US economy thread (1 Viewer)

[Don't Toews Me]

Some recent data here from the NY Fed: HOUSEHOLD DEBT AND CREDIT REPORT

The PDF report has some charts that may be of interest to some here. The "Total Debt Balance by Age" chart on page 23, "Auto Loan Originations by Age" on page 25, "Mortgage Originations by Age" on page 26, "Transition Into Serious Delinquency (90+) for Credit Cards by Age" on page 30, etc.

Additionally, it appears the NY Fed has issued some recent data on HELOCs here: Mortgage Lock‑In Spurs Recent HELOC Demand

Approximately 1.3 million HELOCs were originated in 2023, and then 0.5 million through the second quarter of 2024. HELOCs are typically originated to homeowners with significant home equity and, therefore, the average HELOC borrower is older than the average mortgage borrower. Of these 1.8 million HELOCs, about 57 percent went to borrowers aged 50 and older, with about 24 percent going to borrowers in their 40s and 19 percent going to younger borrowers.

Since HELOCs are secured by owners’ equity in their homes, HELOC credit limits are generally a function of a home’s value, such that the combined total of the first mortgage and HELOC limit are capped at a certain percentage of the home value, typically 80 percent. About 28 percent of the 1.8 million HELOCs originated in 2023-24 had limits below $50,000, with about 29 percent in the $50,000–$100,000 range and about 18 percent in the $100,000–$150,000 range; the remaining 25 percent had credit limits above $150,000. As the value of home equity varies greatly, some HELOCs have very high limits: about 1 percent of HELOCs originated over this time had limits higher than $650,000.

Importantly, underwriting on HELOCs is now much tighter than it was during the housing boom of the early 2000s. HELOCs soared in popularity between 2000 and 2008—and they grew in prevalence across a broader spectrum of credit scores. Since 2010, however, HELOC originations have been overwhelmingly skewed toward high-score borrowers, with only a small share of newly open credit lines going to borrowers with credit scores below 760.

Some charts at that link that cannot be copied but may also be of interest to some here.

Some more data and charts here from Apollo Global Management: Daily and weekly indicators for the US economy

Some charts here from Yardeni Research: Household Debt & Credit

 

[SFBayDuck]

The context was simply about how the dynamics of having exceptionally low mortgage rates with then a stark increase in rates has taken away a way that many Americans dealt with their credit card debt in the past. That is a stresser on many households in a way that is unlike anything we have seen.... in.... I am not sure.... maybe ever.

Thanks, that is what I was missing. Appreciate the explanation! I lived through that in 2007-08, tapping into sky-rocketing home equity to pay off cc debt. You can probably guess how that turned out for me two years later - leaving my keys on my kitchen counter and telling Wells Fargo the place was all theirs. One of the worst periods of my life, no doubt.

I will say that your statement that you think credit card is at an all time high is always true is absolutely false. If memory serves me from 2008 to maybe 2011 it actually continually declined. I don't recall any data pre-2008 so I do not know if that was an aberration or a cyclical thing based on many different factors.

I said "almost always". Because when the US economy grows, which it has done most of the time, most things tied to that growth will tend to grow with it, in nominal terms. That's the context/denominator that gets omitted in the doom headlines that just say something is "at an all time high!" that I get all fired up about (probably too fired up sometimes, I'll own that!). But yes it can drop during recessions, as it did during the GFC and Covid when GDP actually shrunk, before resuming it's upward (nominal) march. I'll just leave it at that for the purposes of this particular discussion, as that's not relevant to the point you were making.

 

[SFBayDuck]

Some recent data here from the NY Fed: HOUSEHOLD DEBT AND CREDIT REPORT

The PDF report has some charts that may be of interest to some here. The "Total Debt Balance by Age" chart on page 23, "Auto Loan Originations by Age" on page 25, "Mortgage Originations by Age" on page 26, "Transition Into Serious Delinquency (90+) for Credit Cards by Age" on page 30, etc.

Additionally, it appears the NY Fed has issued some recent data on HELOCs here: Mortgage Lock‑In Spurs Recent HELOC Demand

Approximately 1.3 million HELOCs were originated in 2023, and then 0.5 million through the second quarter of 2024. HELOCs are typically originated to homeowners with significant home equity and, therefore, the average HELOC borrower is older than the average mortgage borrower. Of these 1.8 million HELOCs, about 57 percent went to borrowers aged 50 and older, with about 24 percent going to borrowers in their 40s and 19 percent going to younger borrowers.

Since HELOCs are secured by owners’ equity in their homes, HELOC credit limits are generally a function of a home’s value, such that the combined total of the first mortgage and HELOC limit are capped at a certain percentage of the home value, typically 80 percent. About 28 percent of the 1.8 million HELOCs originated in 2023-24 had limits below $50,000, with about 29 percent in the $50,000–$100,000 range and about 18 percent in the $100,000–$150,000 range; the remaining 25 percent had credit limits above $150,000. As the value of home equity varies greatly, some HELOCs have very high limits: about 1 percent of HELOCs originated over this time had limits higher than $650,000.

Importantly, underwriting on HELOCs is now much tighter than it was during the housing boom of the early 2000s. HELOCs soared in popularity between 2000 and 2008—and they grew in prevalence across a broader spectrum of credit scores. Since 2010, however, HELOC originations have been overwhelmingly skewed toward high-score borrowers, with only a small share of newly open credit lines going to borrowers with credit scores below 760.

Some charts at that link that cannot be copied but may also be of interest to some here.

Some more data and charts here from Apollo Global Management: Daily and weekly indicators for the US economy

Some charts here from Yardeni Research: Household Debt & Credit

Great, there goes my afternoon

Just skimmed through a few - I should have known that Slock and Yardeni had all of this stuff I'm always poking around on the FRED website to find already neatly pulled together.

 

[Mitchie]

I like credit card delinquency rates better and we’re at the highest % of over 90 days since 2012 and in an upward trajectory.

Actually has been dropping since March. Dropped during Covid and then moved up, now right around the Pre-Covid level. And much less alarming if look at the chart back to 2000. Interesting article w/ chart if anyone's interested

Credit Card “Delinquency Rates” Drop for 4th Month despite Confusion over NY Fed’s “Transition into Delinquency Rates” | Wolf Street

 

[-OZ-]

If you run to Wal-Mart 3 times a week

This sounds horrible. I think I've been to a Walmart under a dozen times, total.

It's a smart place to grocery shop. I've never understood the hate, but to be fair I am part West Virginian.

Alabama here, Walmart is second only to ALDI’s. The only other grocery chains we go are Trader Joe’s, Kroger and Costco. Although, a piggly wiggly just opened a little further away so we might have to hit that. The one in HHI is part of our annual vacation.

The Pig is great for weekly meat sales (and the meat department tends to be very good). Otherwise it's quite expensive.

Great fresh seafood too at The Pig on HHI.

Would you do the pig or south end to take home? Other than shrimp, what would you get?

 

[Chadstroma]

The context was simply about how the dynamics of having exceptionally low mortgage rates with then a stark increase in rates has taken away a way that many Americans dealt with their credit card debt in the past. That is a stresser on many households in a way that is unlike anything we have seen.... in.... I am not sure.... maybe ever.

Thanks, that is what I was missing. Appreciate the explanation! I lived through that in 2007-08, tapping into sky-rocketing home equity to pay off cc debt. You can probably guess how that turned out for me two years later - leaving my keys on my kitchen counter and telling Wells Fargo the place was all theirs. It was one of the worst periods of my life, no doubt.

I will say that your statement that you think credit card is at an all time high is always true is absolutely false. If memory serves me from 2008 to maybe 2011 it actually continually declined. I don't recall any data pre-2008 so I do not know if that was an aberration or a cyclical thing based on many different factors.

