Friday, September 22, 2017

Why the Penalty For Counterfeiting Was Death

 In olden days, the most gruesome punishments were not meted out for murder or rape, but for counterfeiting.  Why is this and what does it say about the future of cryptocurrencies?

One thing lost in all this discussion about cryptocurrencies is it one of the primary functions of the government is to control the currency.  A lot of what is driving cryptocurrency enthusiasts is this  political idea that somehow currency should be independent of governments.  This is not an economic idea but a political one - and there is a difference between the two.

There are a lot of people who waste a lot of time and energy on conspiracy theory websites arguing at the Federal Reserve is somehow "taken away" their money. What they fail to realize that in order for someone to take away your money you have to first have to have some money and usually these people don't have two nickels to rub together in first place.

But it's another example of externalization - blaming all their troubles on the government or some other agency rather than looking inward and wondering whether they could have worked harder, made more money, gotten a better education, spent less and saved more.  But of course, those are all hard things to do, and blaming the government is an easy thing to do and people tend to take the easy way out.

But one reason I think cryptocurrencies will eventually fail is that governments are very protective of currencies, and they're not going about to let some made-up currency take over.  And if you look at the history of money, you will see this has always been the case.

In the days of the kings and queens and crowned heads of Europe, the penalty for counterfeiting currency was death.  And by death I don't mean a simple hanging or beheading, but usually a gruesome death such as drawing and quartering, where the person would be tortured for everyone to see and then trampled into the ground.  The King was deadly serious about controlling the currency and people trying to spoof the currency were basically trying to undermine society as a whole.

Not much has changed since then, although we tend to be a little more forgiving in terms of counterfeiters.  We still pursue them with vigor, but we no longer draw and quarter them.

Cryptocurrencies provide no benefit to governments and thus goverments have no incentive to support them or even allow them to exist.   As they allow for money laundering and transfer of money for illegal purposes, they work against government interests.  In recent years we've seen how things like offshore accounts and numbered Swiss bank accounts have been pierced, one after the other, in order to track down tax cheats and other illegal activities. The era of anonymous banking appears to be coming to an end.

Cryptocurrency would seem to be bucking this trend and facing a strong headwind.  In an era where we are trying to track down terrorists and prevent money laundering, it would seem to cryptocurrencies are setting themselves up for a fall.

What is driving the cryptocurrency boom is not logic but emotion.  First of all, as I alluded to above, there are those people who believe that somehow the government should not control the money supply which is, of course, an emotional argument.  So they have a lot of emotion invested in cryptocurrencies because they believe in things like "Sovereign Citizens" and that the Federal Reserve is out to get them. These are not rational thoughts.

The second group of dreamers are people seeing these cryptocurrencies shoot up in value and thinking to themselves, "Gee, I'm missing out on the big opportunity here, I could be making millions of dollars like that guy they talked about in the paper!" So they go out and buy a new crypto-currency thinking that they're going to be the ones to make a lot of money.  But again, it is sort of like buying gold - you can make a lot of money if you bought it low and sold it high, but once it's published in the paper that it's going up, it's probably too late to get in on the gig.

The third and smallest group of cryptocurrency users are people are actually using it to transfer currency for one place to another, usually for illegal means.  For example drug traffickers might use it to transfer funds or arms dealers might use it to transfer funds. It is not clear, however, how much of the trading in cryptocurrency relates to actual monetary transactions and how much of it is mere speculation by people buying and holding the currency thinking it'll go up in value.  The people engaging in transactions are keeping their cryptocurrency for only the few milliseconds that it takes to go from one exchange to another (well, that and the minutes it takes to blockchain verify), where they are converted to local currency so the end user can actually spend it. The people using it as a means of exchange are at little risk for losing their money, as they don't leave their money in the cryptocurrency for very long.

In short, we have a speculative bubble, driven by fear and greed.  The fear is that people think they're missing out on something and if they don't invest in this they'll lose big and lose their one opportunity in life to make $1,000,000.  And the greed is the flip side of that buying and holding on to something they thing is going to keep going up in value when historically, cryptocurrencies have been well demonstrated to be highly erratic and unstable.

And who knows, maybe governments will go back to drawing and quartering again.

Thursday, September 21, 2017

What's the Deal with Trader Joe's and Sugar?

Why does Trader Joe's put so much sugar in their products?

Trader Joe's is a fun place to shop, and their prices are far lower than that of Whole Foods and other upscale gourmet food stores. And of course, they are home to the Infamous "Two Buck Chuck" line of inexpensive wines, which are now pushing $4.

Some of their other products are not such a bargain. For example their beers are very interesting to look at but very expensive to buy. They have a lot of obscure microbrews which probably are very good but they often cost $3 or $4 a bottle which is kind of ridiculous. I'm not sure why they can't have their beer selection as inexpensive as their wine selection.

Trader Joe's is also a very small market if you think about it, and most of their products are packaged foods, which ironically have fallen from favor in the general marketplace. Trader Joe's gag is that they use house-branded products only, rather than brand names.  Some Trader Joe's fans have gone online and tried to figure out who actually makes these house=branded products by using things like recall notices which list the same product under different brand names.

Trader Joe's uses this kitschy Polynesian theme to imply that they are importing most of their goods, although some of the goods are actually made here in America and just re-branded with her own Trader Joe's name.  And many of these products are very good and are reasonably priced.  Other things are not such bargains and I think they are counting on you buying some of the more expensive items to offset the loss leaders.

Since they don't have a butcher or deli, their packaged meats are somewhat expensive.  I generally steer away from their organic deli, as it is usually twice the price of deli meats in other grocery stores.  Their cheeses are no particular bargain either.

But what aggravates me is that Trader Joe's seems to be very fond of putting a lot of sugar in a lot of their products - where sugar is not needed.  Granted, they use cane sugar instead of high fructose corn syrup which most other manufacturers of packaged goods use.  But oftentimes we buy a product from them that seems to be ruined by an overly generous amount of sugar.  Sometimes sugar is the first ingredient on the label or second or third.

For example, I just opened a jar of roasted red pepper spread.  Roasted red peppers don't contain a lot of calories and they have a very rich and smoky taste.  That is, unless you lace them with sugar. The third ingredient after red peppers and eggplants is cane sugar in the Trader Joe's spread, raising the calorie content and also changing the flavor from smokey and savory to sweet and bland.

Similarly, a garlic and onion chutney was somewhat short on garlic and onion and very heavy on cane sugar.  In fact, it was the first ingredient.   Now granted, chutney is supposed to be sweet and I understand that, but it could have used a lot more garlic in a lot less sugar.

