?   As I told both my Canadian friends, it is a decision they and they alone have to make, as they are "on the ground" in their markets and can see what is going on firsthand.
The signs of a Real Estate Bubble are not too hard to find.  For me, it is a simple test.   If a house costs $1500 a month to rent and costs $3000 a month to buy, it is probably a better deal to rent, unless there is some sort of enormous tax savings or something.   When the bubble burst in the real estate market in the USA in 2008, it was costing two to four times as much to own a house (with a typical mortgage) than it was to rent it.

I sold out in 2005, mostly because all the properties I had bought had either doubled or tripled in price from where I bought at the bottom of the market in the mid-1990's.  I got scared and sold out.  The market continued on in Zombie mode for three more years, with all the people who had "held out" thinking (correctly) that it was a bubble market, then throwing in the towel and buying, saying, "Gee, I guess I better buy now before I am priced out of the market forever!" - a mantra their Real Estate agent told them.  They got screwed the worst.  There are still people today, nearly a decade later, making payments on underwater mortgages.  It is very sad.

The additional mantras being told in Canada right now are "There have never been bubbles in the Canadian housing market!" (not true) and "Canada is different!" (perhaps true, but not as different as you might think).

Would I buy a house in Vancouver or Toronto right now?   Personally, no.  I think I would rent until the market leveled out.  Owning a home is no special treat or privilege - it is just a thing you own, a complicated thing that requires a lot of maintenance and expensive repairs, that breaks down often.   People get emotionally attached to the idea of "home ownership" particularly if peer pressure is involved ("Suzy has a new town house with granite countertops and stainless steel appliances and a sun nook!  How come we can't have nice things like them?").

This graphic from a reader from an article about (aboot?) Toronto pricing trends sort of blows away the myth that "there have never been bubbles in Toronto Real Estate!"  Note the 1989 bubble, but the lack of a 2008 one.  Canada dodged a bullet then.   Are they due now?  Hard to say.  Click to enlarge

The reader also said that maybe since houses were too expensive they would buy a condo instead.  Ouch.  The problem with condos, as I noted in another posting, is that when the market see-saws from high to low, Condos tend to get hammered the most.   Agents sell them as an alternative to an expensive home - for only 2/3 to 3/4 the money!   But they are less than half the value of a free-standing home and worth less in the long run.

Condos are great, if you buy them cheaply (as I did) and then sell them for a lot of money (as I did with two, and will do with the third, once they tear down the building for high-rises).   Others are less fortunate.  There are some owners in our development who paid over $200,000 for their units a decade ago, and the current market value is $150,000 and the buyout price is not a lot more.  They are not happy about having to sell for less than their mortgage amount.

And the idea that renting is a bad thing is a flawed premise.  After the recession of 2008, rents did go up, although not as much as people like to say (except in places like downtown SF, NYC, etc.).   In response, well - you guessed it - builders started building new apartments (they are going up all over Florida) and the supply of rental properties has increased - meaning rents will stabilize.  The law of supply and demand cannot be denied for too long.

The idea that owning a home is "better" than renting as rents could spiral out of control is just as nonsensical as the "being priced out of the market" buying argument.   If no one can afford to rent or buy, prices will go down.   No one builds "unaffordable" housing.

Bear in mind also that low interest rates may be driving down the monthly costs and driving up prices.   But when happens if rates rise?  Insurance rises?  Condo fees rise?   Taxes rise?  That was the "perfect storm" we had in Florida in 2008, and the result was, prices plummeted.   And if you have to sell your house or condo at that point, too bad for you.   Often the "timing" of a sale is not something of your choosing, due to job changes or life changes.

But the bottom line is, I am not an advice columnist.   If you want to know if you are "approved" go talk to Sooze Orman (but I would take her advice with a grain of salt!).  Similarly, I am not sure I would follow the shouting guy for stock tips - or the dudes in the clown suits.

Diversify your investments.   Do the math.   Think logically, not emotionally.   Act rationally in an irrational world.  

If you apply these simple thoughts to complex situations, often the answer pops right out at you.

And then you can make your own decision.

How Much Will the Wall Cost?

What would a wall between the US and Mexico actually cost?

Our border with Mexico is about 2,000 miles long.  1989 to be exact, but we can round this off, I think.

How much would it cost to build a wall that long?

Well, let's assume we make it from cinder blocks, which are 8" tall and 16" long.  The cost $1.25 at Home Depot, but assuming we buy in bulk, we can round this off to a buck a block, I think.   Hey, this is a government contract we're talking about here.  Don't expect lowest possible costs!