I said "almost always". Because when the US economy grows, which it has done most of the time, most things tied to that growth will tend to grow with it, in nominal terms. That's the context/denominator that gets omitted in the doom headlines that just say something is "at an all time high!" that I get all fired up about (probably too fired up sometimes, I'll own that!). But yes it can drop during recessions, as it did during the GFC and Covid when GDP actually shrunk, before resuming it's upward (nominal) march. I'll just leave it at that for the purposes of this particular discussion, as that's not relevant to the point you were making.

COVID was more about the lockdow and people literally couldn't spend money... even so, I am not sure it decreased. I'm not saying it didn't just I seem to remember seeing a chart with it going up consistently since that 2010-2011 area.

 

[Mitchie]

The context was simply about how the dynamics of having exceptionally low mortgage rates with then a stark increase in rates has taken away a way that many Americans dealt with their credit card debt in the past. That is a stresser on many households in a way that is unlike anything we have seen.... in.... I am not sure.... maybe ever.

Thanks, that is what I was missing. Appreciate the explanation! I lived through that in 2007-08, tapping into sky-rocketing home equity to pay off cc debt. You can probably guess how that turned out for me two years later - leaving my keys on my kitchen counter and telling Wells Fargo the place was all theirs. It was one of the worst periods of my life, no doubt.

I will say that your statement that you think credit card is at an all time high is always true is absolutely false. If memory serves me from 2008 to maybe 2011 it actually continually declined. I don't recall any data pre-2008 so I do not know if that was an aberration or a cyclical thing based on many different factors.

I said "almost always". Because when the US economy grows, which it has done most of the time, most things tied to that growth will tend to grow with it, in nominal terms. That's the context/denominator that gets omitted in the doom headlines that just say something is "at an all time high!" that I get all fired up about (probably too fired up sometimes, I'll own that!). But yes it can drop during recessions, as it did during the GFC and Covid when GDP actually shrunk, before resuming it's upward (nominal) march. I'll just leave it at that for the purposes of this particular discussion, as that's not relevant to the point you were making.

COVID was more about the lockdow and people literally couldn't spend money... even so, I am not sure it decreased. I'm not saying it didn't just I seem to remember seeing a chart with it going up consistently since that 2010-2011 area.

it did, click on the link i posted above. Also note this which is from the article:

Credit card balances are a measure of consumer spending – including for expensive business trips that are reimbursed. They’re not a measure of borrowing because most balances are paid off by due date and never accrue interest, but allow cardholders to get their 1% or 2% cashback, airmiles, and other loyalty benefits. Credit cards are the dominant payment method used by consumers in the US, ahead of debit cards, and far ahead of other payment methods, such as checks or cash.

 

[Dinsy Ejotuz]

Some charts here from Yardeni Research: Household Debt & Credit

Thanks for these.

 

[SFBayDuck]

Credit card balances are a measure of consumer spending – including for expensive business trips that are reimbursed. They’re not a measure of borrowing because most balances are paid off by due date and never accrue interest, but allow cardholders to get their 1% or 2% cashback, airmiles, and other loyalty benefits. Credit cards are the dominant payment method used by consumers in the US, ahead of debit cards, and far ahead of other payment methods, such as checks or cash.

This is an interesting angle, that would seem likely to skew the data and that I hadn't considered. Although I wonder how much of an impact it really has - despite the crowds in every Centurion Lounge I've been in over the past few months, most Americans aren't traveling for business regularly. And despite my Facebook feed since I've gotten into the points/miles game the past several months (does everyone fly first class on Emirates? I sure never have!), how many people are really trying to maximize cc spend?

Either way, more support for the thinking that delinquencies, collections, % of credit used would be much more useful metrics to judge the state of consumer debt than the total amount of it. I'm curious how much the metric I've tended to focus on, % of disposable income, gets skewed by the above.

 

[Grahamburn]

The context was simply about how the dynamics of having exceptionally low mortgage rates with then a stark increase in rates has taken away a way that many Americans dealt with their credit card debt in the past. That is a stresser on many households in a way that is unlike anything we have seen.... in.... I am not sure.... maybe ever.

Thanks, that is what I was missing. Appreciate the explanation! I lived through that in 2007-08, tapping into sky-rocketing home equity to pay off cc debt. You can probably guess how that turned out for me two years later - leaving my keys on my kitchen counter and telling Wells Fargo the place was all theirs. It was one of the worst periods of my life, no doubt.

I will say that your statement that you think credit card is at an all time high is always true is absolutely false. If memory serves me from 2008 to maybe 2011 it actually continually declined. I don't recall any data pre-2008 so I do not know if that was an aberration or a cyclical thing based on many different factors.

I said "almost always". Because when the US economy grows, which it has done most of the time, most things tied to that growth will tend to grow with it, in nominal terms. That's the context/denominator that gets omitted in the doom headlines that just say something is "at an all time high!" that I get all fired up about (probably too fired up sometimes, I'll own that!). But yes it can drop during recessions, as it did during the GFC and Covid when GDP actually shrunk, before resuming it's upward (nominal) march. I'll just leave it at that for the purposes of this particular discussion, as that's not relevant to the point you were making.

COVID was more about the lockdow and people literally couldn't spend money... even so, I am not sure it decreased. I'm not saying it didn't just I seem to remember seeing a chart with it going up consistently since that 2010-2011 area.

it did, click on the link i posted above. Also note this which is from the article:

Credit card balances are a measure of consumer spending – including for expensive business trips that are reimbursed. They’re not a measure of borrowing because most balances are paid off by due date and never accrue interest, but allow cardholders to get their 1% or 2% cashback, airmiles, and other loyalty benefits. Credit cards are the dominant payment method used by consumers in the US, ahead of debit cards, and far ahead of other payment methods, such as checks or cash.

If “most balances were paid off” these companies wouldn’t exist.

 

[Mitchie]

The context was simply about how the dynamics of having exceptionally low mortgage rates with then a stark increase in rates has taken away a way that many Americans dealt with their credit card debt in the past. That is a stresser on many households in a way that is unlike anything we have seen.... in.... I am not sure.... maybe ever.

Thanks, that is what I was missing. Appreciate the explanation! I lived through that in 2007-08, tapping into sky-rocketing home equity to pay off cc debt. You can probably guess how that turned out for me two years later - leaving my keys on my kitchen counter and telling Wells Fargo the place was all theirs. It was one of the worst periods of my life, no doubt.

I will say that your statement that you think credit card is at an all time high is always true is absolutely false. If memory serves me from 2008 to maybe 2011 it actually continually declined. I don't recall any data pre-2008 so I do not know if that was an aberration or a cyclical thing based on many different factors.

I said "almost always". Because when the US economy grows, which it has done most of the time, most things tied to that growth will tend to grow with it, in nominal terms. That's the context/denominator that gets omitted in the doom headlines that just say something is "at an all time high!" that I get all fired up about (probably too fired up sometimes, I'll own that!). But yes it can drop during recessions, as it did during the GFC and Covid when GDP actually shrunk, before resuming it's upward (nominal) march. I'll just leave it at that for the purposes of this particular discussion, as that's not relevant to the point you were making.

COVID was more about the lockdow and people literally couldn't spend money... even so, I am not sure it decreased. I'm not saying it didn't just I seem to remember seeing a chart with it going up consistently since that 2010-2011 area.

it did, click on the link i posted above. Also note this which is from the article:

Credit card balances are a measure of consumer spending – including for expensive business trips that are reimbursed. They’re not a measure of borrowing because most balances are paid off by due date and never accrue interest, but allow cardholders to get their 1% or 2% cashback, airmiles, and other loyalty benefits. Credit cards are the dominant payment method used by consumers in the US, ahead of debit cards, and far ahead of other payment methods, such as checks or cash.

If “most balances were paid off” these companies wouldn’t exist.

There are stats for that too, currently at 50% who carry debt month to month.

Survey: Half Of American Cardholders Now Carry Credit Card Debt | Bankrate

More cardholders are carrying debt month to month and many don’t have a payoff plan.

www.bankrate.com

 

[Battersbox]

If you run to Wal-Mart 3 times a week

This sounds horrible. I think I've been to a Walmart under a dozen times, total.

It's a smart place to grocery shop. I've never understood the hate, but to be fair I am part West Virginian.

I mean if smart is short sighted then I guess. Walmart is an awful company because of how it impacts smaller companies and communities.

Ok, you've got me there. I'll avoid giving any corps my business going forward.

 

[Chadstroma]

The context was simply about how the dynamics of having exceptionally low mortgage rates with then a stark increase in rates has taken away a way that many Americans dealt with their credit card debt in the past. That is a stresser on many households in a way that is unlike anything we have seen.... in.... I am not sure.... maybe ever.

Thanks, that is what I was missing. Appreciate the explanation! I lived through that in 2007-08, tapping into sky-rocketing home equity to pay off cc debt. You can probably guess how that turned out for me two years later - leaving my keys on my kitchen counter and telling Wells Fargo the place was all theirs. It was one of the worst periods of my life, no doubt.

I will say that your statement that you think credit card is at an all time high is always true is absolutely false. If memory serves me from 2008 to maybe 2011 it actually continually declined. I don't recall any data pre-2008 so I do not know if that was an aberration or a cyclical thing based on many different factors.

I said "almost always". Because when the US economy grows, which it has done most of the time, most things tied to that growth will tend to grow with it, in nominal terms. That's the context/denominator that gets omitted in the doom headlines that just say something is "at an all time high!" that I get all fired up about (probably too fired up sometimes, I'll own that!). But yes it can drop during recessions, as it did during the GFC and Covid when GDP actually shrunk, before resuming it's upward (nominal) march. I'll just leave it at that for the purposes of this particular discussion, as that's not relevant to the point you were making.

COVID was more about the lockdow and people literally couldn't spend money... even so, I am not sure it decreased. I'm not saying it didn't just I seem to remember seeing a chart with it going up consistently since that 2010-2011 area.

it did, click on the link i posted above. Also note this which is from the article:

Credit card balances are a measure of consumer spending – including for expensive business trips that are reimbursed. They’re not a measure of borrowing because most balances are paid off by due date and never accrue interest, but allow cardholders to get their 1% or 2% cashback, airmiles, and other loyalty benefits. Credit cards are the dominant payment method used by consumers in the US, ahead of debit cards, and far ahead of other payment methods, such as checks or cash.

If “most balances were paid off” these companies wouldn’t exist.

The payment transactions are actually very lucrative but yes, they aren't hurting for interest income either.

 

[Don't Toews Me]

A WSJ article from this morning that may be of interest to the discussion here:

Boomers Buying Houses Had It Bad in the ’80s. Millennials Have It Worse.

The link above should be a gift link that provides free access to those without a subscription.

 

[Gatorade]

If you run to Wal-Mart 3 times a week

This sounds horrible. I think I've been to a Walmart under a dozen times, total.

It's a smart place to grocery shop. I've never understood the hate, but to be fair I am part West Virginian.

Alabama here, Walmart is second only to ALDI’s. The only other grocery chains we go are Trader Joe’s, Kroger and Costco. Although, a piggly wiggly just opened a little further away so we might have to hit that. The one in HHI is part of our annual vacation.

The Pig is great for weekly meat sales (and the meat department tends to be very good). Otherwise it's quite expensive.

Great fresh seafood too at The Pig on HHI.

Would you do the pig or south end to take home? Other than shrimp, what would you get?

Whatever fresh fish that comes in each day. Just ask David. Or Benny's seafood market on the North end next to their new restaurant . The fresh shrimp is by far the best choice in this area. As far as carry out, try Charlie's. Always fresh seafood, salmon, tuna, tile fish, scollups are excellent , the best flounder anywhere and always something different each day.

 

[treat88]

Is it just me or ever since a little before the pandemic, the economy has been rolling straight downhill, no hope in sight... I started believing that in a few years a recension is coming

 

[Ridgeback]

Is it just me or ever since a little before the pandemic, the economy has been rolling straight downhill, no hope in sight... I started believing that in a few years a recension is coming

It's just you.

 

[Tau837]

Credit card balances are a measure of consumer spending – including for expensive business trips that are reimbursed. They’re not a measure of borrowing because most balances are paid off by due date and never accrue interest, but allow cardholders to get their 1% or 2% cashback, airmiles, and other loyalty benefits. Credit cards are the dominant payment method used by consumers in the US, ahead of debit cards, and far ahead of other payment methods, such as checks or cash.

This is an interesting angle, that would seem likely to skew the data and that I hadn't considered. Although I wonder how much of an impact it really has - despite the crowds in every Centurion Lounge I've been in over the past few months, most Americans aren't traveling for business regularly. And despite my Facebook feed since I've gotten into the points/miles game the past several months (does everyone fly first class on Emirates? I sure never have!), how many people are really trying to maximize cc spend?

Either way, more support for the thinking that delinquencies, collections, % of credit used would be much more useful metrics to judge the state of consumer debt than the total amount of it. I'm curious how much the metric I've tended to focus on, % of disposable income, gets skewed by the above.

It is anecdotal, obviously, but I charge every expense possible to my Amazon Visa card. All gas, groceries, restaurants, shopping, monthly bills, healthcare copayments, home supplies, etc. I pay the balance in full every month and get about $1K in cash back every year. I would expect this to be common behavior for most people who can afford to pay in full every month. I would expect it significantly skews the data.

 

[IvanKaramazov]

Is it just me or ever since a little before the pandemic, the economy has been rolling straight downhill, no hope in sight... I started believing that in a few years a recension is coming

Things have been weird since the pandemic, but that's because the pandemic was a once-in-a-lifetime event. We shut down half the economy, saw supply chains severely disrupted, turned on the fiscal and monetary firehoses (rightly IMO), went a little too far and had a spurt of inflation along with interest rate hikes, and here we are. TBH, we handled this pretty well all things considered. Not perfectly, but well.

 

[Osaurus]

Never underestimate a looming resencion

 

[SoBeDad]

The Costco parkling lot in North Miami was overflowing yesterday, I thought people were on vacation. This Costco replaced another one a few blocks away due to limitations in parking about 5 years ago. Miami has had a wealth migration, so this store might be an outlier in that respect. Costco itself might be an outlier, as July saw a 7% increase in net sales compared with 2023. Maybe people are saving $$$ by eating more at home.

Some random numbers: McDonalds sales are down, but Cheesecake Factory same store sales are up 1.4%.

Costco sees 7.1% net sales growth in July 2024

The company will introduce a new entry process to prevent nonmembers from shopping at its stores.

finance.yahoo.com

The Cheesecake Factory (NASDAQ:CAKE) Misses Q2 Sales Targets

Restaurant company Cheesecake Factory (NASDAQ:CAKE) fell short of analysts' expectations in Q2 CY2024, with revenue up 4.4% year on year to $904 million. It made a non-GAAP profit of $1.09 per share, improving from its profit of $0.88 per share in the same quarter last year.

finance.yahoo.com

 

[belljr]

If Vegas is any indication people are flush with cash. Curious what their figures are. I don't recall seeing so many people out on the strip than I did this weekend

The Strip’s 3.7 percent revenue jump in May wasn’t fueled by high-end baccarat play, but by slot machines and table games.

