patrick.net

thomas.wong1986 says

Caterpillar Inc. (CAT - Analyst Report) plans to lay off 2,454 employees across 5 plants in Illinois, Indiana and Georgia to cut costs amid recessionary conditions.
When you cut OPX its normal for net income to raise and stock to go up. CAT had a 10% reduction in force. Of course the stock reacted with higher expectations of earnings in the future. We saw these things happen in prior recessions like back in 1991-92.

No doubt CAT is, um, right-sizing the places where sales are going ballistic. Don't think the Brazilians are buying Cat products because they are on sale. Perhaps to build something big?

"Caterpillar generates a sizeable portion of its revenues overseas. About thirty percent comes from Latin America and China. The numbers there are ramping up big-time. Latin America increases sales by over 80 percent 2Q YoY. Asia/Pacific was up 45 percent YOY; and the machinery segment was up by 62 percent."

It is too late to jump on this one. But co's like CAT, INTC, IBM, APPL are international companies. They have trimmed fat and sitting on record cash.
Seems shipping and rail traffic is up nicely too.
Consult Dr. Copper and Mr. Alcoa as well.
Just some data points.

clayfire23 says

Why stop at saying that just housing needs to be so cheap and almost free for everyone? I want to expand this “I want to have everything for cheap or free” passion. Can you believe that a brand new sedan costs over $20,000.00? Who can afford that? It should be less than $5.00, with used cars between $1.00 and $4.00 depending on mileage. We have a huge bubble in auto prices. Restaurant pizza prices are just absurd. A large pie with 3 toppings should not cost more than 5 cents. Pure greed and speculation has made it cost over $10.00. Everybody deserves a free gallon of milk per day, everyday. That is our birthright, and yet greedy grocery stores are charging between $3.00 and $5.00, which is unsustainable. My index of milk prices starting in 1500 A.D shows that gallon milk prices have historically been one thousandth of minimum wage, so it should be less than a cent now. I look at all the idiots buying all these goods at inflated prices and laugh…

You know, I used to wonder how people could have been so shortsighted as to overpay for houses as much as they did at the peak of the bubble. But sadly, I now realize that clayfire23's post is pretty typical of the extent of the public's understanding of the housing market. That is to say, no understanding at all.

clayfire23 says

Why stop at saying that just housing needs to be so cheap and almost free for everyone?

Housing has two components. 1) the entitlement to land-use rights and 2) the fixed improvements.

1) cannot normally respond to market buy-side pressure by increasing supply. This results in great inflationary effects as supply in a given market tightens. Labor can be applied to improve land to make it habitable, but in my area this hasn't been done at all in my lifetime. Quite the opposite, no-growth advocates have stopped this cold.

2) provides the actual housing good, and what a "good" it is. Try living a normal life just one week with your family without it! This is an incredibly durable good, too. Houses built 50 years ago for peanuts and maintained minimally can actually have appreciated in value, thanks to the higher replacement costs today. Eg. thanks to inflation what cost $25,000 in 1965 would cost $170,000 today. This means actual consumption of the housing good is on the order of 50 or 100 years, even more.

So housing has become a cross between an investment in land and a very durable life necessity -- something that can last basically forever with maintenance. The land was produced by our Heavenly Father and He hasn't billed us for the labor. The fixed improvements last centuries and if anything get better with time and maintenance.

Why shouldn't housing be free to today's buyers?

Of course, being an economic good with limited (if not fixed) supply and unbounded demand (we'd all like a better place to live or a second better place to live, or thirty rental houses to collect income like in Monopoly), rents appear on all housing.

Housing can never be free because of this, we can only, by public policy, determine who gets to pocket the rent.

If we were smart, we'd look at replacing other taxes with all this rent -- all state taxes could easily be replaced with this rent tax.

But we are not smart.

tatupu70 says

What about the top line revenue growth Thomas? How can you explain that away?

Layoffs are no longer tied to good or bad times. As KT states right-sizing. We saw this over a few years at HP as well when Mark Hurd was cutting the fat, before the recession.

thomas.wong1986 says

If you want to use concrete job numbers then yes, PR data is much more solid number to use then ads. Jobs for a single position in a given company can be put up, down, deferred or canceled without being filled. Seen this multiple times.

Of course they can. But that doesn't change the fact that job opening data is most certainly not meaningless.

I can show numbers that housing prices in the Bay Area (SF MSA) for non-short sales/non-foreclosures is trending back down. Morgan Stanley sliced and diced Case-Shiller for this several weeks ago:

http://www.housingwire.com/2010/08/04/for-investors-sake-morgan-stanley-questions-power-of-home-price-indices

MS found that the medians were highly susceptible to mix, as many people suspected.

CS is hilarious. Minneapolis is #3 on the list just behind San Fran and Diego at 11.6% "appreciation."

When you include all types of real estate sales, however (RPX), the actual rate is NEGATIVE 2.6%, clear depreciation. In my county (exurban belt) things are significantly worse than that - especially for new and existing SFHs.

Most recent newspaper article had our metro at an additional 2.6% decline on SFHs now that the tax credit has disappeared.

