The 3-Bedroom Family Home in the Sky: 3500 N. Lake Shore Drive in Lakeview
This vintage 3-bedroom at 3500 N. Lake Shore Drive in Lakeview recently came on the market.
The listing says its a short sale but because it’s a co-op I don’t have the prior sales price.
At 2500 square feet it is larger than many single family homes.
The listing says it has an updated kitchen and that the bathrooms have been restored.
There’s a butler’s pantry with the original woodwork and a wood burning fireplace.
The unit has lake and city views.
It doesn’t have central air, washer/dryer in the unit or deeded parking.
But there are washer/dryers in some other units in the building so it appears it can be installed.
The co-op will do 80% financing.
At just $100 per square foot, is this a deal?
Marna Spizz at @Properties has the listing. See the pictures here.
Unit #7A: 3 bedrooms, 3 baths, 2500 square feet
- I couldn’t find a prior sales price (it’s a co-op)
- Currently listed as a “short sale” for $249,000
- Assessments of $2002 a month (includes “everything”- heat, electric, doorman, cable)
- Taxes of $4134
- Parking is rental for $150 to 250 a month
- No central air
- No in-unit washer/dryer
- Bedroom #1: 19×13
- Bedroom #2: 18×13
- Bedroom #3: 11×11
A beautiful home for the person/family willing to pay $2,200 a month to a co-op. I’ll pass.
I always thought that co-ops wrapped taxes into their assessments, no?
This is a deal especially if laundry can be in the unit. I am not sure of the overall shape of the building contributing to the assessments but the unit price psf is more than reasonable.
very nice space.
Beautiful unit. Perhaps the other owners in the building would have the co-op buy this and rent it out? I would think you could get $2,750 to $3k for this after you put a washer/dryer in it.
“I always thought that co-ops wrapped taxes into their assessments, no?”
They are. Listed separately to (1) fill the field, and (2) show the deductible portion of the assessment.
Note that the $2k includes *electric*, water, cable, heat. Which, with window units, could maybe be $500/month (total) if this unit were a condo. Back out that and taxes, and the assessments are still high, but no longer crazy high.
“A beautiful home for the person/family willing to pay $2,200 a month to a co-op. I’ll pass.”
With additional $400 per month in RE taxes, plus another $1,000 in mortgage payments, makes it over $3,500 per month.
Co-ops generally don’t allow rentals.
If they did there would be all kinds of rif-raf living in them.
Such as the poor and the unattractive
Here are a couple of prior sales of 7A:
4/14/97 closed for $101,000 (“30% down financing available”)
7/23/01 closed for $510,000 (“10% down financing allowed”)
Current listing says “80%” financing. Also states “Major hardship short sale. Portfolio loan @ Northern. Should be very quick turnaround.”
9A rented 4/2010 for $3500 for what appears to be a completely renovated unit (SpacePac, steam shower, rain shower, w/d in unit, “Cook’s” kitchen.)
James, you correct in that there have only been 2 units listed for rent in the mls in the past 4 years, with 9A as the only shown as rented.
“4/14/97 closed for $101,000 (”30% down financing available”)
7/23/01 closed for $510,000 (”10% down financing allowed”)
Current listing says “80%””
So, $30k deposit in ’97, $50k deposit in ’01, and $50k, at ask, now. Only thing surprising is that it wasn’t 50% in ’97.
Dan–the taxes are part of the monthly $2000. So total $3000, not $3500.
Stunning unit, fabulous location. I’m pretty sure its in the Nettelhorst Elementary district. Is the garage rental in the building? Looks like a fabulous opportunity to me.
And I’d bet that this would rent for at least $3500. We’re out of the typical “apartment” scale on this one. Seems like a very good deal to me (not that I could afford it). Nice that, in this case, the price reflects the assessments.
Beautiful co-op. The units in this building have great configurations and beautiful details.
It’s priced right. Co-ops are traditionally priced much lower than comparable condominiums, because of greater difficulty in financing and higher costs, especially in these older buildings. You get a very high level of service here, and heating this place is not cheap. Neither is the ongoing maintenance on the building.
that’s just a great pantry.. great space to really put in an awesome kitchen. If you felt the need.
“Dan–the taxes are part of the monthly $2000. So tota $3000, not $3500.”
K, this listing is actually clear that they are paid together but listed seperately. Props to the Spizz on that pet peeve.
G–is it clear on a longer version of the listing? Because in the truncated redfin one–which is the only one I have access to–it isn’t so clear. I agree, props to ANY agent who makes this confusing question clear.
I love these old vintage units; even $3500/month seems reasonable to me for 2500 square feet, all utilities and taxes included. I wonder–where would one store firewood, though? Back in the day, everyone must have had wood. Storage units in the basement? I think my own Board would murder me if I tried that.
damn dude I could totally live in here, so much potential!
It was under agent remarks: “Asm does not reflect taxes although they are inc. in asm bill. Monthly taxes:344.57.” I guess only half props due to my concern over the dataless.
Good point about firewood. Especially in light of today’s many quarantines on moving firewood due to asian longhorns, emerald ash borers, etc.
Maybe the answer lies in this quote from the 9A rental listing: “Woodburning frplc in LR. Hardwood throughout.”
Oh, wait, there’s a WBFP? No wonder it’s cheap-ish:
http://www.nytimes.com/2011/01/20/garden/20fire.html
I remember my grandfather’s immense wood bin, a large, fancy brass trough-shaped container with a large handle, as decorative as functional, that held the wood and sat beside the fireplace in his house. I don’t remember he bought too much wood at one time- this thing wouldn’t hold a lot of it.
Maybe you want a large metal storage container with a tight lid for your storage locker.
I’d pay cash for this unit (I’d get the cash from selling my place on the North Shore). Because I’d have no mortage, I’d just have a $2,500 a month payment for taxes/assessment that would be roughly equal to what I’m paying now, which includes mortgage and sky-high North Shore property taxes.
I’d still have to pay an extra $150 a month for parking, however, which is annoying.
This is a fabulous building that I’ve been inside a number of times. The drawback to this unit is that it’s in the south-facing “A” tier. I’d prefer a direct lake view.
No garage in building, by the way – to answer whoever asked that above.
Kind of dumb of them not to have included a garage when they constructed the building. It was the 1920s, and plenty of buildings were being equipped with garages at the time.
“sky-high North Shore property taxes”
How do you figure?
Kenilworth 5.288%
Northfield 4.689%
Wilmette 5.002%
Winnetka 5.513% (for 38)
Glencoe 5.387%
Chicago 4.627%
Not sure 1% on an EAV of $337,000 for a $1M market value assessed home is that “sky high” especially when services are generally significantly better. You are talking about $3,370 on a $1M home — not exactly a hardship. In some caes suburban levy rates are pari passu.
“I’d still have to pay an extra $150 a month for parking, however, which is annoying.”
Sky high taxes eh? On a 250k market value home this is 2x the tax difference, and that is assuming you’d find a 250k home in Winnetka. Lol.
Love. Where can you park if the building doesn’t have a garage?
I notice that 20s vintage buildings in Lakeview on LSD do not have garages, while buildings built further north have garages, like the Edgewater Beach, or parking space. You’ll notice that buildings built further north have a lot more ground with them, while almost everything in Lakeview or downtown is built flush to the street, wall-to-wall.
It has to be because land was substantially more valuable in these inner neighborhoods, while the far north neighborhoods were less valuable, and zoned to be more “suburban” in nature, which partly explains why they haven’t worked out as well since.
I believe that if I had the money to pay cash for this AND the money to pay the monthly HOA, I’d rather buy here than further north. This is a very decent deal for the money in a beautiful neighborhood, and it’s a much more attractive apartment, too. Believe this makes the Edgewater Beach look like a shabby deal compared, even though that building has more amenities. This is a truly prime neighborhood.
Hope you find a great deal in a co-op no matter which you settle on, Dan.
Laura,
This is a better deal than the Edgewater Beach – agreed. It’s about the same space, for $100,000 less, although the assessment is higher and the building has fewer amenities (no pool or gardens).
And the neighborhood, of course, is prime. It’s tempting to buy this one now because the price is so low, even though we’re not ready to move. But the $2,000 a month payments are not something we’re ready for. Unless we could rent it out, which doesn’t sound likely.
By the way, to those who responded to my claim of “outrageous” taxes, maybe the tax rates on the North Shore aren’t that outrageous, but we pay nearly $10,000 in taxes on a house we bought for just over $400,000 nearly 10 years ago that can’t be much higher in value now. So that seems outrageous to me. Of course, it pays for very good schools that we’re thrilled to send our kids to.
“Not sure 1% on an EAV of $337,000 for a $1M market value assessed home is that “sky high” especially when services are generally significantly better. You are talking about $3,370 on a $1M home — not exactly a hardship. In some caes suburban levy rates are pari passu.
Sky high taxes eh? On a 250k market value home this is 2x the tax difference, and that is assuming you’d find a 250k home in Winnetka. Lol.”
The fact checking police are on the scene. Let’s look at Winnetka property taxes for around $1MM market value homes (assuming they sell near ask):
Address, Ask Price, Taxes
785 Willow Road, 1.15MM, $27,739
939 Ash Street, 1.2MM, $27,685
140 Bertling Lane, 915k, $20,839
$3,370 in annual property taxes on a $1MM home JMM? LOL no. Not even with a senior exemption.
Naperville Homes
815 Iris Lane, 1.0MM, $20,300
1221 Kimball, 950k, $18,500
321 W Benton, 1.15MM, $24,161
Redonkulous taxes too.
“$3,370 in annual property taxes on a $1MM home JMM? LOL no. Not even with a senior exemption.”
Total misread, dude. He’s saying $3370 *more* than a comp AV house in the city.
Doesn’t look right that way, to me, either, but much closer.
wow…I must be of a different mentality. I am not willing to pay such a high assessment for a building with almost no amenities. I don’t get the owners in these units. Can’t they get together and do something to decrease the assessments? It would add so much more to the unit’s value. Also if someone runs the window units for 500$ a month that is just unfair to the others. Why cannot they separate the billing as it is done in most of European older buildings.
Dan, I know this place seems like a good deal at this price, but if you are paying cash and don’t need to be financed, you could perhaps go quite a bit lower. Since financing is even available, we can assume that most buyers there need some financing, and that always slows things down.
I’d surely try it.
IMO the Edgewater Beach place is overpriced, relative to other units in that building.
“Why cannot they separate the billing as it is done in most of European older buildings.”
Because that would require a special, and the board likes it the way it is.
Not a deal, a steal. Shocked that it’s not under contract already.
“$3,370 in annual property taxes on a $1MM home JMM? LOL no. Not even with a senior exemption.”
Yeah you totally misread it. Difference, not absolute amount. Saying the suburbs have sky high tax rates suggests their tax rates (levies) are double. They aren’t. Some are exactly the same as Chicago and the most expensive (Winnetka for dist. 38) are less than 1% higher.
Not sure your data means anything. Asking prices AV or EAV. I can ask $10M for my house, it doesn’t mean my AV is $1,000,000 (10%). I could ask $10,000 for my house, but boy would the taxes be high relative to purchase price. Suburban properties aren’t assessed higher unless they are deemed more valuable — uniformity, comps, etc. Assessed values are made on the same basis for residential (10% of MV) regardless of where they are.
I will take one of your examples and show you where you went wrong, then you can rinse lather and repeat with the others.
785 Willow Rd. Winnetka
Estimated 2010 Market Value per assessor: 1,428,830 (taxes came down)
Total Assessed Value 142,883
Market value if sold for list: 1,150,000
Implied Assessed Value if sold for list: 115,000
About $3,400 more in taxes for this home purely because it is in Winnetka in District 38. Again, if in Glenview, its about the same taxes.
I agree with Laura that this is a great deal. As long as the pricing of the unit appropriately reflects a high assessment, I’m not sure why people are so averse to allocating a larger part of the montly cost to assessments rather than mortgage (assuming appropriate accounting for ancillary tax/mortgage/lower equity effects). Is it just the principle?