According to a report released Thursday by the Nevada Gaming Control Board, Strip resorts reported gaming revenue of $742.5 million in May. The state’s overall gaming revenue was $1.32 billion, a record for the month and up 2.5 percent from the same time last year. May marked the state's 39th straight month with $1 billion in gaming revenue and the eighth-largest single-month tota

 

[Grahamburn]

If Vegas is any indication people are flush with cash. Curious what their figures are. I don't recall seeing so many people out on the strip than I did this weekend

The Strip’s 3.7 percent revenue jump in May wasn’t fueled by high-end baccarat play, but by slot machines and table games.

According to a report released Thursday by the Nevada Gaming Control Board, Strip resorts reported gaming revenue of $742.5 million in May. The state’s overall gaming revenue was $1.32 billion, a record for the month and up 2.5 percent from the same time last year. May marked the state's 39th straight month with $1 billion in gaming revenue and the eighth-largest single-month tota

They’re all refinancing with @Chadstroma and have HELOC dough to burn.

 

[Gatorman]

The Costco parkling lot in North Miami was overflowing yesterday, I thought people were on vacation. This Costco replaced another one a few blocks away due to limitations in parking about 5 years ago. Miami has had a wealth migration, so this store might be an outlier in that respect. Costco itself might be an outlier, as July saw a 7% increase in net sales compared with 2023. Maybe people are saving $$$ by eating more at home.

Some random numbers: McDonalds sales are down, but Cheesecake Factory same store sales are up 1.4%.

Costco sees 7.1% net sales growth in July 2024

The company will introduce a new entry process to prevent nonmembers from shopping at its stores.

finance.yahoo.com

The Cheesecake Factory (NASDAQ:CAKE) Misses Q2 Sales Targets

Restaurant company Cheesecake Factory (NASDAQ:CAKE) fell short of analysts' expectations in Q2 CY2024, with revenue up 4.4% year on year to $904 million. It made a non-GAAP profit of $1.09 per share, improving from its profit of $0.88 per share in the same quarter last year.

finance.yahoo.com

Sobe:

First, stop by the eye doctors office in there and say hi to Gatorman who is seeing patients in North Miami.

Second: parking was part of it, but they also wanted a bigger store. The new Costco is about 30% bigger than the old one.

Finally, No, it isn't. Costco is in the middle of a growth spurt both in the US and in their global plans.

 

[Gatorman]

Is it just me or ever since a little before the pandemic, the economy has been rolling straight downhill, no hope in sight... I started believing that in a few years a recension is coming

Before the pandemic, the concept of "modern Monetary Theory" was starting to take hold of both sides of the aisle. Democrats believed it was the key to all the spending they wanted to do and republicans thought it was the easy way to make tax cuts fly. The concept basically came about bc economists figured interest rates were so low that any govenment that prints money is getting a great price to go into debt. (there is more to it and I am sure many here are better at expaining it than I am)

Well, along came a pandemic that changed the scarcity model and the Demand curve went way up and the supply curve way down. Add to that a stimulus that put cash in people's hands and that lead to inflation. Now, add to that the concept that businesses could jack up prices under the cover of "inflation" even though they weren't having those issues and that lead to unprecedented corporate profits but at the same time most americans didn't really feel it. Now people complain about housing costs and the price of a happy meal but for the most part the US and their COVID response surpassed how the rest of the world handled the crisis. Problem is certain news agencies like to sow panic so perspective isn't their thing.

All I know is as a small business owner my profits are up and I am in an industry (eyecare) where the 2008 recession saw a downturn in my profitability. Not so this go round. The Fed, for the most part, handled it well. Sticking the landing may be a bit more tricky.

Finally: Private equity is the reason for a good part of some of this. They were flush with cash after the pandemic and started gobbling up housing.

 

[Chadstroma]

If Vegas is any indication people are flush with cash. Curious what their figures are. I don't recall seeing so many people out on the strip than I did this weekend

The Strip’s 3.7 percent revenue jump in May wasn’t fueled by high-end baccarat play, but by slot machines and table games.

According to a report released Thursday by the Nevada Gaming Control Board, Strip resorts reported gaming revenue of $742.5 million in May. The state’s overall gaming revenue was $1.32 billion, a record for the month and up 2.5 percent from the same time last year. May marked the state's 39th straight month with $1 billion in gaming revenue and the eighth-largest single-month tota

They’re all refinancing with @Chadstroma and have HELOC dough to burn.

Must be all my out of town clients because I am not licensed in Nevada.

 

[Grahamburn]

If Vegas is any indication people are flush with cash. Curious what their figures are. I don't recall seeing so many people out on the strip than I did this weekend

The Strip’s 3.7 percent revenue jump in May wasn’t fueled by high-end baccarat play, but by slot machines and table games.

According to a report released Thursday by the Nevada Gaming Control Board, Strip resorts reported gaming revenue of $742.5 million in May. The state’s overall gaming revenue was $1.32 billion, a record for the month and up 2.5 percent from the same time last year. May marked the state's 39th straight month with $1 billion in gaming revenue and the eighth-largest single-month tota

They’re all refinancing with @Chadstroma and have HELOC dough to burn.

Must be all my out of town clients because I am not licensed in Nevada.

Traveling post close to make it rain.

 

[SoBeDad]

First, stop by the eye doctors office in there and say hi to Gatorman who is seeing patients in North Miami.

My daughters and I have been going to North Miami Costco Optometry for 20+ years! Great service every visit. They moved to California 4 years ago, but I was just at Costco Optometry a few weeks ago. Fun fact Gatorman ... on my first visit 25 years ago, I spoke with the doc about fantasy football, cause I noticed a website on a desktop!

 

[Gatorman]

First, stop by the eye doctors office in there and say hi to Gatorman who is seeing patients in North Miami.

My daughters and I have been going to North Miami Costco Optometry for 20+ years! Great service every visit. They moved to California 4 years ago, but I was just at Costco Optometry a few weeks ago. Fun fact Gatorman ... on my first visit 25 years ago, I spoke with the doc about fantasy football, cause I noticed a website on a desktop!

Then that was me. LMK next time.

 

[jvdesigns2002]

One of the more low-key lessons that I've learned over the past few years is that people get a lot more upset about inflation (and, relatedly, higher interest rates) than I would have guessed. I was a kid at the time, but folks must have been incandescently pissed through much of the 1970s and early 80s. I understand now on a psychological level why the Fed is so willing to accept some extra unemployment if that's what it takes to keep inflation in the 2-3% range.

So true, people HATE inflation. I can't find it now, but there was a survey result going around a few months ago where most people said something like a 2% increase in inflation was worse than a 2% increase in unemployment. So paying a few extra pennies for your Little Debbie Nutty Buddy at the Piddly Widdly or your 128 oz Mtn. Dew Baja Blast at 7-11 is worse than hundreds of thousands of people losing their jobs. Got it.

Replace Nutty Buddy with gasoline. Nothing seems to get people more upset than seeing gas go up.

We don't pay enough for gas.

And when we buy prescription medicine we're buying one in the UK, three in India, and another couple in Japan. We subsidize the world.

I don't feel guilty paying for cheap gas - we make it up elsewhere.

The damage we do using carbon emitting fuel is a global problem that impacts generations to come. I don't think inefficient price distribution of prescription drugs is equivalent.

We should also pay a lot more for everything plastic, ideally we should look to eliminate use of plastics to the greatest extent possible.

Totally agree on the plastic thing. The carbon thing is irrelevant unless we get countries like China to match our efforts.

You need to pay attention more to the advances they are making. China realizes the world will run out of gas. We just build bigger SUVs and ***** a ev can't go 300 miles.

I’m not just focused on cars. Industrial carbon usage matters too.

They are winning there also.

