Oct312012
Southern California’s cultural pathology (redux)
I began writing about the housing market back in February of 2007. Over the last five and one half years, I’ve covered a lot of ground. Many of my earliest posts serve as a foundation for my philosophy that comes through my daily posts. I know many of you who read this blog have been with me from the beginning, but I have also picked up many new readers along the way. Since we are entering the recovery stage of the market, and since this material will be new to many I plan to revisit many of my old posts over the coming weeks to remind everyone why we inflated a massive housing bubble and what we should learn from it. I will update the old posts with new historical data as appropriate and new cartoons, and bring these insights to a new generation.
Southern California’s cultural pathology
Southern California is a beautiful place. The weather is perfect, there is a lot to do, and the people are generally friendly and keep out of your business. For those reasons and many others, I have chosen to make Southern California my home. However, Southern California is not perfect. The culture is infected with pathological beliefs that inflated a massive housing bubble which led to the suffering of millions.
What do I mean by Cultural Pathology? There are certain beliefs if widely held and acted upon by a group of people leads inevitably to collective suffering and/or destruction. 
One example we all see is in the American auto industry. Before imports hit our shores the American auto industry used to believe the quality of their product did not matter, people would buy their product irrespective of quality. For many years, the industry was successful despite this pathology. This belief allowed offshore competitors to enter the market, build market share, and finally take over the industry. The American auto industry’s belief system has had a pathologic effect on their business which has caused much suffering in Detroit, and it ultimately lead to the bankruptcy and destruction of our major automakers.
The best treatise on the pathology of cultural beliefs was George Orwell’s novel 1984. In Orwell’s vision, a totalitarian State had convinced the populace the following:
- WAR IS PEACE
- FREEDOM IS SLAVERY
- IGNORANCE IS STRENGTH
Although these statements are clearly contradictory, in the story the slogans do make sense to the State. For example, through constant “war”, the State can keep domestic peace; when the people obtain freedom, they become enslaved to it, and the ignorance of the populace is the strength of the State. Just as Orwell’s Big Brother convinced the populace the above contradictions were true, Southern Californians (with a little help from their own Big Brother, David Lereah, president of the National Association of Realtors) have convinced themselves the following:
- APPRECIATION IS INCOME
- CREDIT IS SAVINGS
- DEBT IS WEALTH
Just as these statements are contradictory and ridiculous, the proof that these statements are believed is that they are reflected in the actions of Southern Californians. For example, through borrowing against one’s increasing home values, appreciation is turned to income; when people obtain more credit, they spend it like available savings, and a large amount of debt used to finance a large, opulent home makes one wealthy. Ask any loanowner in Southern California, and they will tell you that makes perfect sense.
The problem is rooted in a basic misunderstanding of what separates the rich from the poor: the habit of saving. You have heard the expression, “the rich get richer and the poor get poorer.” It is more accurate to say the rich save money and the poor spend it: in the end, the rich will have money, and the poor will have none. This is not one of life’s inequities, but rather of of life’s simple truths.
When you hear your average Joe tell you he wants to be rich, what he is really saying is he wants unlimited spending power. He wants the ability to spend like the rich people he sees wearing Rolexes and driving BMWs to their mansions in Shady Canyon. This is why, when given the chance, poor people will emulate the rich by spending beyond their means in order to be rich. Of course, in the process, they spend themselves poor.
Appreciation is Income
Look at the difference between the behavior of rich and poor when it comes to home price appreciation. The rich view home price appreciation as adding to their net worth. If lower interest rates allow them to refinance, they will restructure their debt to pay off the loan more quickly in order to increase their wealth. Poor people view home price appreciation as income; free money for them to spend. If lower interest rates allow them to refinance, they will restructure their loan to pull as much home equity as possible and reduce their payment as much as possible so they can spend more. If any net worth happens to accumulate, they obtain a home equity line of credit and spend the appreciation as quickly as possible — it makes them feel rich even though it really makes them poor.
Credit is Savings
So how do the rich and poor deal with credit? The rich don’t carry consumer debt. Why would they pay interest on a credit balance when it almost always costs more than the income they earn on their savings? The rich will use credit sparingly and most often pay off any credit balances each month as the bill comes due. In contrast, the poor carry as much consumer debt as they can afford to service. Whenever they receive an increase in a credit line, they believe they have more money to spend, just like it was savings. In a strange way, a credit account is like a savings account, only it has a negative balance. In a savings account, the saver earns money; in a credit account, the spender loses money. Again, the rich have savings, and the poor have credit.