This is overall a great space, but I do think it is tough that this buildling does not have parking; despite what was said above, there are a number of buildings from this era in the immediate area that do have parking.
Only one thing to add to JMM–limited to Cook County. If Dan #2 lives in Lake, it’s different.
“that’s just a great pantry.. great space to really put in an awesome kitchen. If you felt the need.”
Excuse me, but the listing says it is a ‘butler’s panty.’ I wonder if it is clean…
“Doesn’t look right that way, to me, either, but much closer.”
It is just math.
100,000 AV x 3.3701 x differential in levy rate (5.513% – 4.627% = 0.886%). So in precise terms, $2985 for every $1M in MV.
I assumed a 100bps max difference but in reality it is less than that.
Tax extension lessons are over for now.
“I’m not sure why people are so averse to allocating a larger part of the montly cost to assessments rather than mortgage (assuming appropriate accounting for ancillary tax/mortgage/lower equity effects). Is it just the principle?”
Because you don’t get a mortgage interest deduction on an assessment.
Also, where can you park???
Dan, this place looks great. You also probably wouldn’t need to worry about here sending your children to private schools here. But if you did there is a jewish private school just north of here. The whole E Lakeview area is really alot more kid friendly than edgewater
“It is just math.”
The part that doesn’t “look right” is the assumed equivalence of AV as it relates to actual transaction pricing.
Yes, once you are comparing equal AVs, that *is* the extent of the difference.
“Only one thing to add to JMM–limited to Cook County. If Dan #2 lives in Lake, it’s different.”
Lake County has higher taxes (low 6% range in many instances), with good reason. But again, I’d argue that services are higher.
“You also probably wouldn’t need to worry about here sending your children to private schools here.”
HS-aged kids. Anshe has no HS, and Lake View ain’t gonna cut it, at least right now.
“But again, I’d argue that services are higher.”
Sure, and a Merc has more features than a Yugo, but that doesn’t mean the Merc isn’t still “expensive”.
I just laughed out loud at “Butler’s Panty”
“The part that doesn’t “look right” is the assumed equivalence of AV as it relates to actual transaction pricing.”
Ostensible reason for tax appealing process, case in point. A transacton comp coupled with uniformity is your guide. In a falling market, paying a price in line with assessed MV, particularly if prior owner was not aggressive in appealing, is probably evidence you are overpaying. Another way of saying, assessor MV follows transaction MV, not the other way around.
“Sure, and a Merc has more features than a Yugo, but that doesn’t mean the Merc isn’t still “expensive”.”
Yugo? Chicago is more like a rusted out Caprice. Which is to say, if you cannot afford a safe and reliable car, maybe having a car in the first place is not a good idea.
“Another way of saying, assessor MV follows transaction MV, not the other way around.”
Yeah, except when it doesn’t. I know you know that I know how it is supposed to work, and we both know that it doesn’t always (or even necessarily generally) work that way.
“Yugo? Chicago is more like a rusted out Caprice. Which is to say, if you cannot afford a safe and reliable car, maybe having a car in the first place is not a good idea.”
Which has what? to do with refuting that the Merc (Lake County Taxes) is expensive, which was the issue?
Anon Dan, i think you are smart person and believe you have smart children, they will likely get into Northside, Payton, or Jones, and if so those schools are better than most the suburban schools. I went to northside myself (part of the 1st class)
“i think you are smart person and believe you have smart children, they will likely get into Northside, Payton, or Jones”
I admire your optimism for other kids. One less than stellar test day can kill that optimism.
anon–they could put in an EPA-certified high-efficiency fireplace insert, and enjoy their fire guilt-free.
That’s what I’m having done, as we speak, with the place I bought in Urbana. It’s costing me a mint, though… but I’m a sucker for a wood burning fire.
“anon–they could put in an EPA-certified high-efficiency fireplace insert, and enjoy their fire guilt-free.”
Those poncy little heir/ess twits aren’t guilty about such things, they’re just preening for their more authentic hipster friends, and/or trying to make someone else feel bad about themself.
Thanks, GESC. Those are good schools and we’d consider them. Lakeview High School, on the other hand, is not something we’d consider.
As I said, by the time we move to the city, our kids will be in college and high school, so grammar school isn’t an issue. I do hear very good things about Nettlehorst these days, however.
For those who wondered, I live in Lake County, not Cook.
Laura – that’s a good point that we could get it for lower with cash. I wonder what they’d think of a $175,000 offer!
These units are very nice, a friend of mine is the renter in 9A.
Further to the RE taxes debate, the agent has taken them out of the assessment number so the real assessment (incl. taxes) is $2346.57. She put it in agent remarks though not listing notes to make the assessments look (slightly) less scary to prospective buyers.
So $2,346 plus $300 to park two cars – you’re getting close to $3,000 a month. Even if you pay cash and have no mortgage, that’s a lot of money to be spending. The unit may have to sell lower than asking, particularly as it’s not directly facing the lake.
I do wonder if I lived here would I have regrets about not facing the lake. The view is one of the building’s best attributes (I know because we had friends who lived in a unit in this building on a high floor in a unit facing LSD). I also wonder if this listing is showing the actual window view from this apartment. It seems too high up to be only the 7th floor. Anyone else agree?
“and we both know that it doesn’t always (or even necessarily generally) work that way.”
No I don’t know that. I can give you names of at least five firms that will see to it that it doesn’t with guaranteed reliability.
We play this game all the time. Industrial properties, commercial properties, rental properties.
People should understand taxes aren’t mythically applied.
“I admire your optimism for other kids. One less than stellar test day can kill that optimism.”
Lol. Worrying about schools = a bad bargain for Chicago residents. You pay as much as the north shore but don’t have a high school pot to piss in? Don’t worry, average kids will likely end up average regardless of where you send them. And if they are especially bright, the cream will find a way to rise to the top.
“No I don’t know that. I can give you names of at least five firms that will see to it that it doesn’t with guaranteed reliability.”
And what’s the guarantee? That they’ll pay the difference?
No that the assessed value will be reduced to an appropriate value, particularly if a property was over assessed. Hell, it gets reduced even when there is no reason to reduce it and you know how that works. How much experience do you have with BOR proceedings?
If so, please forward names of firms with written guarantee.
k thx
r
“You pay as much as the north shore but don’t have a high school pot to piss in?”
I’m with you on this one. That’s why it doesn’t seem to make sense to OWN in Chicago, unless you’re just wealthy. (Not 450k buying a McCrapBox wealthy but 200k income or $2MM net worth wealthy).
RENT in Chicago, maybe RENT on the North Shore, too. Or maybe OWN on the North Shore. But at least you’re not pissing away tax dollars that you are getting no utility from living there if you have kids.
I guess if you own 250 parcels throughout the city, the guarantee is that it will get done else the business goes elsewhere.
“maybe RENT on the North Shore, too”
Honestly, rentals on north shore are downright awful or grossly overpriced because they think they will catch the odd relocating Google turned Groupon exec.
Do you really think a trade at $1M on a AV proprty of 150,000 isn’t likely to result in a substantial (to 100,000) reduction if there is uniformity (other properties in same class comp at $1M)?
You know the jurisdictions get their $ either way right. It’s not like the taxes go into a vacuum. Add that fact and some polical clout, plus 30% incentive fee structure, and that tends to work pretty damn well.
Lesson time for the real estate monkeys out there: if you’re not sure if you’re going to have kids within the next ten years you should probably not be buying real estate in Chicago unless you’re well off. Most of you aren’t well off.
It’s probably not a good idea to buy a 450k McCrapbox on Sheffield just because it’s next to Kirkwood and Mad River because you’re likely only a 20-something (locations like those are really only a premium for 20-somethings) and it’s not a good strategy when kids come along.
When kids come along you gonna buy a McCrapbox in the city to be near all the hookup bars, sex and head shops and Chipotles, or are you going to buy a place like this for 250k in Wilmette: MLS 07557926, 250k 2/2 nice looking townhome in New Trier district.
You dumb monkeys are still in denial that city living just isn’t feasible for a middle class family with kids, without making significant sacrifices that most of you aren’t willing or able to make.
So put your tail between your legs, admit that attempting to buy in the city to keep your dreams of lingering youth alive is stupid, and run off to those suburbs.
We’re back to high-end suburbs’ public schools vs. Chicago selective enrollment lotto discussion? Anyone seriously contemplating a Chicago home purchase based upon assured enrollment at “holy trinity” of Northside Prep, Peyton, or Whitney Young needs to spend an evening with some “fancy law firm partner/dean/MD” GZ parents who recently lost that lotto-experience, and face more private school tuitions for their high-achiever 8th grade daughters. Ignatius accepted about 1/3 their applicants this year.
Only people who see 3500 LSD and similar high-assessment co-ops as “deals” are those corporate executives relocated from Manhattan to Chicago, who console themselves with the “Lake Shore Drive frontage = Central Park frontage” analogy and try to create a “mini-Manhattan” Gold Coast/East Lincoln Park/East Lake View bubble.
This might be an estate sale, furnished with a grandchild’s college-apartment furniture. I suspect a close inspection will reveal need for significant refurbishment. Pictures alone reveal a unit not decorated to the 3500 standard.
Oh yeah and that Wilmette property I showed you is right near the El. So BIG LOL at all of you people willing to bid up real estate near city El stops because you think the bus isn’t some comparable form of public transportation.
Also admit that only do you hate the bus and love rail but you’d only really consider living near an el stop in a nice neighborhood with a CITY address because you don’t want to be thought of as a suburbanite who settled by your suburbanite friends back home at whatever bumbleheck town you came from.
“200k income … wealthy”
And you’re ragging on how little money the “real estate monkeys” have? You really put the breakpoint for “wealthy enough to buy in the city and stay” at $200k income from *work*? GTFOH. It ain’t close to hard up, and it’s objectively well off, but it’s not that much more than HD’s family income and he’ll tell you how far that *doesn’t* go in the city.
“We’re back to high-end suburbs’ public schools vs. Chicago selective enrollment lotto discussion?”
Um, we had a NSCP grad say “don’t worry, your kids will get in” and I said “not so fast”.
“Anyone seriously contemplating a Chicago home purchase based upon assured enrollment at “holy trinity” of Northside Prep, Peyton, or Whitney Young needs to spend an evening with some “fancy law firm partner/dean/MD” GZ parents who recently lost that lotto-experience, and face more private school tuitions for their high-achiever 8th grade daughters. Ignatius accepted about 1/3 their applicants this year.”
Latin is harder to get into than Havard and they are open about favoring legacy. I believe the public magnets referenced are equally hard to get into. Though this isn’t true today, if your poor kid got sick and missed a few school days, you were f’d and out of the running. It’s all BS but then again so is CPS.
The city has no reliably tenable high school option as compared to the suburbs. It didn’t used to be that way 60 years ago, but it is true today.
I’d take $2M net over 200k in income any day. Lol.
Dan, you might as well start with $175K. You can always work up from a low offer, but not down if you go in high. What more can they do but counter, or say no? If they say no, go up maybe another $7,000.
I have a feeling that anybody who has cash can get a substantial discount, especially in a building with such a limited market. You also want to remember that if you ever want to dispose of it, it won’t be any easier than it is for this seller, so keep that in mind, as well as the work the place needs.
You could always follow Stevo’s advice on bank offers, don’t know if he would have recommended it equally for short sales and foreclosures
“And you’re ragging on how little money the “real estate monkeys” have? You really put the breakpoint for “wealthy enough to buy in the city and stay” at $200k income from *work*? GTFOH. It ain’t close to hard up, and it’s objectively well off, but it’s not that much more than HD’s family income and he’ll tell you how far that *doesn’t* go in the city.”
It depends. A family income of 200k (remember less taxes for marriage, HD ain’t, or wasn’t, despite being a co-habitor, so was volunteering to pay higher taxes). Should be enough for a family to raise one kid comfortably in the city and provide for private schooling. Okay for 2 kids let’s bump that up to 240k HHI.
Most of the people I’ve heard about/seen buying the condos in the city that caused these crazy valuations don’t even have 200k HHI. Typically it’s around 130-150k. Buying a 450k McCrapbox on 140k HHI, leaving little room in their budget for much else.
