patrick.net

Hey Seenthisb4, your topic was not funny, it was good.

I just read your interesting post and look forward to reading more. Thanks for coming.

What I meant was that the satirical thread topic was funny.

No offense meant.

Buy Gold. It is a great inflation hedge and the next speculative bubble. Also energy. Check out Fording Canadian Coal for its 16% dividend and CDN dollar exposure. It would be a great thing to put in a non-taxable account (IRA).

How about gold futures? Carrying cost is less than 5% per year, less than mortgage rate. This may be a good way to leverage. :)

NOT INVESTMENT ADVICE

ENI has a great yield! Have you checked out NHY? They have a great Aluminum business as part of the deal. How about Fording Canadian Coal (FDG)? Thanks for your input.

I own IAU and a mutual fund that is weighted towards the seniors. A lot of talk about them buying up the juniors. That may also be a great way to get leverage as well. Most mines have a recovery cost between $250 and $400, so if gold gets moving, the stocks will really see rapid earnings growth. I've never ventured into futures.

SF Renter, I don't know if you read any of my lengthy rants, but I'll repeat one fact. I read recently in "Beating the street" by Peter Lynch that he was buying stocks when PEs were 5, 6, 7, 8. People get rich buying stocks when they're cheap, not over valued.

I had never heard of NHY, but I just went and checked them out at your suggestion and they're definitely on my watch list now. Like the dividend, like the valuation, like the margins, like the balance sheet--assets goin' up, liabilities goin' down! They're even paying down debt. Me likey.

So $200,000 is the lowest possible price for this kind of home? Not really - nothing stops a desperate owner selling below construction cost - right?

In a severe downturn, prices can fall below replacement costs. However, this is unlikely for regular homes in places with higher land value. ("Luxury" McMansions in Fresno? Maybe.)

John Mauldin had a great newsletter about the "Rationality" of investors. He quoted these two characters who recently got a nobel prize in economics for their work in "Behavioral finance". In a nutshell, these guys said that investors are irrational, but predictably irrational. In other words, people never learn. They make the same mistakes over and over again. Just as the sent prices too high, they will send them too low. Fundamental analysis is great to figure out where that point is. Warren Buffet and Ben Graham had it right: Buy with a margin of safety. I plan to begin looking at real estate when the fundamentals work, and I am confident that they will. I'm not going to buy until I can STEAL the property. I'm also interested in the buy-renovate-flip method to riches. I did it once (by accident) and I have a friend who has a great methodolgy. The chumps with suicide loans (who I refuse to compete with) have given flipping a bad name. It's just like day trading. Everyone is a genius and gets rewarded for taking enormous risk, until the music stops. Once the bottom is in, there will be oppty for savvy investors who know value when they see it and bring a property to a higher and better use.

For the meantime, fundamental analysis tells me not to compete against the flood of mis-allocated baby boomer money in the S&P, NASDAQ, and DOW. Until I see dow 6000, I want stocks with low PEs, high dividends, and the ability to perform in a sinking economy. Call me old fashion. Thanks for the analysis above.

BTW, Its not going to be a crash, it's going to be a reckoning.

Deo,

I'm not looking to go toe to toe with anyone on the whole 401K/Herd Mentality issue. I just felt things had gotten more than little ridiculous with blue collar and middle management types obssesing about their 401K selections and having to drag people out of their cubicles to attend a meeting. Tell them I'll be there in a minute! I just want to see if my Stop Loss Order gets filled! Clearly this was not the intent of offering employees a retirement plan.

If we look at the sentiment on Capitol Hill we can reasonably conclude that in the near future we will all be responsible for our own "benefits package". That's why I've always advocated people contribute to their own accounts (IRA or taxable) in addition to participating in the "Company Plan". I'm not a spokesman for the Mutual Fund Industry but if we were to take you at your word than no one should save for retirement because they won't let you daytrade in the "Plan". Bad idea. If you're not a fan of Mutuals, great just keep it in cash. But while we're in the workforce it does reduce pre-tax income and when we ultimately leave (or are forced out) at least we'll walk away with something, (vesting schedule not withstanding).

