Owning a home or renting a home is fundamentally a major financial decision.  A home is a immovable liability in any area of that does not have an increasing population and job opportunities.  The psychological and cultural importance of owning a home is exaggerated, knowingly and unknowingly.  The . . . → Read More: Homeownership is a ball and chain in a transient nation]]>

Homeownership in a transient society

Owning a home or renting a home is fundamentally a major financial decision.  A home is a immovable liability in any area of that does not have an increasing population and job opportunities.  The psychological and cultural importance of owning a home is exaggerated, knowingly and unknowingly.  The cliche is that you can’t put a price on it; the fact is that homeowners do place a price on home ownership through the home mortgage.

Real estate agents ridicule renters by saying that “they are throwing away money”, this notion from overpaid sales professionals should to be taken with a truck load of salt.  Renting is analogous to the modular design concept, the important advantage is flexibility.  Non-modular design is analogous to homeownership, it ties into obsoletism.

The assumption that young people will be able to pay off a 30 year mortgage and live in a debt-free house (as their parents or grand-parents did) is false in the present and the foreseeable economy.  In the olden days, job security kept people in one city or town and with guaranteed salaries and benefits, they were able to pay off their mortgages since many knew that the first house they bought could be one they would live in forever.  Job security existed because the labor force was local, competition was less and outsourcing was non-existent.  There is no more job security (as there was 30 or 40 years ago).  Many people undertake at will employment.   Today, young and older people, are being forced to move, wherever it is necessary, in search of jobs and education.

So, you could buy a house in Boston today, but if you got laid off from your job, you would firstly make efforts to find employment in the city where you own a home.  However, if your only job offer was in Colorado, you’d have no choice, but to move.  This reality is something that is excluded in the overall discussions on home ownership in the popular media today, i.e. lack of job security leading to more transient lives.  A factor for this exclusion could be the flow of advertising dollars from the greater real estate industry to the popular media (television, newspapers).

Don’t get sucked into this, as Warren Buffet reportedly called it, mass delusion for home ownership

Designer-builder John Abrams of the South Mountain Company describes three factors that are driving the popularity of large size homes:

“First, with less of a sense of community and public life in our culture, the home becomes a fortress which . . . → Read More: Warren Buffett on Leverage]]>

Think of a home as an interesting opportunity, then follow Warren Buffett's quote

Designer-builder John Abrams of the South Mountain Company describes three factors that are driving the popularity of large size homes:

“First, with less of a sense of community and public life in our culture, the home becomes a fortress which needs to contain everything we need, including multiple forms of entertainment, rather than basic shelter;

second, the building industry has been selling ‘big is better’ and the message has been heard; and

third, diminishing craft and design generosity has resulted in sterile homes — people mistakenly think that what’s missing is grandeur: more space.”

We will reject interesting opportunities rather than over leverage our balance sheet says Warren Buffett. It should be noted that Warren Buffet does not refer to the financial balance sheet, I reckon he means the life’s balance sheet of which the financial balance sheet is a small part.  Warren Buffett is reported to have defined leverage as a fancy term for debt by Wall Street.

I hear media reports where financial advisors talk about about good debt and bad debt.  I think there is no good financial debt, whether its origin is your local pay check cashing business or a Wall Steet firm.  If debt was good, Microsoft Corporation and Cisco Systems would not have billions of dollars of cash on their balance sheet.  If debt was good, Warren Buffett would be borrowing money from Goldman Sachs and Harley Davidson and not investing in them.

Debt always comes with strings attached and the borrower becomes one of the puppets in the show whether the borrower is an individual or corporation.  Debt is anti-personal freedom and therefore is not a value of Americaneers.  An exception, an example of a good debt is that intangible obligation that one owes to one’s parents or to your teachers or to one’s country.

Related Post: Sarah Susanka Defines a Beautiful Home

Warren Buffett was on CNBC with Becky Quick and he said, “Our country will do fine even if we screw up”.  I wish we screwed up less by not embracing concepts that work only for the short term.

He also felt that President Obama is right for our current economy and . . . → Read More: Warren Buffet and Wells Fargo Company]]>

Warren Buffett

Warren Buffett was on CNBC with Becky Quick and he said, “Our country will do fine even if we screw up”.  I wish we screwed up less by not embracing concepts that work only for the short term.

He also felt that President Obama is right for our current economy and I agree with him.

I figured from what he said that Wells Fargo Company would be a bank to consider investing in over the long term.  Its stock price is about $9 today.  I think it will fall more and I intend to buy, just because Warren Buffet said so.

I don’t like listening to the financial analysts that come on CNBC anymore.  But I will listen to Warren Buffet, any day, any time,  even on CNBC.

The only function of economic forecasting is to make astrology look respectable -John Kenneth Galbraith

Here is an excerpt from an interview of Carlos Slim Helu, Mexican billionaire, that appeared on CNBC approximately in February 2008 as the stock market was going down.

Michelle Caruso Cabrera: In 1982, when Mexico was falling apart, people were fleeing the country. You were buying assets that . . . → Read More: Carlos Slim Helu on Stock Investments]]>

Carlos Slim Helu-Photo: Agencia Brasil

Here is an excerpt from an interview of Carlos Slim Helu, Mexican billionaire, that appeared on CNBC approximately in February 2008 as the stock market was going down.

Michelle Caruso Cabrera: In 1982, when Mexico was falling apart, people were fleeing the country. You were buying assets that nobody else wanted, and at very good prices, that turned out to be very good investments over the long-term. Do you have the same opportunity right now?

Carlos Slim:  What we do, most of our investments are in our own companies. The companies we manage are in a healthy situation, but we also manage some investment funds, mostly Mexican paper, now they are more open to invest outside, and these investment funds have a policy that when the markets are very low, they are heavy in equities.  And when the markets are very high, doesn’t matter that it goes higher, the position of equities is very low. Let’s say 35 or 40 percent in equities and when the market is very low, they go 70 or 80 percent in equities, that’s why they have moved in these parameters in some ways.

Carlos Slim versus Warren Buffet:  I think Warren Buffet invests, buys and holds for a long time, in simple businesses.    Carlos Slim does the same, buys and holds for a long time but he also believes in market timing a bit more than Warren Buffet.

So far, Carlos Slim has invested in Bronco Drilling, Saks Inc. and New York Times.  I think he figures that the market will go down more and I expect to see more investments in equities from him.  I think when Carlos Slim makes his next stock purchase, that will probably be close to the market bottom.

Warren had made an investment in Pier 1 Imports several years back, its stock price is 15 cents now.  Recently Warren Buffet took a loss for buying Conoco Phillips when its share price was too high, he did not anticipate the severity of the recession!!.   Recently he has indicated that the market is going to be in shambles.  We live in interesting times.