Debt is Wealth
There are a great many Southern California residents who live in big houses, and they believe that makes them rich. To them, the possession and use of an expensive house makes them wealthy even if they have no equity in the property. The rich buy less home than they can afford and work to pay off the debt in order to maximize their net worth. The poor stretch their finances to possess more home than they can afford with loan terms which never retire the debt, or in the case of negative amortization loans, actually increases their debt held against the property. This ensures they either never gain any equity or only gain it by appreciation, and as mentioned previously, if prices appreciate they quickly withdraw the gain to fuel more consumer spending.
It’s a California Thing
So what happens when you give poor people money? They spend it. I’m sure you have all heard the stories of people who won the lottery and managed to spend themselves into bankruptcy a few years later. These stories are classic examples of the pathology of the beliefs of spenders. A great many Southern Californians are spenders. This is why I contend that Southern California has a strong cultural pathology. The reason our house prices have been bid up to such dizzying heights is because there is a high percentage of our population in Southern California that subscribes to the spending habits I have described. They went out and borrowed as much money as they could with suicide loans, bought up all the real estate they could get their hands on, and in the process drove real estate prices into the stratosphere. In other areas of the country, reckless spending is not so trendy, and home prices have not been bid up so high.
I grew up in the Upper Midwest in a rural farm community. Pretentious displays of conspicuous consumption are less common in the Midwest, and consumerism is often viewed with contempt rather than envy. In short, there is a smaller percentage of the general population in the Midwest with the aforementioned pathologic beliefs. To prove this, I would like to profile Minnetonka, Minnesota, a suburb of Minneapolis with very similar income and demographics to Irvine. According to Sperling’s Best Places in 2007, the median income in Minnetonka, Minnesota was $84,024, and the median income in Irvine, California was $84,253. I think that is close enough to be a good comparable. The median home price in Minnetonka was $305,600 and the median home price in Irvine was $738,000. If my thesis is correct, one would expect to find a much higher percentage of home loans utilizing exotic loan terms in Irvine as compared to Minnetonka. Remember the Map of Misery?
In fact, according to the map, in 2006 the Minneapolis area had 8.7% of its loan originations were negative amortization, while Orange County had 32%. In all of California more than 80% of loan originations in 2006 were either option ARM or interest-only. Here we have two groups of people with the same median income, and with the same access to credit making very different choices. Potential homebuyers in Minnetonka and Irvine faced the same decision on taking out a suicide loan and buying more house than they can afford or choosing to live within their means. Very few in Minnetonka chose to overextend themselves, so they did not bid up the values of their houses. Orange County (and the rest of Southern California) chose to utilize exotic financing and thereby real estate prices were bid much, much higher. The high utilization of exotic financing was the cause of the price increase not the result of it. Nobody was forced to buy. (Most just wanted the HELOC money.)
So if we accept the premise that Southern California has a high percentage of its population with the spending habits I have described, so what? Everyone here in Southern California is spending freely, feeling rich, and enjoying life. What is the problem? Where is the pathology? Isn’t it true Californians are just more financially sophisticated than the rubes back on the farm in the Midwest?
It is pathological because it is not sustainable: It is a house of cards. There is an inevitable Day of Reckoning when all debts must be paid. Charles Ponzi was the most extreme example of the pathologies illustrated in this post. So extreme was his activities, that the term Ponzi Scheme has become synonymous with the use of ever increasing amounts of investment or debt. This scheme is also encapsulated in the expression “robbing Peter to pay Paul.” At some point, the debt becomes so large that no lender is willing to loan more money and no greater fool can be found to bail them out, and the whole system comes crashing down. However, while the debt was building, the debtor became accustomed to a certain lifestyle and level of spending. When the credit is cut off, the debtor can no longer spend, and a great deal of suffering ensues.
We are quickly approaching the Day of Reckoning in our housing market. In my view this will be Armageddon for California debtors: the spending will stop, they will lose their homes and with it their illusion of wealth, and they most definitely will not be enjoying life. The cause of all the weeping and gnashing of teeth will not be some exogenous event, but rather a direct result of the circumstances they themselves created.
[Originally written in April of 2007. The Day of Reckoning did arrive, and it was the Armageddon California Ponzis feared most.]
OCHN: ”Since we are entering the recovery stage of the market”
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Au contraire, if we were actually entering the ‘recovery’ phase, forward obligations, market intervention events and govt subsidies would all be decreasing, not increasing.