The packaged foods at Trader Joe's are akin to what we saw on the IGA supermarket in the 1960s, at least in terms of sugar content.  And yes, they do have a lot of cookies and sugary cereals as well.  Healthy eating this ain't.

I'll still continue to go to Trader Joes for various items which can't be found elsewhere and are also good dargains. However in the future I'm going to read the labels more carefully as some of the products have ended up being somewhat disappointing due to the sugar content.

But they know their market, and I guess the typical Trader Joe's customer wants sweet not savory.  Sort of like the vegetarian aisle at Wegman's - all candy!

Monday, September 18, 2017

Bitcoin And The Railroad Bubble

Bubbles occur when people think that something is valuable and therefor that anything related to it is valuable as well.  Some railroads were quite profitable back in the late 1800's, but that didn't mean that all railroads were equally as profitable or valuable.   When the bubble burst, it took down all railroad stocks.  The same thing can happen to Bitcoin, not because Bitcoin is worthless, but only that it is over-valued and the johnny-come-lately currencies are bidding up the market.  The housing market worked the same way - not all houses were worthless, but some were worth less.

The recent surge in the price of Bitcoin and its subsequent drop reminds me a lot of the railroad bubble of the late 1800's. In case you don't remember it, in the mid to late 1800's, railroads took over from canals and wagons as the primary means of transportation of goods and people in the United States. This allowed vast tracts of land in the West to be opened up for development, as farmers could grow crops and then ship them to the major cities.

Of course, the system was not without its problems. The railroads quickly realized the farmers were dependent on them for their livelihood, and they could charge whatever freight rates they wanted, and screw the farmers out of every last penny of their profits. A crop that doesn't get to the market is like having no crop at all. As a result, we established regulations in this country to regulate freight rates and prevent price gouging.

But by the late 1800s, railroads became wildly profitable, and many people clamored to invest in them. The logic was that if one railroad was profitable than all railroads must be profitable. Suddenly, many new railroads were springing up, often times building rail lines costing millions of dollars that went from nowhere to nowhere. As it turned out, a railroad has to have a purpose and a steady stream of customers in order to be profitable.

And as we found out a decade or so later, the vanted prophets in the railroads could rapidly evaporate if government stepped in to regulate them. Suddenly, a wild profit turns into a mild profit when railroads became regulated carriers.

In the case of Bitcoin and other cryptocurrencies, both effects are now taking place. First, we are seeing that people are wildly investing in cryptocurrencies other than Bitcoin, thinking that Bitcoin is wildly profitable and therefore other cryptocurrencies will be wildly profitable too. They are thinking emotionally and not logically, assuming the getting in on the "ground floor" of a worthless cryptocurrency will make them billionaires. This is akin to the same logic of people buying stocks in railroads that went from nowhere to nowhere and quickly went bankrupt and left them with nothing.

Yes, the larger railroads  survived and prospered, but not before a lot of blood was shed. Similarly, the larger cryptocurrencies might continue to survive and prosper much as Bitcoin has, but not before a lot of people lose money on these smaller currencies.

Then there is the issue of government regulation. People like to say that cryptocurrencies are immune from government regulation as they are in the ether of the internet and can't be tracked or traced. However, as I have noted time and time again, you cannot spend these cryptocurrencies directly, but have to convert them into local currencies first. People make a big deal about saying such and such a company "accepts Bitcoin" but  what they are usually doing in reality is merely converting the Bitcoin to dollars or other local currency and then applying it to the purchase price of the goods or services.

Thus, Bitcoin and other cryptocurrencies quickly become worthless if they cannot be converted into dollars,yen, yuan, pesos, British Sterling or euros. And as the Chinese have recently demonstrated, they can outlaw currency exchanges very easily and thus prevent the use of cryptocurrencies - decreasing their inherent value.

I noted the time and time again the only real logical reason for using a crypto-currency is to do something illegal. Cryptocurrencies are useful if you are in the business of buying and selling drugs, weapons, or children. They really have no legitimate use and there really is no cost savings and using them as the fees extracted by the exchanges are often  on a par with those of Visa and MasterCard. The only reason for using a cryptocurrency is to avoid detection by government agencies.

And government agencies can figure this out. Why Bitcoin is allowed in the United States, or more precisely why Bitcoin exchanges are allowed to be used in United States, is a good question. I suspect, the federal government has a reason for allowing the use of Bitcoin at present time, but once that reason evaporates they may decide to outlaw Bitcoin exchanges as well. I could see a very good RICO case could be made that could be made since Bitcoin is largely used for a illegitimate transactions.

Once it becomes harder and harder to exchange your Bitcoins for local currencies the value of Bitcoins will correspondingly plummet. Unless Bitcoins can be regulated and controlled, most governments will shy away from allowing them to be exchanged for their local currencies. And if Bitcoins are regulated and controlled, then the primary reason for using them - illegal transactions - will disappear.

At that point, cryptocurrency could become one of those things we'll talk about in the future, as in, "you remember that whole cryptocurrency fad back in the 2010s?" Unless cryptocurrency can adopt a legitimate use, its future doesn't seem very certain.

Saturday, September 16, 2017

Freeze Your Credit? Not So Easy!

Should you freeze your credit? It's not as easy as it seems.

After the recent Equifax security breach I'm sure a lot of you are feeling the same way I did. First, I felt that the media was trying to scare us to death with a lot of horror stories about how everything we have will be taken away from us and how we will be ravaged by internet thieves operating from deep within cyberbunkers in the heart of Russia.

The second feeling is one of anger. Why should it be so easy for people to get credit with just a name and social security number? And why should it be so hard for a person who is innocently caught up in one of these deals to extricate themselves from it?

A recent article online illustrates both aspects of this issue. The journalist describes how he spent three years in hell trying to extricate himself from an identity theft scenario.  However he doesn't explicitly set forth how his identity was stolen - and I get suspicious when I hear only half the story.  In many cases when you hear these horror stories, there is usually some friend or family member involved who does the initial identity theft.  The journalist claims that the thief was able to obtain a driver's license in the journalist's name with the thief's picture on it.

I'm not sure how this is even possible.  As I noted in my recent posting about the DMV, you now need three primary forms of identification including something like a birth certificate, passport and social security card as well as a previous ID or utility bill in order to get your driver's license renewed - much less to get a new driver's license. So there's something more  to that story there,  but the journalist is not being forthcoming about it.

But he correctly points out that it is very difficult once your entity is truly stolen (and by identity theft I don't mean somebody stealing your credit card number, that's just plain old credit card fraud), it can be difficult to extricate your self and have these issues settled.