Many of the investment vehicles you talk about simply aren't allowed in retirement accounts, period. Company sponsored or otherwise. Even if you took your rollover to E-Trade you can't margin it. Covering a call would constitute an excess contribution. Can't short either, downside can be unlimited. I'm not unaware of the alternatives you discuss it's just that there is a reason they're not allowed in retirement accounts. Back to the crash!

BTW, Its not going to be a crash, it’s going to be a reckoning.

I love that term.

Bay Are Housing Crash Continues. A *reckoning* expected soon. :)

I am always against the idea of retirement accounts. I think the government should cancel such programs AND cancel capital gain taxes and dividend tax altogether.

John Mauldin had a great newsletter about the “Rationality” of investors. He quoted these two characters who recently got a nobel prize in economics for their work in “Behavioral finance”.

I am very happy that behavioral finance is being recognized by the Nobel committee.

I love the market efficiency theory though. It should be taught at every university to every finance or engineering student. It should be as the universal truth with no possibility of fault.

The market will be a much better place for traders if smarter, "more informed" people believe in the market efficiency and refrain from entering. :)

Market efficiency is simple tautology. Outside of market how could you price anything?

Of course. :)

By assuming market is efficient it makes you aware of what brings you your gain and therefore better manage exposure.

I agree.

H.Z. -- the market can only be efficient IF there are a large number of participants actively attempting to find arbitrage opportunities and execute them. Then by the acts of these players engaging in said trading activity, supply/demand shifts to a new (efficient) equilibrium point.

So in my mind it is kind of funny when people have a fanatical devotion to the strong form of the efficient markets hypothesis--they say, "don't even bother to do any active investing, just go passive and index only." See, if EVERYONE decided to go passive, then the market could no longer be reasonably efficient, because no one would be actively seeking arbitrage opportunities and shifting the market to efficiency!

I have also done a lot of research on asset bubbles in general because I wrote a thesis on them, and I tend to believe that the very fact that asset bubbles continue to form so prevalently in markets (see: current RE bubble) kind of disproves the strong form of the efficent markets theory as well.

So I guess I fall into the weak form of the efficient markets school of thought.

P.S.--Clarification: I'm not saying that everyone should do their own active investing--just that active investing is necessary to CREATE a reasonably efficient market.

So in my mind it is kind of funny when people have a fanatical devotion to the strong form of the efficient markets hypothesis–they say, “don’t even bother to do any active investing, just go passive and index only.” See, if EVERYONE decided to go passive, then the market could no longer be reasonably efficient, because no one would be actively seeking arbitrage opportunities and shifting the market to efficiency!

So market efficiency is a paradox.

P.S.–Clarification: I’m not saying that everyone should do their own active investing–just that active investing is necessary to CREATE a reasonably efficient market.

This is why market efficiency is being taught to university students and day-trading seminars are being helding for the under-educated.

The market needs a constant supply of new losers. It needs people who have no clue of what they are doing. It needs analytical people to stay out or it will be too efficient. It is a conspiracy in a zero sum game. :)

I’m not saying that everyone should do their own active investing–just that active investing is necessary to CREATE a reasonably efficient market.

BTW, you are exactly correct. Right on!

"still most average joe are better served just sticking with indexing because they don’t know how to discover price abnormality."

I do agree.

still most average joe are better served just sticking with indexing because they don’t know how to discover price abnormality.

Prices are always abnormal because of human emotion.

Hey Peter P, I just read an editorial over lunch that exactly validates what you said before:

"The market needs a constant supply of new losers. It needs people who have no clue of what they are doing. It needs analytical people to stay out or it will be too efficient. It is a conspiracy in a zero sum game."

Check this out, it's written by a shark professional trader who's just begging for some chum to be thrown in the water:

http://www.financialsense.com/editorials/odonnell/2005/1220.html

And here's the kicker for those who don't have time to read that: guess where the author thinks all the "amaeturs lemming gamblers" went? You guessed it: real estate.

