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Weekend links – Jan 21st 2022

  1. The 30-Year Mortgage is an Intrinsically Toxic Product. Byrne Hobart argues that mortgages are speculative bets where the payoff is correlated with your wages (especially if your wages are local). Times when your house price does badly are correlated with times when your local wages are down. By contrast, renting is a more sensible hedge. If local wages are going down (or you’re out of a job), that’s correlated with rents (and house prices) going down. In Byrne’s own words:

    “Your paycheck is a derivative whose value is partially tied to things within your control, but partially tied to local wages; the way to hedge this bet is to make a floating bet in the opposite direction, i.e. to rent. My wife and I rent right now, and like everyone in New York I face an annual exercise in sticker shock. In the event that markets crater and banks go under, my current rent will be completely unreasonable. But the rent I negotiate the year after that will be very reasonable indeed.” …and… “Americans are socialized to think that buying a house and getting a mortgage means being a “homeowner,” but the more debt you have and the less means you have to service your debt, the more it’s just way to be a highly leveraged real estate speculator.”

2. Metaverse for cows (obviously this can’t make economic sense)

3. Shopify is offering checking accounts (I assume via a partner bank):

4. Used car prices as an analogy for housing shortages – This is a great (although paywalled) article by Matt Yglesias arguing that – while we make tons of excuses for why there is a shortage of housing, we don’t make those same arguments for cars. We just accept not enough cars were built last year because of supply chain issues.

“Nobody denies that the increased price of used cars is related to the reduced production of new ones. Nobody says that you can walk around any city and see tons of vacant cars and that must be the real problem — even though it is true that at any given time, there are tons of vacant cars. Nobody blames billionaire car-hoarders for the shortage of cars even though it is true that there really are rich car collectors who own far more vehicles than they actually drive. Nobody blames “speculators” even though it’s true that there are middlemen who make a living buying and selling used cars. And most of all, nobody blames the rapacious greed of the world’s car companies even though auto executives do enjoy the current high margins.”

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