The journalist recounts how he had to deal with Bank of America to try to convince them that he never opened up several credit cards with their bank. They finally straightened out the matter, but since Bank of America wrote off the debt is bad debt, they sent him a 1099-C reporting it as income to the IRS, creating more problems.

In addition, he recites how he was stopped and searched every time he had to travel abroad to see if he was transferring currency overseas, as the credit card Thief had stolen a large amount of money and he was on a watch list. It truly was a nightmare.

But his case was unique. The thief was local and in the United States and was caught and sent to jail. In most cases, as I illustrated in my credit card and debit card theft postings, most criminals merely make a mad grab for cash once they have your credit card or debit card number. In the old days they would try to charge an airline ticket and then cash it in, which many airlines foolishly allowed people to do. As I noted in my debit card posting, they used my debit card to buy ads on the internet to sell nonexistent dogs other people in a layers-of--the-onion type of con.

Some news articles suggested that people put a credit lock on their accounts to prevent others from opening credit in their name without written approval. This is possible to do, and I've done it in the past. It is a bit of a hassle with some of the agencies, as when you want to release this credit lock, you have to submit paperwork or go online and sometimes pay a fee to have it locked and then unlocked.

So, I figured this was good blog fodder, and I would try the three different Credit Agencies and see how their credit locking systems work.

Experion has an easy to use link - but wants three bucks for the service!  Screw That.   Quite frankly this is where we need reform in the credit reporting industry. People should be allowed to lock and unlock their credit reports without having to pay a fee. And in some states you don't have to pay a fee while in another state you do. Again, we have this crazy Patchwork of laws United States which make no sense at all. I'm just guessing here but I bet that blue States probably don't require a fee and red states allow for a charging of a fee. The way the Credit Agencies put it, the states requiring them to charge a fee in some instances which is really not the case. But they say it that way so it makes it sound like they're not the bad guy.

If you pay $3 to each agency, that's $9 every time you want to lock and unlock your credit.  Just a crazy idea, but maybe this should be a free service, as after all, it is just setting a byte in a computer file, not some onerous task they have to perform.  Here's an even crazier idea - why not have every file locked by default?  Why should it be so easy to get credit without proper identification or even being there in person?  I know, I'm crazy.  Right.

Equifax, which started this whole mess, also has an easy-to-use link, but since they are being bombarded by requests (my guess anyway) the system reports:

System Currently Unavailable - Error 500

We're sorry. We cannot process your security freeze request online at this time. Please try back later.
To make a security freeze request with the other national consumer credit reporting agencies, please contact Experian and TransUnion:

Experian, P.O Box 9554, Allen, TX 75013 (888)379-3742

TransUnion,P.O Box 6790, Fullerton, CA 92834 (888)909-8872

Thank you for giving Equifax the opportunity to assist you.

Equifax Information Services, LLC

Equifax is recently said that they would waive the $3 fee if you wanted to put a lock on your credit report. Either their system is now being overwhelmed by the number of people using it, or they are intentionally slowing it down so that bombs out for most people so they don't have to eat this $3 fee until for the time being at least.

Of the three, Transunion had the easiest system to use.  They correctly point out that fees may be charged if you use a traditional freeze, so they offer TrueIdentity, which allows you to set up an account.  It is a bit cantankerous to use (shouldn't it be?) but once set  up, you have a dashboard of controls, including a credit freeze that requires only one click.

Like Credit Karma, they are monetizing the system by making credit card offers, and of course, up-selling credit monitoring services.  It also allows you to have texts sent if anyone tries to open credit in your name.   All it all, it seems to work pretty well and is the best of the three.

So far, Transunion is the clear winner here - at least offering a free service that is easy to use, even if they are making a buck from it in other ways (hey, that's Capitalism, right?).

* * *

Should you put a lock on your credit report? For me it is an easy question, as I no longer have any need for credit. The potential hassle of identity-theft, albeit small, makes it worthwhile to put a lock on the credit report, provided it doesn't cost me anything to do so or the cost is very little.

I will retry the Equifax credit lock in the future and see if I can get it to work. Whether I will pay $3 for the Experian lock remains to be seen.

For others, who use credit more often, a credit lock might be more of a hindrance. Many people change credit cards every year or every other year, or trade-in cars regularly, and they have to apply for new car loans. Others are constantly refinancing their homes to take out cash or taking on other forms of credit such as consumer credit to buy purchases like furniture and appliances.

Of course all of these are all very self-destructive economic habits. And maybe a credit lock is a good way of disciplining yourself not to sign up for that 12 months same-as-cash, or an easy-credit nothing-down loan for the new sofa.  Maybe it is a the pain in the ass to have a credit lock, and having to pay $3 to remove it might cause you to think overnight about whether you really need to finance something that you don't really need in your life.

Because when you get right down to it, if you have a decent mortgage, and you have a good credit card, and you have a decent reliable car, you really don't need to be constantly taking out new lines of credit - and a credit lock shouldn't be a hindrance.

On the other hand it shouldn't cost you anything either.

UPDATE: Senator Elizabeth Warren is proposing a new law which would eliminate the $3 fee for freezing and unfreezing your credit. Some have argued that consumers should be allowed to lock and unlock their credit for free, without having to resort to using free credit monitoring services such as offered by Transunion and now Equifax.

While I commend Senator Warren's attemp, I am sure there will be cries from the Republican party that this is another example of "unnecessary regulation" in the marketplace. This shit never ends, does it?

Friday, September 15, 2017

ChrisCraft in a Cornfield - Carrying Cost Versus Sales Price

How does a boat end up miles from water, rotting in some farmer's cornfield?  Failing to take into consideration carrying costs is how.

When we lived in Central New York, we would drive by a huge Chris Craft - a 55-footer at least, made of wood, sitting miles from water on this guy's farm.  We wondered how it got there and why he dragged it home, only to let it rot apart in his yard.  Since then, in our travels, we've seen quite a few large boats - boats that require tractor-trailers and wide-load permits - in the side yards of rural impoverished farmers, looking like the remnants from Noah's flood or something.  How did they get there and why?

Our boat deal did not go through. Although it is end of the season and prices on boats are generally lower at this time of year, the owner wanted to "get his price".  Ironically, this means he'll have to pay $4,000 to store the boat through the spring in order to "get his price" - which ironically is $4,000 more than what we offered.

In other words, it would have been a wash for him, but he didn't see it that way. Since the price would have gone below the magic $40,000 mark, he would have felt he was "giving the boat away."

