sunk cost calculation

SUNK COST CALCULATION

Sunk costs can really suck, come time to once again try to stay one step ahead of the AmComParty and its Turd World Brown Shirts.  The worst thing is having to move.  For about eighty years, this wasn’t so bad.  About the time that independent farmers were being forced into urban resettlement for factory work, our little buddies at the central bank and federal government introduced the mortgage.  Look, how easy, we’ll help you move!  If we stole all your savings through gold confiscation, well, you simply don’t need any savings because now you have credit!

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Okay, it wasn’t technically a confiscation.  You got Greenbacks in return.  But then they promptly devalued the dollars by 40%.  You might not have noticed because there was a Depression going on and prices were falling, but in the long term you still lost the value.  And if there is one ounce of gold left in Fort Knox, I’ll eat crow out of my own ass ( you know it is long gone, and I’ll wager even the fake gold is gone, sold to Chinese conmen in exchange for opium or equivalent ).  Regardless, we had credit and real estate always increased.

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Almost always.  When rampaging Diversities burned down cities or Rust Belt cities sent all the jobs overseas to any eager Ornamental country willing to work for subsidized Sacramento Delta rice, well, real estate values weren’t so hot.  But that was localized and for the most part you usually had a bit of warning to move the heck away before your property came close to becoming an insurance settlement by arson investment.  Even today, even right after the 2009 implosion, a heck of a lot of areas, even or especially in employment wastelands, retained ridiculously high real estate values. 

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I could belabor this point, talk about the collusion involved in this racket, discuss how the poser One Percenters all try to start their global Doctor Evil empire by becoming slum lords, plus all related topics and write a damn book about it, but I’ll just stop there and point out that for nearly a century the norm was relatively easy credit and the relative ease of moving when you had to.  We’ve all been through a time when we lost huge chunks of cash when we moved, but the norm has been that it was always a manageable amount.

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That system has obviously broken down, although it hasn’t completely collapsed.  If you are presented with the opportunity to cash out and move, I would strongly encourage you to take it, because that paradigm will NOT last too much longer.  The NOL sold her not-over-priced-for-the-area but still quite insane in cost second rental unit and right afterwards ( three weeks ) the second biggest mine here started laying off more than a hundred people.  You cannot time these things and you do NOT want to try to be that lucky.  Just like you buy ammo now and don’t count on future generosity.

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I’ve never had an issue abandoning any shelter investment to move when I regarded it as advantageous, but I’ve never invested much more than months of wages into the equation rather than years.  I imagine most everyone else takes their investment a bit more seriously.  And I can’t fault you there.  But you have already seen the cracks in the real estate market.  After 2008, houses lost half their value ( even as property taxes shot up ).  They have recovered those loses, but now it can be hard to sell as there are no jobs in the area. 

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I drive past the same collection of abandoned ( but not unmaintained ) houses year after year visiting my folks in a ritzy area all the rich bitches from California settled.  The banks proudly proclaim they are worth gobs and oodles of money, yet there they sit.  Real estate inflation could continue for some time.  Or, it is already over.  We can’t know ( I’d wager a jelly filled donut that as the fracking industry goes, so goes the long suburban commute, but we all agree I am just silly with worry and paranoia ).  I’d act as if things are just going to get worse.

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If you don’t want to gamble and speculate now, and are not willing to incur the wraith of Mrs. Kraken, Mrs. Hyde, or just are tired and weary and don’t want to move just yet, not until you have to, at least wargame the scenario of when the crash comes to your community.  At least draw a line in the sand and resolve to NOT try to hang on too long, pissing away your savings trying to save the house you are going to lose anyway eventually.  Have a funded escape plan.

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Automobiles are in another class, not viewed as a sunk cost or investment per se.  A car is more like a pair of shoes, something you know is going to be a worthless hunk of crap one day and must be discarded.  A house is supposed to be a savings plan for retirement.  A car is just something you must keep paying into, and you just try to minimize your cost ( a house has become a car, but not emotionally.  Most people actually believe their house is worth what they paid and will last their lifetime.  Suckers ).

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There is going to come a time when your car is not worth a thimble full of warm spit, a pant load of hot stool or a wet fart in a windstorm.  All that money you invested into it, all the trillions invested in macadam and all the wars fought for oil, all will be for naught.  Of course, a house tied to the grid will have the same value, but cars will become far more worthless far quicker.  You can still camp in a cold dark house, but the cars stop rolling much faster. 

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At least cars are able to be abandoned without penalty, unlike houses in a lot of states where a politician passed a law after a Monica Lewinski nobber and a line of blow that you had to pay off the bank even if you had no job.  I don’t think there were too many states that pressed the issue last time, because I can’t imagine THAT would have done anything keeping the torches and pitchforks at bay, but they WILL be far more desperate next time.  Are you SURE you don’t want to take that loss now and escape while you can? 

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After breaking out in a cold sweat once you realize how screwed you are from having held on to depreciating assets, you probably could care less about the smaller items you’ll made poor decisions on such as arsenals or food storage.  But of course, these are going to be much more important one day.  Not that I’m advising changing or switching, because sometimes embracing sunk costs are better than not.  This is more pointing out how you could be blind to improvements because you use sunk costs as an excuse.  I’ll discuss excuses verses justifications come tomorrow.

( .Y. )

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