Rolling US Economy Into The Shitbin Thread

So there are two things at play here:
one is the debt (mortgage) owed by the landlord -- which, I think I mentioned upthread -- tends to be a long-term debt that could be refinanced, such that landlords won't be looking at the balloon payments the same way things are set up for the tenants who are unable to pay rent, but would be liable for all the back rent once the moratorium expires.

The other thing is the lost income from the rent the tenants owe. So a bailout concept isn't just covering the costs of the property (including the mortgage debt), it's making up for the fact that the landlords were counting on profits from the rental units that they are currently not receiving.

The pain of all this should be distributed as widely as possible via the tax power and not just fall on those people unlucky enough to be directly affected.

This makes excellent sense to me, but we live in a nation where a very large percentage of the inhabitants simply expect to live their lives as they always do in the middle of some of the worst hotspots in a global pandemic, who find wearing a face mask in public enclosed spaces to be an intolerable inconvenience, and they do not care much for this idea. All they want from taxes is to be taxed less and less, so long as this doesn't inconvenience them in any way at all.

I think from a policy perspective, we should assume that there are plenty of cold, unthinking parties involved who have assholish instincts, and policy should be crafted to prevent those assholish instincts from evicting people who lost their jobs due to Covid.

I am fine with having the government pay landlords the lost income and cover mortgage obligations, but they should be required to retain the tenants at their previous rent (plus nominal cost of living increases) in order to receive the funds. ... Now this is a real bureaucratic problem, because of private property rights, for one, and also the fact the IRS sent stimulus checks to dead people ... dealing with getting and processing and correctly analyzing data of tenant rolls could be a real disaster.

how do you define "risky" here? Or is the key phrase for you "highly leveraged"?

― sarahell, Monday, August 3, 2020 12:06 PM (fifty-four minutes ago) bookmarkflaglink

it's risky because, assuming they have a mortgage, they have high, fixed costs relative to the income, the income is an all or nothing thing (it doesn't go up or down a couple of % each day like retail). the upside is enormous, as discussed on this thread, and extremely bad outcomes are rare. but extremely bad outcome = rare does not mean it's not risky.

I was chatting about this with an accountant friend and he explained to my dumb ass that if you canceled mortgage payments the bond market would collapse which would wipe out to a of retirements and pensions. What’s the better plan, I asked? Just give people money, duh!

wipe out a ton of

the problem with giving people money to pay rent is that it tends to make rents go up. seems like giving the mortgage lenders would actually be better in this situation.

Ben Bernanke was derided as 'Helicopter Ben' for making a speech in the 00's in which he said that the best response to some economic crises was to get money into people's hands at any cost, even if you had to dump bushels of money out of helicopters. This is precisely such a situation and the deficit hawks are solidly in the "we must destroy the village in order to save it" camp.

I was chatting about this with an accountant friend and he explained to my dumb ass that if you canceled mortgage payments the bond market would collapse which would wipe out to a of retirements and pensions. What’s the better plan, I asked? Just give people money, duh!

it's a little more complicated than that, retirements and pension funds are somewhat diversified, but ... again, cancelling mortgage payments is not the same as cancelling rent. There are different ways to cancel mortgage payments -- you can essentially refinance the loan so the debt is the same but just pushed back, or you can cancel the payments by reducing the loan by the amount of the payments, which would reduce the amount of assets held by the banks/lenders, which would constrict and damage things like the bond market, which is invested in mortgage backed securities, also, the lower the value of the assets held by the banks (e.g. loans), the less they can lend, thus restricting the flow of money.

the problem with giving people money to pay rent is that it tends to make rents go up.

Increasing the money supply on the order of trillions of dollars will have some side effects, but most of that money will be sopped up by lenders or reabsorbed as taxes later on. Crises happen in present time and must be dealt with immediately. Medium term complications can be sorted out after the crisis has been addressed.

I'm gonna take this phrase by phrase here:

it's risky because, assuming they have a mortgage, they have high, fixed costs relative to the income,

not necessarily. The amount of mortgage debt could be quite low. Also, since the last crisis, underwriters are pretty cautious in terms of the amount of debt they will "enable" -- commercial mortgages (that is mortgages for rental property) require more documentation than a standard homeowner's mortgage ... Property owners are generally required to have a certain number of months of reserves, as well as a certain allowance for vacancies and collections, and loans are often capped at a certain percentage of the value of the property.

the income is an all or nothing thing (it doesn't go up or down a couple of % each day like retail).

not really ... rents can go up and down, some properties (commercial buildings, but these are also involved here) have tenants that pay a portion of profits as part of rent (malls tend to do this). You can do rentals by the month, or week, or convert it to an Air BnB, even (depending on local regulations)

And on a related shitbin topic -- I am wondering about the market for re-packaged PPP loans -- is this a thing yet?

