patrick.net

Dr. Strangelove said...

What really hit me and I thought was most interesting in my research is a quote from a warden of one of the more sizeable and violent prisons…”quantify? who needs to quantify that which is readily observed?”

I think many RE bears (myself included) are like the warden…we know through observation, rational awareness and research that the bubble simply IS. I sensed its existance quite early on, just looking at the hyperbole, ridiculous rise in prices (DOT.com anyone?) and of course–the unreal euphoric faces of those buying into this thing (at the wrong time).

Doctor...while I'd like to agree with you, and while you'll probably be proven right, this kind of thing doesn't leave room for the inevitable surprises that fill life and markets.

In Cupertino, reduced from 1,000,000 to 799,000

They still have a long way to go I'm sure.

Holy smokes, I wish I lived nearby and could learn some stuff from you.

I thought I could learn some stuff from you...

In Cupertino, reduced from 1,000,000 to 799,000

And that $1M was probably what they could've got a market top, from what I've heard about sales in the vicinity. Track that one over time and see where it goes.

Very good R Patrick....now you can work on Billys song "movin out".

Who needs a house in suburbia........Is that all you get for your money?

It may drop around 90% in your area Jack...only because you live there..........Kidding Jack...just kidding :lol: :lol: :lol:

Not quite true, many prime neighborhoods like Los Altos, Los Altos Hills, Saratoga, Monte Sereno (the prime part of Los Gatos), were all down >15% in 2001 and continued the trend well into 2003. If not for the loose credit, they would have continued their descent.

I am targeting a 40% reduction from the current price, if they don't go down that much, I stay put in my home. If they do, upgrade time.

_singing_

Who needs a house out in marin....Is that all you get for the money?

Sorry Jack.....it's the beers talkin' now. :lol:

I am targeting a 40% reduction from the current price, if they don’t go down that much, I stay put in my home. If they do, upgrade time.

What if your house drops 40%?

I predict a 99% drop in anything not built on sand.

Liquefaction is Prime

I hear Troll Brothers is throwing in a McMansion dog house for fido.....woof! :lol:

My house will drop less than the top prime areas in absolute value, because it is worth less to begin with. Also, my house a lot more potential buyers who can afford it when it drops 40% compared to say, Los Altos Hills. Therefore, for the owneroccupiers who want to upgrade to a better neighborhood or a larger home, they always hope for a big drop in the market, because the difference in price will be smaller.

Also, when the market tanks, and when I upgrade, I don't have to be locked in to a higher realty tax valuation, which was the major reason stopping me from upgrading in the last few years.

Therefore, for the owneroccupiers who want to upgrade to a better neighborhood or a larger home, they always hope for a big drop in the market, because the difference in price will be smaller.

Sure...if they have the supporting equity.

Therefore, for the owneroccupiers who want to upgrade to a better neighborhood or a larger home, they always hope for a big drop in the market, because the difference in price will be smaller.

If only the drop will be uniform...

Many subprime areas are highly infested with newly abundant liquidity...

The key is the supporting equity or savings put aside for trading up. Actually even the subprime areas can only drop so much in terms of aboslute value. Let's say you live in a 400K home, and have another 400K set aside for trading up to a 800K home. Your house can only drop to the max 400K, while in the same dire strait, the 800K home can drop easily over 400K.

As long as one has enough money set aside, it is almost always beneficial for the person trading up. I live in Los Gatos, I am sure when Los Gatos drops 40%, my target neighborhood will drop similarly, if not more in %, but definitely more in absolute value.

Actually, it is such a weird “market moment” right now that I COULD see just about ANY scenario become reality!

Jack, I'm with you on that...after slogging through market data, economist's analyses, and stories here, all I can say is we're in strange times--and whatever happens, we'll be there together (more or less).

Peter P:

You mention Home Depot… are you thinking of shorting?

I doubt that Home Depot will fall. Home improvement tends to be countercyclical to homebuilding and housing markets. It is true that Home Depot is also a bit of a mix with builder supply, but is mostly home improvement. When people can not trade up they are more likely to spend on modest upgrades to their current place. When things are tight they are more likely to do it themselves. That is precisely the sweet spot for Home Depot. Further, Bob Nardelli is a really smart guy. I would be reluctant to bet against him. I doubt that you will benefit from shorting HD.