We were into the same situation selling our vacation home. People told us that if we kept the house on the market for two or three years we could get $460,000 for it.  We sold it in one week for $400,000. The carrying costs on the house were over $30,000 a year and thus we would have broken even - probably come out behind - if we waited two or three years to get a higher offer.  An offer which may not have materialized.

When we sold our last boat, we faced the same dilemma.  The annual storage costs were about $6,000. People on the Bayliner Owners Club website told me to put an outrageously high price on it because they felt their similar boats were worth a lot of money.  This is a very typical problem, and a psychological one,  which is been noted by others.  We tend to value things that we own higher than what we perceive other people's possessions to be worth. As result, we overvalue our own things and undervalue others'.

I lowered the price by $8,000 and sold it on eBay within 10 days. People said I sold the boat for too little, but I would have had to wait a year to sell it using conventional means and would have had to pay for the insurance and storage and overhead in the meantime.   I would have ended up breaking even at best, probably losing money in reality.

And unlike houses, things like boats, cars, and RVs depreciate every year and are worth less and less. The longer you hold on to it, the less it will be worth.  Maybe you'll find a better offer in a year, but then again the item will probably have depreciated by 5 to 10% or more during that time - perhaps even more.

As I wrote in my earlier posting, Constipated Commerce, this seems to be a particular problem in impoverished areas such as Central New York and in the North Country. We also saw it during our sojourn in Appalachia.  People offer things for sale, but put unrealistic prices on them so they never sell. People get indignant and say, "I'm going to get my price for this!" - as if somehow they are entitled to a price of their choosing.

They also believe, as I noted in my other posting It's Not Costing Me Anything, that there are no carrying costs to keeping something that is "paid for."  But as we have seen, depreciation does actually "cost you something" every year.  These are the people who finally get frustrated and just leave the faded "For Sale" sign in the front of the motorhome in the side yard and watch it slowly sink into the mud.  Eventually their widow sells it for scrap.

This goes back to the poverty of the spirit and the poverty mindset we discussed earlier. One thing I noticed when I moved to Washington DC was how quickly people bought and sold things like cars and houses, compared to my upbringing in rural upstate New York.  In central New York, people will think about buying a car for months or years and discuss it and haggle over it with the owner, who will also bide his time looking for the right buyer at the right price, before they finally reach an agreement - if they ever do.

I was shocked moving to Washington that people put their cars out for sale and put reasonable prices on them and made them go away. These are busy people who had better things to do than extract the last $250 out of an old Impala. They had good jobs, they had money, and they already had a new car and they didn't need the old one clogging up their driveway.

Again it is this mindset of poverty that you see in rural areas. People will spend tens of thousands of dollars to install an outdoor wood furnace in an elaborate hydronic heating system and then buy a pickup truck, chainsaw, and log splitter and spend all summer long felling trees and chopping them into firewood convinced they're saving tons of money on their utility bill.

Wealthier people just write a check to the utility company and figure they have better things to do with their time.  They also do the math and realize the cost of all this equipment and hardware far exceeds any minuscule savings in their heating bill over the winter.  They are looking at the big picture - their careers, their investments, their savings, not obsessing about saving on heating bills and moreover locking themselves into an elaborate heating system that requires them to never move for a decade or more to see any real savings.

Simply turning down your thermostat at notch or better insulating your house is often a better move. But again, people in poor regions set the thermostat at 80, on the logic that since they are getting all this "free heat" from their firewood they might as well live in a sauna.  Some of them don't bother insulate their houses and often you can actually see through the cracks of the shack with the $20,000 outdoor wood furnace parked next to it.

But once again, I digress.   Don't do what poor people do, and you won't be poor.   You needn't even analyze it - just avoid poverty behavior and you will avoid poverty.

Anyway, we've decided to move on with our boat search and perhaps look more Southward where people are a little more reasonable in their pricing.  And perhaps we'll look for a smaller boat - perhaps one with the diesel engine that would be more reliable and more cost-effective in terms of fuel economy, as we actually wish to travel and not just live at a marina, which many boters do.

It is an interesting phenomenon, and I have noted it before, that it many marinas, people simply come up for the weekend, wax their boat, sit on the stern, mix cocktails chat with her friends but never actually go out on the water. The boat becomes a floating condo or hotel room, albeit a very expensive one that is depreciating.

In the Thousand Islands area, it is very typical to put only 40 to 50 hours on the boat during the season - although granted, it is a short-season at that.  Some owners put as few as 20 hours on their boat every year which means they only take two or three trips in their boat of a few hours each and spend the rest of the time at the dock.

Weirder still, many boat owners end up buying a boat for their boat which is sort of like buying a cat for your dog.  Pets don't need pets and boats don't need boats, although a larger boat could make certainly make use of a dingy.  But I'm not talking about dingies, I'm talking about 18 to 24 foot center console fishing boats or small cuddy cabin cruisers.  The large boat owners who never leave the dock use these smaller boats to go to local bars and marinas and visit other people because the large boat is just too much of a hassle to untie and navigate.

We saw this phenomena and thought about it very carefully.  What's the point of having a boat if you're too afraid to actually use it as a boat?  You might as well buy a used houseboat with blown up engines and simply tied up to the dock and live on it and buy yourself an 18 foot Runabout to go to the bars and other attractions.

Again, people make irrational economic choices in life and then often complain about the outcomes.  We are staying in an RV park which also has a marina, this seems like a much cheaper alternative than to living on a boat. Several people here have Park Model RV's which I discussed before in my blog entries about Park Models. These are a lot cheaper to buy than a boat and a lot easier to maintain and you don't have to worry about them floating away or sinking.

At the marina accompanying the RV park, you can keep a small boat at the dock, the equivalent of the boat for the boat that the big boat owners have.  You can then visit all the local attractions here in the Thousand Islands without having some lumbering boat rotting away at the dock.

Who owns all these big boats?  Millionaires?  Investment bankers?  Hardly.  I noted before how the myth of the underpaid school teacher is well ingrained into our society.  But yet several people we met here were pensioners from the State of New York - retired New York State School teachers, who had homes in Florida and then spent the Summers here on their rather elaborate yachts, playing golf and enjoying themselves. They hardly appeared to be starving or underpaid.  One actually bragged to me that there were more retired teachers in New York than working ones.  And you understand why I had to sell my vacation home and why taxes here are out of sight (along with everything else!).

But of course the NEA has us all brainwashed that teachers are all living at the poverty line and using food stamps to get by. Maybe this is true in Arkansas and Alabama, but certainly not in New York State.