Don’t believe everything you hear about China. I have indirect and direct contacts there (through business relationships)—and a lot of their being “ahead” of us is nothing more than government controlled propaganda. The CCP control everything from the media to the internet there. The reason why they sell so many EV’s there is because of developers “scamming the government” through fake sales and due to failures in their infrastructure (the vast majority of China’s cities have massive drainage issues) and anytime they get a moderate rain—they experience bad flooding which destroys lots of vehicles. The CCP will create programs to where EV manufacturers might get what is equivalent to a $3-4k check from the government for every EV they sell—so the developers come up with ways to make a crap EV that costs them less than $3-4k—-doctor up a bunch of fake sales—-and the cars just sit idle in fields all around the country. Similar types of scams happened with bikes for ride sharing—and the country had mountains of bikes just rotting away all over the place. The groundwater is so bad in China that 90% of it is unusable—not “undrinkable”. Literally—it is so toxic that even its use for industrial uses is questionable. I have contacts in tier 1, tier 2 and tier 3 cities—and they all tell me that things are really bad over there. I have a couple contacts in Shanghai that tell me that the malls and the business oriented parts of the city are turning into ghost towns. Keep in mind—I’m not anti-China—- (I admit that I’m certainly not a fan of the CCP government)—as I’d love to see a world where everybody is doing well and improving—but the notion that they are “ahead” in some of the stuff you mention is nothing more than narrative driven by propaganda. The CCP is paying influencers to create controlled content glorifying their infrastructure—but what you don’t see is that a lot of their infrastructure is a facade. Brand new roads and highways there are collapsing randomly, buildings randomly toppling over, fake drainage grates, tofu dreg construction. The reason why they are pumping out so much propaganda is because their economy is so dependent on foreign investment. They have to make it look like they are above and beyond to entice people to park their money there. Their consumer driven economy has all but halted as the Ponzi scheme that was their real estate market all but collapsed recently.

 

[Sand]

One of the more low-key lessons that I've learned over the past few years is that people get a lot more upset about inflation (and, relatedly, higher interest rates) than I would have guessed. I was a kid at the time, but folks must have been incandescently pissed through much of the 1970s and early 80s. I understand now on a psychological level why the Fed is so willing to accept some extra unemployment if that's what it takes to keep inflation in the 2-3% range.

So true, people HATE inflation. I can't find it now, but there was a survey result going around a few months ago where most people said something like a 2% increase in inflation was worse than a 2% increase in unemployment. So paying a few extra pennies for your Little Debbie Nutty Buddy at the Piddly Widdly or your 128 oz Mtn. Dew Baja Blast at 7-11 is worse than hundreds of thousands of people losing their jobs. Got it.

Replace Nutty Buddy with gasoline. Nothing seems to get people more upset than seeing gas go up.

We don't pay enough for gas.

And when we buy prescription medicine we're buying one in the UK, three in India, and another couple in Japan. We subsidize the world.

I don't feel guilty paying for cheap gas - we make it up elsewhere.

The damage we do using carbon emitting fuel is a global problem that impacts generations to come. I don't think inefficient price distribution of prescription drugs is equivalent.

We should also pay a lot more for everything plastic, ideally we should look to eliminate use of plastics to the greatest extent possible.

Totally agree on the plastic thing. The carbon thing is irrelevant unless we get countries like China to match our efforts.

You need to pay attention more to the advances they are making. China realizes the world will run out of gas. We just build bigger SUVs and ***** a ev can't go 300 miles.

I’m not just focused on cars. Industrial carbon usage matters too.

They are winning there also.

Don’t believe everything you hear about China. I have indirect and direct contacts there (through business relationships)—and a lot of their being “ahead” of us is nothing more than government controlled propaganda. The CCP control everything from the media to the internet there. The reason why they sell so many EV’s there is because of developers “scamming the government” through fake sales and due to failures in their infrastructure (the vast majority of China’s cities have massive drainage issues) and anytime they get a moderate rain—they experience bad flooding which destroys lots of vehicles. The CCP will create programs to where EV manufacturers might get what is equivalent to a $3-4k check from the government for every EV they sell—so the developers come up with ways to make a crap EV that costs them less than $3-4k—-doctor up a bunch of fake sales—-and the cars just sit idle in fields all around the country. Similar types of scams happened with bikes for ride sharing—and the country had mountains of bikes just rotting away all over the place. The groundwater is so bad in China that 90% of it is unusable—not “undrinkable”. Literally—it is so toxic that even its use for industrial uses is questionable. I have contacts in tier 1, tier 2 and tier 3 cities—and they all tell me that things are really bad over there. I have a couple contacts in Shanghai that tell me that the malls and the business oriented parts of the city are turning into ghost towns. Keep in mind—I’m not anti-China—- (I admit that I’m certainly not a fan of the CCP government)—as I’d love to see a world where everybody is doing well and improving—but the notion that they are “ahead” in some of the stuff you mention is nothing more than narrative driven by propaganda. The CCP is paying influencers to create controlled content glorifying their infrastructure—but what you don’t see is that a lot of their infrastructure is a facade. Brand new roads and highways there are collapsing randomly, buildings randomly toppling over, fake drainage grates, tofu dreg construction. The reason why they are pumping out so much propaganda is because their economy is so dependent on foreign investment. They have to make it look like they are above and beyond to entice people to park their money there. Their consumer driven economy has all but halted as the Ponzi scheme that was their real estate market all but collapsed recently.

It does appear, in the case of BYD, that they are ahead in sodium ion batteries. Which look to be pretty compelling.

The rest of it doesn't surprise me. This goes back to the west's panic over rare earth elements. They aren't really that rare but they are a pain to purify. The Chinese are more than willing to rape the earth and pollute their country to pull this stuff out cheap. We aren't.

 

[Dinsy Ejotuz]

I thought the link to the Yardeni charts and etc were great upthread, so thought I'd drop some other views in here for others who might like similar stuff. These guys have a podcast and post all the charts they talk about on each show. Over time it's a great source of info from a team who tries hard to get it right.

https://awealthofcommonsense.com/2024/08/animal-spirits/ (scroll down for charts)

 

[Battersbox]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

 

[stbugs]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

I’ll be honest that I don’t get it. Your daughter chose the more expensive school and has the same debt? My oldest went out of state but had a nice scholarship. It was still more than in state so he took out the same minimum loans. He’s been out a year and he’s paying the $200 a month plus some extra now. My middle son started his sophomore year in state and I told him when he was deciding that if he went in state he’d graduate with no loans. I haven’t even filled out FAFSA for him the past two years. Even with the loans and scholarship, I still paid more for my oldest so I have no problem only having him take out loans and not my middle son. My oldest understands and didn’t have a problem with it because he knows we paid more.

If my youngest goes in state, I plan to not do loans for him as well. He’s a bit more of an academic so I’m hoping he gets some scholarships like his older brother but he’s pretty frugal already so I think he wants to go in state anyway and there are a couple really good ones. Hoping he gets in to his favorite.

 

[General Malaise]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

You and I are on the exact same page. Great post. Agree 100%.

 

[IvanKaramazov]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

Sounds reasonable to me. I can see where this sort of thing might be helpful just to make sure that your kids fully understand how expensive this is and what a serious undertaking it is. As you note, you can pay off those loans for them after graduation if you're so inclined.

 

[DA RAIDERS]

One of the more low-key lessons that I've learned over the past few years is that people get a lot more upset about inflation (and, relatedly, higher interest rates) than I would have guessed. I was a kid at the time, but folks must have been incandescently pissed through much of the 1970s and early 80s. I understand now on a psychological level why the Fed is so willing to accept some extra unemployment if that's what it takes to keep inflation in the 2-3% range.

So true, people HATE inflation. I can't find it now, but there was a survey result going around a few months ago where most people said something like a 2% increase in inflation was worse than a 2% increase in unemployment. So paying a few extra pennies for your Little Debbie Nutty Buddy at the Piddly Widdly or your 128 oz Mtn. Dew Baja Blast at 7-11 is worse than hundreds of thousands of people losing their jobs. Got it.