Remember our Fannie Mae discussion… FNM had just collapsed to about $41 when we discussed that. You were considering shorting FNM. I said don’t do it. FNM immediately bounced and then rose to the high 40s and has since stabilized around $46. Any short would have been a real losing bet. I hope you didn’t do it.

Peter P:

The weak point for Home Depot is their decline in customer service quality. I am assuming that they will improve this. This issue has been festering somewhat, and is not news. If they fix it the prospects improve. This weak spot is therefore a potential source of upside.

Under the Armageddon scenario there will be very few unaffected investments. But such doomsday scenarios are farfetched.

RIC, Doubling in five years is not the norm nor the average. There are many places that have appreciated by less. The national average is still largely affordable. Over time some locations become premium priced. It is not realistic to expect the average person to be able to buy in the premium-priced areas.

I think shorting is very risky. There is very little margin for error and the clock is working against you.

To short HD you have to believe that the new information will drive the price down. What I am saying is that the negatives are already known and priced in. If HD fixes their service problem it is upside potential for the stock. If not, the stock will continue to under-perform. Do it yourself tends to do well during less favorable economic times. So a downturn could actually help Home Depot.

However, I would neither buy nor short Home Depot. There are better places to be.

Look at food production, agricultural equipment, transportation, and most high growth companies with strong cash flow and low debt.

showmethebuyers,

thanks for the link, that further strengthens my decision to get the hell out of dollar before it becomes peso.

The dailykos article suggests that it’s all a big conspiracy… Too many things to be a coincidence… hmmm…

It must be a conspiracy because random things never happen!

So, I guess it must be true. It all started with the Knights Templar almost a thousand years ago. They were all killed, but their conspiracy lived on. It is just now reaching its conclusion and the trap will be closed on us! Somehow they knew America would be discovered and be a world power when their conspiracy reached full effect. But that’s part of the conspiracy as well! Those of you who doubt the big conspiracy just wait, you’ll see… Elvis will be there too!

You mention Home Depot… are you thinking of shorting?

Remember our Fannie Mae discussion… FNM had just collapsed to about $41 when we discussed that. You were considering shorting FNM. I said don’t do it. FNM immediately bounced and then rose to the high 40s and has since stabilized around $46. Any short would have been a real losing bet. I hope you didn’t do it.

Thanks for your concern.

To me, trading is not really about predicting the future. It is more about reacting to adverse or favorable outcomes. I do control my risks, so don't worry.

I think shorting is very risky. There is very little margin for error and the clock is working against you.

Very true. The most difficult part to manage is one's own emotion. Any rally can "force" a trader into taking a loss at the worst possible time.

Mr.Zyphyr, sir, your sarcasm falls on the deaf ears of those that have staked their futures on the implicit accuracy of the Elliot Wave, Tipping Points, and anonymous Blog Talk.

I am deaf, so I cannot hear you. :)

California schools can only get worse. It may or may not have anything to do with Prop 13, but the change in demographics itself would be damaging enough to public schools.

I don't think we should chase "good school districts" anymore. In 10-15 years, private schools may become the only real choice.

California schools can only get worse. It may or may not have anything to do with Prop 13, but the change in demographics itself would be damaging enough to public schools.

Yes...this can happen....not to mention all the kids who become snobs in the richer areas of town. ;)

Peter P Says:
“California schools can only get worse.”

Peter,
You probably want to reserve judgement till you have kids. Some of the schools are very good. Plus, it is parental involvement that really counts.

There are some academically sound schools in some areas - Menlo Park, San Carlos, Cupertino. But I don't trust even these schools to be morally sound. I know a teacher at a very highly-regarded Palo Alto school whose colleague refused to follow Bush's request to have everyone pledge the flag after 9-11. I'm not saying it's immoral to disagree with Bush, but when we have *teachers* acting openly unpatriotic in front of kids, something has gone wrong.