The wall should be 20 feet high, I think, otherwise why bother?   And we would need a foundation or footing for the wall, at least a foot wide and three feet deep to provide support in the desert sand and help prevent people from tunneling through.

So the wall would need to be 30 blocks high.   And for 2000 miles of it, you'd need 237,600,000 blocks.  That's a quarter of a Billion dollars at a buck a block, just for the materials.

For our footer, well, we'd be looking at a cubic yard of concrete for every three feet of wall, based on our assumptions.  At $90 a cubic yard, factor in another $316,800,000 for concrete.   We're up to over half a Billion dollars here.

Of course, I have not factored in the cost of the cement to build the wall - to tie the blocks together.  After all, a stack of concrete blocks could just be pushed over, if there was no cement holding them together.

And maybe you'd need to fill that wall with concrete and rebar- or make if from concrete reinforced with rebar.  A hollow cinderblock wall could be punched through with a sledgehammer in a manner of minutes.

Say we wanted to make the wall solid concrete, a foot thick and 20 feet high.  A cubic yard is 27 cubic feet.   Throwing in our footings, we could round off to one cubic yard per linear foot of wall, or $90 a foot.  That brings our concrete cost to $950,400,000 or a cool Billion even.

This does not include rebar, of course.  Or concertina wire at the top.  Or the labor to build the wall.  Or the excess cost of shipping materials to some of the most remote spots in our country - as well as establishing work camps for all the laborers.  The exact cost is hard to calculate.

Fortunately, we do have some idea of costs of previous walls.   During the Bush era, 670 miles of wall was built at a cost of $2.4 billion.  Presuming we want to keep this part, the remaining part of the wall (1330 miles) would cost another 4.7 Billion, which I think you can easily round up to 5 Billion.  Factor in that the un-walled sections are in some of the most remote and difficult areas, and maybe 6 or 7 Billion is a better guess.  And there has been inflation since the Bush era.   Maybe $10 Billion?

Putting this in perspective, the F-35 program is expected to cost $1 Trillion (A thousand Billions), but that is over the lifetime of the fighter aircraft - each plane is about $85 million each.  So for the cost of about 60 F-35 joint strike fighters, you could build the wall, I guess.

The problem is, the wall, once built, isn't self-maintaining.   It would not deter people who are bent on a better life.   A simple ladder would be enough to breach it, unless it was patrolled day and night.

So the real cost is the hundreds, if not thousands, of border patrol guards you would have to hire, pay, and fund the retirement of, in order to keep the wall from being just a minor inconvenience for migrants.

Say each 100 miles of wall was patrolled by three guards in SUVs who worked in three shifts.   That would mean 60 guards in all.   Of course, 100 miles is a long way, and even at 50 mph, it would take two hours driving on dirt roads to patrol each section.   All the migrants would have to do is wait for the patrol to go by and they would be set.  So you would need at least twice that number, if not more.   Or electronic monitoring systems (even more expense) and a candre of guards to monitor those as well.  You see where this going - you can build a wall fairly cheaply, but to build an effective wall, you need a lot of manpower and equipment to patrol and maintain it.

You know, a few drones with infrared cameras might be a cheaper alternative.  Just saying.

Each of those guards will have to be paid, with taxes and overhead, about $100,000 a year, with benefits, as starting salaries are about $49,000 a year.  At 120 guards, we'd be looking at $12 million a year or so - plus the cost of their SUVs.

Now you understand why the border patrol union endorsed Trump - their dues income will be skyrocketing if this is implemented.

Good high-paying union jobs - isn't that what he promised?

Monday, November 28, 2016

Is Nestlé Stealing Our Water? Not Exactly...

For some reason, it is not OK for Nestlé to use tap water to make its products, but it is perfectly OK for Coca-Cola to do the same - or the local brewery.

In whiny on-line articles, left-wingers argue that Nestlé is "stealing water" from the American public.   These are the sort of articles than handed the Presidency to Donald Trump - they are mindless left-wing bullshit that makes Liberalism look bad.

And "Liberal" isn't a dirty word, but one has to wonder if some of the more extreme versions of it are not in fact financed by the far-right to discredit Liberalism in general.

Nestlé isn't in fact "stealing" water from anyone, but as the article cited above even admits, is buying water from a public water utility for 65 cents for every 470 gallons, and using it to make bottled water.   Some folks think this is outrageous - that every bottle of bottled water should come from some quaintly named spring high up in the Rocky Mountains.  But the reality of bottled water is, it is usually just tap water or well water, sent through a reverse-osmosis system (which purifies it to basically distilled water) with minerals added (because distilled water tastes like crap).