“I’d take $2M net over 200k in income any day.”
Take it over $400k, even.
At $200k, leaving as cheaply as Bob, $2mm is, what?, 25 years? of after tax income.
“I’d take $2M net over 200k in income any day. Lol.”
Depends on the variability of the income stream. In business/consulting absolutely. If we’re talking about surgeons absolutely not–that’s a sure thing.
Can Chicago condo valuations hold up when you can get that nice Wilmette townhome near the El for 250k? I don’t think so. We are seeing absolute decimation of Chicago condo valuations.
There are just too many choices right outside the city limits for far less money that aren’t encumbered with the schooling issue.
“A family income of 200k (remember less taxes for marriage, HD ain’t, or wasn’t, despite being a co-habitor, so was volunteering to pay higher taxes)”
Actually, Bob, at that sort of income level, with 2 wage earners, there’s a rather meaningful marriage *penalty*. And it’s more of a penalty if there’s moderate spread b/t the wages (like 150-50 or 130-70) which is more likely.
“At $200k, leaving as cheaply as Bob, $2mm is, what?, 25 years? of after tax income.”
I have to live cheap: my job situation is anything but stable. Basically I live a pretty good life overall (I won’t lie), but not one with a lot of financial visibility. Allows one to be pretty good with one’s money when times are aplenty so one needn’t freak out when they aren’t.
“Actually, Bob, at that sort of income level, with 2 wage earners, there’s a rather meaningful marriage *penalty*.”
Uggh I thought the Bush tax cuts took care of this but I just checked brackets..uggh WTF is wrong with our government.
“I have to live cheap: my job situation is anything but stable.”
Wasn’t a criticism, was just an example of how much $2mm *in the bank* really is. Or how poorly $200k/annum compares to that $2mm. Or some variation on that.
“Or how poorly $200k/annum compares to that $2mm.”
70% * 200 = 140k. That’s 7% of that $2MM. That’s a pretty good yield these days. Zero inflation.
“70% * 200 = 140k. That’s 7% of that $2MM. That’s a pretty good yield these days. Zero inflation.”
Yeah, but if I have $2mm in the bank, I don’t have to live in Chicago to have that income. And I can spend *all* day, *every* day doing whatever I want. Which could include having a job to make up the difference b/t cash-flow and lifestyle.
If this closes here or lower, killer comp for 2A, no?
“And I can spend *all* day, *every* day doing whatever I want. ”
Noted. But also _very few_ people wind up working at a job that pays 200k for long (either voluntarily or involuntarily) if it’s a job they hate.
“And I can spend *all* day, *every* day doing whatever I want. ”
Well, you don’t need a million dollars to do nothing, man. Take a look at my cousin: he’s broke, don’t do shit. 🙂
About a week ago, I happened to drive by NSCP on Kedzie on my way up to Shore Galleries gun shop in Lincolnwood. Maybe it was the 48 degree overcast day, the fact that the trees still have no foliage, but that location just flat out blows and the neighborhood around there is totally depressing and miserable looking. Why not just send your kid to New Trier? At least it’s in a area that’s pleasing to the eye.
“But also _very few_ people wind up working at a job that pays 200k for long (either voluntarily or involuntarily) if it’s a job they hate.”
And even fewer have $2mm in the bank (liquid securities, etc).
Plus, you hypothesized a family, so that’s $200k combined, and I can vouch for the existence of *many* people making $100k+ in the long-ish term in jobs that bring them no joy.
“Well, you don’t need a million dollars to do nothing, man. Take a look at my cousin: he’s broke, don’t do shit.”
Who pays for his iP* devices and his bike?
anon…. from Office Space
“and I can vouch for the existence of *many* people making $100k+ in the long-ish term in jobs that bring them no joy.”
There’s a lot of jobs that suck (ie: aren’t meaningfully rewarding to many) but still require skilled labor. The kind of jobs that really don’t provide the kind of mental stimulation people with the education to do them often desire. They likely have to pay this just to keep people there.
I’ve read somewhere the two professions with the highest incidence of alcoholism are dentists and accountants.
Yeah plumbing and the trades pay well too, but you don’t need to have that higher order level of self-worth/meaningful-work that often comes with higher education. (And at the end of the day actually plumbing is more meaningful than accounting!) Probably also one of the reasons sales pays so well for excellent salespeople.
““sky-high North Shore property taxes”
How do you figure?
Kenilworth 5.288%
Northfield 4.689%
Wilmette 5.002%
Winnetka 5.513% (for 38)
Glencoe 5.387%
Chicago 4.627%”
YOU FORGOT OAK BROOK – 2.8% – yeah, read it and weep!!!!
$200k won’t go far in the green zone primarily because at that kind of income, you believe you *deserve* a 1990’s or 2000’s brick house near public trans and you’re willing to commit roughly $5,000 a month including property taxes, utilities etc towards that house; and well, if you have a nice house, then you also need at least one (maybe two) new acura/bmw/lexus SUVs to go with the house at cost of $1,000 a month including insurance (and more if you include gas). And of course when you announce your family summer vacation to your friends/co-workers, etc, it’s somewhere fancy you have to fly to, or it’s a rental house for a week on lake delavan, etc. And when you throw a BBQ, it can’t just be bubba burgers and bud light; it’s whole food burgers & goose island…..and when it comes to child care, daycare is for the *plebs urbana*, the Patricians of the GZ must have full time nannies at $1,000 a month (including the nanny tax)…
$200,000 won’t go very far on that lifestyle, whether its the north shore, the green zone or hinsdale or barrington.
If you’re making $150,000 a year HH income and want to live in a green zone type neighborhood, you better figure out what IS important and what isn’t because that $150,000 can go really quickly with two leased cars, a nanny and a jumbo mortgage.
That jumbo mortgage (which is pretty much required to live in a nice SFH in the green zone) is the real killer for a lot of households. Sure it fits into the budget but it doesn’t leave much left over. And the property taxes dont help the situation either.
Nice thing I could see about plumbing is being left alone. Used to have a running joke with a co-worker about being plumbers. Great thing to learn how to do, very easy.
. “And the property taxes dont help the situation either.”
they do if you live in oak brook……
OT.
clio,
As per your statement yesterday — “I currently have less than 2 million in mortgages” — I wanted to ask:
What’s the appraised value of the property securing that debt?
http://cribchatter.com/?p=10411#comment-151187
As far as liquid net worth, I’m pretty close to the top of the range being discussed here. And while it’s nice – don’t get me wrong – it’s nowhere near enough to never have to worry about what you spend. Or to stop working (unless you’re 70, I suppose).
“$200k won’t go far in the green zone primarily because at that kind of income, you believe you *deserve* a…”
If you realize that it’s 200k in 2011 dollars and not 1985 dollars you’ll realize the SFH isn’t doable, the cars probably aren’t a great idea and regular vacations to places like Cozumal are basically as good as luxury ones to the Swiss Alps.
If someone can’t live on 200k household income with one child then they’re doing something wrong, because last I checked that’s twice the median in Hinsdale and 50% more than that in Lincoln Park.
Not everyone’s spending ramps up in lockstep with their income, HD. In fact a lot of 200k jobs are probably so demanding leaving little time for spending it.
So wouldn’t the co-op under discussion, 2500 sq.ft. in a prestigious location that will carry for around $3500/month, be an attractive alternative for a couple with these aspirations and income? Similar space and amenities; no yard but also no maintenance.
“$200k won’t go far in the green zone primarily because at that kind of income, you believe you *deserve* a 1990’s or 2000’s brick house near public trans and you’re willing to commit roughly $5,000 a month including property taxes, utilities etc towards that house”
“$200k won’t go far in the green zone primarily because at that kind of income, you believe you *deserve* a 1990’s or 2000’s brick house”
HD, you seem to have some kind of prejudice against those that are better off than you. You assign them negative traits and tendencies for no reason other than the fact that they can afford something that you can’t.
Let me give you a real life case.
Our HH income is slightly north of 200k
I drive a 92 Chevy pickup with 185k miles
My wife drives a 2000 Ford Explorer with 150k miles
I have 2 kids that go to public schools. Prior to that, they were in all day daycare (we both work full time)
I have a cleaning lady that comes every other week.
We went on vacation to Washington DC this year (booked on priceline)
Are there some people that do what you describe? Sure. Is that what most people do? No.
Larry! One of the funnier bit roles in a long, long time.
“Well, you don’t need a million dollars to do nothing, man. Take a look at my cousin: he’s broke, don’t do shit. :-)”
“YOU FORGOT OAK BROOK – 2.8% – yeah, read it and weep!!!!”
Not on the north shore as far as I can tell.
“that’s twice the median in Hinsdale and 50% more than that in Lincoln Park”
Most people you will run into make more than median, because median includes retirees, of which there are many in Hinsdale, and students and/or recent grads, of which there are many in Lincoln Park.
Kenilworth reports a median HH income of around 200k, but most peak career stage families take in 300-400k or more. Those who don’t are “north shore goofs” with lots of liquid assets invested in treasuries or equities so reported income levels are low. Or own businessess and, if S corp or other pass through, run at breakeven by running lots of stuff through or, if C corp, don’t dividend cash out.
By the way, who was it who was signalling impending doom with their silly calculated risk post on Q1 GDP? Looks like the market, already at record levels, barely blinked.
Why? Well, look at industrial production for one.
How much is your mortgage every month chuk? Is it a jumbo? You made sacrifices – you drive older cars, you forgo private schools. Not everyone makes those sacrifices.
“Are there some people that do what you describe? Sure. Is that what most people do? No.”
___________________________________________________
Bob, it’s the income earner who’s spending the $200,000.
“Not everyone’s spending ramps up in lockstep with their income, HD. In fact a lot of 200k jobs are probably so demanding leaving little time for spending it.”
___________________________________________________
“How much is your mortgage every month chuk? Is it a jumbo? You made sacrifices – you drive older cars, you forgo private schools. Not everyone makes those sacrifices.”
I bought my house for cash for 578k in 2002. I had bought my condo in 1992/3 for 170k and paid it off by 2002. I sold the condo in 2002 for 340k, and added money I had made in the stock market to buy my house.
And it’s not really a sacrifice. My cars work fine and I don’t drive much. I just couldn’t care less about cars. When my cars die, I’ll buy a used one with 30k miles. While I don’t spend much money on cars, I do spend money on my hobbies.
Again, you say not everyone makes sacrifices. I say even fewer do what you described. People that make 200k aren’t generally stupid.
“Not everyone makes those sacrifices.”
Forgoing private schools is easy in Chicago, not so much in LA.
“the Patricians of the GZ must have full time nannies at $1,000 a month (including the nanny tax)…”
$1,000 a month? Try $1,000 a week. We pay about $4,000 a month for a nanny inclusive of taxes, workers comp, benefits, etc. That is the equivalent of an $800,000 house mortgage payment — lol. Well worth it though.
“People that make 200k aren’t generally stupid.”
In addition, at that income level and above a high portion of spending is discretionary. This is why raising taxes on poor people is difficult — they spent a lot on basic necessities whereas high income folks do not. The marginal $50k in income on a $200k base is usually saved, invested, or if spent, spent on discretionary items that are not recurring in nature and can be scaled down if income requires.
Sorry JMM, $1000 a week – not a month. I dont proof my posts.
I was still in high school in 1992. Those kinds of gains (doubling the price of a condo in 9 years and outsized stock market gains) are some of your generation’s luck and don’t appear likely to be part of my generation’s story.
There is plenty of conspicuous consumption going on. Just because you don’t do it or don’t see it doesn’t mean that it doesn’t exist.
“chukdotcom on April 28th, 2011 at 8:22 am
“How much is your mortgage every month chuk? Is it a jumbo? You made sacrifices – you drive older cars, you forgo private schools. Not everyone makes those sacrifices.”
I bought my house for cash for 578k in 2002. I had bought my condo in 1992/3 for 170k and paid it off by 2002. I sold the condo in 2002 for 340k, and added money I had made in the stock market to buy my house.