I was rereading the UCLA report on upcoming Covid evictions and am I understanding this correctly?

The number of *just children* that could enter homelessness in the next few months is 300% the last count (66,400) for ALL people experiencing homelessness in LA County?? pic.twitter.com/nSYm2301G3

— josh vredevoogd (@jawshv) August 4, 2020

jeeeesus

Brutal chart by the legendary @byHeatherLong. Cripes almighty that’s some rough business.https://t.co/fhrpoASetC pic.twitter.com/1IZ334gW3p

— Andrew Van Dam (@andrewvandam) August 13, 2020

a playwright once wrote a mediocre 10 minute short play that got done here by friends of mine about a society where only a small, lucky percentage of the "plebeians" get actual "jobs", which all pay pennies an hour. the rest are unemployed and fight for scraps (literally and figuratively)

we're pretty much there rn.

sadly i suspect these are still 'the good times' tbh.

Paying someone under $14 an hour is illegal where I live.

That chart as an article https://www.washingtonpost.com/business/2020/08/13/recession-is-over-rich-working-class-is-far-recovered/

As talks between Republicans and Democrats in Washington have disintegrated

Cool, cool:

https://www.theguardian.com/us-news/2020/aug/14/us-health-insurers-coronavirus-pandemic-profit

Imagine if single-payer had been on the table.

Paying someone under $14 an hour is illegal where I live.

― Zelda Zonk, Thursday, August 13, 2020 4:44 PM (yesterday)

same here! ... the chart also has a regional aspect because of this. Not to be all virtue signalling about "where I live has a higher minimum wage" because where I live is way more expensive, and the people in that chart making $14-20/hr where I live are probably in similar circumstances to the $14 and under group in other parts of the country.

it's actually interesting looking at the chart -- because it looks like the $14-20/hr dipped down prior to the $14 and under, and I wonder if there is a correlation between higher cost of living states (e.g. California, New York, Mass.) going into quarantine/lockdown earlier than lower cost of living states ...

* or maybe it shouldn't be states so much as areas -- I guess my point is, the $14 and under and the $14-20 groups are potentially the same class of workers, just with different pay rates due to regional differences in cost of living, and it is interesting to see those compared in terms of regional responses to Covid.

S&P 500’s forward P/E ratio now sits at highest since mid-2000 pic.twitter.com/R3kCQD4q1J

— Liz Ann Sonders (@LizAnnSonders) August 18, 2020

speculatin' on vaccinatin'

Too many suckers with too much free time putting their vacation money into robinhood

lol tom

the crash is coming

There really isn't an economic crisis for the rich right now, not even for the moderately well-off. Roughly speaking I think the top third of the income distribution is fine.

today, yeah. tomorrow we die.

pessimism from ulysses, i love it

don't know why you would! i'm justifiably depressed!

https://www.nytimes.com/2020/07/08/technology/robinhood-risky-trading.html

“They encourage people to go from training wheels to driving motorcycles,” Scott Smith, who tracks brokerage firms at the financial consulting firm Cerulli, said of Robinhood. “Over the long term, it’s like trying to beat the casino.”

oh yeah i wanted to read this last month but had run out of free articles

this is a particularly bold take

Vlad Tenev, a founder and co-chief executive of Robinhood, said in an interview that even with some of its customers losing money, young Americans risked greater losses by not investing in stocks at all. Not participating in the markets “ultimately contributed to the sort of the massive inequalities that we’re seeing in society,” he said.

i felt very reassured and reaffirmed by the chart that showed Schwab customers as the most cautious investors! Yes! It is me! I _am_ a Schwab customer

At least a casino gives you free alcohol and possibly some bachelorette parties to interact with.

Over the long term, it’s like trying to beat the casino

On the one hand, it's not that much like that, because the casino has a long-term negative expected value, and investing in stocks, even day-trading, doesn't. On the other hand, it's definitely true that Tenev's business is giving finance companies the opportunity to skim money from inexperienced investors who can be persuaded to overpay for things in a herd.

But yes, everybody who is lucky enough to have money saved beyond immediate six-month needs should put it in a big Vanguard zero-fee meatgrinder fund and forget about it until they're old.

it's like being an uber driver but your car costs $800,000

$5,000 passenger charge - cheap jeans caused minor perforation in leather seats

But yes, everybody who is lucky enough to have money saved beyond immediate six-month needs should put it in a big Vanguard zero-fee meatgrinder fund and forget about it until they're old.

― Guayaquil (eephus!), Tuesday, August 18, 2020 11:57 AM (thirty-three minutes ago)

you're being sarcastic, yeah?

i don't think so, that's basically what i do

Me too

like one of the pre-mixed "target" funds?

When I thought I was going to have enough money for a retirement account, all advice was to put it into one of the Vanguard ‘Total Stock Market’ or Balanced Market finds.

And to look at it as little as possible.

Chief KyiV neVer returned.