These "gains" are just temporary statistical noise, garbage - the market is consolidating, bouncing along the current bottom. Whether it will GENUINELY go up or down in the future is at best a guess, but guess which way every single economic fundamental is pointing?

Fed admits "recovery" is weakening and ready to induce a second round of quantitative easing (will be nearly meaningless economically speaking - big guns have already been fired/shooting a BB gun isn't going to make anyone jump). Their actions suggest desperation/failure, and they continue to do what did NOT work very well in the past (we continue to hemorrhage jobs). Inducing oil and food price spikes will just crater the economy that much faster.

Jobs analysis of latest report is EXCEPTIONALLY DISMAL, period. We are now NEGATIVE 3,300,000 PLUS JOBS since Obama took office! The BLS has announced that it will be revising DOWNWARDS the jobs numbers as models suggest an additonal 340,000 jobs or so were LOST during latest revisionary period.

For every tiny glimmering piece of bullish hope, we have many more that are bearish. The Fed's actions (minutes) indicate this.

schmitz_kris says

We are now NEGATIVE 3,300,000 PLUS JOBS since Obama took office!

That number is coming close to Obama's campaign promise of "creating 4 million jobs." The only problem is that he failed to clarify those "jobs" were for China, not America.

schmitz_kris says

but guess which way every single economic fundamental is pointing?

Kris--when you make statements like that, you lose credibility. I'm not sure if you ever read or watch the news, but economic fundamentals are mixed at worst. Manufacturing has been growing for something like 14 months straight. GDP has been positive for multiple quarters. As I posted earlier, job openings are rising.

Things still aren't great, but they are clearly better than a year ago.

Positive GDP? Depends on the math you use.

http://www.shadowstats.com/alternate_data/gross-domestic-product-charts

GDP increase as a result of DRAMATICALLY INCREASED DEBT LOADS (to fuel consumption, like Cash for Clunkers, etc.) is a ridiculous pile of poop.

ISM data for manufacturing HAS BEEN OVER 50 for 14 months straight, BUT WHAT MATTERS IS HOW THAT RELATES TO EMPLOYMENT!

Get this: EMPLOYMENT in the manufacturing sector HAS BEEN FLAT FOR FIVE MONTHS (since May) according to last week's official BLS report, AND THEIR BENCHMARK REVISION IS A NEGATIVE 114,000 JOBS IN THE SECTOR.

Given the unprecedented, huge monetary stimulus I don't see anything to cheer about.

Plus, look up what is currently included in US "manufacturing." You'll be amazed, trust me. Smile.

Lastly, "better than a year ago."

Existing house sales are not (record low hit this summer) New house sales are not. (ditto) U-6 unemployment is not - JUST INCREASED FROM 16.7 TO 17.1 IN A SINGLE MONTH - ALMOST AT THE VERY WORST OF THE OFFICIAL STATS (17.4).

I could go on and on and on.

schmitz_kris says

Positive GDP? Depends on the math you use.
http://www.shadowstats.com/alternate_data/gross-domestic-product-charts
GDP increase as a result of DRAMATICALLY INCREASED DEBT LOADS (to fuel consumption, like Cash for Clunkers, etc.) is a ridiculous pile of poop.
ISM data for manufacturing HAS BEEN OVER 50 for 14 months straight, BUT WHAT MATTERS IS HOW THAT RELATES TO EMPLOYMENT!
Get this: EMPLOYMENT in the manufacturing sector HAS BEEN FLAT FOR FIVE MONTHS (since May) according to last week’s official BLS report, AND THEIR BENCHMARK REVISION IS A NEGATIVE 114,000 JOBS IN THE SECTOR.
Given the unprecedented, huge monetary stimulus I don’t see anything to cheer about.
Plus, look up what is currently included in US “manufacturing.” You’ll be amazed, trust me. Smile.

Obviously you aren't cheering, that much is clear. And what you're saying then is that "every economic fundamental" actually means only employment.

I own a house now and fu_king want housing price to drop so I can buy one more.... PLEASE DROP!!!

It will drop simply because there are no takers for the product they are selling at the marketed price point. Self denial only lasts so long, at some point people need jobs food and money. Pipe dreams don't work out.

tatupu70 says

bubblesitter says

What amuses me as that correction started in 2006-2007 and people(existing homeowners) were calling bottom already in 2009. Like 10 years of crazy appreciation was okay but 2 years into down turn and we are fine….it is going to start recover now…

Why do you think it’s going to a symmetrical rise and fall? Better to look at price/rent or price/income ratios. If those are OK, it doesn’t matter if it’s been 1 year or 15 years…

Tatapu, you are, as always, dreaming. Show me one bubble where the decline was not symmetric with the rise. This bubble began all the way back in the 1975. The 1989-1995 rise/fall was just a Bear Trap, the 2006 was the peak, the 2009-2010 was a Bull Trap, and now we are on the continuation of a 1 continuous path down which will fall much much lower than most bulls can even imagine. The broken clock of the bull's predictions will eventually come true, but the bottom will be just as insanely low as the top was insanely high.

dunnross says

This bubble began all the way back in the 1975.

Enough said. I don't think I even need to respond to that.