I agree, parental involvement makes all the difference. But in a place where everyone needs (or wants) 2 incomes to make mortgage payments, how many have time for school? It's a vicious cycle. Crappy schools turn out crappy kids, crappy kids contribute less to society and the economy, taxes/defecits/crime go up, people have to work harder, people have less time for kids, schools get wose, repeat.

hello every one
can we start a new discussion regarding how to overcome inflation/deflation / stagflation scenarios?

apart from the housing bubble is gold markets in a bubble too? if gold prices rise too much from here gold demand falls particularly in india ( only theoretical i do not have any material evidence for the same.). also there are alot of banks in india that are selling gold coins. does that mean anything?

Next relative to the price of gold, diamonds have not appreciated that much does it mean diamonds are a better buy now, to beat inflation and the housing bubble. If so what kinds of diamonds does one buy. i mean small or large, what grade, cut ,clarity, etc? which store or brand has better value in the long run?

how about other precious stones/ platinum.
thanks

hesses fan

Diamond can already be easily manufactured, bearing exactly the same qualities as the real one, only that they are flawless, and there is absolutely no way you can tell if they are manufactured in the lab or by mother nature. Gold cannot be manufactured. In case you don't already know, almost all precious stones can be manufactured.

Diamond will be a terrible store of value going foward.

Plus, it is parental involvement that really counts.

Absolutely.

You probably want to reserve judgement till you have kids. Some of the schools are very good.

Okay. I am reserving my judgement for later. :)

But how are schools going to get funding though? They are outside the machinary of free market.

Investors will be able to trade contracts electronically based on median home prices in Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, D.C., or a composite index of the cities, the AP said.

Perhaps it will inspire some home equity insurance products?

Keep in mind that "hedging products" will also take fear out of potential homebuyers.

I think such products will be good for the markets.

Diamond can already be easily manufactured, bearing exactly the same qualities as the real one, only that they are flawless, and there is absolutely no way you can tell if they are manufactured in the lab or by mother nature. Gold cannot be manufactured. In case you don’t already know, almost all precious stones can be manufactured.

I thought gold can be manufactured using a colossal particle accelerator... ;)

warning: off-topic divergent ranting blather to follow:

@matt_walsh: I know a teacher at a very highly-regarded Palo Alto school whose colleague refused to follow Bush’s request to have everyone pledge the flag after 9-11. I’m not saying it’s immoral to disagree with Bush, but when we have *teachers* acting openly unpatriotic in front of kids, something has gone wrong.

Complete abdication of logic. Refusing to follow the President is not unpatriotic. Teachers are not expected to be more patriotic than the average person. Pledging the flag is not patriotic. It is not immoral to be unpatriotic. It is not moral to follow. It is not immoral to not follow. Your statement implies your opinions, but it is not immoral for someone to disagree with you.

@Owneroccupier: Diamond can already be easily manufactured, bearing exactly the same qualities as the real one, only that they are flawless, and there is absolutely no way you can tell if they are manufactured in the lab or by mother nature.

But manufactured diamonds cost a bit more than natural diamonds. So far. And that's despite the DeBeers Corp's artificial product scarcity and exceedingly sleazy marketing practices... But, at least when you buy a manufactured diamond, you know your money isn't going to buy Kalashnikovs for the illiterate slavelords who kidnap six year olds and force them to crawl into holes in the ground to bring back pretty things for their massahs.

If your sweetiepie insists that your love is only real if it takes the form of a geological curiosity, get her one that doesn't kill children. Or get a new sweetiepie.

dear owner occupier
thanks for the info. but now i have more questions. yes they can manufacture it in the lab. but the cost of producing diamonds particularly larger than.25-0.45 carats is prohibitively expensive. in fact natural diamonds obtained from known deposits are cheaper. Source (simon and shusters guide to gems and precious stones 1986 edition page no 88.)

well id like to know may be emeralds as an alternative to gold hedging?

Complete abdication of logic. Refusing to follow the President is not unpatriotic. Teachers are not expected to be more patriotic than the average person. Pledging the flag is not patriotic. It is not immoral to be unpatriotic. It is not moral to follow. It is not immoral to not follow. Your statement implies your opinions, but it is not immoral for someone to disagree with you.

Pledging the flag is not necessarily patriotic. However, using one's position as a teacher to openly refuse a request by the president is not exacly nice.