It is a manufactured product like any other beverage.   It is no different from Coca-Cola, who takes tap water (or well water), purifies it, adds High Fructose Corn Syrup and their "Secret Ingredients" and sells it back to the public at a profit.

Oh, and yes, Coca-Cola also takes tap water or well water and purifies it and sells it as bottled water (the Dasani brand), which for some reason is OK, but not OK for Nestlé.

Or take your local brewer.   They use enormous amounts of water, and in most local breweries, this is local municipal (tap) water that they buy, just like you and I do, for so many cents per thousand gallons.  For some reason, no one is protesting the local brewery or Coca-Cola bottling plant, but they are protesting Nestlé.

Or take your local chemical factory, or car assembly plant, or, well, just about any other industrial concern.   Odds are, they are using millions of gallons of water a year, which they buy from the local municipality, and for which they pay the going rates.   Is it an "outrage" they are using so much water?   Would you rather they close the factory and lay off all the workers?

Maybe what really angers these moonbats is the idea that companies are selling what once was free and an inalienable right - or so we thought, anyway.   When I was growing up in the 1960's, the only "bottled water" sold was maybe Perrier, and even that had to be obtained from some specialty store.   We made do with drinking fountains, which every business had at least one of.   A drink wasn't something you paid for, but something that you felt entitled to.

And America has some of the best drinking water in the world, believe it or not.  New York City has wonderful water - some of the best for any large city.   And pretty much free, too. 

The fad of "bottled water" took off in the late 1970's and early 1980's and it was a status thing, particularly among fitness buffs who would slake their thirst with designer labels and look down their noses at people slurping from the public fountain.  And over time, it took off, until the point where I found myself buying water at gas stations for $1.65 a bottle.  I put a stop to that pretty quickly.

When traveling, we do use "purified" bottled water in our camper on occasion.   When you travel, your intestines are not used to new bacteria, and the constant changing mix of local water can cause, well, problems.   "Montezuma's revenge" is not limited to Mexico, but to any water supply you are not familiar with or immune to.

But a case of bottled water at Wal-Mart is only about $3-$4, so it isn't going to break the bank.  Paying half as much for one bottle is.

But it seems the looney left is upset at Nestlé for a number of reasons.   There was the bru-ha-ha about Nestlé pushing infant formula to third world mothers as being "better" for babies.   That was the case in the USA in the 1930's and 1940's, when it was deemed "more hygenic" than breast feeding.   But a lot of people pushed back on this.  The La Leche league was formed to promote breast feeding.  And people like my Mother opted to breast feed, although I am not sure if it "healthy" for a baby to be breast feeding while Mom is sipping a martini.

The point is, people changed their habits, to the point where today it is more common to breast-feed than not, despite any "corporate influence" to the contrary.   We are in control of our own destiny, provided we choose not to be mindless drones who believe everything advertised on the TeeVee.

With bottled water, it gets down to choices.  And if you make your choices in life based on advertising slogans from international corporations, whose fault is it if these turn out to be bad choices?   Whether it is infant formula or bottled water, the choice of whether to consume is up to the consumer, ultimately.  My mother decided against infant formula.  I decided against bottled water.

But there are occasions where both infant formula and bottled water are useful products.  If you leave your baby with a sitter, she can't necessarily feed the kid breast milk, unless you left some in the fridge.  If you spend the weekend at Burning Man, you might want to bring a case of bottled water, or spend hours purifying water at home and putting it in containers - your choice.

But to say that bottling water is somehow inherently evil makes no sense.   What makes even less sense is to single out one company as being "bad" for doing this, while giving others a free pass.   And this is particularly egregious when other companies, such as Coca-Cola went out of their way to promote soft drinks and bottled water as alternatives to tap water.

Should we be shocked by this?  Should we be shocked that Coca-Cola wants us to, well, drink Coca-Cola?  What else are you outraged about?  That General Motors would rather you drive a Chevy than a bicycle?   You expect them to do otherwise?   Now who's being naive?

Bottling water is just another industrial process, no different than bottling soft drinks or making beer.  If you think this is an overpriced product then don't buy it - it is as simple as that.

But to say that a company is "stealing" water when they are actually paying for it is just utter nonsense.

And to target one company as being bad, while giving all others a free pass is just liberal gibberish.

It is all part of this mindless corporate-hate that seems to infect left-wing America, who loves to find any reason - real or imagined - to hate Wal-Mart, McDonald's, General Motors, or whoever is the whipping-boy du jour.   But don't look too closely in the back seat of their Chevy - you'll see old McDonald's wrappers obscured by a pile of Wal-Mart plastic shopping bags!

This is the sort of nonsense that the rest of America is fed up with.  By itself, it is not enough to sway an election, but in combination with a lot of other nonsense, it is enough for people to turn away from the Democratic party as being out of touch with reality.

P.S. - Note that the "meme" above quotes 400 million gallons of water, where the article cite claims 80 million gallons.  I suspect neither number is accurate - the Bureau of Specious Statistics strikes again!

UPDATE:  The outrage du jour about Nestlé has moved to Michigan, where a meme (always the best source of hard facts!) claims that Nestlé is stealing millions of gallons of groundwater for only $200 - the cost of a permit fee.   However, if Nestlé has a ground well, they can legally pump water from it, and Michigan is hardly going though a drought condition.

Moreover, again, we are not told why it is "outrageous" that Nestlé does this but not outrageous that Coca-Cola, local brewers, or even car factories in Michigan go through millions of gallons of water a year.

For some folks on the far left, they have a grudge against Nestlé.  Oh, wait.  Maybe this is part of an overall Union Propaganda Campaign?

I'm just guessing, but these horrific things that Nestlé is doing will suddenly be just fine, once the last plant is unionized.

"Nice bottling plant ya got here.  Shame if something happened to it......"

Is Global Warming a Hoax? No. Does the Media Exaggerate It? Yes.

While sea levels are rising, reports of Manhattan being flooded in a decade or two are a little overstated.

One of the contentious issues of the last election was global warming.  Just as most Republicans stopped denying global warming existed (and that the moon landing was faked) Donald Trump "went there" by tweeting that global warming was a hoax perpetuated by China to put us at a strategic disadvantage in global trade.

China, ironically, is the largest consumer of coal but also the largest producer of solar panels.   They are well aware of the dangers of smog and pollution, as their cities are choked with bad air.  Thus, while they are responsible for a huge portion of the CO2 problem in the atmosphere, they may be the first to help solve it, by making solar panels cheap and affordable.

But is global warming being used as a trade leverage?  Maybe.   In many climate agreements, third world or "developing" countries (including China and India) are or were given a pass on emissions standards on the grounds that they are still developing economically.  In a way, it gives them a free pass to pollute while we have to spend extra dollars to find new ways to eliminate pollution.

And despite claims that there are ways to eliminate CO2 emissions, it basically isn't possible to do.  When you combust anything you produce carbon dioxide.  That is the basic equation:  C + O2 => CO2 + energy.  There are few exceptions, such as Hydrogen, which if combusted efficiently, produces only water.   But the problem with hydrogen is that most of it is made from fossil fuels, as "splitting" it from water using electrolysis is costly in energy terms.

So there is no easy out on carbon dioxide, other than nuclear power, hydroelectric power, wind power, or solar power - each with its own problems and detractors (The Donald says wind turbines spoil the view from his golf course!).

In the past, I have done some work for NOAA and talked with some of the scientists there.  As an Engineer and Lawyer, trained to study "just the facts" I am convinced their methodology is accurate and their results are valid.   Human activity, which covers the planet, it slowly warming it.   We have an impact on our atmosphere, which is only a thin layer of gases covering the planet only a few miles thick.

But the media, as usual, wants a sensational story.   Telling people that water levels may rise, on average, an inch or so a decade, isn't selling newspapers or eyeballs.   Instead, you have to tell them that Pacific Islanders are up and moving already as their islands are already underwater!   For some reason, an island several feet above sea level is underwater due to a 1" rise in ocean levels.  Or maybe not precisely.  In order to capture attention, you have to tell them that their vacation homes will be gone tomorrow, along with every coastal city in existence.

It is a bit of exaggeration, and it doesn't help the global warming debate one iota.  Because when these exaggerated outcomes don't materialize then people may conclude that the whole thing was a hoax - which it wasn't.

The reality of rising sea levels is that sea levels are rising, but not as fast as the media says they are.

Global sea level has been rising at an increasing rate since the 20th century. Analysis of a global network of tide gauge records shows that sea level has been rising at the rate of about 0.6 inches per decade since 1900. Since 1992, satellite altimeters indicate that the rate of rise has increased to 1.2 inches per decade—a significantly larger rate than at any other time over the last 2000 years. In the next several decades, continued sea level rise and land subsidence will cause tidal flood frequencies to rapidly increase due to typical storm surges and high tides in many coastal regions. 
In other words, sea levels have been rising, but the rate of rise has nearly doubled.   In 100 years, at the present rate, levels may rise by a foot.

