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213 comments on DrumBeat: March 21, 2008

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westexas on March 21, 2008 - 5:28pm Permalink | Subthread | Parent | Comments top

As Mudlogger noted, OIl Patch survivors have "Been there, done that," regarding deflation, at least on an industry basis. What saved my bacon in the late Eighties was when I went to my boss at the time and literally demanded a 50% pay cut--offset by an equity interest in oil deals I generated. I suspected that layoffs were coming and by cutting my salary by 50%, I moved myself from the highest paid employee to the least paid. And as I suspected, there was a round of layoffs.

Regarding your house, if I were you I would cut the price to 5% below the last comparable sale, and then keep cutting it by 5% below the last comparable sale.

I believe that 90 day T-Bill rates are down to about 0.21% . Stashing cash, in amounts over $100,000, is beginning to be a real problem. Real T-Bill interest rates, after inflation, have been negative for a while, but there is some chance that nominal T-Bill rates could go negative. You would actually pay the government to hold your money for you (I think that it happened in the Thirties), and a lot of T-Bill money market funds probably have negative yields now.

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theantidoomer on March 21, 2008 - 5:36pm Permalink | Subthread | Parent | Comments top

Regarding your house, if I were you I would cut the price to 5% below the last comparable sale, and then keep cutting it by 5% below the last comparable sale.

How much do you want to bet westtexas isn't taking his own advice? and how much do you want to be he'll use Spousal Nesting Syndrom as his excuse.

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westexas on March 21, 2008 - 6:20pm Permalink | Subthread | Parent | Comments top

Actually, when I can sell, pricing the house at 5% less than the last comparable sale is precisely what I plan to do. As I explained in my missive, I have some personal experience in surviving deflationary cycles. Partly because of that experience, we never went crazy in real estate, and we live in a much smaller home than what we could have techically afforded (I would just prefer to be in a two bedroom rented unit).

In any case, you will note that they have basically had zero activity after six weeks--that kind of sounds to me like the property is overpriced.

BTW, why don't you go over the recommendations in the following article, posted almost a year ago, and see how people would have fared if they had followed my advice to radically downsize then?

ELP Plan (April, 2007)
http://graphoilogy.blogspot.com/2007/04/elp-plan-economize-localize-prod...

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skylar on March 21, 2008 - 6:25pm Permalink | Subthread | Parent | Comments top

Wasn't it Dr Abernathy that said -- regarding smoking; "Do as I say, not as I do?"

WT may be constrained in following his own advice, but it doesn't mean it's not sound.

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westexas on March 21, 2008 - 6:55pm Permalink | Subthread | Parent | Comments top

Being above market price in a falling price environment is not a good place to be--much better to be somewhat below market price in a falling price environment.

This also holds true for labor costs, which is one of the advantages of implementing aggressive cost cutting, it allows you to underprice your competitors for declining job opportunities. If people want to do as I did, you should give some serious thought to going into to your boss's office and demanding a pay cut.

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aangel on March 21, 2008 - 7:57pm Permalink | Subthread | Parent | Comments top

I'm using the strategy as I attempt to sell my Subaru. Unfortunately, the glut of used Subarus plus this strategy still have not resulted in a sold Subaru.

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Samsara on March 21, 2008 - 8:59pm Permalink | Subthread | Parent | Comments top

Stashing cash, in amounts over $100,000, is beginning to be a real problem.

Hmm. That's just a stack of 100 coins. About the size of a thermos of coffee.

Also, if I may interject this. It may be of an advantage in 1-10 years to NOT have anyone KNOW you have money.(that by definition leaves all electronic money out).

In 10 years, I don't know if I would trust the Gov at that time knowing what I have any more than I would want a burgler to know what I had.

Just sayin...

BTW, there is a REAL problem getting physical silver right now. For those interested in those things...

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popple on March 22, 2008 - 5:04pm Permalink | Subthread | Parent | Comments top

To ease the sting a little bit I try to look at the low rates of return on cash as the temporary cost of capital preservation.

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213 comments on DrumBeat: March 21, 2008

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