As I pointed out in a recent post, everything you point out is correct, but prices are going to go up anyway.
Case-Shiller: August Home Prices at 2-Year High
U.S. home prices continued to increase in August as the Case Shiller 20-city Home Price Index increased 0.9 percent to its highest level since September 2010. The 20-city index is up 2.0 percent in the last year. At 145.87, the index was down 12.9 percent from where it was just before the 2008 presidential election.
The index rose in 19 of the 20 cities, falling only in Seattle.
The 10-city index also rose 0.9 percent in August, increasing to 158.62, 1.3 percent ahead of August 2011 and the highest level since October 2010.
Economists had expected the 20-city index to be 2.0 ahead of August 2011.
The monthly gain in each index was slower than in July, when the 10-city index went up 1.5 percent and the 20-city index improved 1.6 percent. July also saw gains in all 20 index cities.
Four of the cities—Cleveland, Denver, Miami and Tampa—are located in “battleground” states. In all but one, Denver, the home price index remains below where it was in the last report before the 2008 election.
While the price index in Denver is up 0.6 percent in the last four years, it was down 29.2 percent in Tampa, 22.2 percent in Miami, and 7.3 percent in Cleveland.
The median price of an existing single family home dropped 1.5 percent in August, according to the National Association of Realtors, but was up 8.0 percent from August 2011. In July, the median price of an existing single family home was up 9.7 percent from one year earlier.
Home values play a significant role in the nation’s economy following the “wealth effect,” which holds that households spend more as perceived wealth increases. Increases in household net worth due to real estate (rather than stock) values have a greater impact on consumption, which is more than 70 percent of GDP.
The prices gains reported by Case-Shiller were led by a 2.3 percent gain in Detroit, a 1.8 percent increase in both Atlanta and Phoenix, 1.6 percent in Las Vegas, 1.3 percent in Los Angeles, 1.2 percent in Minneapolis, 1.1 percent in Washington, D.C., and 1.0 percent in both Cleveland and Miami. The year-over-year price improvement in Las Vegas was the first in that city—which had been a poster child for the housing boom—since December 2006.
Prices rose year-over-year in 17 of the 20 cities—compared with July when prices rose year-over-year in 16 cities—led by Phoenix, 18.8 percent, Minneapolis, 7.4 percent, Miami, 6.7 percent, Denver 5.5 percent and San Francisco, 5.3 percent.
The steepest annual price drop was in Atlanta (6.1 percent), followed by New York (2.3 percent) and Chicago (1.6 percent).
Even with the improvement in April, the 10-city price index is down 29.9 percent from its June 2006 peak, and the 20-city index is down 29.4 percent from its July 2006 high point.
Re price, nothing goes up or down in a straight line but the trend is your friend. You know this.
And… post peak, the downtrend remains in-tact.
The market cannot recover,in a traditional sense,with a 20 percent mortgage because of the globalization of labor. So, the only real recovery takes two forms. One is when the .1 percent, the hedge funds and private equity, buy up the homes and rent them out.At that point, they can either bundle up the rents into securitization or offer easy money loans that are securitized,but this time backed by the US government guarantee, the Bernanke Backstop.
Watch out for the Fed and the banksters.
Will the Upcoming Election Shed Some Light on Shadow Inventory?
Ever since the notorious subprime mortgage meltdown and subsequent collapse of the housing market in 2007-2008, many of the nation’s lenders have found themselves loaded down and plagued with a plethora of foreclosed real estate holdings.
Not wanting to create an influx of inventory in this unambiguous buyer’s market, lenders have been hesitant to overstep the delicate tenets of supply and demand for fear that such a step would further reduce property values, diminishing their ability to recoup housing costs and possible ROI.
This “retreat” from the market resulted in a surplus of what is commonly known as the “shadow inventory.” Frustrated with how the market’s been trending, both buyers and lenders are just now beginning to actively seek out real estate transactions, but their previous inactivity has resulted in a stalemate of sorts, leaving the market sluggish and in desperate need of a kick-start.
As the 2012 presidential election looms, the question has been raised: How exactly might this inaugural season and possible transition of power affect lenders, REO sales agents, property preservation professionals, and others in default servicing?
Many industry experts are predicting that, regardless of which candidate is chosen, the shadow inventory will begin to make its way onto the market after the presidential election is decided and a leader is installed. Based on this hypothesis, the stability symbolized by a new presidential term will afford the market a greater feeling of security, leading it to correct itself simply because the transitional period of campaigning has come to an end and a final decision has been made.