And it’s not really a sacrifice. My cars work fine and I don’t drive much. I just couldn’t care less about cars. When my cars die, I’ll buy a used one with 30k miles. While I don’t spend much money on cars, I do spend money on my hobbies.
Again, you say not everyone makes sacrifices. I say even fewer do what you described. People that make 200k aren’t generally stupid.”
“I dont proof my posts.”
Yet you are the one who calls me out for fat fingering 181 N. Clark instead of 118 N. Clark?
“There is plenty of conspicuous consumption going on. Just because you don’t do it or don’t see it doesn’t mean that it doesn’t exist.”
Invisibile conspicuous consumption. Certainly a contradiction in terms.
I was still in high school in 1992. Those kinds of gains (doubling the price of a condo in 9 years and outsized stock market gains) are some of your generation’s luck and don’t appear likely to be part of my generation’s story.
Whining again HD…. you just missed +2 years of stellar stock market returns. Opportunity knocks but I fear you will never answer the door.
One can be oblivious to a lot of things, including the conspicuous consumption of others. I’m quite oblivious to the various sorts of shoes and handbags that women spend hundreds if not thousands of dollars on.
“#JMM on April 28th, 2011 at 8:44 am
“There is plenty of conspicuous consumption going on. Just because you don’t do it or don’t see it doesn’t mean that it doesn’t exist.”
Invisibile conspicuous consumption. Certainly a contradiction in terms.”
So did most people Valasko, so did most people. 70% of all stock trades these days are executed by automated traders who hold positions for less than a few seconds.
“Whining again HD…. you just missed +2 years of stellar stock market returns. Opportunity knocks but I fear you will never answer the door.”
“anon…. from Office Space”
Crap.
Still, that was 12 years ago. How’s Larry live an appropriately boho live these days?
So did most people Valasko, so did most people. 70% of all stock trades these days are executed by automated traders who hold positions for less than a few seconds.
Sound bites again HD…… you have to do what most people aren’t doing, that how to make money. When you go to dinner parties and everyone talks how great the stock market is, how they are thinking of quiting their jobs, etc. you know its time to head for the exits……
I know you think it is impossible to make money in stocks,bonds, realestate…. try it see what happens. Please stop parroting sound bites and start to think for yourself.
“70% of all stock trades these days are executed by automated traders who hold positions for less than a few seconds. ”
And that keeps one from making money over the past 2 years with a buy-n-hold strategy how?
“are some of your generation’s luck and don’t appear likely to be part of my generation’s story.”
Sure, some part is luck, and a large part isn’t. I could have rented in 1992 instead of buying (just like some are doing now). After all, this was right after the condo collapse where everyone said the same things they are saying now. Condos will never go up, etc etc etc. I chose to take the risk and buy, and I was rewarded. Which is why I am making the similar argument today.
And the stock market was definitely not just luck. Most people I know got wiped out by 2002. I made most of my money betting against the .com bubble (hence my screenname being somewhat of a parody of everything adding a .com to their company name at the time). The stock market has doubled in the last 1.5 years. Your generation had the same chance to ride the market bubble. But when there is blood in the streets (2008), it is difficult to buy. Just as it was difficult to short YHOO at 400.
“There is plenty of conspicuous consumption going on. Just because you don’t do it or don’t see it doesn’t mean that it doesn’t exist.”
Sure. I’m just saying it isn’t the norm IMO. You are taking what I consider to be a somewhat isolated example, and applying it to that entire income bracket as a justification for why houses aren’t affordable at current pricing. Also, I think you see people in lower income brackets living more like you describe (spending above their means). For example, my cleaning lady always has a brand new SUV. She’s had 3 different brand new ones in the 8 years she has worked for us.
I don’t think it’s impossible to make money, stocks, bonds, real estate. but it’s become a lot more difficult these past few years….much more difficult. that’s undeniable. just like in japan, the housewives of Tokyo became so fed up with low yields in …stocks, bonds & real estate that they started, in mass, investing in foreign exchange markets.
contrast that with stocks, bonds & real estate circa 1980 to 2008…put your money into those things and watch the price go up up up. too many people misinterpreted that as financial acuity as opposed to dumb luck of a credit bubble….this is undeniable. And builders too, no matter what they built, no matter how far into the exurbs they built, it made money, until it didn’t. There’s a lot of money chasing so little yield right now.
“I know you think it is impossible to make money in stocks,bonds, realestate…. try it see what happens. Please stop parroting sound bites and start to think for yourself.”
“You dumb monkeys are still in denial that city living just isn’t feasible for a middle class family with kids, without making significant sacrifices that most of you aren’t willing or able to make.”
Oh man this rhetoric (and its variations) is killing me. a middle class family CAN own a home in the city and not make more “sacrifices” than living in a burb. do you really want a 3 hour round trip commute? well there you go a sacrifice to live in a burb.
i can list many more but its all trade-offs in life no matter what. just do what works for you.
but saying one cant afford to live in chicago proper is just talking lies!
“So did most people Valasko, so did most people”
Just as most people will miss out on the next real estate gains.
When you’re crying you should be buying.
When you’re yelling you should be selling.
Same thing goes for all markets driven by fear and greed. And yes that includes real estate, and yes there are a lot of people crying at the moment.
http://www.wealth-building-101.com/wp-content/uploads/2010/07/Trading-Emotions.jpg
“For example, my cleaning lady always has a brand new SUV. She’s had 3 different brand new ones in the 8 years she has worked for us.”
and probably rolled the negative equity into the next one, gosh i see that with people all the time its such a waste of cash and by the third car the loan is twice what the car is worth on the street.
new cars every three years is throwing money away (i speak from experience)
“I don’t think it’s impossible to make money, stocks, bonds, real estate. but it’s become a lot more difficult these past few years….much more difficult. ”
“contrast that with stocks, bonds & real estate circa 1980 to 2008”
Not true. It’s easy to say if you didn’t live through those times participating in the market. People had years and years worth of returns wiped out in days in 1987 and 1998 and 2000 and 2001 and 2008.
Making money is ALWAYS hard (especially keeping it). Only in hindsight is it easy.
i’m not saying it’s possible but the stock market these days seems pretty rigged to me. more akin to gambling than investing. maybe it’s always been that way, but this of course is my opinion and i’m entitled to it.
of course, sort of along these lines, “Wal-Mart: Our shoppers are ‘running out of money'”
http://money.cnn.com/2011/04/27/news/companies/walmart_ceo_consumers_under_pressure/index.htm
NEW YORK (CNNMoney) — Wal-Mart’s core shoppers are running out of money much faster than a year ago due to rising gasoline prices, and the retail giant is worried, CEO Mike Duke said Wednesday.
“We’re seeing core consumers under a lot of pressure,” Duke said at an event in New York. “There’s no doubt that rising fuel prices are having an impact.”
Wal-Mart shoppers, many of whom live paycheck to paycheck, typically shop in bulk at the beginning of the month when their paychecks come in.
Lately, they’re “running out of money” at a faster clip, he said.”
“#anon (tfo) on April 28th, 2011 at 9:01 am
“70% of all stock trades these days are executed by automated traders who hold positions for less than a few seconds. ”
And that keeps one from making money over the past 2 years with a buy-n-hold strategy how?”
I don’t think it’s impossible to make money, stocks, bonds, real estate. but it’s become a lot more difficult these past few years….much more difficult. that’s undeniable. just like in japan, the housewives of Tokyo became so fed up with low yields in …stocks, bonds & real estate that they started, in mass, investing in foreign exchange markets.
contrast that with stocks, bonds & real estate circa 1980 to 2008…put your money into those things and watch the price go up up up. too many people misinterpreted that as financial acuity as opposed to dumb luck of a credit bubble….this is undeniable. And builders too, no matter what they built, no matter how far into the exurbs they built, it made money, until it didn’t. There’s a lot of money chasing so little yield right now.
Ok HD, now a simple question WHAT ARE YOU DOING ABOUT IT, HOW HAVE YOU POSITIONED YOUR ASSETS?
Not trying to pick on you, I would like to see you view things differently…… you know how can you position yourself to take advantage of the hand you have been dealt. You have lemons go out and make some lemonade!
“i’m not saying it’s possible but the stock market these days seems pretty rigged to me. more akin to gambling than investing.”
And it has been that way since daytrading, electronic trading, etc. exploded in the early 90’s. I say we go back to calling our trades into our broker, and waiting for the physical shares to be mailed to your home. Should be forced to hold for 2 years. The stock market will never go back to normal with the ability to buy and sell millions in a second by some idiot sitting at home. You get a years worth of movement in a day. If they created an electronic market for buying and selling real estate, a 1 bedroom condo would go to 2mil in a week.
And again, hindsight is easy. But at the time of the S&L crisis, it looked like the end of the world. In 1998 with the Russian and Asian financial crisis, it looked like the end of the world. On the flipside, in 1999, it looked like a “new economy” built on “eyeballs” that would forever change the world. And then again in 2008, it looked like they would just have to shut the damn markets down for good. Next thing you know, they have doubled.
It ain’t ever easy…
I’m investing in myself.
It’s far easier to earn income than it is to risk assets competing for yield among cnbc junkies.
“Not trying to pick on you, I would like to see you view things differently…… you know how can you position yourself to take advantage of the hand you have been dealt. You have lemons go out and make some lemonade!”
more akin to gambling than investing. maybe it’s always been that way, but this of course is my opinion and i’m entitled to it.
You are entitled to maintain your belief but it is innacurate. It has always been part purpose/part casino. Even the computerized systems you think negatively of have helped make spreads to get in and out only a penny wide whereas years ago the specialists would rape you, every time, for 1/4.
and it was never easy… that’s why 99%+ who tried it still aren’t day trading.
“It’s far easier to earn income than it is to risk assets competing for yield among cnbc junkies.”
Then sometimes you just need to go against the herd. Short oil, gold and silver for when the bubbles burst (mind you I don’t recommend it at the moment). Build up a position slowly over time and enjoy the rewards when the house of cards collapses.
“more akin to gambling than investing”
If you ever thought that “growth stocks” are anything but “gambling” (yes, pejorative, but not wrong), you’re mistaken. Fundamentally a ponzi scheme. Reasonable minds may disagree with me, but I’d appreciate an explanation of *why*.
HD – you have to diversify and invest in many different things (stocks, bonds, real estate, etc.). Sure you may not get rich quick – but it is the safest way to go over the long haul (which is what you should be looking at).
“If you ever thought that “growth stocks” are anything but “gambling” (yes, pejorative, but not wrong), you’re mistaken. Fundamentally a ponzi scheme. Reasonable minds may disagree with me, but I’d appreciate an explanation of *why*.”
You are 100% correct. You can just substitute AAPL, AMZN, GOOG, NFLX, etc below:
http://economics-files.pomona.edu/GarySmith/nifty50/nifty50.html
“But is such a company’s stock worth any price, no matter how high? In late 1972, Xerox traded for 49 times earnings, Avon for 65 times earnings, Polaroid for 91 times earnings. When the stock market crashed in 1973, the Nifty Fifty defied gravity for a while, held up by institutional enthusiasm that created a two-tiered market of the richly priced Nifty Fifty and the depressed rest. Then, in the memorable words of a Forbes columnist, the Nifty Fifty were taken out and shot one by one. From their 1972–1973 highs to their 1974 lows, Xerox fell 71%, Avon 86%, and Polaroid 91%.”
And everyone can spare me the “AAPL is different” nonsense. It will end up the same as the nifty fifty. In tears.
yeah, 99% of day traders are flushed out, because the house always wins. wasn’t just recently that the major banks didn’t have a single losing day in an entire quarter? how can that be? The game is rigged in favor of the house, the HOuse of morgan, if you know what I mean.
anon(tfo), growth stocks are more of a ponzi scheme, yes, rather than gambling, but I use the gambling analogy above.
“#gringozecarioca on April 28th, 2011 at 9:29 am
more akin to gambling than investing. maybe it’s always been that way, but this of course is my opinion and i’m entitled to it.
