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The Terrifying Reality of Long-Term Unemployment

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Re: The Terrifying Reality of Long-Term Unemployment

#281

Post by pekk »

_delirium wrote: post #155
cletus wrote: post #84

This doesn't surprise me at all. One thing I've come to learn in life is the importance of social proof. Social proof takes many form. It's why MIT and Stanford CS grads have tech companies come to their campuses and throw money at them (these institutions don't have a monopoly on good engineers). It's why if you have Google/Facebook/Twitter on your CV you are pretty much guaranteed a job. It's why academic staff who…

The social-proof side not only means you need to have jobs, but they have to be a certain "class" of jobs. Though you can invent them pretty well. Here's a story from an acquaintance (don't know him that well, so may or may not be apocryphal, but it seems plausible). For a period of 2 years he worked at Home Depot to pay the bills, and did a bit of puttering around on tech side projects on the side. Not really any ki…

It really seems that honesty is a gigantic liability in this industry.

Re: The Terrifying Reality of Long-Term Unemployment

#282

Post by quesera »

jquery wrote: post #255
quesera wrote: post #176

Earlier quoted context omitted.

It depends. The interest portion is very high in the beginning of the mortgage and very low at the end. In a typical 30yr mortgage, you will make 360 monthly (roughly equal) payments. If your mortgage payment is $1000/mo, payment #1 will be approximately $950 interest and $50 principal. Payment #360 will be ~ $50 interest and $950 principal. Most people move every five or six years (historical, might not be true with…

I just bought a home and 40% of my payments are principal from day 1. That's at 3.5% interest. If you get a conventional loan instead of a jumbo, you can do even better than that. Mortgage interest deductions make the calculus even better. Plus tax-free capital gains. It was quite the slam-dunk easy decision to make where I live (San Francisco), considering how hot the rental market is. My house rents for $1k more th…

Interesting. If I understand the math correctly, that means that you have an effectively variable interest rate over the life of the loan (though presumably it will average out to the 3.5%). Is there a special name for that kind of loan?

The reason mortgages front load the interest is not to victimize borrowers (that's just a pleasant side effect) but because in the early days of the loan, you are using more of the lender's money. You pay it back slowly, but you pay interest in each payment on the amount that you're using at that point in the term.

So payment #1, you pay interest on ~100% of the loan. Plus a little extra to reduce your principal. Next payment is interest on ~99.8% (100% minus 1/360th), plus a little extra (more than last time) for principal reduction so that the payments total the same amount. On and on til payment #360.

If you're paying 40% principal on payment #1, by my math, either your effective interest rate is variable over the term, or you're choosing to overpay the invoice (applying the excess to principal -- which makes a huge difference in the early years).

I'm surprised the economics of buying work out so well in SF these days. When I left, it was the other way around. Interest rates help a lot. Congrats on the house!

Re: The Terrifying Reality of Long-Term Unemployment

#283

Post by yen223 »

t0mbstone wrote: post #116

Here's an idea. Think outside of the box: If being employed in the past six months is really such a big deal, just start your own LLC and do contracting work of some sort. Hey, look at that. Now your resume shows that you were employed during that period. Sure, you might not have made all that much money while you were employed at your own business, but at least you were employed.

If finding contracting work were easy, the person wouldn't be unemployed for 6 months now, would he?

Re: The Terrifying Reality of Long-Term Unemployment

#284

Post by luser001 »

enraged_camel wrote: post #127
cletus wrote: post #84

This doesn't surprise me at all. One thing I've come to learn in life is the importance of social proof. Social proof takes many form. It's why MIT and Stanford CS grads have tech companies come to their campuses and throw money at them (these institutions don't have a monopoly on good engineers). It's why if you have Google/Facebook/Twitter on your CV you are pretty much guaranteed a job. It's why academic staff who…

>>There is another side of this that the article doesn't touch on: home ownership. Oh boy. There's so much I can say about this topic, and none of it is positive. Basically, the way our culture mindlessly promotes home ownership is insane. Absolutely insane! Every time I hear people complaining about "throwing away money" by renting, and how they would rather put that money into a house, I want to hold them by the sh…

Given your last point re: kids, how is it "insane" that people want to buy houses? Most people have/want to have kids.