Those Goddamn stupid boomers. If they destroy the stock market as well when this whole house of cards built on debt that is our economy goes down, I'm gonna be wicked hella pissed off.

it held the promise of being the Boomers Salvation at a time when they needed to hear it the most

Personally, I see this as more symptomatic of American culture than specifically "Boomers". Far too many people have adopted such a careless attitude towards spending and finances, that no long-term financial plan can possibly cover their ass. Conservative fiscal policy is for losers, because it doesn't feed their short-term impulse to fill their homes with more distracting, but pleasantly affirming, crap. Therefore, "investments" need to be impulsive and dare I say: ludicrous: worthless dot-com stocks, Kinkade painting, beanie babies: seemingly inane kitch that fuels fads. Perhaps even real estate fits that bill, if you flip it fast enough; fuel that impulse baby!

Now, I've got to wonder: when credit-fueled spending comes crashing to the ground, what will be left to our economy--and what new business opportunities will there be? Unless you believe we're going to continue offshoring everything, while purchasing cheap goods on borrowed dollars, certainly there's some potential in the US that could be realized....

Just goes to prove I can sound angry on this blog as well---but hopefully to a point! :)

"Conservative fiscal policy is for losers"

Yup, it is interesting that so many people think this way, and yet everyone I know and talk to that has any sort of education in finance/economics almost automatically becomes a fiscal conservative because they both learn to understand the risks of excessive leverage and the long-term reward that conservative fiscal policy brings. I never thought I'd say it, but I truly miss the "old-school" Greatest Generation Republicans. It seems that the fiscal conservatism they espoused has fallen by the wayside of American Politics. And I'm sorry if I've offended any Boomers that also feel this way with my ranting, but I am deeply discouraged with the fiscal policies of the Neocon Boomers. As a member of Gen Y, they are mortgaging MY future so they can have their cake and eat it too right NOW, and naturally that really pisses me off. So I appologize to you minority of responsible Boomers--I understand you must be very lonely as is since there's so few of you. :)

Wow, lots of ideas to digest on this board in so litte time. DinOR, I guess I owe you a response:

"Many of the investment vehicles you talk about simply aren’t allowed in retirement accounts, period. Company sponsored or otherwise. Even if you took your rollover to E-Trade you can’t margin it. Covering a call would constitute an excess contribution. Can’t short either, downside can be unlimited. I’m not unaware of the alternatives you discuss it’s just that there is a reason they’re not allowed in retirement accounts"

I rolled a 401K into an eTrade account. I don't use margin. Most of my money is in CDs. I also own a mutual fund of gold mining companies and the metal. I've done well. I've done well in ARTIX, an international growth fund. I do not trade. I am placing hedged bets on macroeconomic scenarios that I believe are likely based on research. In my investing, I look to avoid the worst possible outcomes, while making money. I plan to accumulate into energy because I use energy (so do you), so I win if it goes up or down. I also think that it is going significantly higher over the next decade or more. My purchases of gold and holdings of foriegn equity insure the value of my dollars from inflation and dollar depreciation. Do not assume that you know my objectives or my view of risk. I am more than willing to tolerate fluctuations in commodity prices, because I believe that they must go higher, over the long term, that the S&P and housing markets must come down. Helicopter Ben must print money, and the dollar must slide as this happens. If I'm wrong, I'm wrong. I'll be fine. I do not have one penny of debt. I no longer own a home, preferring to rent a great house with a hot tub and pool for cheap. I own a used Acura and Honda Accord--in cash. I just closed an 8 figure deal today at work. (yes, 8 figures). I will put my bonus check in the bank when I get it.

BTW, I do not make any mental distinction between my 401k, my eTrade IRA, my brokerage account, or my ample checking/savings. I look at the choices availble (which are pitiful in my 401k at work) and allocate capital based on tax advantage. I manage my entire net worth as a single portfolio, NOT as individual portfolios. I am obessed with evaluating risk, preventing the worst possible outcomes, and preserving the real value of my capital. And I want a little growth while I am at it. My wife and I are allergic to spending money, and we seek to preserve and grow our wealth. The concept of "Saving for retirement" is for people who lack the focus to become wealthy through hard work over time.

As for what congress intended, I DO NOT CARE. I will use tax law to MY ADVANTAGE to grow MY WEALTH. What congress wants or what other people do is NOT MY PROBLEM.

Wow, that felt good. Did the "release" come across..........