You are entitled to maintain your belief but it is innacurate. It has always been part purpose/part casino. Even the computerized systems you think negatively of have helped make spreads to get in and out only a penny wide whereas years ago the specialists would rape you, every time, for 1/4.
and it was never easy… that’s why 99%+ who tried it still aren’t day trading.”
” The game is rigged in favor of the house, the HOuse of morgan, if you know what I mean.”
The trick is to get on the same side as the house. There is a reason why GSCO was betting against housing while they were selling it to their clients. “Do as I say, not as I do”.
“growth stocks are more of a ponzi scheme, yes, rather than gambling, but I use the gambling analogy above. ”
Ponzi scheme *is* gambling, with an unregulated and dishonest house.
“wasn’t just recently that the major banks didn’t have a single losing day in an entire quarter?”
1. You believe everything a corp tells you?
2. The corps could play tricks to show no single losing day and no net profit on prop trading at the same time, so even if #1 isn’t a factor, “no losing days” isn’t really meaningful, depending on what they hold at the end of the quarter–maybe they’ve held *every* losing position for income-smoothing/tax-avoidance purposes.
yeah, but you know, they’re a bunch of scumbags and morally deficient sociopaths.
“#chukdotcom on April 28th, 2011 at 9:42 am
” The game is rigged in favor of the house, the HOuse of morgan, if you know what I mean.”
The trick is to get on the same side as the house. There is a reason why GSCO was betting against housing while they were selling it to their clients. “Do as I say, not as I do”.”
“yeah, but you know, they’re a bunch of scumbags and morally deficient sociopaths.”
When in Rome…
“The game is rigged in favor of the house, the HOuse of morgan, if you know what I mean.”
And again, it always has been.
My point is at moment of execution you are 50/50 and there is no difference in price pattern distributions than there ever was before. The game looks almost exactly the same as it always did.
And my bet is 95% of the 99%+ went bye bye simply because they lost. Shit, penny wide between the bid and the offer… 50/50 bet even for a monkey.
so buy huge good multinational companies with good yields and enjoy the yearly dividend increases
that isn’t gambling, that’s a recipe for long term money making
“that isn’t gambling”
I’m sure you noted my limitation to “growth stocks”.
HD, I give up on you… at least you are scrimping and saving which is better than most people. I just wish you would look at the a little world differently. Oh well I tried….
S%P 500 two years ago = 855.16
S&P 500 today = 1356.78
CAGR = 26%
Naked shorting is for losers (notice I am not assailing paired trades). Your gain is capped at 100% and that never ever happens. Since the market nadir in March 2009, we’ve picked up over 100%…
Pointing to the fact that the S&P is still below Sept 2007 highs is also a loser argument. Most money gets invested on a DCA basis through 401(k) funds, not at a single point in time. If you invested the same amount each period over the last 5 or even 10 years, your CAGR is positive, and significantly so. Is the market in a bubble? Hardly. NTM S&P ratios are reasonable compared with historical standards, the economy is growing and productivity continues to increase.
Chuckdotcom nice use of MMIDs on a real estate blog. Fish out of water — you must be a day trader.
http://www.tigernt.com/onlineDoc/MMID.html
“Naked shorting is for losers (notice I am not assailing paired trades). Your gain is capped at 100% and that never ever happens.”
I don’t think people who take naked shorts are necessarily making long term trades, or for that matter shooting for the full 100%.
From their perspective, it’s like you are saying betting pass is better than don’t pass.
“Chuckdotcom nice use of MMIDs on a real estate blog.”
Oops. Habit.
“Fish out of water — you must be a day trader.”
Not anymore. I used to back in the days of fractional trading. But I found that 95% of my money was made on about 5% of the days. Then it turned into swing trading. Now I basically just wait for big buy/sell panics. A lot less work, same return.
I respect a man who can earn a living in his underwear.
“The trick is to get on the same side as the house. There is a reason why GSCO was betting against housing while they were selling it to their clients. “Do as I say, not as I do”.”
I find it interesting how what people say and what people do so often don’t agree. Soros indicating gold is a bubble and then increasing his position in IAU. Or Schiff and Roubini calling for continued declines in housing and then purchasing real estate.
“Or Schiff and Roubini calling for continued declines in housing and then purchasing real estate.”
No matter what else, declines in resi RE as an asset *class* do not require declines in a particular individual property.
Just as a decline in the stock market does not mean that *every* stock will decline.
This may finally be the property that sells for less than zero.
wow JMM,
How old is that list of market-makers, ten or fifteen years old? That’s one for the archives. It’s almost funny to see no mention of firms like Citadel, Getco, BATs, or any one of a dozen other hft firms that together execute over half of all stock trades today.
I don’t know anything about stock trading but I’d guess that when measured by volume Getco & Bats are two of the biggest.
A quick search turned up this fun article:
http://www.bizjournals.com/kansascity/stories/2010/08/02/daily11.html
hd,
as per the banks’ seeming ability to generate “perfect trading” quarters, check out KidDynamite’s post:
http://kiddynamitesworld.com/big-bank-perfect-trading-quarters-the-real-story/
Barry Ritholtz has also riffed on this subject. See his post “Bank Arbitrage” (4/28/11).
If I understand KD correctly, it’s not that the banks’ profits come from a lot of buying low & selling high, but instead they reflect the positive carry they enjoy borrowing from the Fed at low rates and reinvesting the proceeds in higher yielding Tbonds and GSE bonds.
There’s nothing new here. This very same Fed policy was deployed in the early 90s, the end of our nation’s previous real estate & LBO collapse.
iirc, in the early 90s a mantra among Chicago re developers was “Stay alive ’til 95”, — the time when the Fed’s easy money would be presumed to have worked its magic. And it did ‘work’ — for those who were overleveraged and those who wanted to get levered.
It’s fun to think about what might have happened if, as a precondition to putting Frannie into conservatorship, the US govt had demanded bondholders to take, say, a 20 or 40 percent haircut.
Of course that route wasn’t taken. As the FCIC report notes, Secretary Paulson, cognizant that the Chinese and Russian central banks owned large quantities of GSE debt (and nuclear weapons?), decided that the better part of wisdom was to make whole the debtholders of the failed GSEs — that is, to NOT exact haircuts from them.
And thus, an international incident was avoided, peace reigned over the land, and the mantra “buy the dips” was affirmed once again as plausibly good investment advice.
chukdc, what leads you to believe this:
“If they created an electronic market for buying and selling real estate, a 1 bedroom condo would go to 2mil in a week.”
“Of course that route wasn’t taken. As the FCIC report notes, Secretary Paulson, cognizant that the Chinese and Russian central banks owned large quantities of GSE debt (and nuclear weapons?), decided that the better part of wisdom was to make whole the debtholders of the failed GSEs — that is, to NOT exact haircuts from them. ”
And a worse banking collapse was avoided here, as its my understanding many domestic banks and credit unions owned those GSE securities to meet their required capital & reserve ratios.
It’s funny but when you talk to mortgage brokers during the boom they knew the crap they were selling on was total garbage. But the government (quasi-govt), as always, being very bureaucratic and slow to react, took years to catch on. The problems with the loans were ignored so long as valuations were rising.
chukdc, what leads you to believe this:
“If they created an electronic market for buying and selling real estate, a 1 bedroom condo would go to 2mil in a week.”
There are plenty of RE companies that have publicly-traded stock. Most mini-trumps would have been better off buying and holding EQR than going cash flow negative, then boom, then bust on GZ properties.
“Most mini-trumps would have been better off buying and holding EQR than going cash flow negative, then boom, then bust on GZ properties.”
If you’re in it for status at dumb cocktail parties it doesn’t have the same effect. Telling idiots that you own some stock and they think your boring or a day trader. Tell them that you “own” several million dollars worth of property, with conveniently leaving out the amount of the banks mortgage liens, and they think you’re successful.
Yes people are largely stupid. That’s why we are where we are today.
In the late 1990s the big thing was being a VC investor in tech. That was the famous pickup line for socially awkward business savvy guys back then. In the latter 2000s it was a mini-Trump.
Now it’s having a government/steady job and being a renter 😀
“chukdc, what leads you to believe this:”
Just that as soon as you introduce the ability to buy and sell in seconds, you get a total disconnect from fundamentals. I’m not saying that people will buy 1 br condos for 1mil to live in. But you would get people behind a keyboard that would buy a symbol on the screen for 900k if they think they can sell it for 1 mil. And of course I am exaggerating a bit.
“But you would get people behind a keyboard that would buy a symbol on the screen for 900k if they think they can sell it for 1 mil.”
True but uninteresting, since by the same logic ‘people behind a keyboard would sell a symbol on the screen for 1 mil if they think they can repurchase it for 900k.’
I thought you might have something more than a bullish outlook to evidence your claim: “If they created an electronic market for buying and selling real estate, a 1 bedroom condo would go to 2mil in a week.”
but that’s cool. we’re just chattering.
Look at what’s happening to the price of commodities and oil when a handful of firms can bet with impunity using borrowed money to ‘buy a symbol on a screen’. Homes don’t trade as quickly and financing is a lot more difficult these days, but if Goldman could figure out a way to make futures or derivative contracts on specific units without having to ultimately take delivery, you’re damn right 1 bedrooms in the SONO building would be selling for a million dollars in a matter of weeks. The guy who gets stuck holding the million dollar condo in sono and can’t unload the contract is the guy in his underwear day trading, or some municipality in norway who hired bankers to invest their money conservatively.
“True but uninteresting, since by the same logic ‘people behind a keyboard would sell a symbol on the screen for 1 mil if they think they can repurchase it for 900k.’”
Or it could go to $1. But bubbleheads are bullish by nature, so I’d assume they’d push it up instead of down. The point is, it would disconnect from the fundamentals. You’d have condo prices going up (or down) 20% in a day.
That is all.
“Look at what’s happening to the price of commodities and oil when a handful of firms can bet with impunity using borrowed money to ‘buy a symbol on a screen’.”
Exactly. I assure you that if these guys had to take physical delivery of oil and store it somewhere, it would not be driven up to today’s prices.
exactly how & when the subprime market imploded in 07 is one of the great (mostly unreported) stories of the crisis, though both the FCIC and Levin/Coburn reports offer a lot of fresh details.
Gregg Lippmann, one of the heroes of Michael Lewis’s book “The Big Short” gave a 3-hour interview to his FCIC interogators. Lippmann was famously bearish on real estate in 04. By 05 he began convening meetings with other broker dealers in an effort to devise a derivative that would bring more “price discovery” & transparency to the CDO/funding markets.
In Jan 06 the ABX index on subprime mortgages began trading & Lippmann immediately began selling it. More importantly, he claims to his interogators that the introduction of the ABX played a key role in reversing the ascent of real estate prices, because now people (like him, John Paulson, Dr. Michael Burry, Tricadia, etc.) could more easily & efficiently wager large sums of money on behalf of their bearish housing-market views.
That story is one reason why, even today, 4 years after the funding market’s collapse, I doubt that a derivative on, say, condos, would necessarily lead to an uptick of condo valuations — but who knows.
Bloomberg says this about the meetings Lippmann convened in 05 that eventually lead to the ABX’s creation:
“Those meetings of the ‘group of five,’ as the traders called themselves, became a turning point in the history of Wall Street and the global economy.”
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aA6YC1xKUoek
hmm…. that’s a little hyperbolic, though the claim is plausible.
OT:
HD: hope you see this post, here could be a trial rental for you…. http://chicago.craigslist.org/nwc/apa/2343593700.html
“And everyone can spare me the “AAPL is different” nonsense. It will end up the same as the nifty fifty. In tears.”
Apple is trading around 15x forward earnings. That is not expensive as long as they make what everyone thinks they’ll make over the next 8 months. That is a much different story from the Nifty 50 who, by the end of their run, were collectively trading at around 50x forward earnings. No company can sustain the growth to justify that P/E ratio (though some can do it for awhile.)
Google is likewise not expensive based on its earnings. Trading at, what, around 19 times?
I wouldn’t expect either one of those to end in tears. The companies with 50, 60 and 70 P/Es will come back down to earth at some point (AMZN, TZOO- to name just 2.)
But you can’t lump all stocks that go up 80% in a year with others because it’s not always accurate.