The election itself, as opposed to the actual victor, could be the catalyst for a positive market change (and charge). That being said, the modus operandi as well as the speed at which the shadow inventory emerges very likely will be impacted by the chosen candidate’s political plans.
Both post-election scenarios have supporters with convincing arguments as to why their pick for commander-in-chief would provide a positive boon to the nation’s limping housing market, and we will be sharing some of those viewpoints with you over the coming days. In the meantime, we’d like to know which campaign you would choose to lead us out of the crisis, and which policies you think would be most effective in bringing the industry’s shadow inventory into the light.
Drop us a line at [email protected] to share your opinion, and be sure to look for future installments of this special election series here at DSNews.com.
A topic for an upcoming post.
Achieving Homeownership After a Foreclosure: Report
Apparently, if one loses his or her home to foreclosure, the waiting period to qualify for another mortgage can easily be another decade.
According to a report from the Federal Reserve Bank of San Francisco, a mere 10 percent of borrowers with a history showing a serious delinquency were able to obtain a mortgage again within 10 years.
In addition, subprime borrowers, or those with credit scores lower than 650, have an even more difficult time returning to the market.
For borrowers who end their mortgage for a reason other than default, they were able to access mortgage credit about two-and-a-half times faster compared to those who went into default.
The report was based on analysis using Equifax data in the New York Federal Reserve Bank’s consumer loan file. Mortgages were counted as being in default if they were either 120 days past due or past due and reported to have a charge-off or foreclosure.
The timeline for credit accessibility varied, however, when observing the rate of return based on different years. In 2001, 30 percent of borrowers who defaulted were able to take out another mortgage within 10 years. In 2008, the rate of return was much slower. For example, after almost four years, the rate of return for borrowers in 2008 was about 5 percent, but in 2001 during the same period, it was above 15 percent.
The authors of the report, William Hedberg and John Krainer, attributed the low rate of return in 2008 to lack of demand. In the early 2000s, demand for housing was strong, but following the Great Recession, uncertainty about jobs and income may have caused people to become “unwilling or unable to demand housing,” the report explained.
While borrowers with prior defaults are influenced by conditions such as unemployment and home price growth, the report said, “the best predictor of when a defaulting borrower returns to the market is the change in the borrower’s credit score.”
The researchers found that a typical borrower who experiences foreclosure will have a credit score below 600, no matter what their score looked like prior to the derogatory mark. But after five years, the report said, “borrowers who return to the mortgage market after a default have experienced a more-than-100 point increase in their score.”
With an estimated 4 million foreclosures since 2007, according to the report, the movement toward homeownership will be a gradual one for millions.
In addition, the Census Bureau reported Tuesday the homeownership rate stayed near historic lows at 65.5 percent. In the first quarter of 1997, the rate was 65.4 percent.
In response to the homeownership rate, Capital Economics released a report, authored by Paul Diggle, projecting a worsening rate.
“We think that continued tight credit conditions and plenty more foreclosures could see the homeownership rate fall slightly further yet,” wrote Diggle.
Even though the rate is expected to decline, Capital Economics expects the recovery to be able to continue with investors leading the way.
“Indeed, it’s hard to escape the conclusion that the sustainability of the housing recovery depends on how robust investor demand proves to be. Our view is that, for the next few years at least, institutional and individual investor demand will hold up well,” Capital Economics stated.
Homeownership Rate Stays Near Historic Lows
The number of households owning homes reached 75,076,000 in the third quarter, increasing from 74,832,000 in the second, but down from 75,251,000 a year ago, the Census Bureau reported Tuesday.
At the same time, the nation’s homeownership rate (seasonally adjusted) remained at 65.5 percent.
The homeownership rate stayed near historic lows. The rate in the first quarter was 65.4 percent, the lowest since the first quarter of 1997, when the rate was also 65.4 percent. The homeownership rate peaked at 69.2 percent in the second quarter of 2004. The rate measures the proportion of households owning their primary residence, computed by dividing the number of households that are occupied by owners by the total number of occupied homes.
The Census Bureau also reported the homeowner vacancy rate fell in the third quarter to 1.9 percent nationwide, down from 2.1 percent in the second quarter and 2.4 percent one year ago. The homeowner vacancy rate—the proportion of the homeowner inventory for sale that is vacant for sale—is at its lowest level since Q3 2005.