But once again, I digress.....

Wednesday, September 13, 2017

How Word-Of-Mouth is Co-Opted

Is everyone and everything a huckster - including us?  Are we all being played?  Are we all chumps?  Answer: Probably yes to all three.

After I wrote a piece about Ham at Wal-Mart a reader became suspicious.   Was I being paid by Walmart to sell ham?  Maybe indirectly, if their ads appear on my pages - such the problematic nature of monetizing a blog.   But no, I did not get paid directly by Walmart to sell ham, I just thought that $5 a pound was better than $9 a pound and waiting at the Deli where they act like they are doing you a favor to shave off a pound of meat.

And by the way, my monetization experiment may be ending prematurely - Google sent me a nice note saying that my use of naughty words and discussing taboo subjects (such as sex) makes my blog no longer "G-rated".   They gave me a deadline to remove the "offensive material" which I think has past.   I am not sure whether this means they drop ads for that one blog entry, the page, or the entire blog.

But you see where this is going - once you start accepting ad money, you start changing how you write, either consciously or subconsciously.   And in fact, you might start to write just random words like Meal Kits and Wal-mart and see if banner ad appear and get that click revenue.  Another reader noted that my piece criticizing meal kits as another sign of the end times was framed by banner ads for.... you guessed it... meal kits.

I also noted in the past (and reproduced in a blog entry) an entreaty from Hertz Rent-A-Car social media coordinator asking me to write a blog posting about used rental cars.   So I did - and pointed out that their prices were "meh" at best, and the car you buy has a red letter "R" on its CarFax, as it is now branded for life as a "fleet use vehicle" and the resale value degraded accordingly.   But I guess even bad publicity is better than no publicity and they figure that once someone reads my posting, the idea of buying a used rental car will enter their head.  I've been played!  Big time.

Another time, a company asked me to write a blog about potato chips - offering a free bag of the snack if I would write fun things about the chips and suggest a dip recipe.   People read that shit?  They must be more bored than I am!   I politely declined.

I guess there is a lot of money in doing that and I am an idiot for not jumping on it.  Some guy started a blog called 22 words (a precursor to Twitter's 140 characters?) and then sold it for millions, bought it back, and now makes $3M a year from the blog - promoting products and services and reviewing them.  I've never bothered to visit the site and don't recommend it - he clearly is making money promoting products - why bother going to an ad page?

But it never stops, though.  I get blog "suggestions" from people and sometimes I use them, other times I wonder if they are playing me also - trying to get me to write on a topic so they can capture the text and use it for a text farm.   Yes, there are people in India and Russia who, for a fee, will write text on a topic.  One fellow even e-mailed me from such a word-farm and asked me to review his blathering text about some topic - no doubt hoping I would give him free editing services.  It was horribly written, with no point of view - one of those "There are many pros and cons to leasing a car..." kind of deals that basically tells you what you already know about car leasing, but sounding authoritative and like it is dispensing real knowledge.

The internet is a fascinating place and we are all being played in one way or another.   You don't need to be a Bride of ISIS or some idiot who believes in Inforwars or to fall for a Nigerian Scam to be snookered by the Internet.  Just joining Amazon Prime makes you an internet chump, first class - like the rest of us.

So how is is possible to even perceive reality in any rational manner these days?   Living today, with the Internet and the media as it is, is like living in a funhouse, with those wacky mirrors distorting reality at every turn.  You finally see a flat mirror with a real image, and you reject it as false, as the wavy mirrors are more entertaining and see legit after a while - right?  

As they say, in any war, truth is the first casualty.  And maybe we are living in an era of informational conflict - conflicts of ideas, both true and false.  Inforwars (or disinfowars, more accurately) has aptly named itself in that regard.  They are fighting with words, ideas, tweets, and facebook likes in a new online battlefield.   And Breitbart is guarding their flank.

Anyway, once again I digress.   What started this was a series of annoying e-mails from a reverse mortgage broker who wanted me to link to his "blog" about reverse mortgages, which as little more than an advert for his services.  Let me reiterate it again:  REVERSE MORTGAGES SUCK!!!   There is little reason behind them and seniors get bit on the ass by them all the time.  The reason they are so heavily regulated is that the companies that were in this business used to rip-off old people all the time.   It is not so much they are stealing money that it is a bad bargain just as leasing a car is a bad bargain.  Yes, you get a car out of the deal, for a few months, but you pay nearly twice as much to ride.   Similarly, reverse mortgages allow you to "stay in your home" for a while longer, but like any loan or mortgage, it has to be paid back, and the later you ends up paying it back, not your estate - in 70% or more of the cases.

Hey Robert,

Just a quick follow up to make sure you got this, and to confirm that I’m a real person and not some some automated email robot!

I know how busy you must be! I chose your site specifically to show my guide to and would truly appreciate a response =)


On Thu, Sep 7, 2017 at 11:41 AM, xxxxx@xxxx wrote:

Hey Robert,

Xxxxx here, I founded my website to educate people (like my grand parents) how to free up some more cash and generally have more freedom in their retirement lifestyle. I noticed you spoke about reverse mortgages in one of your posts here -

The problem with retirement is, you never get a day off! You can be young with money, but you can't be old without it. the point - I wrote a super guide on what reverse mortgages are, how they work and who may be interested. You can check it out here - / - I remained very neutral and Kind of made me doubt all of my life actions when putting this together, but I suppose that's the whole point!

I thought it might make a nice addition to the post you wrote, since it gives a ton of detailed information on what a reverse mortgage is (way more than the wikipedia page does) and how they work.

Please let me know if you'd be interested in sharing my guide.

Kind Regards,
So you see how this sort of thing works.  You read a blog and think, "Well, that's interesting impartial information!" but it isn't.  In addition to all of our own biases and prejudices, some blogger are shilling for other people or being paid - sometimes huge sums of money - to promote certain products, ideas and services.  We are all hucksters today, trying to make a buck it seems, by influencing public opinion in one way or another.

Well, not me just yet, but only because I'm too stupid to figure out how to make $3M  a year from deceiving people.

Tuesday, September 12, 2017

Pain Focuses The Mind

Pain and infirmity can put things in perspective.

Another day in the hospital, this time in the emergency room.  Not that I had an emergency, but that we were traveling and I had another diverticulitis attack.   And it wasn't fun.  Not only were my guts hurting, but when I took ibuprofen (which I am allergic to, apparently, thank you God!) I was breaking out in hives.  My eyes were so swollen, I looked like Rip Torn.  Then throw in vertigo and well, I ain't feeling so slick.   I am hoping that since I hit my deductible under Obamacare, this won't cost me too much this time around.  But I have to stop wearing those backless gowns - it is getting old, even if they also give you a keen bracelet to wear with it.