Replace Nutty Buddy with gasoline. Nothing seems to get people more upset than seeing gas go up.

We don't pay enough for gas.

And when we buy prescription medicine we're buying one in the UK, three in India, and another couple in Japan. We subsidize the world.

I don't feel guilty paying for cheap gas - we make it up elsewhere.

The damage we do using carbon emitting fuel is a global problem that impacts generations to come. I don't think inefficient price distribution of prescription drugs is equivalent.

We should also pay a lot more for everything plastic, ideally we should look to eliminate use of plastics to the greatest extent possible.

Totally agree on the plastic thing. The carbon thing is irrelevant unless we get countries like China to match our efforts.

You need to pay attention more to the advances they are making. China realizes the world will run out of gas. We just build bigger SUVs and ***** a ev can't go 300 miles.

I’m not just focused on cars. Industrial carbon usage matters too.

They are winning there also.

Don’t believe everything you hear about China. I have indirect and direct contacts there (through business relationships)—and a lot of their being “ahead” of us is nothing more than government controlled propaganda. The CCP control everything from the media to the internet there. The reason why they sell so many EV’s there is because of developers “scamming the government” through fake sales and due to failures in their infrastructure (the vast majority of China’s cities have massive drainage issues) and anytime they get a moderate rain—they experience bad flooding which destroys lots of vehicles. The CCP will create programs to where EV manufacturers might get what is equivalent to a $3-4k check from the government for every EV they sell—so the developers come up with ways to make a crap EV that costs them less than $3-4k—-doctor up a bunch of fake sales—-and the cars just sit idle in fields all around the country. Similar types of scams happened with bikes for ride sharing—and the country had mountains of bikes just rotting away all over the place. The groundwater is so bad in China that 90% of it is unusable—not “undrinkable”. Literally—it is so toxic that even its use for industrial uses is questionable. I have contacts in tier 1, tier 2 and tier 3 cities—and they all tell me that things are really bad over there. I have a couple contacts in Shanghai that tell me that the malls and the business oriented parts of the city are turning into ghost towns. Keep in mind—I’m not anti-China—- (I admit that I’m certainly not a fan of the CCP government)—as I’d love to see a world where everybody is doing well and improving—but the notion that they are “ahead” in some of the stuff you mention is nothing more than narrative driven by propaganda. The CCP is paying influencers to create controlled content glorifying their infrastructure—but what you don’t see is that a lot of their infrastructure is a facade. Brand new roads and highways there are collapsing randomly, buildings randomly toppling over, fake drainage grates, tofu dreg construction. The reason why they are pumping out so much propaganda is because their economy is so dependent on foreign investment. They have to make it look like they are above and beyond to entice people to park their money there. Their consumer driven economy has all but halted as the Ponzi scheme that was their real estate market all but collapsed recently.

I watched a documentary about those fields of unused Ev and mountains of bicycles crazy

 

[DA RAIDERS]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

You and I are on the exact same page. Great post. Agree 100%.

Same.

 

[STEADYMOBBIN 22]

One of the more low-key lessons that I've learned over the past few years is that people get a lot more upset about inflation (and, relatedly, higher interest rates) than I would have guessed. I was a kid at the time, but folks must have been incandescently pissed through much of the 1970s and early 80s. I understand now on a psychological level why the Fed is so willing to accept some extra unemployment if that's what it takes to keep inflation in the 2-3% range.

So true, people HATE inflation. I can't find it now, but there was a survey result going around a few months ago where most people said something like a 2% increase in inflation was worse than a 2% increase in unemployment. So paying a few extra pennies for your Little Debbie Nutty Buddy at the Piddly Widdly or your 128 oz Mtn. Dew Baja Blast at 7-11 is worse than hundreds of thousands of people losing their jobs. Got it.

Replace Nutty Buddy with gasoline. Nothing seems to get people more upset than seeing gas go up.

We don't pay enough for gas.

And when we buy prescription medicine we're buying one in the UK, three in India, and another couple in Japan. We subsidize the world.

I don't feel guilty paying for cheap gas - we make it up elsewhere.

The damage we do using carbon emitting fuel is a global problem that impacts generations to come. I don't think inefficient price distribution of prescription drugs is equivalent.

We should also pay a lot more for everything plastic, ideally we should look to eliminate use of plastics to the greatest extent possible.

Totally agree on the plastic thing. The carbon thing is irrelevant unless we get countries like China to match our efforts.

You need to pay attention more to the advances they are making. China realizes the world will run out of gas. We just build bigger SUVs and ***** a ev can't go 300 miles.

I’m not just focused on cars. Industrial carbon usage matters too.

They are winning there also.

Don’t believe everything you hear about China. I have indirect and direct contacts there (through business relationships)—and a lot of their being “ahead” of us is nothing more than government controlled propaganda. The CCP control everything from the media to the internet there. The reason why they sell so many EV’s there is because of developers “scamming the government” through fake sales and due to failures in their infrastructure (the vast majority of China’s cities have massive drainage issues) and anytime they get a moderate rain—they experience bad flooding which destroys lots of vehicles. The CCP will create programs to where EV manufacturers might get what is equivalent to a $3-4k check from the government for every EV they sell—so the developers come up with ways to make a crap EV that costs them less than $3-4k—-doctor up a bunch of fake sales—-and the cars just sit idle in fields all around the country. Similar types of scams happened with bikes for ride sharing—and the country had mountains of bikes just rotting away all over the place. The groundwater is so bad in China that 90% of it is unusable—not “undrinkable”. Literally—it is so toxic that even its use for industrial uses is questionable. I have contacts in tier 1, tier 2 and tier 3 cities—and they all tell me that things are really bad over there. I have a couple contacts in Shanghai that tell me that the malls and the business oriented parts of the city are turning into ghost towns. Keep in mind—I’m not anti-China—- (I admit that I’m certainly not a fan of the CCP government)—as I’d love to see a world where everybody is doing well and improving—but the notion that they are “ahead” in some of the stuff you mention is nothing more than narrative driven by propaganda. The CCP is paying influencers to create controlled content glorifying their infrastructure—but what you don’t see is that a lot of their infrastructure is a facade. Brand new roads and highways there are collapsing randomly, buildings randomly toppling over, fake drainage grates, tofu dreg construction. The reason why they are pumping out so much propaganda is because their economy is so dependent on foreign investment. They have to make it look like they are above and beyond to entice people to park their money there. Their consumer driven economy has all but halted as the Ponzi scheme that was their real estate market all but collapsed recently.

I watched a documentary about those fields of unused Ev and mountains of bicycles crazy

I have a friend who travels to China all the time and he has said for years that it’s all lies and that they are a house of cards. Massive poverty and the majority of people outside the cities are destitute and living on and off the land.

 

[Battersbox]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

I’ll be honest that I don’t get it. Your daughter chose the more expensive school and has the same debt? My oldest went out of state but had a nice scholarship. It was still more than in state so he took out the same minimum loans. He’s been out a year and he’s paying the $200 a month plus some extra now. My middle son started his sophomore year in state and I told him when he was deciding that if he went in state he’d graduate with no loans. I haven’t even filled out FAFSA for him the past two years. Even with the loans and scholarship, I still paid more for my oldest so I have no problem only having him take out loans and not my middle son. My oldest understands and didn’t have a problem with it because he knows we paid more.

If my youngest goes in state, I plan to not do loans for him as well. He’s a bit more of an academic so I’m hoping he gets some scholarships like his older brother but he’s pretty frugal already so I think he wants to go in state anyway and there are a couple really good ones. Hoping he gets in to his favorite.