“Making money is ALWAYS hard (especially keeping it). Only in hindsight is it easy.”
Not really. My great grandfather bought stock in several big banks, oil companies and the like in the 1940s and 1950s. He left them to his children upon his death in the 1970s.
My grandmother has owned several large oil company stocks since the 1970s- always reinvesting the dividends. I think she has an annual return of like 11% over that time. Didn’t do anything. Never bought, never sold. Now has a lovely nest egg.
Just buy and do nothing. It’s not hard.
“I was still in high school in 1992. Those kinds of gains (doubling the price of a condo in 9 years and outsized stock market gains) are some of your generation’s luck and don’t appear likely to be part of my generation’s story.”
The boomers (or the oldest Generation Xers) had it made. They lived through an 18 year stock bull market where returns averaged about 20% over that time. Can you even imagine?
Additionally, if they bought their home in the 1980s or even early 1990s, they did extraordinarily well (doubling, tripling or quadrupling) their investment (as long as they didn’t HELOC the heck out of it.)
Both of those methods to wealth went away for anyone who has come of age after the year 2000. And Generation X and Y are now both reluctant to buy stocks (even if they are at 3 year highs). Real estate is done for a decade or more. Even when it starts going up it will be 1-3% a year. You’re not building wealth fast that way.
Where does that leave Generation X and Y then? They will be much poorer than the Baby Boomers unless another asset class really starts heating up again.
“I wouldn’t expect either one of those to end in tears. The companies with 50, 60 and 70 P/Es will come back down to earth at some point (AMZN, TZOO- to name just 2.)”
Sabrina – You think those are high, check out Open Table at a P/E ratio of 191: http://www.google.com/finance?client=ob&q=NASDAQ:OPEN
Now that’s insane.
“I wouldn’t expect either one of those to end in tears.”
But they will. Their growth will eventually go away. That 15 PE will turn to 50 in a heartbeat. Those stocks are over-owned and will collapse 50%+ from their eventual peaks.
“Just buy and do nothing. It’s not hard.”
Ridiculous. You are comparing two completely different eras. When you have stocks that move 1-2 years worth in a day, buy and hold is dead.
“Both of those methods to wealth went away for anyone who has come of age after the year 2000.”
So, housing market has changed for good, but stock market hasn’t?
“Just buy and do nothing. It’s not hard.”
The overwhelming majority of stocks eventually go to 0. Now, you may be able to buy and hold a self-adjusting index (like S&P 500) where companies come and go. But to say that the same companies of today are the ones to hold for 20 years is absurd. Tell that to the owners of XRX, T, GM, etc.
You don’t just buy one chuk. Look at the list of dividend aristocrats. Some of those companies have been paying dividends for 55 years. Companies like the railroads have been around for 100+ years. I’m not seeing them go anywhere- are you?
Sure, you could have bought GM or, gasp, Enron. But if you had owned 20 stocks that you bought 30 years ago, reinvested the dividends every year- you’d be fine even if 2 out of the 20 were GM and Enron. (you know what they say- never put all your eggs in one basket.)
I know many are saying, “I can’t afford to buy 20 companies.” Do one of the low cost companies like sharebuilder and buy $50 or $100 or a company every month. Spend $1000 a month doing so. In 5 years, you’ll have quite a nice diversified portfolio.
Again, it’s not hard. My grandfather knew nothing about stocks. He simply invested in America. We have great companies that churn out substantial profits.
“Again, it’s not hard. My grandfather knew nothing about stocks. He simply invested in America.”
This America is not your grandfathers America.
Just for one example:
Over the last 20 years, Kansas City Southern Railroad was up 1425%. The S&P 500 was up 264%.
CSX up 699% over the last 20 years.
Again, it’s not that hard.
Sure, not everything is up that much. Maybe you bought Dupont: up 177% over the last 20 years v. 264% for S&P 500 (without dividends reinvested, however.)
It’s why you own 20 companies.
Sure it is chuk. American companies are the best run companies on the planet. Also, some of the most profitable. Look at Caterpillar. No one on the planet competes with them. Not even close. Same with John Deere. Same with some of our chemical companies like PPG Industries, Dupont, Dow. Yum brands is the largest fast food chain in China.
Our technology companies dominate the market (okay- you have to include RIM there but they’re Canadian.)
I can give you a list of 200 or 300 companies all kicking butt around the world. The recession made them stronger and better. Our products are still the most trusted in the world (even if made in another country.)
Again- everyone- it’s not hard. Buy companies with businesses that have been around awhile. Reinvest the dividends. Grow your wealth.
For every example you give me of out-performance, I can give you 10 that underperformed. The next AAPL is not AAPL. The nasdaq is unchanged over the the last 12 years. But in that time, it has had moves up of 100%, 70%, and 90%.
Buy and hold is dead.
Look at this chart:
http://finance.yahoo.com/echarts?s=^IXIC+Interactive#chart1:symbol=^ixic;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
The market went off the rails in the mid/late 90’s. It will never return to the way it was when your grandfather invested.
I am not saying you can’t make money in the market. I made a fortune in the market. But buy and hold is for suckers now.
buy and reinvest your dividends is very alive, chuk…
“The market went off the rails in the mid/late 90’s. It will never return to the way it was when your grandfather invested.”
Um…yeah. It’s called “a bear market.”
And you’re wrong. My greatgrandfather was a banker in downstate Illinois during the great depression. He couldn’t sleep at night- having to foreclose on dozens of his neighbors farms (it was a small farming town.) It was a brutal, brutal time.
Yet he still believed in America and still bought stock. In fact, he bought when no one wanted to be buying (in the 1940s and 1950s.)
My grandmother got her shares from his estate in 1971. Gee- wonder what happened right after that? The market crashed! Again, it was brutal for about 9 years. Did she sell? No. She didn’t care. Just reinvested the dividends.
She held through the bull market (of COURSE it was good from 1981 to 2000) but she held through 2000 to the present too. Was she pleased to see her stocks crushed down? No. But why would you sell? Just reinvest the quite nice dividends (by this point- she was getting pretty substantial income from the dividends. You know- the power of compounding over all those years.)
Buy and hold isn’t for suckers. It’s for people who can think long term and realize they aren’t retiring for 30 years. Just put your money into a diversified portfolio and watch it grow. Heck, now IS the time to be buying.
Buy a dividend stock that pays 6% to 7% and you’ll double your money in like 7 years.
“For every example you give me of out-performance, I can give you 10 that underperformed. The next AAPL is not AAPL. The nasdaq is unchanged over the the last 12 years. But in that time, it has had moves up of 100%, 70%, and 90%.”
Don’t buy the dumb Nasdaq then. Buy companies that have been in business a 100 years. There are plenty of them. But I guess that’s not “exciting” enough for you.
Look around you. Plenty of products, restaurant chains, service companies that are expanding quickly and have huge growth potential both in the US and in the emerging markets.
By the way- when an asset class goes “unchanged” for a decade or more- it’s a sure sign of a bear market. (just in case you didn’t know that already…)
The same will be said in ten years with housing in Chicago. People will be saying “but if you bought 10 years ago, you’ve made nothing.”
“but if you bought 10 years ago, you’ve made nothing”
Which is ok given you dont use your property as the only source of investment. Add up all the cash lost in those ten years through renting…(obvi interest, taxes, assys, general upkeep is costly)
“The same will be said in ten years with housing in Chicago. People will be saying ‘but if you bought 10 years ago, you’ve made nothing.'”
Really? On a nominal basis? You think that real estate in Chicago will be unchanged over the next decade so that 2020 prices are essentially the same, on a nominal basis, as 2000 prices? (I use nominal, because that’s what people use when they say how much someone has made in a personal real estate transaction.)
“Buy and hold isn’t for suckers.”
For the majority that try otherwise… suckers!
Sabrina,
So what you are saying is, only buy stocks that are going to go up. Don’t buy the ones that are going to go down. Gosh, why didn’t I think of that!
“So what you are saying is, only buy stocks that are going to go up. Don’t buy the ones that are going to go down. Gosh, why didn’t I think of that!”
Chuk- you seemed disturbed by the up and down movements of the Nasdaq over the last 10 years. The technology stocks (if those are what you bought- since not all of the Nasdaq is technology) have been more volatile. All I was saying was- then don’t buy those more volatile plays. Don’t buy the $2 stocks. Don’t buy those companies that don’t pay dividends. Blah, blah, blah.
You don’t have to buy stocks Chuk. It’s a good sign for those of us who believe in the wealth building power of the stock market that there are many people who think like you right now. A year ago, I still thought we were in a bear market for stocks which we wouldn’t get out of for at least another decade. But now I’m not so sure.
So many people hate stocks- and refuse to buy them- which is usually a sign of a bottom in a bear market. So now I don’t know- maybe we only had a 9 year bear market in stocks. The shortest former bear market was 11 years- so it’s not outside the realm of possibility- but it would be unusual.
As for housing- too many people are still obsessed with it. Too many people are doubling down without ANY fear. Not a single buyer I talk to has ever told me they’re scared about losing money in housing. All the stories I’m told every day running this site are about people looking to buy, parents giving 30-year old kids $100,000 or $200,000 to buy something- all without a care in the world.
But you Chuk, and others, have a lot of fear about stocks- again- which is the sign of a bottom.
“Which is ok given you dont use your property as the only source of investment.”
A-fed, I wish this were true. Most young people are putting ALL of their assets into housing. And they’re also spending huge portions of their income on it.
“Chuk- you seemed disturbed by the up and down movements of the Nasdaq over the last 10 years.”
Disturbed? Not at all. It’s how I made my money. Without the up and down of the market I’d be sitting right where I was 10 years ago, instead of having returns that far outpace the market.
(p.s. It wasn’t just the NASDAQ that went up and down)
“You don’t have to buy stocks Chuk.”
Sure you do. But you have to sell them and buy NEW stocks every few years. Gone are the days of buying a stock and holding it for 30 years.
“But you Chuk, and others, have a lot of fear about stocks- again- which is the sign of a bottom.”
I have zero fears. And sign of a bottom? Please.
(p.p.s. Do you wonder why the VIX is so low? Hint: It’s not because a lot of people fear stocks)
Chuk- the retail investors are not buying stocks. $300 billion went into bond funds last year. Was there even a net inflow into stock funds? I’d have to check- if there was it was very, very small (as investors were still pulling money out- not putting money in.)
Even this year- as the 2 year rally continued it has been much the same thing. The regular guys continue to put money into bond funds even though those are going to be very bad investments in the next few years. Meanwhile the small cap index is up 150% in the last 2 years and only in the last few weeks has anyone noticed.
Though I did see that finally investors are putting some money back into equity funds (for 19 straight weeks- at least they were putting it in and not yanking out like last year) but bond funds have seen money inflows for the last 13 weeks- and at far greater levels (well outpacing equity funds.)
The regular investors aren’t playing. They aren’t buying stocks (only bonds) and refuse to buy into the rally. It’s a signal of the bottom if they’re staying out of the biggest rally in 70 years.
The VIX doesn’t signal a bear market. It never has. That is the traders- not the investors.
“Do you wonder why the VIX is so low? Hint: It’s not because a lot of people fear stocks)”
Chuk, it’s not because they don’t fear them either.
“Just put your money into a diversified portfolio and watch it grow. ”
Was very good advice. I would have left out last 2 words though.
” It’s a signal of the bottom if they’re staying out of the biggest rally in 70 years.”
How could it be a “bottom”? We just went up 100%. You could argue we will go higher, but it certainly isn’t a “bottom”. The bottom was made at S&P 666 when the VIX was 90.
The VIX doesn’t measure bear markets. But it does measure fear. And right now, there is none.
By the way- if you owned Kansas City Southern- why in heavens name would you want to sell it and buy new stocks every few years? What a mistake that would be. Same with dozens of other stocks I can mention.
It’s not surprising that those investors that are written up by the media that die with $3 million or $10 million (or more) in their accounts (when they only made $70k a year in income) are those that bought and held. It truly is a magnificent way to create wealth.