Wow, lots of ideas to digest on this board in so litte time. DinOR, I guess I owe you a response:

"Many of the investment vehicles you talk about simply aren’t allowed in retirement accounts, period. Company sponsored or otherwise. Even if you took your rollover to E-Trade you can’t margin it. Covering a call would constitute an excess contribution. Can’t short either, downside can be unlimited. I’m not unaware of the alternatives you discuss it’s just that there is a reason they’re not allowed in retirement accounts"

I rolled a 401K into an eTrade account. I don't use margin. Most of my money is in CDs. I also own a mutual fund of gold mining companies and the metal. I've done well. I've done well in ARTIX, an international growth fund. I do not trade. I am placing hedged bets on macroeconomic scenarios that I believe are likely based on research. In my investing, I look to avoid the worst possible outcomes, while making money. I plan to accumulate into energy because I use energy (so do you), so I win if it goes up or down. I also think that it is going significantly higher over the next decade or more. My purchases of gold and holdings of foriegn equity insure the value of my dollars from inflation and dollar depreciation. Do not assume that you know my objectives or my view of risk. I am more than willing to tolerate fluctuations in commodity prices, because I believe that they must go higher, over the long term, that the S&P and housing markets must come down. Helicopter Ben must print money, and the dollar must slide as this happens. If I'm wrong, I'm wrong. I'll be fine. I do not have one penny of debt. I no longer own a home, preferring to rent a great house with a hot tub and pool for cheap. I own a used Acura and Honda Accord--in cash. I just closed an 8 figure deal today at work. (yes, 8 figures). I will put my bonus check in the bank when I get it.

BTW, I do not make any mental distinction between my 401k, my eTrade IRA, my brokerage account, or my ample checking/savings. I look at the choices availble (which are pitiful in my 401k at work) and allocate capital based on tax advantage. I manage my entire net worth as a single portfolio, NOT as individual portfolios. I am obessed with evaluating risk, preventing the worst possible outcomes, and preserving the real value of my capital. And I want a little growth while I am at it. My wife and I are allergic to spending money, and we seek to preserve and grow our wealth. The concept of "Saving for retirement" is for people who lack the focus to become wealthy through hard work over time.

As for what congress intended, I DO NOT CARE. I will use tax law to MY ADVANTAGE to grow MY WEALTH. What congress wants or what other people do is NOT MY PROBLEM.

Wow, that felt good. Did the "release" come across..........

I have to apologize for the length, but the voices in my head all demand equal air time, and they plot against me if they don't get it. I'll try to keep it shorter.

RE: efficient markets. Is anyone out there a fan chaos theory? You can make money because you are a PARTICIPANT in the market. The "Invisible Hand" is the pattern that emerges as individual participants freely interact, governed by the same rules, but different interpretation of the same data. Your action and the action of others, in aggregate IS the efficient market. Wait, I was supposed to keep this short, wasn't I? Shit!

-D

If you thought the Housing Bubble was scary, wait until you see this puppy!

http://www.lifeaftertheoilcrash.net/

YIKES!

Let me repeat! RECKONING! It's gonna be a RECKONING! I've had a big mortgage that I couldn't pay before (because I was sitting on my dumb ass unemployed). It SUCKS! People will be reminded every month that they are SCREWED when they can't pay the bills. IT SUCKS! Believe me. And don't go thinking that you can stick it out. Life does not always bring roses. You CAN get worse than your worst case scenario. AND IT SUCKS! Believe me. There, that was shorter. The voices are at bay.

The BA? Paved with GFB, gold fucking bricks, Research? Only CS. Fuck Materials, Electrical, Mechanical. This is what more than all else what I do not miss about the BA.

Jack. Dude. You miss read my friend. The only intangible in California is the people, well, at least back in the day. People like you. As far as the view, water, ocean etc, these are all "tangible" and this is what the carpet baggers are paying for. The problem with your comments is that there only purpose is to illustrate just how much we've lost. Thanks though. Old, good, hippies are hard to find. Merry Holikwanzabong my friend. :)

Who stole Venus D'Milo's arms?

Anybody on here over 30 or 35 years old, have lived in the Bay Area for over 5 years, and rent? I’m just wondering how you guys reveal to people when they ask rent or own? I have lived here for 4 years now, and will be turning 30 next year.. so, i will be in that situation soon.