The hospital in Alexandria Bay, New York is very well staffed and efficient.  I was seen by a nurse practitioner who had a lot of more sick people on his hands to deal with.  But they actually gave me a cat scan which I am sorry I did not get a copy of, as I could put up a picture proving I have actual guts, as well as a heart.   But the bad news is, those guts are rotting out, now in two places, and I have to be a lot more careful about what I eat and drink from now on.

So he prescribes two kinds of antibiotics (not the kind that cause my muscles to detach, this time around, we hope) and my good friend, prednisone.  Oh, serious, you can see how easily these steroids are to abuse.  Within 24 hours, I go from feeling like throwing myself under a bus to feeling like I can rule the world.  There is no greater pleasure in the world than the release from pain.  That is how torture works, by the way, not by hurting people to get them to confess, but by offering them release from pain as a reward from confession.   People will do anything to make pain stop.

It is positively euphoric when pain stops, and there is a physical and chemical reason for this.  When you are in pain, your brain releases endorphins, which are sort of a home-made opiate in your brain, to help alleviate pain.  Take away the pain, and well, you are soaked in the damn things and are in fact, quite high on them.   So I am feeling quite good right now, in fact, fucking fantastic.

So we decided to buy a boat.  I think.  We'll see in the next few days, anyway.

Just what we need, a hoary old Chris Craft!

We have enjoyed traveling in the RV, but Mark wants to get back into boating and explore the Thousand Islands, St. Lawrence Seaway, The Rideau Canal, Lake Champlain, the Hudson river, and the Erie canal, the Finger Lakes (at least Seneca and Cayuga, anyway), the Great Lakes, and who knows what else?  Maybe the Intra-coastal Waterway as well.   Our budget is limited to under $50,000, but of course, the operating costs (including storage, fuel, insurance, docking, etc., will easily exceed $10,000 a year (yes, you read that right).

At this stage, the boat is like a butane lighter.  You are buying the right to spend money and little else.   Over the years (and after three boats) we've realized that spending a lot of money on a boat is pretty pointless.  They depreciate like mad, and the costs of ownership are about the same.  It costs as much to store, maintain, fuel and insure and $250,000 boat as it does a $50,000 one.  The big difference is that  you lose $125,000 in depreciation on the latter in five years.

You often see people throw a lot of money at a boat, or RV or car, trying to fix it up, and then they lose interest.  If you can find a vehicle like this, it can be a bargain.   We found a few boats that owners had thrown a pile of money at - the proverbial "hole the water to throw money into".   This boat for example, has two new bored and stroked 496 big block Chevy Mercruisers, which should move it through the water and suck fuel with two straws.   Like I said, the damn thing is a butane lighter - the cost of the fuel could easily exceed the cost of the boat.

We looked at a similar boat as well - and old Silverton with rebuilt 454 Crusaders and a brand-new generator.  A nice boat, but the master stateroom was way too small - I could barely fit into the bed.  Plus the owner fell ill before completing the project and there were a lot of loose wires and some apparent electrical problems to chase down.  A nice project boat, but more of a "turn wrench" than "turn key" - plus it was a little overpriced.  Plus the Chris Craft just has sexier classic lines.  I mean we looked at a Carver, but those don't even look like boats even if they have lots of room inside.  They look like a pregnant football.

We saw other boats up here that were newer and in nicer condition, but with over 1,000 hours on the clock.   Down in Florida, you can't give away a gas boat, and they rarely last more than 900 hours before the motors blow up.  In New York, gas is king, and it is rare to find a diesel boat and rarer still to find someone who knows how to work on one.  It is like the land time forgot.  The short season and lack of salt and sun mean older boats run for decades up here, and not just at the antique boat museum.

But my recent health issues have forced me to realize that if we want to do this boating thing, we need to do it now, because there won't be a later, and if there is a later, we won't be in any position to be dicking around with a boat.  A lot of boats are bought by older people - well into their 80's and even 90's, if you can believe that.   Usually they use the boat for a year or two and then you see them listed with the notation "health forces sale!" at which point they are sold to someone younger (in their 60's or 70's) who uses them more - for a few years - until they come up here less and less, and spend more time at the dock waxing and polishing than they do actual boating.  Finally, one year (or two or three or more) the boat never leaves the dock, and one year, they never go at all - and realize they paid $8,000 or more in fees to own something they haven't seen in a year or more and it moves down the food chain.

And eventually the food chain reaches us.

We plan on spending three or more months on the boat, so in terms of usage, we should enjoy it.  And the operating costs and overhead are far less than our vacation home was.   And ironically, this won't be the most expensive boat we've owned.  Our previous boat, the 28' Bayliner cost us over $60,000 secondhand.  We thought that a "newer" boat would be more reliable and cost less in terms of maintenance.  Guess what? NOT!  It was the least reliable of the three boats we had, and the overhead was about the same as the boat we are looking at, in terms of storage, docking, insurance, and fuel costs.   And it was a far smaller and less seaworthy a boat as well.

And we may sell the RV and the pickup truck in the meantime, as we may be using both less and less, and we have no need for two cars.   Selling those two "toys" will pay for half the cost of the boat, too.   One hobby at a time, right?

So this is hardly a major expense for us.  People spend more money on a moderately loaded pickup truck these days.  We will use it, have fun, and it will be a floating summer home for three months or more of the year.  But when we stop using it, it will go away.  We figure maybe five years or so, and when we are done seeing everything there is to see here, sell the boat and move on to the next thing, whatever that is.  Another RV, traveling, or just staying at home at that point.

The point is, life is very finite, so you might as well make the best of it.  We are fortunate that we are in a position now in life to go out and do things and one of the things we want to do is going boating again - for a while, at least.

And we can do this, because we got off the merry-go-round of living "paycheck to paycheck" with too many toys and not enough time to use them.  One reason why boats like this are so cheap, is that prices on older toys (including cars) fall off the map at a certain point, as banks get reluctant to loan on them.  The boat we are looking at had several offers on it this summer - all fell through due to financing.  In this price range and age, cash is king.   And for once in my life, I'm the guy with cash, instead of the poor slob I used to be, begging banks to borrow money for stuff I really didn't need.

And that's a better place to be, quite frankly.

UPDATE: The boat deal fell through, Which was probably just for the best. As I noted in an earlier log entry and as a reader reminded me, it's probably better just to rent these things rather than try to own them.

