Category: Economy

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When describing a good salesman people often refer to the adage that this guy is so good that he could sell refrigerators/air conditioning to the Eskimos. Which is generally considered a complement to the salesman’s ability. But why? Is it really a talent to brag about — convincing people to buy something that they didn’t want, don’t need and can’t use. Why would you brag about being a conman? But people do. They in fact admire it.

What is forgotten is that there is another person involved in this story — the Eskimo. He, however, is a chump. The mark, the person who it is all right to take advantage of because they should be smarter and more careful when talking to a fast talking salesman. Someone who deserves to get taken. The salesman, on the other hand, is the hero of the story. He is clever, a smooth talker, someone who gets what he wants, someone who doesn’t let a little thing as selling something unnecessary to a gullible customer get in his way. The salesman has the abilities people want. Who wants to be the chump.

It is sad that the whole salesman relationship is based on the notion that all he wants from you is your money and doesn’t care about whether you need or want what he is selling. The salesman is perfectly within his rights to sell whatever useless item he has to any gullible buyer willing to buy. It’s not the con man’s fault if the Eskimo is so gullible and bought the refrigerator. Buyer beware and all that crap but it isn’t an honest transaction.

Aren’t we suppose to value honesty above good salesman ship. Would it be so wrong for the salesman to tell the Eskimo that he doesn’t really need refrigeration? I am afraid there are an awful lot of people who would say yes. Why pass up an opportunity to separate a fool from his money. Someone is going to do it, right. And it is all perfectly legal which this tells you everything you need to know — we prefer the conman to the chump.

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The average price for a home in San Diego county, where I live, snuck across the million dollar mark last month. This was good news for home owners but disastrous news for any young person wanting to buy a home here. The ever increasing price, however, has created an impossible situation for new buyers. They may never be able to afford a home in San Diego.

In a normal real estate market where the normal rules of capitalism apply, a slight downturn in prices would correct the market and bring about more manageable prices. California, as we all know, does not have a normal real estate market. A slight downturn in house prices would do nothing to relieve the situation. Indeed a 20% reduction in the average price would make the price 800,000. Still out of reach for the average buyer who makes somewhere in the neighborhood of $68, 564. Worse still, a big reduction of housing prices might ruin the present owners. Nobody, particularly home owners, wants that.

So we are left with the high prices. A million dollar home will need quite a down payment particularly since the banks have gotten a little stricter since the Savings and Loan collapse of 2008. Wink. Wink. Just kidding. The banks can still be gamed but this requires parents with money and who are also willing to temporarily loan their children money. Once the loan has gone through the children can return the money to the parents. The banks have evidence that the buyer is a good credit risk and every is happy.

It does defeat the idea of actually vetting people to see if they can reasonably pay a bank loans though. This type of strategy usually comes from either the real estate agent of the bank loan officers who are anxious for the buyer to get the loan. Why you ask would the bank encourage someone to take out a loan on a house they can’t afford? Well, the bank has the house for collateral. If the buyers can’t pay, then the bank get this house. The real estate agent gets their commission for selling the house. Win-win. Of course for the buyer it is lose/lose. They lose their money they paid into the house, they lose their house and they lose their credit rating.

But enough about the losers because there is another winner who also makes the real estate market difficult for the Average Joe. The people who flip houses or who buy houses for investments. These people pay cash. Sellers prefer cash to mortgages. If there is a cash offer and mortgage offer, the seller usually takes the cash. It is a lot less paperwork and the money is guaranteed. Wouldn’t you? However, this means anyone who needs a mortgage (read here young couples looking to buy their first house) is always outbid. Flippers are particularly annoying because they usually bid on fixer uppers which is just the type of house a young couple might get because it needs work and may come at a lower price than the average house.

I know of a young couple who had the money for the down payment and had jobs that were suitably high paying that they could comfortably pay the mortgage. They were, however, always outbid by cash buyers. What is a potential buyer to do? Well, the young man in the couple complained to his boss about his situation. His boss liked the young man and decided to loan him the full cash payment. The next time the couple bid on a house, they won because they had cash. So really, to get into the California real estate market, it helps immeasurably to have someone with a lot money who is willing to help you out. Seems simple enough to me. Doesn’t everyone have a loved one or friend willing to loan them a million dollars?

Then rent, you say. Because it is expensive housing market, San Diego also suffers from a highly competitive and expensive rental market. The average price for a one room apartment is $2,756. For a year this would be a little less than $36,000. Remember that the average wage is $68,564 which means the average person will spend over half of their income on rent. Leaving $32, 500 are so for taxes, food, car payment, electric, wifi/cable and whatever you can set aside for a down payment on your future house. In Duluth.

There is very little we can do to remedy the situation because it is in nobody’s interest, nobody, that is, who has a money in the game, to do anything about the high cost of housing even though it is seemingly untenable. People are leaving California at record levels for less expensive vistas. The market may correct itself, as capitalists like to say, but at what cost. And if real estate collapses, the whole California economy soon follows. The good news will be that you can pick up some prime California real estate for a song and there is no better investment than California real estate.

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Boney Fingers

Work your fingers to the bone – whadda ya get?
Whoo-whoo. Boney Fingers – Boney Fing-gers.

                                                            Hoyt Axton

Hoyt Axton’s great country western song rumbles around in my brain a lot these days. There is this strongly held notion that hard work eventually pays off. We continue to pass this notion down generation after generation to ensure children know that hard work, at some point, may be necessary for success. 

I grew up thinking that hard work mattered – anyone who put in a full days’ work would receive the fruits for their labor. Nothing luxurious – a roof over your head, enough food for your family, affordable transportation and decent education for your children.  The perfect middle class idea was a man putting in an eight-hour day at a job while the woman staying at home to raise the children. For a short time, it was the expectation in post-World War II America and, to a large extent, the whole western world. The prosperity was so prevalent that we were lulled into to believing that all a person had to for the good life is work hard.

Yet there is more than enough evidence that this notion is false even when prosperity was the norm.  Everybody knew people who have worked hard all of their life and received little. This notion of hard work fails to consider other factors like Intelligence and luck. And even people who have all three elements going in their favor, often failed. Hard work is just not enough.

Yet, we continue to sing the praises of hard work.  Why? There are people working three jobs to keep afloat with so much debt that there is little expectation that in this life time, these debts will be paid. Don’t worry the hard work mythers have an answer for that.  There are stories about people who were in exactly the same situation who worked their way out of their problems, continued to work hard and now are billionaires. It is possible only if you keep trying.

These success stories are singular experiences not the norm. These stories, in fact, are rare. How many billionaires do you know? Most people do not achieve that kind of success from hard work.  These myths rarely highlight the luck or smarts involved for these people to succeed.  All that is needed is that nose to the grindstone.  This is the lesson we pass on to children so that they continue to work hard.  Wouldn’t want them to stop working hard now would we?

To me, the notion of hard work is pernicious. Everybody talks about hard work as the answer to our problems and people are working themselves to death for what? Western society is rife with addictive behavior – we drink too much, drug too much, gamble too much, buy too much, watch TV too much – the list is endless. The answer is work.  Work on your addictions, work on your relationships, work, work, work.  The problem is always the individual not working hard enough to succeed. This, of course, is a distraction. If you view yourself as the problem, you will always be addressing how you don’t quite measure up to the system. It is a distraction from the real problem – the system. All most people will get from hard work is boney fingers.