Category: Business, Investing & Finance - Page 2

Recessions, Home Prices, Unemployment and Inflation

When an economic recession occurs, one thing that happens for sure is the unemployment rate goes up. You can see a graph of the California unemployment rate since 1967 on the St. Louis Federal Reserve Bank’s website. Below is a copy of that graph until 2019-01-01.

The shaded areas indicate a recession. As you can see, the unemployment rate has jumped up during each recession. Logically, as unemployment goes up, incomes go down since fewer people are working. Following is the graph of real median household income in California over the years.

So how do you know when a recession will occur. It turns out that the best indicator of a recession is when the Treasury Yield Curve inverts.

How to Price Work in Other Countries

I occasionally use Upwork (formerly eLance) to hire contract workers in other countries to work on some projects. Considering that I live in the San Francisco Bay Area, which happens to be one of the most expensive places to live, I have to constantly remind myself to price my projects according to the economy and cost-of-living where I hire workers overseas. Here’s an example cost analysis.

US Cost
Let’s say that, based on the type of work you need done, a fair US wage would be $10 per hour. Let’s also say that you expect the work should be done in no more than 17.5 hours. Therefore, the total project cost in the US would be $175.

Target Country
Let’s say you hire someone in Egypt to do the work. You’ll need a way to fairly and reasonably convert wages in the US to wages in Egypt. One way to do this is by comparing each countries GPD per capita, which is an estimate of the average salary in a particular country.

GDP Per Capita
According to the World Bank, as of July 6, 2018, the GDP per capitas of the US and Egypt are:

2018 US GDP per capita = ~ $60,000
2018 Egypt GDP per capita = ~ $3,000

https://goo.gl/wG6AAd

In other words, the average annual salary in the US and Egypt are $60k and $3K, respectively.

Invest in Real Estate or Stock Market (and Other Comparisons)

Average rate of return

Stock Market: 10% (before inflation). 7% (after inflation)
Real Estate: 10% (especially in the San Francisco Bay Area)

ROI based on own money or borrowed money

If you invest $100,000 in stocks, with a 10% ROI, you’ll get $10,000 at the end of year one.
If you invest $100,000 in real estate (20% of a $500,000 house), with a 10% ROI, you’ll get $50,000. Your ROI is based on the value of the property ($500K), not your $100K down payment. Most of your ROI comes from borrowing $400,000 from the bank.

Of course, you can also borrow $400,000 and dump it all into buying stocks but

no one, especially a bank, would lend you $400,000 to invest in stocks, and even if they did, the interest rate would be more than 10%, causing you to lose money
unless you invest in something like index funds, investing in individual stocks is more risky because their values can plummet in very short periods of time, e.g. Facebook dropped by 26.4% in just one day. A single-day devaluation like that would never happen in real estate. Real estate depreciation can occur, but it would take at least months.

Facebook biggest one-day US stock plunge

How to Find and Research (Pre) Foreclosure Houses / Properties

This information applies to properties in California (specifically, Alameda County).

When a bank begins the foreclosure process, they must file a Notice of Default with the county clerk. You can search for all notices of default within a time period in a county by going the county clerk’s website. For Alameda county, that would be

http://www.co.alameda.ca.us/auditor/clerk/propertysearch.htm