I don't really view it as what's fair between them. He chose to stay in state because he loved the program which was offered. He had every opportunity to spend as much of our money as my daughter is spending, he simply chose not to do so. Now, with that said, it is possible we might cover more of his debt on the other end of this than we do for our daughter because he did use our resources to a lesser extent. We're holding back on those decisions until much later because frankly, we can. No reason to make the decision now.

NO matter where they had chosen to go though my wife and I agreed it's smart to make them take a bit of debt for the reasons stated above 'skin in the game'. It's no different than making them old jobs...it's good for their character. Going to work and having a boss and sacrificing some of their free time is about far more than the little paycheck they get out of it. Similarly, holding a bit of gov't-subsidized debt for a few years could potentially help them grow-up financially.

 

[Orange&Blue]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

why not go galavanting around europe and waiting for government to forgive your student loan debt...

 

[Battersbox]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

why not go galavanting around europe and waiting for government to forgive your student loan debt...

I would be lying if I said it hadn't crossed my mind that another reason to have my kids hold a bit of student loan debt was the possibility of later cancellation. I vehemently disagree with any cancellation, but if it happens I sure want to benefit like everyone else.

 

[Psychopav]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

You and I are on the exact same page. Great post. Agree 100%.

Same.

+1

Exactly how I handled my kids' college costs so far. Kid #3 has savings and is opting to pay the tuition rather than take the loans. Good choice.

 

[Orange&Blue]

Credit card balances are a measure of consumer spending – including for expensive business trips that are reimbursed. They’re not a measure of borrowing because most balances are paid off by due date and never accrue interest, but allow cardholders to get their 1% or 2% cashback, airmiles, and other loyalty benefits. Credit cards are the dominant payment method used by consumers in the US, ahead of debit cards, and far ahead of other payment methods, such as checks or cash.

This is an interesting angle, that would seem likely to skew the data and that I hadn't considered. Although I wonder how much of an impact it really has - despite the crowds in every Centurion Lounge I've been in over the past few months, most Americans aren't traveling for business regularly. And despite my Facebook feed since I've gotten into the points/miles game the past several months (does everyone fly first class on Emirates? I sure never have!), how many people are really trying to maximize cc spend?

Either way, more support for the thinking that delinquencies, collections, % of credit used would be much more useful metrics to judge the state of consumer debt than the total amount of it. I'm curious how much the metric I've tended to focus on, % of disposable income, gets skewed by the above.

It is anecdotal, obviously, but I charge every expense possible to my Amazon Visa card. All gas, groceries, restaurants, shopping, monthly bills, healthcare copayments, home supplies, etc. I pay the balance in full every month and get about $1K in cash back every year. I would expect this to be common behavior for most people who can afford to pay in full every month. I would expect it significantly skews the data.

fwiw, amazon visa isn't bad, but there are better options if going straight cash back.

 

[Sand]

Credit card balances are a measure of consumer spending – including for expensive business trips that are reimbursed. They’re not a measure of borrowing because most balances are paid off by due date and never accrue interest, but allow cardholders to get their 1% or 2% cashback, airmiles, and other loyalty benefits. Credit cards are the dominant payment method used by consumers in the US, ahead of debit cards, and far ahead of other payment methods, such as checks or cash.

This is an interesting angle, that would seem likely to skew the data and that I hadn't considered. Although I wonder how much of an impact it really has - despite the crowds in every Centurion Lounge I've been in over the past few months, most Americans aren't traveling for business regularly. And despite my Facebook feed since I've gotten into the points/miles game the past several months (does everyone fly first class on Emirates? I sure never have!), how many people are really trying to maximize cc spend?

Either way, more support for the thinking that delinquencies, collections, % of credit used would be much more useful metrics to judge the state of consumer debt than the total amount of it. I'm curious how much the metric I've tended to focus on, % of disposable income, gets skewed by the above.

It is anecdotal, obviously, but I charge every expense possible to my Amazon Visa card. All gas, groceries, restaurants, shopping, monthly bills, healthcare copayments, home supplies, etc. I pay the balance in full every month and get about $1K in cash back every year. I would expect this to be common behavior for most people who can afford to pay in full every month. I would expect it significantly skews the data.

fwiw, amazon visa isn't bad, but there are better options if going straight cash back.

Open a brokerage account at Fidelity and get their 2% cashback card - redeems straight into the account. Or the Citi double cash card.

 

[General Malaise]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

Sounds reasonable to me. I can see where this sort of thing might be helpful just to make sure that your kids fully understand how expensive this is and what a serious undertaking it is. As you note, you can pay off those loans for them after graduation if you're so inclined.

Not sure why I feel compelled to post this here, but I've shared in other threads that my second son was asked NOT to come back for his junior year at our state university due to what some might call a failure to attend classes and/or maintain a GPA above 2.0. Did fine his freshman year, his soph year? I don't think he did anything more than attend sporting events and become ultimate "Frat Guy" last year.

Now, this kid also took out some student loans and we paid the balance, including his living expenses. But here's a really important and expensive lesson that he (and we) learned the hard way. When you fail to maintain the minimum GPA for a semester after being placed on Academic Probation, the loans AND grants you received get kicked back and that money is payable to the university. Due in full now or interest begins accumulating. Whoops.

Anyhow, I told him "buddy, this one is on you. We agreed to help you as long as you made your grades. So this nut is yours to cover and if it takes you 2-3 years, so be it." He agreed, but it's going to be a while before he's getting this monkey off his back. But if I paid this off for him, I don't think he learns anything. And my wife would divorce me if I did, so......yeah. Not doing another one of those.

 

[Battersbox]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

Sounds reasonable to me. I can see where this sort of thing might be helpful just to make sure that your kids fully understand how expensive this is and what a serious undertaking it is. As you note, you can pay off those loans for them after graduation if you're so inclined.

Not sure why I feel compelled to post this here, but I've shared in other threads that my second son was asked NOT to come back for his junior year at our state university due to what some might call a failure to attend classes and/or maintain a GPA above 2.0. Did fine his freshman year, his soph year? I don't think he did anything more than attend sporting events and become ultimate "Frat Guy" last year.

Now, this kid also took out some student loans and we paid the balance, including his living expenses. But here's a really important and expensive lesson that he (and we) learned the hard way. When you fail to maintain the minimum GPA for a semester after being placed on Academic Probation, the loans AND grants you received get kicked back and that money is payable to the university. Due in full now or interest begins accumulating. Whoops.

Anyhow, I told him "buddy, this one is on you. We agreed to help you as long as you made your grades. So this nut is yours to cover and if it takes you 2-3 years, so be it." He agreed, but it's going to be a while before he's getting this monkey off his back. But if I paid this off for him, I don't think he learns anything. And my wife would divorce me if I did, so......yeah. Not doing another one of those.

I have fears about my son going down a similar road. Bright kid, but he's not his sister. He doesn't live for grades. If he parties too much, he comes home and starts paying down this early debt. You're doing the right thing by him in the long run.

 

[General Malaise]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

Sounds reasonable to me. I can see where this sort of thing might be helpful just to make sure that your kids fully understand how expensive this is and what a serious undertaking it is. As you note, you can pay off those loans for them after graduation if you're so inclined.

Not sure why I feel compelled to post this here, but I've shared in other threads that my second son was asked NOT to come back for his junior year at our state university due to what some might call a failure to attend classes and/or maintain a GPA above 2.0. Did fine his freshman year, his soph year? I don't think he did anything more than attend sporting events and become ultimate "Frat Guy" last year.

Now, this kid also took out some student loans and we paid the balance, including his living expenses. But here's a really important and expensive lesson that he (and we) learned the hard way. When you fail to maintain the minimum GPA for a semester after being placed on Academic Probation, the loans AND grants you received get kicked back and that money is payable to the university. Due in full now or interest begins accumulating. Whoops.