Monday, September 11, 2017

Hurricane Verti-go-go

What is Veritgo?  Something you likely will have to live with, if you live long enough.

When God gets bored he likes to go bowling. He lines up human beings like ten pins and then knocks them down with his Almighty bowling ball, or so it seems, at least to some.

The latest trick up his sleeve after giving me Diverticulitis and gout as well as allergy to pain medication which results in my breaking out in hives, is to bless me with vertigo - all at the same time, of course.

Vertigo, like hives, it's not necessarily life-threatening, but it is annoying as all hell. It is caused when your inner ear clogs up with calcium and thus your balancing mechanism doesn't respond quickly enough to your movements. If you lay down or get up suddenly it will seem like the entire world is jumping up and down or spinning around for several seconds.

For some people this can go on for as long as 20 minutes, which is quite nauseating. This could be result of something called Ménière's disease which fortunately is curable with a simple pill.  For others it is just a natural consequence of old age and not much can be done to put a stop to it put to put a stop from it occurring.

There is a procedure called the Epley maneuver in which you assume several positions to clear the gunk from your inner ear (Update, the Seamont maneuver is easier to do, and I tried it and my Vertigo seems to be going away, thank God!).  A doctor or chiropractor and put you through these positions and supposedly it miraculously curious the problem in a matter of hours or days. But if you are prone to vertigo it may come back later on.

Like I said it's more annoying than anything else, although people who have vertigo for extended periods of time end up getting nauseous and throwing up, which of course is not pleasant.   If you have extended vertigo, it could be the sign of Ménière's disease or something even more serious, so it would pay to get it checked out.  To me it is just annoying and I find myself getting angry for something like this to happen. I just wanted to go away and stop.

We are traveling in our RV and hope to do some fun things I kayaking and bicycling but vertigo has other ideas. However it's been pouring rain for the last few days so it doesn't seem like kayaking in bicycling would have been possible anyway.

And we are fortunate to be away during Hurricane Season. We've been following the track of hurricane Irma closely, and it seems like although the storm has weakened it still have a major impact on South Florida. What is unfortunate for one group of people is fortunate for another. Florida will take the brunt of the hurricane knocking it down from a category 4 to a three to a two and then to a tropical storm about the time it hits the Georgia border.

And it appears it'll hit the Georgia border far west from Jekyll Island which may be spared from the brunt of the storm. So it looks like we've managed to dodge a bullet here.

As I've noted before, hurricanes are rather predictable event if you live in Florida or anywhere on the East Coast or Gulf coast of the United States. People get lulled into a false sense of security when years or even a decade go by without a major hurricane. But eventually they will come and strike and damage homes and buildings.

There has been some controversy of course as to whether people are overhyping this current hurricane. People on both the left and right are using the hurricane to justify their positions with regard to global warming. Those in the right argue that the media is overhyping the hurricane to sell a global warming narrative. I don't think this is the case, the media hypes everything pretty much equally in order to generate revenue from clicks and eyeballs.

And indeed some of the articles posted by the media are quite nonsensical. One article argues that an airplane was "outracing hurricane Irma" which is ludicrous as the hurricane travels at about 18 miles an hour and the airplane travels at hundreds of miles per hour. As it race, it was no contest.

But there is a nugget of truth In these warnings, however. This looks to be a fairly major storm and it will cause extensive damage as it comes ashore unless a miracle occurs and the storm loses strength substantially before making landfall which does not look likely.

Predicting storm paths and storm intensities is an uncertain science of course. It is better to have people evacuate and find out later it was unnecessary than to have people stay in place and be injured or killed. We evacuated last year for hurricane Matthew only to later find out that the damage was not that great. However in a few instances very large pine trees did fall over and crush people's houses which could have been fatal if somebody been in the path of the tree. So it is better safe than sorry.

And it is true there is a bit of a drum beat on the left every time there is a major storm to make the allegation that this storm is proof of global warming. And I think such claims maybe a little more extreme. The press is reporting that hurricane Irma is the strongest Atlantic hurricane ever, however that's based on the definition of the hurricane being in the Atlantic and not the Caribbean. And as you can see the Atlantic and the Caribbean are quite close together if in fact sort of overlap one another.

Again this is not to trivialize global warming or trivialize a hurricane, only to point out that it is impossible to draw a direct connection from any one storm or weather event to overall weather trends.

A reader asked what we would do if a category 5 hurricane hit our Island directly which has not happened in over a hundred years. If that did occur, the winds no doubt would rip the roof off our house and it is possible that water would wash over the entire island, destroying much, if not all, of the infrastructure.
If that were the case, we would have to hope that our insurance would cover us. Our flood insurance maxes out at $250,000, which is far less than the market value of the home at $440,000.

There literally is no way to buy additional coverage under the FEMA flood insurance program. Of course the lot is worth something which is what they're figuring into the equation, even if the house flooded, the land still exists. Also in most cases even a flooded house can be repaired even if it means removing all the sheetrock and insulation, spraying everything with Clorox and drying it out first.

We would have to hope that some combined wind and flood payout would equal the value of the home if we decided to start over. Or the cost of rebuilding would be less than the market value of the home at the present time.

If that were to happen I would have to sit down and think a long time as to whether to rebuild or move elsewhere. As I noted to before, I have no intention to live in my current home for the rest of my life, as it is not well suited for the elderly. We have no support or infrastructure for the elderly on our Island. I have seen firsthand how people struggle as they get older without any sort of infrastructure or way of getting around.

If we did rebuild, I would definitely build higher on stilts as permitted by local building codes and definitely reinforce the house with hurricane straps and other features to make it resistant to future storms. Of course much of this is now required by local building codes as we discovered when we built Mark Studio which indeed has these features.

And that is probably the irony, if we were hit by Hurricane directly, it might level the house but leave the studio standing, giving us a third option to just abandoned the house and live in the studio.

But regardless of what happened, I would move on in life and not sit around and whine and complain that I'm victim of a hurricane which is a predictable event which I have insured against. I would have no more right to complain than people in New York do after a severe snow storm or people in California after an earthquake - or wildfire. These are quite predictable events which have occurred with regularity over the years and we should be prepared for them.

And yes it is a tragedy when people lose their homes and possessions or worse yet, lose loved ones to a storm or tornado or other natural disaster. But these are not unexpected things, just as medical issues, aging, and inevitable death are not unexpected things.

So while vertigo does make me uncomfortable and indeed angry, it is not something that is unexpected in my life, much like weather events. I am getting older and can expect more of such things in the future. This is a telegraphing of how the rest of my life will be and I should cherish the remaining time I have when I'm healthy - rather than complain about the unfairness of it all.

