Flipping Real Estate and how it's not working anymore

Do you know what the Ghost Housing Market is?

Here is the link to a sobering look at what's going on between developers and flippers . . . it used to be a good gamble to buy a house pre-construction and sell it before you had to take occupancy of it . . . that doesn't work anymore and flippers are taking baths on their "investments". Hopefully your not one them.

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Do you really need instant pleasure?

As much as you may think you need immediate pleasure, you don't. You can wait for a trade to come to fruition. If you wait calmly and follow your trading plan, you will increase your odds of success, and end up with a lot more profits later.

Has Patenting Gone Crazy??

Have you ever used a laser pointer to drive your pet crazy? You may soon have your day in court because you infringed on Patent No. 5443036, "Method of Exercising a Cat," including "any other animals with the chase instinct."

And if you, after reading this, think you better go back to having your dog fetch a plain old stick, beware. There's a patent for that, too. (No. 6360693, "Animal Toy.")

Have you ever sat on a swing suspended from a tree branch, making yourself swing from side to side by alternately pulling on the chains? You're toast, according to the laws protecting Patent No. 6368227, "Method of Swinging on a Swing."

And speaking of toast: You may want to eat your bread unheated from now on, lest you may be found guilty of violating Patent No. 6080436, "Bread Refreshing Method."

In Australia, John Keogh, a freelance patent lawyer striving to expose the faulty system, managed in 2001 to patent a "Circular Transportation Facilitation Device," a.k.a. the wheel.

Patent laws were originally designed to protect truly innovative ideas from being stolen by others, granting the owner 20 years of exclusive rights to his invention. So far, so good.

Golf

Paul Azinger pointed something very interesting . . . a round of golf consists of 90 seconds of motion and 4 1/2 hours of emotion.

Is the grice of gasoline too high?

a recent survey for the National Retil Federation found that 42% of households with incomes of less than $50K were dining out less frequetnly because of high gas prices and that 33% with higher incomes had cut back on eating at restaurants. less than 25% of the 7,388 people polled in May said that gas prices were having "no major impact," down from last year's 33.8% the pressure on houshold finances is showing up in higher credit card deliquencies, the ABA said. late payments to credit card companies rose to 4.4 % in the first 3 months of the year - a reversal fromthe six months of declines.

then there's my own "tell" . . . I don't see any evidence of people slowing down on freeways. trying to drive the speed limit in California will get you run off the road and until I see people slowing down (which is the most effective way of conserving gasoline) I won't believe that the price of gasoline is too high.

What does war mean to your wealth?

Many times in the past, shortly after war breaks out, markets rally . . . read more
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State of Califonia Tort Liability Index

State Tort Liability Index Rankings

Regular readers of this newsletter know that we like to look at how the State of California ranks against other states on matters of public policy. A recent study by the Pacific Research Institute assesses the condition of each state’s tort liability system relative to other states. The study uses a dynamic model of elements of each state’s tort system to come up with a ranking in relation to other states. In other words, it assesses the positive and negative aspects of each state’s laws and outcomes of court cases instead of relying on individual opinions.

The report, U.S. Tort Liability Index: 2006 measures which states have relatively high tort costs and which states have enacted more reforms to better position themselves for future economic prosperity.

According to this study, California ranks 35th out of 50 states We score the highest (meaning the worst) in the study’s monetary caps category. This means that we have very few caps on monetary awards. We score the best on the study’s monetary tort losses category, which measure the amount of loss that defendants experience in tort cases. States that do best on the overall scale are Texas and Colorado (where recent tort reforms have been adopted) and the worst are Rhode Island and Vermont (states that have few legal limits on tort cases).

The reason we need to examine where California lies in relation to other states is because it makes a difference on whether businesses open a new location, hire more people, or invest in new plants.

As stated by former Michigan Governor John Engler, who is now President of the National Association of Manufacturers, “the health of a state’s civil justice system is a key indicator of its economic vitality and potential for future growth. A fair, stable, and predictable legal environment is critical to a state’s ability to attract investment, draw new businesses, and generate new jobs.” I couldn’t agree more.

To view the Institute’s study you can go to:
http://www.pacificresearch.org

sorry I've been gone awhile but . . .

we bought a house and you know what type of work that takes. anyway, I'll be back after the fireworks on the 4th of July but if you haven't checked out www.checkout.google.com . . . do so

economic theory . . . eh?

Any given economic theory will perfectly describe the world as long as you agree with the underlying assumptions. More often than not, however, the underlying assumptions take us from the real world into a world of, well, theory.

Real Estate values and the CPI - rental equivalence explained

Rental Equivalence--Background

Until the early 1980s, the CPI used what is called the asset price method to measure the change in the costs of owner-occupied housing. The asset price method treats the purchase of an asset, such as a house, as it does the purchase of any consumer good. Because the asset price method can lead to inappropriate results for goods that are purchased largely for investment reasons, the CPI implemented the rental equivalence approach to measuring price change for owner-occupied housing. It was implemented for the CPI-U in January 1983 and for the CPI for Urban Wage Earners and Clerical Workers (CPI-W) in January 1985.

Rental equivalence. This approach measures the change in the price of the shelter services provided by owner-occupied housing. Rental equivalence measures the change in the implicit rent, which is the amount a homeowner would pay to rent, or would earn from renting, his or her home in a competitive market. Clearly, the rental value of owned homes is not an easily determined dollar amount, and Housing survey analysts must spend considerable time and effort in estimating this value.