Anyhow, I told him "buddy, this one is on you. We agreed to help you as long as you made your grades. So this nut is yours to cover and if it takes you 2-3 years, so be it." He agreed, but it's going to be a while before he's getting this monkey off his back. But if I paid this off for him, I don't think he learns anything. And my wife would divorce me if I did, so......yeah. Not doing another one of those.

I have fears about my son going down a similar road. Bright kid, but he's not his sister. He doesn't live for grades. If he parties too much, he comes home and starts paying down this early debt. You're doing the right thing by him in the long run.

Crazy how kids 19 months apart can be SO different. Our oldest son is going to graduate on time with two majors and an econ minor for good measure. Fluent in Spanish and I think he's made one B total in 3+ years. He'll have some student loan debt, but he also has enough saved in a brokerage account and a CD to pay it all off at once if he wants to (and I'm telling him not to for similar reasons to you, plus he should let his investments grow and chop the debt down at his pace). Has held a job the entire time he's been in college and could work for UO after he graduates if he wants.

So, on one hand, I've got this over-achieving child who makes me feel like the best father in the world and on the other, I've got Chazz Rheinhold living in my basement using up all our bandwidth on Xbox games.

 

[SFBayDuck]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

Sounds reasonable to me. I can see where this sort of thing might be helpful just to make sure that your kids fully understand how expensive this is and what a serious undertaking it is. As you note, you can pay off those loans for them after graduation if you're so inclined.

Not sure why I feel compelled to post this here, but I've shared in other threads that my second son was asked NOT to come back for his junior year at our state university due to what some might call a failure to attend classes and/or maintain a GPA above 2.0. Did fine his freshman year, his soph year? I don't think he did anything more than attend sporting events and become ultimate "Frat Guy" last year.

Now, this kid also took out some student loans and we paid the balance, including his living expenses. But here's a really important and expensive lesson that he (and we) learned the hard way. When you fail to maintain the minimum GPA for a semester after being placed on Academic Probation, the loans AND grants you received get kicked back and that money is payable to the university. Due in full now or interest begins accumulating. Whoops.

Anyhow, I told him "buddy, this one is on you. We agreed to help you as long as you made your grades. So this nut is yours to cover and if it takes you 2-3 years, so be it." He agreed, but it's going to be a while before he's getting this monkey off his back. But if I paid this off for him, I don't think he learns anything. And my wife would divorce me if I did, so......yeah. Not doing another one of those.

I have fears about my son going down a similar road. Bright kid, but he's not his sister. He doesn't live for grades. If he parties too much, he comes home and starts paying down this early debt. You're doing the right thing by him in the long run.

I went down this path myself, did well early on but then stopped regularly going to class, partyed too much, etc. So my parents rightfully cut me off early in my Junior year after paying up to that point. I took out loans, kept messing around in school, got (horrrible) jobs, and went to Alaska to work two summers. While it took 2 1/2 more years to finish my final year it was all on me to figure out and I finally got back on track. It taught me a lot.

I've talked to my parents about it since, and what a hard decision it was for them to cut me loose. And I always end up thanking them for doing so.

 

[dgreen]

Mortgage rates in 1990 were 10.4%. It was not easier back then for people in their mid-20s to buy a home.

This is misleading. PITI is a much better metric

Do you think it was "easier" for a person in their mid-20s to buy a home in 1990? I don't.

College was cheaper. That's going to be a factor. School debt and car debt is going to keep 20s out of homes for a bit.

There's probably something to this. Neither my wife nor I had any student load debt when we graduated. Neither did most people we knew. Student loans existed, of course, but it seemed pretty uncommon to encounter anybody with substantial college debt unless they were a cardiologist or something. My wife and I made it a priority for our own kids to graduate debt-free, and I'm surprised at the number of people in their peer group graduating with debt even though their families could have easily afforded otherwise.

For example, my son's girlfriend (who he can propose to any day now, but that's a separate conversation for another time) has about $50K in student loans stemming from her graduate degree in occupational therapy. Now, obviously, she is going to be just fine. It's not like she took out this debt for a master's degree in gender studies or something -- she'll have no problem recouping this. But I've met her family, and they're loaded. They're taking their kids and SOs (including my son) to Europe for a family trip later this year. That's nice and everything, but don't you think getting your own children off to a debt-free start is a little more important than galavanting around a dying continent? I'll admit to being very judgey about parents who get their kids set up for success but just choose not to do so.

I hear you on parents who won't help out their kids to the extent they're able, but there is a flip side to this as well.

I'm a believer that there's value in kids having some skin in the game when it comes to their own education. My son did me the favor of choosing to stay in-state for his educations, and it's going to save me massive amounts of money. Still, I'm having him take the gov't subsidized loans nonetheless...(5,500 fresh year, 6,500 soph, etc). He'll come out with 28k in debt. We may help him with that after graduation, we may not, but it's valuable I think for him to have some ownership in what's being paid. For my daughter, who decided to go out of state, we're paying much more of course, but she'll exit with the same $28k in debt. We've already told her she of course can live at home for as long as she wants rent free, but we expect her to aggressively pay off these loans while she does so.

Sounds reasonable to me. I can see where this sort of thing might be helpful just to make sure that your kids fully understand how expensive this is and what a serious undertaking it is. As you note, you can pay off those loans for them after graduation if you're so inclined.

Not sure why I feel compelled to post this here, but I've shared in other threads that my second son was asked NOT to come back for his junior year at our state university due to what some might call a failure to attend classes and/or maintain a GPA above 2.0. Did fine his freshman year, his soph year? I don't think he did anything more than attend sporting events and become ultimate "Frat Guy" last year.

Now, this kid also took out some student loans and we paid the balance, including his living expenses. But here's a really important and expensive lesson that he (and we) learned the hard way. When you fail to maintain the minimum GPA for a semester after being placed on Academic Probation, the loans AND grants you received get kicked back and that money is payable to the university. Due in full now or interest begins accumulating. Whoops.

Anyhow, I told him "buddy, this one is on you. We agreed to help you as long as you made your grades. So this nut is yours to cover and if it takes you 2-3 years, so be it." He agreed, but it's going to be a while before he's getting this monkey off his back. But if I paid this off for him, I don't think he learns anything. And my wife would divorce me if I did, so......yeah. Not doing another one of those.

I have fears about my son going down a similar road. Bright kid, but he's not his sister. He doesn't live for grades. If he parties too much, he comes home and starts paying down this early debt. You're doing the right thing by him in the long run.

I went down this path myself, did well early on but then stopped regularly going to class, partyed too much, etc. So my parents rightfully cut me off early in my Junior year after paying up to that point. I took out loans, kept messing around in school, got (horrrible) jobs, and went to Alaska to work two summers. While it took 2 1/2 more years to finish my final year it was all on me to figure out and I finally got back on track. It taught me a lot.

I've talked to my parents about it since, and what a hard decision it was for them to cut me loose. And I always end up thanking them for doing so.

I didn't do the partying thing, but I was not a good student going all the way back to late elementary school. I probably shouldn't have graduated HS on time, but I did. I then took a year off (we didn't call it a gap year back then) because I had no idea what I wanted to do. I then ended up in a college, continued to get bad grades, and failed a few classes. Like I said, I wasn't partying, but I just wasn't going to class (especially morning classes!) and put in no effort. I followed a girl (who is now my wife) and transferred to another school back home. Still having no idea what I wanted to do, I ended up in an econ class that the professor made interesting so I declared that as my major. All of sudden, since I found the topics interesting, I was getting all As and Bs and graduated with a good GPA (because my classes from the previous college simply transferred as pass/fail so my GPA started clean at the new college).

All of that to say, for me, I had to find something that I was interested in. I'm still that way today. I have no motivation to do anything I'm not interested in. I can easily get bored and lack drive if I'm not engaged in something that I find interesting. Maybe some of the kids that parents are worried about just haven't found that subject that moves them.