I honestly do want to buy next year and not wait another 5 years. I’m sick of it.

I have a similar situation. How I reveal to people when they ask? Just answer! I really do not give a damn what people think. Why should you care? :)

RE: efficient markets. Is anyone out there a fan chaos theory?

I did look into the chaos theory a while a go. It was was too chaotic. :)

Now, I just see the market as an expression of human psychology. The effects may be chaotic, but I am unable to understand it that way.

BTW, have you read "The Misbehavior of Markets"?

But spending $10,000 to faux paint perfectly nice kitchen cabinets is never a sign of finacial good sense.

I will only accept a real estate crash if faux paint crashes with it. That's my offer; take it or leave it.

Question:

With all of the outsourcing of jobs overseas, and businesses moving to more tax-friendly locations such as Nevada and Texas, is Silicon Valley
doomed to revert back to it's pre high-tech boom status?

Say, as it was around the early late 60's & early 70's before it radically took off?

Or will the brain trust, university research centers, and desireable living conditions keep it as a high-tech hub?

I think theoretical physicist Michio Kaku said something to the effect that Moore's law, coupled with cheap computing capacity/chips will turn it
into a ghost town, or something along those lines.

Just wondering what people think the fate of the Valley is. I grew up in San Jose, late 60s to the late 90s, though I live in Phoenix now.

Question:

With all of the outsourcing of jobs overseas, and businesses moving to more tax-friendly locations such as Nevada and Texas, is Silicon Valley
doomed to revert back to it's pre high-tech boom status?

Say, as it was around the early late 60's & early 70's before it radically took off?

Or will the brain trust, university research centers, and desireable living conditions keep it as a high-tech hub?

I think theoretical physicist Michio Kaku said something to the effect that Moore's law, coupled with cheap computing capacity/chips will turn it
into a ghost town, or something along those lines.

Just wondering what people think the fate of the Valley is. I grew up in San Jose, late 60s to the late 90s, though I live in Phoenix now.

Oops, double post...

correction: "Say, as it was around the late 60’s & early 70’s before it radically took off?"

I guess it’s going to take a state of emergency declaration from the White House before anything is done. Maybe.
This is not a good thing to hear right now, this levy situation. There is a long storm track developing that has the potential to dump plenty more rain on SF & SCTO this week...could be some hydro issues.

(But of course even with the handful of computer models to choose from, >24 hr forecasts are still 50/50 :) )

Re: Ha Ha's post at 9:15 AM, I saw a similar article in CNN.com this morning, except cnn said that it got its data from the census bureau

http://money.cnn.com/2005/12/23/news/economy/newhomesales/index.htm?cnn=yes

Looking at the graph on the right side of the article made me think, were there similar declines in new home sales during the same period in 2003 and 2004? The article said its the largest decline in a decade, but are there declines every year from Oct-Nov? The number of new homes sold in Nov 2005 is really no less than Dec 2004, so what's the dif? I get a feeling it was an unusually large decline since Oct was abnormally strong. Not that I mind or anything. I'm really glad things are slowing down.

All y'all seem well educated and informed, so I wonder if anyone has kept track of the data for this preceding 2005? If there is a website that has the info, that would be great.

What I'm really hoping is that there are usually some declines in the late fall, but this one is so large it will precipitate less buying through the spring and summer of next year.

"so I wonder if anyone has kept track of the data for this preceding 2005?"

Here's a site that tracks MLS listing data:

http://www.benengebreth.org/housingtracker/

Scott J,
Yes, from what I've gathered, sales and even price declines in the fall are fairly typical. However, this year there was increasing inventory when it typically decreases in the fall, and some expect much greater inventory surges in winter/spring 2006.
Also, the CAR data for November shows a large declining YEAR OVER YEAR sales volume, so it can't be seasonal by definition.

As for slow sales & high inventories, here is a chart that shows what's happening to the inventory (I think the data is for east SFBA, not sure though):
www.realtyworldcal.com
So, the case for a huge spring inventory is getting stronger.

Scott J,
Oops, my mistake; I thought HaHa's link was for CA November 05 sales volume, which show >10% year over year sales volume decline:

www.car.org/index.php?id=MzU3MjI=