The number of housing units for sale in the third quarter, Census reported, was 1,476,000, down from 1,595,000 in the second quarter and 1,862,000 in third-quarter 2011. The number of housing units held off the market was 7,190,000, down from 7,612,000 in second quarter but up from 7,190,000 a year ago.
The stagnant homeownership rate combined with a decline in the number of units held off the market suggests opportunities for home sales. At the same time, the profile of homeowners by age is changing.
The homeownership rate for older Americans—defined as 65 and over—fell in the third quarter to 81.4 percent from 81.6 percent in the second. The homeownership rate for Americans younger than 35 fell to 36.3 percent. The 45-64 age bracket was actually the only group to see an increase in homeownership; the rate for that group increased 0.6 percentage points to 72 percent.
The rental vacancy rate—the proportion of the rental inventory that is vacant for rent—in the third quarter remained at 8.6 percent, the lowest level in 10 years, underscoring a shift in housing patterns.
According to the quarterly report, the number of housing units in the third quarter was 132.8 million, an increase of 121,000 from the second quarter and 487,000 since third-quarter 2011. According to the Census Bureau, 18,145,000 units were vacant, down from 18, 518,000 in the second quarter and 18,804,000 in third-quarter 2011.
The highest homeownership rate in the third quarter was in the Midwest—69.6 percent, unchanged from the second quarter. Homeownership also increased in the West (to 60.1 percent) and the Northeast (to 63.9 percent), making the South the only region to experience a decline (to 66.9 percent).
The median asking sale price for a vacant home rose to $137,000 in the third quarter from $134,600 in the second and from $136,700 one year earlier. The median asking rent in the third quarter fell to $706 from $716 in the second quarter but is up from $700 in the third quarter of 2011.
This article reminds me of why so many Californians lease expensive luxury cars. It’s much more than what you need to get around, but why pay an extra $300 to $500 a month? It’s just to look rich and looking rich is more important than actually having investments or savings.
As Will points out below, appearance is reality to many of these people. Looking good is more important that amassing real wealth or even having security.
Sorry, the bankers are at fault for the housing bubble. They imported toxic loans from the UK, called self certified loans there. To say this is the fault of borrowers who can’t afford the high rent and desperately get a loan with easy money, is just ridiculous.
Both are at fault, it’s only a matter of degree. You can’t absolve the borrowers of all responsibility. It took two to Tango.
Sorry, the lending was devised by the lenders.They were responsible for sound underwriting, which they could dispense with, as the loans were pawned off to crap CDO’s.
The cause of the housing bubble was the scam set up by the lenders.
And the next bubble is already being set up. In selected places, the .1 percent are bidding up real estate by 100k to get the comps up.
The Fed is buying all the mortgage loans.
Once the Fed is desperate, it may be that it will allow easy money as it did the last time. Even the IMF worries about household formation. They want securitization to start again.
Now tell me who is at fault. Guys like you will blame the borrowers the next time too.
“Now tell me who is at fault. Guys like you will blame the borrowers the next time too.”
I don’t think you read this blog too much.
When you use your equity like a ATM machine, you take some you can’t pay your bills later. People have responsibility to look after finances. They were good home owners and renters that didn’t take out huge loans. To say none of the borrowers were at fault is pretty naive.
Before you continue to spout nonsense and mis-characterize my position, I suggest you read this:
Lenders Are More Culpable than Borrowers
That post lays out my position in nuanced detail.
Thanks for the report. I read that lenders are more culpable. But without the lenders, who had control of the money, the rules and the leverage and the securitization, the housing bubble would not have happened. Here is my BI article explaining this. Madoff victims are victims. So were housing borrowers who did not understand that real estate did not always go up. It was a con, a scam:
How to Assign Blame for the Housing Crisis”
Sorry guys, I couldn’t get the html to work. Here is the link:
http://www.businessinsider.com/how-to-assign-blame-for-the-housing-crisis-2011-10
The feds need the FHA insurance premium.
Wells Fargo mails checks to thousands with FHA-backed mortgages
By Megan Hopkins October 30, 2012 • 2:44pm
Wells Fargo ($33.80 -0.17%)recently surprised thousands of home loan customers by sending refund checks to a fraction of its Federal Housing Administration-backed borrowers. The checks came with a letter informing recipients they had previously paid unnecessary mortgage-insurance related fees.
When the checks are cashed, the borrowers loses the right to sue the nation’s top home lender, on the grounds that the refunds came as a result of borrowers being placed into FHA-backed mortgages unnecessarily.