Oh- and they’re nearly all women too. Maybe women are the only ones who have the patience to do buy and hold and that’s why those that do it get rich?
My grandmother’s brother sold his stock he inherited almost immediately in the 1970s. Poor guy. Her sister, however, also still has her original shares.
Again, I am not arguing against the stock market. Far from it. But time has become compressed. Stocks move too far too fast. The stocks that did well from 1990 to 2000 are not the stocks that did well from 2000 to 2010. And the stocks that will do well from 2010 to 2020 will not be the ones that did will from 2000 to 2010. Buying and holding a particular stock is dead. That stock will need to be sold, and the proceeds rolled into a DIFFERENT stock. Sure, you can always hold stocks. But not the SAME stocks. Which is what buy and hold means.
The “bottom” psychologically Chuk not by the darn numbers. I assumed this was a bear market rally and we will retrace it lower in the next few years (since this bear should last probably another 10 years- give or take.) But given the hatred of stocks by the general population (who is NOT getting into this rally)- it makes me question that and think that maybe we have already left the bear behind.
I don’t know though. With the government debt crisis about to blow up (and no one there to save them when it does)- I could see us having another big blow-off before a real bottom is established. By that point- those few who don’t already hate stocks REALLY will and it will be a fantastic buying opportunity (for those with guts.) I don’t know of many investors who could take another huge decline without throwing in the towel.
“Buying and holding a particular stock is dead. That stock will need to be sold, and the proceeds rolled into a DIFFERENT stock. Sure, you can always hold stocks. But not the SAME stocks.”
That’s just not true. You are clearly a momentum player. Sure- if you bought all the stocks that did “good” in a particular decade (outperformed) then it’s likely they cannot keep up that performance. That is true even of the big cap companies my grandmother owns. Over the last 40 years- it hasn’t all been a bed of roses. But she has steadily been getting a 3% (or more) dividend every year over that entire time. She has been adding more shares when her particular stock was out of favor and has benefitted when it was finally surging.
The best performing stock in the S&P 500 since 1958 is Altria Group (by far) – mainly because of its dividend. But the others on the list (that would have made you rich) are all well known companies (with the exception of Tootsie Roll- which I would not have assumed was in the top ten.) It’s all the others everyone knows: the drug companies, the oil companies, Coke, and the like.
Again- it’s not a mystery.
“By the way- if you owned Kansas City Southern- why in heavens name would you want to sell it and buy new stocks every few years?”
Umm, maybe because it went from 55 to 12 in less than a year? Decade worth of gains wiped out in about 6 months. Sure it came back to 55, but wouldn’t it have been nice to have had a 400% gain instead of a 1% one? Buying and holding was most certainly NOT the way to go with that stock, yet you use it as your prime example. Bizarre.
Hopefully you do not learn the hard way like many did when they remained in equities into their retirement ages, only to see them cut in 1/2.
In all markets, there is a time to buy, and a time to sell. Those that know what they are doing do so, those that do not just cling to the “buy and hold” mantra as an excuse for not knowing what to do.
What would you say to the “buy and hold” real estate investors? Shouldn’t they have taken their profits in 2006?
Why is OK for you to hold onto an investment that goes down 80%, but they are fools for holding one that goes down 35%?
“The VIX doesn’t measure bear markets. But it does measure fear. And right now, there is none.”
Fallacy.
“Stocks move too far too fast”
They actually, particularly as a group, move exactly as they always have.
Just buy the Star Fund every month and go to sleep….
Um…no. Why would you panic sell? You’re in it for the long term. You add to your position (if you can- or have the stomach) when the panic sits in.
Like I said- my grandmother had many of these “panics” during her ownership of stocks over the last 40 years. It’s smoothed out over time (even with the 2008 crash.) Her dividends were buying her more shares at cheaper prices. And believe me- there were 5 or 6 years in the 1980s when her stocks didn’t do much (her particular industry.) But, again, she’s a long term investor.
Stocks are not real estate. One is liquid and the other is not. Stocks have also well outperformed real estate in the last 100 years. You can’t compare the two.
Like I said- stock investing is really easy as long as you diversify, buy companies that make lots of money and don’t worry too much about it all.
“That’s just not true. You are clearly a momentum player.”
Momentum? Hardly. I play multi-year trends. I captured the majority of the move from 666 to 1350. I am not daytrading GOOG. As the market goes down, I buy more and more (primarily SPY) until I am heavily invested at the bottom. As the market goes up, I sell more and more (via covered calls), until I am barely invested at the top. I certainly don’t run out of stock at the exact top, or buy my final share at the exact bottom, but there is no need to. (I started selling at S&P 1200, and have continued to till now. I have about 15% remaining invested. At 666 I was 100%+ invested).
When you have a market that goes down 50%, and then goes up 100%, it is not good enough to say “I held and my stocks and they are up 3%.” That is horrible performance, and if you just captured a fraction in the internal movement, you would have annualized gains of 30%+ and not flat for a decade.
Dollar cost averaging with your buys is fine. But you need to dollar cost average with your SELLS as well.
Very simply, the market moves too far, too fast now. That ensures that we will continue to have large corrections as a result. Why should I hold all my stocks at 1350 when I know I will be able to buy them back at 1050? So what if we go higher first?
“Fallacy.”
It’s a fallacy that it’s a fallacy. It measures volatility, but you do not get that kind of volatility with greed. You only get it with fear. Look at the times the VIX has topped 40 and tell me again that it doesn’t measure fear.
“They actually, particularly as a group, move exactly as they always have.”
They do?
http://finance.yahoo.com/echarts?s=^DJI+Interactive#chart1:symbol=^dji;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
“Like I said- stock investing is really easy as long as you diversify, buy companies that make lots of money and don’t worry too much about it all.”
Ummm, no. But you will learn….
chuk.. If you don’t mind the question. Do/Would you ever go short?
“It’s a fallacy that it’s a fallacy. It measures volatility, but you do not get that kind of volatility with greed. You only get it with fear. Look at the times the VIX has topped 40 and tell me again that it doesn’t measure fear.”
Your tail is wagging your dog…
“They do?”
Eerily so, yes!
“stock investing is really easy as long as you diversify”
For 98% out there, it is excellent advice, I would never guarantee gains, but will guarantee you beat most professionals.
Oh yes, about 50% of my money had been made on the short side. When I run out of stock, I keep selling. So as the market goes higher, I get shorter.
People always ask me how I can get the moves up and down so well. It is not because I can predict them with any sort of accuracy. I can just predict them close enough to not get blown out shorting, and not get margin calls going long.
Because the market was on such a tear up to 2008, I ended up getting fairly well short by the time the market topped (again, I didn’t short the top, I started before and dollar cost averaged up). When the top came, I was already short, I didn’t need to “guess” the top. Then as the market fell, I started to buy (cover) until I covered all my shorts (that happened around S&P 850-900). Then I continued to buy (now getting long) until the market bottomed (again, I didn’t buy the bottom, but I was very long AT the bottom).
So, I end up very short at tops, and very long at bottoms. It’s not rocket surgery…
“Eerily so, yes!”
Then how do you explain the lifetime Dow chart?
BTW, those that say “shorting is for suckers, because you can’t make more than 100%” have no idea what they are talking about.
“It’s not rocket surgery… ”
Science?
Then how do you explain the lifetime Dow chart?
Brownian Motion???
All going well for you so what do I know. Good luck.
“Science?”
It’s a joke…
I thought you were thinking of someone.
“I thought you were thinking of someone.”
That was part of the joke…
Sabrina, Any chance we could have some posts on the newer high rises such as Aqua, Legacy and MPs? I feel we don’t discuss new high rises all that much.
Thanks!
For instance, I thought this one looks interesting:
http://www.redfin.com/IL/Chicago/225-N-Columbus-Dr-60601/unit-5806/home/21829526
I wonder what CCers think about these new high rises. BTW, I was interested in buying in Legacy but it seems they are only 50% sold which scares me.
“Sabrina, Any chance we could have some posts on the newer high rises such as Aqua, Legacy and MPs?”
There’s not much going on in any of these buildings at the moment. Not a lot of resales etc. Are they even giving out loans yet in the Aqua? I haven’t heard (though a million+ unit just closed in there a week or so ago.)
“Like I said- stock investing is really easy as long as you diversify, buy companies that make lots of money and don’t worry too much about it all.”
Ummm, no. But you will learn….”
You mean from watching my greatgrandfather and grandmother invest? They have a collective investment history of 70 years. And they’re living the american dream because of it.
God I love traders.
“You mean from watching my greatgrandfather and grandmother invest?”
Did your greatgrandfather and grandmother have online brokerage accounts?
“God I love traders.”
God I love suckers.
Chuk: Nothing has changed in the stock market other than computer trading. You are day trading or whatever. Who cares if it “moves fast” if you’re holding for 30 years? Not my grandmother and not me. Who cares about a few quick blips on some dumb ticker?
Again- it’s the difference between men and women. Women make better investors. Men make better traders. I’m an investor. I’m growing my wealth for the long haul. There is no need to buy and sell stocks on momentum or stock price (not if nothing has changed with the story of that company.)
You buy the stock. You reinvest the dividends. If you are lucky- you get 10% a year over the course of a few decades. It makes you rich. That’s all you need to do.
Oh- my grandmother HAS actually averaged about 10% a year on her stocks over the course of that 40 years. It’s given her a comfortable life. Everyone should emulate her. The country would be better off.
“Oh- my grandmother HAS actually averaged about 10% a year on her stocks over the course of that 40 years.”
And that means it will work for the NEXT 40 years?
“Did your greatgrandfather and grandmother have online brokerage accounts?”
Since my greatgrandfather died in 1971- um…no.
But my grandmother has one. So?
She simply looks at her statement every few months on it. Wow. So dramatically different than “before.”
If anything- online brokerage accounts have made it MUCH easier to accumulate wealth but people are too dumb to see it. You no longer need $5000 to open an account but can add a little bit of money every month to build yourself a diversified portfolio. There are no longer crazy transaction fees to buy and sell. There are no longer fees (at most places) if you never buy and sell. It really has opened up the whole investment arena. But, again, too bad most people don’t take advantage of the ease of it all.
“And that means it will work for the NEXT 40 years?”
Yep. The stock market is the greatest wealth builder in the history of America. There’s always going to be great companies here (and around the world) that you can own. Nothing has changed in the story.
“The stock market is the greatest wealth builder in the history of America. ”
Yes it is. But not for the average person. The average person will watch their gains get wiped out every 5-10 years.
My grandmother is “average”. Don’t you get it? All my friends parents are “average” and they’ve all owned 30 years or more. None of them are wiped out. Far from it.
Pulease.
Heck, I own the same stock I started buying in 2000 (so- doing the math that is 11 years.) Not wiped out. Getting my dividend every quarter. Reinvesting it. Buying more shares.
Wait a minute. It’s the SAME company as one of the stocks my grandmother owns (and my great grandfather owned.)
So- members of my family have owned a piece of this particular company for a total of over 60 years- uninterrupted through recessions, bears and bull markets and the great crash of 2008. Gosh- and none of us were wiped out.
Go figure.
“My grandmother is “average”. Don’t you get it? All my friends parents are “average” and they’ve all owned 30 years or more. None of them are wiped out. Far from it.”
Again, you are talking about a completely different world.
“Heck, I own the same stock I started buying in 2000 (so- doing the math that is 11 years.) Not wiped out.”
What stock is it?
By the way- the fact that we’re even having this “discussion” only confirms what I’ve been saying.
The average person thinks the stock market doesn’t work anymore. If you, Chuk, a professional investor who has mastered the art of the game, think that all your gains are wiped out every 5 to 10 years- what does the little guy think?
They’re not touching stocks with a ten foot pole. The money flowing into various funds confirms that. They’re buying bonds because they feel that it is “guaranteed” and you won’t get burned (“bonds never lose all their value!”)
“If you, Chuk, a professional investor who has mastered the art of the game”
Far from it.
“think that all your gains are wiped out every 5 to 10 years”
They are. Do you need a chart? Just because YOUR stock wasn’t is irrelevant. The average stock was.