And just as we saw the storm path of hurricane Irma and knew what to expect, years ago I saw the path of my life and knew what to expect in the coming years. And I'm happy to say I'm in a comfortable place where I can deal with these health issues and not have to worry about missing work or the cost of treatment.

Saturday, September 9, 2017

Walmart Fursuits

Walmart is more adept at trend-spotting than Target these days...

I wrote before about Walmart fixies.  These are trendy bicycles that people in Portland and San Francisco ride, with no gears, no freewheel, and no brakes.   They are usually painted in garish colors with chopped handlebars and little-girl bike hand grips in pink.   Walmart jumped on this trend, offering a "fixie" with a brake, of course, and a "reversible" hub so it could be in fixed-gear mode or with a freewheel.  For $99 they sold well, although the fixie community felt betrayed.

Fursuits are another trend, albeit one that is a little naughty.  People like to dress up in fur suits, which look like those character suits at amusement parks or the team mascot suits at the football game.   They go to conventions and give each other back rubs (skritching or something) and even have sex while dressed in their fur suit.   They spend thousands on their suits, which are mostly hand-made.

Well, leave it to Walmart to take some obscure trendy thing and bring it to the trailer park.   You can now buy fur suit heads and even fur suits at Walmart and join this weird new trend.

Mark noticed it first - at a Walmart in rural Pennsylvania they had "union suits" for adult men that were basically bear costumes, complete with a head piece.  I am not sure if these were intended to be Halloween costumes or sleepwear or what.  They also had them in batman, tiger, polar bear, and other forms.   Take the "union suit" and combine it with a "maskanimal" fur suit head, and you've got yourself a Walmart fur suit!  You're now ready to crash the next "furry" convention!

Take the bear suit, add the bear "maskanimal" head, and you've made a Walmart fursuit!  Or go tiger if you want to...  No word as to whether they have SPH.

Of course, just as the fixie people were incensed that Walmart had usurped what was a small cultural trend, based on hand-crafting using found objects, the furries are in a similar fury.  The fur will fly, as they say.  Once again, Walmart has targeted a niche audience and taken their trend to the masses.   Now Lurleen and Bubba can dress up as tigers and bears and start skritching and yiffing in the trailer on Saturday night.

First fixies and now furries!  Oh, Walmart, is nothing sacred anymore?

Friday, September 8, 2017

Toronto Real Estate Crash? Maybe

When prices drop 20% or more overnight, it should be concerning.

They passed a law in Ontario, taxing foreign investors on properties and taking other actions to limit folks from speculating on real estate.  Almost overnight, property values dropped by 20% or more, according to some articles.   Others claim it is a temporary drop, and that the expanding market, driven by the economy and jobs, will bring prices back.  Both sides are right and wrong.

Someone who just paid $900,000 for a house in suburban Toronto, which is now worth $700,000 (but still mortgaged for over $800,000) is finding themselves suddenly "upside-down" on their house.  They are likely shitting their pants.   Worse yet, their friends, who were thinking of buying a house see this happening and think, "Um, this may not be such a great deal - suppose prices go lower?"

Worse yet, suppose the upside-down guy loses his job and can't make the payments?  Or suppose he was one of those speculative investors who paid $900,000 for a $700,000 house?  He has little to lose in walking away from the investment.  The net result is a foreclosure sale, and the bank (and presumably the government guaranteeing loans) taking a hit, which in turn could turn into a snowball effect we saw in sub-prime lending here in the States.   Banks will become more reluctant to lend, which in turn makes it harder to sell, which in turn drives down prices, and a death spiral ensues.

The second half of the argument that favors naysayers is how quickly this new law brought down prices - this seems to validate that much of the market was driven by speculation - foreign speculation at that.  Part of the new law is aimed at taxing "empty houses" which tells you where this is coming from.  Prices are not being driven up organically by working people looking for a place to hang their hat in the evening, but people looking to make a quick kill in a rising market.  If there were few investors and speculators in the market, prices would not have been affected as much.   This new law ended up illustrating how many of the buyers in the Toronto market were not interested in living in the homes they bought.   And those are just the foreign buyers, too.

On the other hand, others argue that the boom in real estate prices in Toronto and Vancouver are driven organically by rising wages in a rising economy.  People can afford to spend a million or more on a house, so they do.   And if you look at housing prices in many major American cities, they seem to be tracking what is going on in Toronto.   The land that my house in Virginia sat on, now has two houses on it, selling for a million apiece.  My friends, who all paid $150,000 to $250,000 for their modest tract homes in suburban developments near the Beltway, are all sitting on $600,000 to $800,000 homes, which unfortunately, they have re-mortgaged several times.  I literally could not afford to go back and live in Virginia at this point - even though I own a condo there (whose monthly cost is more than my house on a resort island!).

So long as there are jobs and people make the money to afford the mortgage payments, such homes are "affordable" although they take a substantial portion of a paycheck to afford.   And of course, one thing driving affordability is staggeringly low interest rates.   When mortgages dropped below 4% in America, well, it made houses incredibly affordable - at a time when no one had any money.  Today, rates are higher and of course prices are higher, as demand has risen.   But interest rates keep creeping up, and this is not good news for real estate prices.

Even a rise of a percentage point or two can make a house change in value dramatically.  For example, for every $100,000 you borrow at 4%, you pay $477 a month in mortgage payments.  If rates rise to 5%, you pay $537 a month - a 12% increase in monthly cost.  And due to the non-linear way interest works, each subsequent increase will raise costs even more dramatically.   People buy based on what monthly payment they can afford - or at least working people do.  Speculators spend cash, but they buy based on what they think an ultimate customer is willing to pay.

It will be interesting to see how this works out.  In general, rapid increases in real estate prices are usually followed by at best, a flat market, if not a decline or outright free-fall.   When no one can afford to buy a house and the only people buying are speculators, well, watch out.  The game will be over, and over soon.

As I noted in another posting, acting like an extreme market (with 30% price increases annually) is a "norm" is one way to set yourself up for a fall.  And yet Americans (and apparently Canadians as well) believe that a high-growth economy should be a normal thing, and incredible periods of growth should be infinitely sustainable - despite the fact that our history shows that fast growth has always - always - been followed by a period of retraction.

Whether the Toronto market will recover from this setback from the new anti-foreign investment law remains to be seen.   The poor schmuck who bought a condo on spec a few months ago (and is now upside-down to the tune of $100,000 or more) is probably not sleeping well at night, that is one thing for sure.