When initially introduced, the rental equivalence index’s monthly movement was calculated by reweighting the rent sample to represent owner-occupied units. Starting with the CPI for January 1987, the rental equivalence index movement was based on changes in the implicit rents of a sample of owner-occupied units. As part of the 1987 revision, BLS drew a new housing sample to replace the old rent sample. The new sample had both owner- and renter-occupied housing units. To estimate the change in the implicit rents of the owners, the CPI:

* Estimated initial implicit rents by asking the CPI data collectors to work with the owners themselves to estimate the units’ potential rent.
* Measured the change in implicit rents over time by matching owner units to renter units with similar characteristics. The characteristics included location, structure type, and other general traits such as age, number of rooms, and type of air conditioning.
* Derived the change in the implicit rent for each owner unit in the sample from the change in the actual rents of its matched set of renters. Because owners pay for utilities separately, the CPI calculated the pure rent of the matched renters by removing the value of any landlord-provide utilities and furniture. The implicit rents of the owner units were moved by the changes in the pure rents of the matched renters.
* Moved the rental equivalence index by the average changes in the implicit rents of the owner units.

In 1997, BLS started the process of developing a new housing sample to replace the one that had been in use since 1987, and began using it starting with the index for January 1999. BLS dropped the owner sample and returned to the method that was used for the rental equivalence index when it was first introduced, that is, reweighting the renter sample to represent owner-occupied units.

This decision was made for several reasons:

* Moving implicit rents by matching renter and owner observations is inherently a reweighting of the rent sample.
* A large portion of the 1987 sample was devoted to owners, to support the estimation of initial implicit rent. By dropping the owner sample, the field staff would not have to initiate, price, and maintain an owner sample.
* Because owner-renter matching is not needed for rental equivalence, the calculation of the index would be greatly simplified.

you can learn more at the Bureau of Labor Statistics website

on economists

"If all the economists in the world were laid end to end, it wouldn't be a bad thing."
-- Peter Lynch

Charlie Munger quote

in case you don't know who Charlie Munger is, he's Warren Buffet's partner at Berkshire Hathaway . . . now here's a great quote from CM

"The harder you work on something, the more confidence you have in it. But you might be working on something you aren't good at."

Ron Howard

a conversation with Ron Howard reveals :

Who are your favorite writers? The Daily Show with Jon Stewart staff.

Who is your favorite hero of fiction? R.P. McMurphy, of One Flew Over the Cuckoo's Nest.

Which historical figure do you most identify with? Lenny Wilkins. A long career as a point guard, a longer career as a head coach.

Dead Reckoning

Captains of the 15th, 16th and 17th centuries used to determine their position at sea (distance east or west of home port) by this method. The captain would throw a log overboard and observe how quickly the ship receded from the temporary guidepost. He noted the crude speeedometer reading in his ship's logbook, along with the direction of travel, which he took from the stars or a compass, and the length of time on a particular course, counted with a sandglass or a pocket watch. Factoring in the effects of ocean currents, fickel winds and errors in judgment he then determined his longitdue. Too often, the technique of dead reckoning marked him for a dead man.

Before the invention of the ship's clock by John Harrison in 18th century, ship's captains really didn't know where they were longitudally . . . . this is interesting when you think about Magellan circumnavigating the globe.

should we be worried about a Democratic congress ?

from thestreet.com's Jim Cramer . . . . mostly he's brilliant, forget the Mad Money persona

here's his take this morning

Random musings: Guess we should be panicked that the House of Representatives might go Democratic. Sell the drug stocks. Be ready for big spending. You can bet that the budget will no longer be balanced and that federal borrowing will spike. Oops! That all happened under the Republicans, didn't it? The papers are trying to sow fear about the Republican agenda, but to me the agenda has been everything that could possibly be reckless for the dollar and stock markets, except the dividend tax cut. We have experienced an unprecedented spending binge, one that has helped make U.S. markets among the worst in the world. I don't fear a Democratic turn in the House. We had two-party government with Clinton and it worked great. Frankly, all we want out of Washington is that they do nothing at this point, and a gridlocked Congress is a recipe for exactly that. I am hoping it happens. That way we take Washington out of the equation. Good riddance!

Ax

If the ax is not sharp, it doesn't matter how hard the wood is."

old Chinese proverb

the First of Ten things every American should do before dying

1. Explore golf from the singles line. Go out to your favorite course and join some others who don't have a complete foursome. You'll meet some interesting people and learn something about yourself too.

English is our language

So they're debating in congress on a bipartisan agreement which states that English is the "national" language . . . . they couldn't go for "official".

you say potato and I potahto, whatever, if this bill passes maybe we can get on with the simplification process where the government doesn't have to cater to everyone with a different language; all documents in English, thank you. that ought to be the best motivator for people wanting to assimilate into our society to learn the language.

Alcatraz to Aquatic Park

in case you missed it . . . a 7 year old boy fueled by a couple of slices of pizza braved the chilly waters of San Francisco Bay and became one of the youngest to swim across the channel. it's a 1.4 mile swiim and he did it in 47 minutes . . . yes, he wore a wetsuit

Bob Dylan - sixty five today

Happy Birthday Bob, thanks for the great music.