No- it really wasn’t Chuk. What planet are you from? The stock market is up 90% to 150% in the last 2 years. If you were “wiped out” in the last 5 years- you are a complete moron (unless you owned the financials- but, of course, you should be diversified so even if you did own Lehmann or Citigroup etc. it shouldn’t have “wiped” you out.)
If you bought and held in 2000- you’re doing quite well for yourself in a host of stocks. Shall I name some that an “average” investor would own?
Chevron up 126%
Caterpillar up 359%
Dupont up 25%
Johnson & Johnson up 36%
PPG Industries up 78%
GE down 57%
These returns are NOT with dividends reinvested which would push up the returns significantly.
Oh- by the way- Mcdonald’s was up 184% as well.
Again- it’s really not that hard. Nobody wiped out in these stocks that I’ve seen.
” The stock market is up 90% to 150% in the last 2 years.”
Exactly. After going down 50%+. Thanks for making my point for me.
“If you bought and held in 2000- you’re doing quite well for yourself in a host of stocks.”
No you’re not. You’re doing terribly. You aren’t even keeping up with inflation. I don’t care about your cherry picking of names. The average stock is flat since 2000.
Um…if you’re a long term investor you don’t care if it has gone down 50%. You see- my grandmother (or myself) can easily go on vacation in a remote part of the world with no internet access and re-emerge 5 years from now not caring what our stocks are doing. Because we’re in it for the long term. I understand you are not (and you panic and whatever.) But that is the difference.
By the way- the “average” stock is not flat in the last decade.
Since 2001:
S&P 500 up 9%
Mid cap 400 up 29%
Russell 2000 up 78%
Dow Jones up 19%
Nasdaq up 66%
Sure- you’re not doing great if you only owned the S&P 500. But very few people buy in one year and never add another dime (and if they were buying- it probably wasn’t in 2001 when it was a bear market anyway.)
If you have been steadily investing over the last decade- you’re doing quite well for yourself.
“re-emerge 5 years from now not caring what our stocks are doing.”
Depends which year it is. Hopefully for her, it is not a -50% one.
“. I understand you are not (and you panic and whatever.) ”
Panic? You have it backwards. I was BUYING as the market went down. Just as I SELL when the market goes up. And I am not talking about momentum trading. I am talking multi-year positions.
“If you have been steadily investing over the last decade- you’re doing quite well for yourself.”
Really? You can’t be that naive.
Chuk- we’re talking in circles. She could care less if it is down 50%! She is in it for the long term. I could care less if it is down 50%! Who cares when I intend to (hopefully) still be an owner in 20 years (if things go right.)
Honestly- what don’t you get about LONG TERM investing?
My grandmother hardly ever thinks about her stocks. She sees what the stock market is doing on the news and tells me, “it seems to be recovering a bit now. How are my stocks?”
I tell her “you’re doing fine.”
She says, “thank you dear. I thought so.”
Similarly- if you were buying real estate to live in for the next 20 years (you have no intention of moving in that time period)- would you be on Crib Chatter obsessing over every market gyration downward (or upward)? Of course not. You could care less.
“By the way- the “average” stock is not flat in the last decade.”
OK, make it 11 years. After all, longer should be better for you buy and holders, right?
I’m telling you, the market FUNDAMENTALLY changed around 1998. It will never be the same again. You can not compare what happened before then.
“Honestly- what don’t you get about LONG TERM investing?”
You are confused. Long term investing does not mean buying one (or more) stocks and holding the same ones for decades. It means investing in many different stocks over the long term.
Chuk- I guess I’m naive and all my returns are a mirage. I’ve been investing every month over the last decade. For some reason- there is actually money in my account. Gasp! I don’t know how I am able to do it and no one else is. I must have some special “magic” behind me.
My grandmother too. She must have the secret formula. Maybe it runs in our family. We have a special gift.
I wish sharebuilder still had the feature that tells you your return if you bought every month (as they used to have.) I would run the chart for the S&P and let you know what it would be if you even just put $100 in every single month over that time. But, alas, it looks like they got rid of that feature (which was really great- by the way.)
“I guess I’m naive and all my returns are a mirage. I’ve been investing every month over the last decade. For some reason- there is actually money in my account.”
What % is your account up over the last 11 years? Remember, it is up 100% just in the last 1.5 years. So, anything less than that would make buy and hold a horrible underperfomer.
“I’m telling you, the market FUNDAMENTALLY changed around 1998. It will never be the same again. You can not compare what happened before then.”
How old are you again Chuk?
Come on!
1998 was a Nasdaq bubble. We’ve had them before. Since 2000 we’ve been in a bear market. Kind of like the one from 1966 to 1981. Talk to the people who invested then. I’m sure they would have said, “we’re never going to see 1955 again.” Those were brutal years. The Dow was in a narrow trading range all that time. You literally made no money.
It’s no different this time. That’s what bear and bull markets do Chuk.
Go read some books on the stock market. I really recommend Bull: A history of the boom and bust. It covers what goes on historically in these types of markets (how investors react etc.) but focuses on 1984-2004.
” the market FUNDAMENTALLY changed around 1998″
Did not.
“What % is your account up over the last 11 years? Remember, it is up 100% just in the last 1.5 years. So, anything less than that would make buy and hold a horrible underperfomer.”
I don’t know. I don’t keep track like that. Only a small position was bought in 2000 and then I keep adding every year. So am I up on the money I put in in 2005? 2006? 2008? I should hope so but I don’t break out individual positions.
And only the small caps are up 150% in the last 2 years. My stocks are not all small caps- so that is not the comparison.
“How old are you again Chuk?”
40. Why? And believe it or not, I had grandparents and great grandparents too.
“Go read some books on the stock market.”
A Random Walk Down Wall Street and Reminiscences of a Stock Operator pretty much cover what you need to know.
Okay- I just looked up the company that my grandmother also owns (since I started buying that one in 2000.) It is up 86% in nearly 11 years or 7.8% a year.
I’ll take that return considering we had a three year declining market to start the last decade and then the crash of 2008. It’s not that far under her 10% year average she’s had over 40 years.
“I don’t know. I don’t keep track like that.”
That explains a lot…
“And only the small caps are up 150% in the last 2 years”
Who said anything about 150%? Who said anything about small caps? The S&P is up 100%. The same index that is DOWN over the last 11 years. That is pretty much your “average” stock.
“Reminiscences of a Stock Operator”
As I said- a trader and an investor are two different animals. This is a book for traders, not investors.
Oh- and when was it published? 1923!
I thought this market was FUNDAMENTALLY different? That we couldn’t go by the past to consider the future? That nothing that happened before 1998 was relevant?
Ha! ha!
Whatever Chuk.
“Okay- I just looked up the company that my grandmother also owns (since I started buying that one in 2000.) It is up 86% in nearly 11 years or 7.8% a year.”
In other words, buy and hold badly underperformed. it’s not a question of if you are happy with it. Someone that bought that stock in 2008 is probably up more than you. And you had to tie your money up for 8 more years.
“A Random Walk Down Wall Street”
Explains a lot.
Chuk- like I said- I must be an investing genius then. I have the magic formula. Because my portfolio is up over the last 11 years. So is my grandmothers. So are all my friends (who have been putting into their 401ks- in equity funds.) We’re all dollar cost averaging and we’ve been doing it for a decade or more. It accumulates- even if you have crashes (because you’re also buying on the low.)
But I’m tired of trying to educate you. Keep on trading. Your online brokerage will love you. I’ll keep cashing my dividend checks.
“Ha! ha!”
Obviously you miss the point. The thing that has changed is the TIME. Bubble have been the same for centuries. What has changed is that they inflate and pop faster than ever. And that is directly due to the increase in the speed of trading. Program trading. HFT. And a far larger portion of the US involved in the markets than any other time in history.
“Because my portfolio is up over the last 11 years”
Up? Who cares? So is my CD. I guarantee people that bought in 2008 are up FAR more than you. Tell me again how your “buy and hold” strategy beats them?
“But I’m tired of trying to educate you. Keep on trading. Your online brokerage will love you.”
Why are you hung up on “trading”? You invest every month don’t you? You probably trade more than me.
“What has changed is that they inflate and pop faster than ever. And that is directly due to the increase in the speed of trading.”
You keep insisting on something that is not true.
“Up? Who cares? So is my CD. I guarantee people that bought in 2008 are up FAR more than you. Tell me again how your “buy and hold” strategy beats them?”
Chuk- if I am dollar cost averaging then that means I too bought in 2008. But that was an accident- since it does it automatically. But when you own for the long haul- you simply add to your positions. I don’t “trade” chuk. I invest. Every month. That’s not “trading.”
Everyone looks like a genius when an asset class doubles in 2 years (housing, stocks or whatever.) It won’t go up for forever. I intend to hold my positions for the next couple of decades. I could care less about what it did or did not do since 2008. It’s been nice for my portfolio- but that is all.
“What has changed is that they inflate and pop faster than ever. And that is directly due to the increase in the speed of trading.”
Right. There hasn’t been a stock bubble since 1999-2000. We’ve gone 11 years without a stock bubble. And we’ll likely go another 11 years (or more) before we ever see that again- especially given the hatred for stocks.
“You keep insisting on something that is not true.”
You keep insisting things aren’t true that are:
http://finance.yahoo.com/echarts?s=^GSPC+Interactive#chart2:symbol=^gspc;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined
Chuk- there haven’t been any stock bubbles in 11 years.
“There hasn’t been a stock bubble since 1999-2000.”
So why did the market collapse when the credit bubble burst? The gains up to 2008 were fueled by that same credit bubble.
No, no, no. Chuk- go read books on what a “bubble” is. An asset class rising isn’t a “bubble.” A market collapse isn’t a bubble.
In bigger news- Osama Bin Ladin is DEAD!
Forget the word bubble. It’s meaningless. When the market goes up 100%, it can’t just keep going up 100% every year. So, it gets cut in 1/2. Then it goes up 100% again. Then it gets cut in 1/2 again. The market doesn’t go up 7% a year. It goes up 100% and down 47%. Sure, to someone that was in a coma, it looks like a plain ol’ 7% year. But the reality is far from that. With algo trading, etc. it forces larger moves in shorter periods of times. The only way to continue that is to have corrections, so they can run it back up again.
Bring back a market that moves 7% a year without huge % swings in between, and I will be a buy and holder.
But as long as you are getting an entire years moves in a week, it will not be a buy and holder market.
“You keep insisting things aren’t true that are:”
No, you keep insisting that the market is more volatile than it ever was before, that there has been a structural/fundamental change to daily price movements, and you keep posting some irrelevant chart thingy.
“The market doesn’t go up 7% a year. It goes up 100% and down 47%.”
Again- no! Go read some books on the history of the stock market. We just went through a massive recession. The volatility has been huge. It won’t always be like this. Historically- it hasn’t been. But there have been some years over the last 80 years when there have been big swings. This 2-year rally is the largest in 70 years. It’s not going to be like this for forever.
Go look at history- at the rallies and at bear markets. There were many swings in the 1970s.
saw that..very pleased! kinda feels like Miracle on Ice.
“No, you keep insisting that the market is more volatile than it ever was before, that there has been a structural/fundamental change to daily price movements”
And it’s true.
And it’s true.
ROFLMAO!! No it’s not! Do the math. The data is all there. Absolutely NOT!
“ROFLMAO!! No it’s not! Do the math”
I’ve done it. And it’s true.
I’ve done it. And it’s true.
going to bed 🙂
Sabrina,
Do you see the irony in the fact that you run a blog that exists to mock people for overpaying for assets and then watching their value decline by 35%+, while you did the same thing, and then some?
“going to bed”
Me too Ze.
I just can’t deal with it.
How long before people start spinning the OBL death to a turnaround in sentiment & the economy and a re-inflation of the bubble?
In…3….2….
“It is up 86% in nearly 11 years or 7.8% a year. ”
Typo? ‘cuz 86% over 11 is only 5.8%/year. +7.8%/annum = +128% over 11.
Price lowered. Hummm, getting even more interesting.
Short sale ask price cut again to $219,000 on June 7th.