Btw, I don't agree with your last point. It's pretty much possible to stay in a rented apartment for 5 years at a time quite easily. And kids go through wrenching changes every five years on average (home->kindergarten->middle->high school).

You make good points about the drawbacks of buying a house. However, the ability to lock in your housing expenses for the next 30 years (i.e., no impact of inflation) shouldn't be underestimated. IMHO.

Re: The Terrifying Reality of Long-Term Unemployment

#285

Post by sfont »

nilkn wrote: post #278
scarecrowbob wrote: post #234

Earlier quoted context omitted.

I second your post here-- I am currently idled through the end of summer by choice (we're moving and then traveling), but it's not a big deal-- I live in the sticks, but I do drive into Austin, TX pretty frequently. There are indeed a lot of opportunities, but you do have to focus on business development as part of what you're doing; while I don't have a lot of specific offers on my plate for the fall, I'm not worrie…

I'm in TX too (not Austin, but another big city). I'm curious how you're liking consulting here and how it's going. Do you find most of your clients in Austin or are they remote? And do you feel like you would be better off just getting a salaried full-time job with benefits given the going rates here for salaries vs. consulting? If you don't mind spilling the beans (I understand if not), how much are you generally a…

I can't give you any insight into developer wages. But as far as commuting in the Houston area goes, I used to commute from Fort Bend County to Bush Airport (which really was an absurd commute) and it took me about an hour each way. So if you're trying to keep your commute under 45 minutes each way, you may have a wider area of acceptable areas to live in. Especially if you are thinking of companies inside the loop.

Re: The Terrifying Reality of Long-Term Unemployment

#286

Post by rdtsc »

dredmorbius wrote: post #237
nostromo wrote: post #186

Earlier quoted context omitted.

A few things you're not accounting for: * Leverage. (The most you can leverage a stock investment is 2x. For homes people can leverage their money up to an insane 20x, for example: by buying a 500k home with 25k down. The proper comparison is not to compare buying a 500k home vs 500k worth of stocks; it's buying 25k or 50k worth of stocks vs a 500k home.) * Mortgage deduction. (Imagine if you could invest 500k in the…

What leverages up can (and will) leverage down. The problem with the housing collapse was that people with low or zero down-payment mortgages found that the property value fell, wiping out their entire stake (if they had any at all). More skin in the game should (though there's some research suggesting otherwise) make the market more stable by reducing the ability to speculate. This is a lesson that goes back to the…

Each of those is an contribution to risk and and potential reward, I guess it still comes down to whether people think their house will appreciate or not faster than inflation.

There is also:

* Closing costs. 5k to 10k can easily go to that only. So just buying and selling constantly could end wasted eaten "transaction costs"

* Chance of moving. Are you likely to move? If so think twice about a house. This is offset in the software world by working from home.

* You effectively get a 4% loan and pay it off in 30 years. That could be hundreds of thousands of dollars over the cost of your house you end up paying to the bank in 30 years. That completely escapes many people. Now there is inflation and the opportunity cost to do something else with the money but:

* You have to figure is your salary going to keep up with the inflation? You hope so right...right?

* Opportunity cost. Could you make more by buying some stock, and sell it after 30 years?

* Do you think housing is going to go up again or is the stock market going to go up faster. Same compounding for interest rate goes for reinvesting stock dividends.

Re: The Terrifying Reality of Long-Term Unemployment

#287

Post by rdtsc »

snowwrestler wrote: post #239
nostromo wrote: post #186

Earlier quoted context omitted.

A few things you're not accounting for: * Leverage. (The most you can leverage a stock investment is 2x. For homes people can leverage their money up to an insane 20x, for example: by buying a 500k home with 25k down. The proper comparison is not to compare buying a 500k home vs 500k worth of stocks; it's buying 25k or 50k worth of stocks vs a 500k home.) * Mortgage deduction. (Imagine if you could invest 500k in the…

Excellent summary. Home ownership will probably never in our lifetimes look like a better investment than it does now. Mortgages rates are extremely low, and because of all the quantitative easing, it's possible that we will see higher than average inflation over the next 10 years. As a result you can basically borrow hundreds of thousands of dollars, long-term for free. Inflation offsets a fixed interest rate--and t…

If nothing go and refinance now. At least do yourself a favor and calculate to see how much you'd save over the life of your loan.

Re: The Terrifying Reality of Long-Term Unemployment

#288

Post by rdtsc »

drcube wrote: post #196
nostrademons wrote: post #161

Earlier quoted context omitted.

It's because 2/3 of Americans are homeowners, so for a majority of Americans, falling house prices are bad. It's the same thing for most goods - the price mechanism is inherently value-neutral, and then whether it's better if prices go up or down depends upon how many people are potentially on each side of the transaction. Falling wages are seen as a bad thing, because most Americans identify with labor and not capit…

>It's because 2/3 of Americans are homeowners, so for a majority of Americans, falling house prices are bad. Why? Those homeowners shouldn't care what the price of their house is. While they're living in it, it doesn't matter, and when they sell, presumably their next house will be cheaper too. The only time home prices should matter is in comparison to the overall market. If your house got cheaper while other homes…

Maybe. BUT 2 things:

* Most bought and expect it to appreciate. Very important. That is the most important retirement asset they have. If their house loses half the money it could mean eating ramen for 20 years after retirement or eating steak.

* Property taxes. Some would actually not like it to appreciate too fast if they are not selling yet because they have to shell our many thousands of dollars a year. Ideally they would like the price to stay low then right before they sell, to spike through the roof.

Re: The Terrifying Reality of Long-Term Unemployment

#289

Post by rdtsc »

jdietrich wrote: post #157
enraged_camel wrote: post #127

Earlier quoted context omitted.

>>There is another side of this that the article doesn't touch on: home ownership. Oh boy. There's so much I can say about this topic, and none of it is positive. Basically, the way our culture mindlessly promotes home ownership is insane. Absolutely insane! Every time I hear people complaining about "throwing away money" by renting, and how they would rather put that money into a house, I want to hold them by the sh…

It's a very simple mathematical error - people compare the cost of a mortgage payment with the cost of a month's rent, failing to take into account that only a tiny fraction of the mortgage payment actually becomes equity. If they actually sit down and work it out, most people are astonished at how much flexibility they sacrifice for that small slice of equity.

It comes down to compounding interest. Same as with credit cards or really any similar debt (or investment).

People are: shown the total amount they have to pay to the bank over the life of the loan. It is hundreds of thousands of dollars over 30 years. And most can see in their statement what gets applied to principle and what gets applied to interest.

If they didn't screw themselves and get a loan with early payment penalties they are always free to pay extra anytime they see fit to reduce principle (and if it is early enough it could end up dramatically reducing the total interest paid).

TL;DR: people need to know more math

Re: The Terrifying Reality of Long-Term Unemployment

#290

Post by pnathan »

mgkimsal wrote: post #271
pnathan wrote: post #265

Earlier quoted context omitted.

> A single person might not mind having a small apartment or sharing with someone - people with families or other priorities can't live like that. Actually, people can . Immigrants are notorious for doing that in the US. If you're willing to rearrange your perceptions of what can be done... you could definitely have 3-5 people in a 800-900 sq. ft apartment. :-)

I thought that might be brought up when I was writing it, and you're right. Yes people can , but not everyone wants to, of course, and it's a pretty big sell to tell someone "pay $2500/month to live in this small apt to be close to company X" when there's far different options out there: bigger space, less pollution, better schools, cheaper food, perhaps closer to other relatives, etc. So yes, it can be done, but I t…

> I think many companies are doing themselves a disservice by requiring people to be onsite and live nearby or commute long distances.

Me too. But I believe that the cramped apartment is worth keeping open as an option.

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