In an email to HousingWire, Wells Fargo stated: “During the course of our own internal review, we identified a small group of borrowers who had received FHA loans between 2009 and 2011 who may have qualified for conventional financing under circumstances where such financing could have been a preferred option.”
FHA loans, typically offered to borrowers who are unable to pay the 20% down payment required for traditional loans, may be more expensive in terms of fees and insurance.
“The FHA loans impacted by this remediation are less than 2% of our total FHA originations for this period and the bulk of the refunds are between $2,000 and $5,000,” said Wells Fargo.
These loans were granted on the upward journey of Wells Fargo to become the No. 1 originator of loans. In September, Wells Fargo identified their error and began mailing notifications to customers.
“FHA and conventional loan products have a great deal of overlap,” the Wells email said, “there are many times that a borrower qualifies for both products but that the FHA choice is the preferred choice for that customer given interest rate and down payment considerations, among other things.”
[email protected]
“When the checks are cashed, the borrowers loses the right to sue the nation’s top home lender, on the grounds that the refunds came as a result of borrowers being placed into FHA-backed mortgages unnecessarily.”
Now we know the real purpose of the “refund.”
Irvine Renter – you are overlooking perhaps the most important element of the So Cal Pathology, especially as it applies to Irvine and parts of Tustin…
APPEARANCE IS REALITY
This explains the willingness to borrow huge amounts of money to live in a house that the “owner” can’t afford, or lease an expensive car rather than drive a more economical one, or do all manner of idiotic things to prove one has “arrived.”
Alexis de Tocqueville wrote that in a democracy people were not sure of where they stood, whereas in an aristocracy every person knew exactly where he or she stood. As a result, in a democracy people would always be trying to define themselves through their posessions – by “one upping” their neighbors. This is very characteristic of Irvine, where so many homes are “cookie cutter” and everything is designed to look bland and almost identical. People have to have more in order to be sure of who they are.
That is a great addition to the post. I hope everyone reads through the comments to find that gem. Thank you.
The bankers, with centuries of experience, never thought that these people wouldn’t pay back the money they borrowed? The whole notion that this was a consumer driven debacle is ludicrous. Who ultimately owns all the properties that were put into play? The fed.
ADP “Cancels” 365,000 Private Jobs Created In 2012
Frequent readers know that in addition of any “data” and “numbers” out of Larry Yun’s National Association of Realtors (aka the NAR, whose only real function is to permit real estate-based money laundering for foreign oligarchs), which we openly boycott as these are consistently manipulated (see the massive historical December 2011 revision), slanted and conflicted, the second dataset which we have mocked with a passion is anything coming out of the ADP, which every month releases its “Private Jobs” number a day before the official BLS Non-farm Payroll data. Today, our mockeries have been proven 100% spot on.
http://www.zerohedge.com/news/2012-10-31/adp-cancels-365000-private-jobs-created-2012
What does impact does this have for Friday’s jobs report?
Rest assured, real estate will continue its decline for several more years when priced in real money, gold.
They can play with the supply of fiat money, homes, and interest rates; but gravity has a hold on it all.
They can only delay the day of reckoning, but cannot avoid it.
el O needs to start showing the Case-Shiller adjusted for inflation or indexed to gold. As you point out, by those measures real estate will continue to fall for a few more years, perhaps longer depending on how much money Ben prints.
“•APPRECIATION IS INCOME
•CREDIT IS SAVINGS
•DEBT IS WEALTH”
It true for the select few, who can skim points off the top with fees, interest, or taxes. But they also have been infected and show symptoms that their spending is more than their income.
People ask why I drive a 20 year old car. Answer: It still runs, looks okay and is reliable.
I guess that makes us rich
“It is more accurate to say the rich save money and the poor spend it”
how can i keep reading when you say something this stupid?
WTF!!
The fact that you find that statement stupid says something about your net worth, doesn’t it?
Lol! +1
[…] Last year I wrote A Brief History of the Housing Bubble, and for anyone wanting a more detailed recap, you can download my 2008 book on the subject. The Great Housing Bubble was a true financial mania, and today, I want to recall the psychology, or as I described it, Southern California’s cultural pathology. […]
[…] pretentious spenders obsessed with conspicuous consumption are not going away. As I pointed out in Southern California’s Cultural Pathology, we have many spenders in our midst. These people will spend and spend until their creditors cut […]