This may not sound like a lot, but for folks living only a few feet above sea level, this may mean that a super-high tide, accompanied by a storm surge, could flood their home, as opposed to merely crawling up the sidewalk.

And it makes a difference, too.  During the recent hurricane evacuation, we thought about this.  Even an inch of muddy salt water in your home can cost tens of thousands of dollars in damage.   Goodbye engineered hardwood floors and carpets, for starters.  If the water enters the walls and "wicks" up the insulation, it could mean re-sheetrocking your home.

We visited such a home in the Keys many years back, after a hurricane.  It was for sale and on a canal, and not more than a few feet above water level.  Inside the home, you could see where the homeowners had cut the sheet rock about a foot from the floor, patched it, and then put in new baseboard molding.  The problem was, when you entered the house, the smell of mildew hit you like a wave.  I am not sure the house was safe to live in!  And at the prices they wanted back then (pre-2008) it was certainly no bargain.

But in my lifetime, sea level rise isn't going to be much of an issue.  Yes, that sounds selfish, but that is just a statement of fact.  Another 4.5 inches over the next 30 years isn't going to make much of a difference to me.   For the next generation, maybe more so, and the generation after that, it may be a real issue.

But permanent sea level rises of 5-10 feet would be centuries away.  New York City isn't about to become the next Venice anytime soon.

But tell that to the New York Times.  Over the weekend they ran a fear piece that seashore properties are no longer selling as people are fleeing for higher ground.   A few skewed graphics (and scary hurricane photos) and some alarmist text (accompanied by conjecture) makes it seem like Miami beach is already under three feet of water.  This isn't the case.

The narrative is flawed, as are the statistics.  Consider this graphic and accompanying text:

 Look at the scales on this chart - they are non-linear.  Click to enlarge.

The premise is that people are "fleeing" coastal properties and that sales are plummeting.   But if you look at the scale of the graph, the most negative areas are minus 1% while the most positive are a whopping 64%.  For some reason, the extremes of the scale are clearly lopsided.

The article goes on to state that the cost of flood insurance is making it hard to sell some homes.   And this is true - for homes built on the ground in flood zones.   People who wisely built on stilts find their flood insurance premiums far less.

It also illustrates the folly of building a mansion in a flood zone.   In years gone by, people built modest homes or "camps" by the water.  If your beach shack on Cape Cod blew away in a storm, no one much really cared - you simply built a new one.   Today, people build expensive "look at me!" houses right on the water and wonder why they cost over $10,000 to insure.

The answer is, don't build a monument to yourself on the water.   Or, if you are like me, pay cash for a waterfront home.   Does this mean that prices are adjusted accordingly?   Well, sure.   But most retirement homes in Florida, historically, were never mortgaged.   As I noted many years back, the rationale for living in Florida has somewhat evaporated.

Back in the 1960's and 1970's, you could sell your home "up North" for a lot of money and for half as much, own a nice house near the beach in Florida, with low property taxes, low insurance, and no income tax.   Since you paid cash for the house, you weren't too concerned with flood insurance.

Today, if you sell your house "up North" you can expect to pay double for a comparable house in Florida - and pay sky-high property taxes, unless you move to an inland area such as The Villages, which may explain why that area is growing rapidly.

The rest of the article is full of pablum and emotional thinking.  One homeowner on the Outer Banks (which have been hammered by hurricanes long before the white man set foot in North America!) laments that his house will eventually be washed away and "my grandkids will never experience it!"   But of course in the same breath, he laments his flood insurance premiums - which means FEMA will build him a new house, on stilts, for his grandkids to enjoy.

The New York Times article is flawed in that it reports a trend that really isn't happening.  A 1% drop in sales in some selected areas is hardly indicative of an overall trend.   Emotional quotes and vague paragraphs about how banks "should study the phenomenon of global warming" really aren't much of a story, so much as they are conjecture and click-baiting.

We expect more from the grey lady - the "newspaper of record".

So is global warming a hoax?  No, of course not.  The climate is changing, and a lot of this is due to our activities in burning fossil fuels.   Will we all be wearing hip waders in 20 years?  No, it isn't changing quite that fast, but fast enough that in the next 100 years, the architecture and construction techniques used in coastal communities will undoubtedly change.

Whether New Yorkers will take boat taxis everywhere, remains to be seen.