IMO there definitely will be a second dip. For one thing markets out here are still ballooned and above afford-ability by a lot. The fact that houses that were in low 200's are now in high 300's to mid 500's tells me we got ways to go.

In business it is almost impossible to sell a product when no buyer wants it (or especially cannot afford) at the asking price, and knows it is overpriced while having access to cheaper alternatives. At the end of the day people need money, jobs and food. Pipe dreams don't work out. Which is why there will be another dip in CA.

tatupu70 says

dunnross

Well, I asked people on this blog already where they thought we were according to these graphs, and I got no response. I assumed, that most people can see the uncanny resemblance.

Like I said in the other thread where you posted that--I believe the stealth phase started in 1890.

Saying the bubble started in 1975 is dumb. Houses weren't overpriced by any measure until ~1999 or 2000. Why you would pick 1975 is beyond me...

Nomograph says

I’m curious how you consider the fact that most people are willing and able to pay their mortgage as “proof” that the market is crashing. Your own facts indicate exactly the opposite.

"Most" people didnt buy during bubble years.

vain says

I think prices are correct in my area.
Let’s look at a typical lower end home in San Francisco.
You should be able to get one for $450k or so in the south eastern neighborhoods.
Put 20% down ($90k). You will need a loan of $360k. The mortgage for that is around $1800/month. Income requirement for a safe mortgage is $5400/month, or $65k/year. That’s couple earning $32500/year. San Francisco minimum wage is nearly $10/hour. A couple earning minimum wage has a household income of $41k. If prices go any lower, you will soon be competing with minimum wage earners. Do you guys realistically think market conditions will allow minimum wage earners to be able to afford a home?

Vain, I have a hard time with this math. I make about 110K a year. I put about 11K in my 401K. I really think I should max that out and hope to get myself to do that this year. I have a child for whom childcare runs about 1400 a month. I don't have a car payment or cc debt. I have a little bit of student loan debt that costs me about 200 a month. I put about 1200 in investment accounts each month. I find myself running close to spending all of my cash that isn't going to savings or retirement every month. This month it was 1400 in car maintenance (tires, brakes, 100k service). Next month my car insurance and registration is due. I can't imagine managing a life where I earned near minimum wage, bought a house (with all of the expenses) and kept up with the expenses of running a family life. I can't imagine being that buyer. I do live on the peninsula, so maybe I am located in a very different place than what you are talking about. I also had some health problems in my family that meant a couple of unexpected trips that depleted some cash. So, take it with a grain of salt, but I think that buying with low income would be very difficult.

thomas.wong1986 says

Nomograph says

I’m curious how you consider the fact that most people are willing and able to pay their mortgage as “proof” that the market is crashing. Your own facts indicate exactly the opposite.

“Most” people didnt buy during bubble years.

No but an awful lot of them heloc'd the equity out.

thomas.wong1986 says

Nomograph says

I’m curious how you consider the fact that most people are willing and able to pay their mortgage as “proof” that the market is crashing. Your own facts indicate exactly the opposite.

“Most” people didnt buy during bubble years.

APOCALYPSEFUCK says

Anyone buying a house instead of seed potatoes, water purification systems and advanced armaments is insane. A house you can’t defend will be clearly worthless when cannibal anarchy overtakes America.

When I first started reading this site, I was a little confused and disconcerted by your posts. Now they are kind of pleasing and funny.

“Most” people didnt buy during bubble years.

I think this is a really good point that seems to get lost sometimes.

dunnross says

tatupu70 says

dunnross

Well, I asked people on this blog already where they thought we were according to these graphs, and I got no response. I assumed, that most people can see the uncanny resemblance.

I would comment but I feel like pointing out an error in your logic
you would just dismiss it as meaning we're still in the denial stage.

So there's really no point in arguing with you.

Yeah, Japanese are smart a$$ people and they couldn't correct their bubble. Economics of nature. I don't see any reason why US could quickly buy their way out so fast without producing goods and service to counter the bubble money.

bg says

I am often amazed by the things that people do that make little financial sense.

Hi bg. Maybe you misunderstood me. I agree with you too. Most people do do things which makes little financial sense. That's why 75% of underwater mortgage holders are not defaulting now, thinking there is some kind of a return to normalcy. That makes very little financial sense. However, as the bubble transitions from "return to normalcy" phase to "fear" and "capitulation", you will see more and more of these 75%'ers defaulting. The majority of them will be defaulting at the trough of the housing market, which, again will make absolutely no financial sense at all.

dunnross says

bg says

I am often amazed by the things that people do that make little financial sense.

Hi bg. Maybe you misunderstood me. I agree with you too. Most people do do things which makes little financial sense. That’s why 75% of underwater mortgage holders are not defaulting now, thinking there is some kind of a return to normalcy. That makes very little financial sense. However, as the bubble transitions from “return to normalcy” phase to “fear” and “capitulation”, you will see more and more of these 75%’ers defaulting. The majority of them will be defaulting at the trough of the housing market, which, again will make absolutely no financial sense at all.

That is why this 75%'ers will never see the money they want, because they simply does not exist. Bear euphoria! Inflation will fetch me that money. Yeah right! