Don't Quit Your Day Job…

The San Francisco Bay Area, generally agreed to include the nine California counties of Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano and Sonoma, is one of the wealthiest regions in the United States. From its powerhouse engineering and business schools to the Venture Capital firms in Menlo Park and Palo Alto; from the financial buildings in San Francisco to the tech firms in Silicon Valley, the region has an immense capacity for generating wealth (and a history of massive booms and devastating busts).

There is a part of the Bay Area, which I’ll call the Inner Bay (although I know it is sometimes called the “Real Bay Area”) which has an especially concentrated amount of wealth. That wealth is reflected in home prices which are among the top in the nation. In the Inner Bay, consisting of Alameda, San Francisco, San Mateo and Santa Clara County, it’s not unheard of for houses around 1,000 square feet to sell for close to a million dollars (or more, in places like Atherton, Saratoga, Los Altos and Palo Alto).

Here at DQYDJ we’ve rambled on recently about the affordability of homes, and even tried to convince you that when mortgage interest rates are low it’s not necessarily a good time to purchase a house. We’ve tried to make the point that affordability in Real Estate seems conditioned on affording payments instead of the actual purchase price of a home. That said, we left our readers hanging by not graphing that affordability with changing interest rates.

For a deeper background, please visit “Rooting for Price Increases and Low Interest Rates” for a description of the DQYDJ Median Home Affordability Index, and “Home Price Affordability Calculator” to play with the affordability numbers yourself.

As educational inflation makes college more and more expensive, there is a curious slide in the SAT scores colleges use as one of the factors in determining who will get admitted into a new class. For years, SAT scores (standing for the Scholastic Assessment Test) and ACT scores (standing for American College Testing) have been the final hurdles for High School seniors (and practice for HS juniors) who are looking to go on to college. As a standardized test used by colleges and universities to compare students to each other across a new class, SAT scores are also useful to compare students in various years. SAT scores, which had a clear positive trajectory from 1995 until 2005, started sliding until today. 2011′s average score of 1011 is only one point above the 1995 average of 1010.

Here’s an interesting link, this time brought to you by an Economist piece which asks, “Who are the world’s biggest employers?”. Luckily, they answer. The top spot went to our own United States Department of Defense, with a whopping 3.2 million people on the payroll.

As you may recall, the United States implemented a huge package of stimulus – about $787 billion worth – in 2008, President Obama’s first year in office. Included in that package was a fair amount of temporary tax cut measures, increased funding for programs like unemployment and food stamps, and a large list of spending on various projects identified as “Good Investments”. This is relevant for two reasons. First, President Obama proposed in a recent speech $447 billion in new spending along similar lines to the original stimulus (do the math, that will be $1.2 trillion in ‘stimulus’, not including the plethora of other stimulus programs like Cash for Clunkers) . Second, it is relevant because the Congressional Budget Office recently declared the original stimulus a success based upon the models which were used to propose the stimulus.

Great attention in major media sources has been called to the recent dip in oil prices (CL1Q) which peaked at over $114 per 159 liters of light crude. It is hovering around $94 now, which is a decrease of over 16% from the peak. Traditional thinking claims that gas prices typically peak in the summer months due to more gas being used during holiday travel times such as the 4th of July and Memorial Day (and Earth Day: irony?). One of the recent developments is a claim by OPEC companies that the International Energy Association (IEA) released emergency oil stocks to alter the oil prices. In response, some observers believe that Saudi Arabia will not follow through on their promise to increase oil production by as much as originally claimed (some reading here and here). The confusion as to how each individual country will respond to this creates very different incentives for each of the countries in OPEC.

A recent article reviewed the new debt agreement as follows: “It’s like a 400-pound man boasting that he plans to drop 20 pounds over a decade, while his doctors warn about the risks of losing weight so fast.” I found that analogy grossly misinformed. It’s much more like a 400-pound man who is gaining 50 [...]

Ever wonder how much better a house would be if it was in a better location?  Ever complain about a house because of its proximity to a highway or main street?  Throughout my housing search, I saw numerous houses which hit every mark – except being located on a busy street, or too near a highway.  Post-house search, I saw an interesting web site linked from Redfin’s Bay Area forum.  Yes, there actually is a study measuring how much an increase or decrease in average 24 hour day night sound levels, Ldn, affects the values of a home.

Serious Thinkers™ in all corners of the web return to some common themes, even when those themes are currently out of the public spotlight. Recently, those Serious Thinkers™ have been reading between the lines on topics which the public has moved on from – the effect of the minimum wage on unemployment, and even more to the point, the effect of the minimum wage on specific segments of the population. And why shouldn’t they? The current official unemployment rate is 9.2%, but the official unemployment rate among those with a Bachelor’s Degree or higher is a relatively healthy 4.4%.

Every few months, we here at DQYDJ like to check in on the market’s expectations of inflation.  There are lots of variables in the market – not least of which is the ending of the Federal Reserve’s open market purchase of bonds known as Quantitative Easing 2.0.  Still, even with the conflicting signals of  historically high gold prices, ridiculously low mortgage prices, and out of control commodity prices, the market isn’t pricing out of control inflation.  As a matter of fact, the inflation that it is pricing in is decently low.  Enough rambling, let’s take a look.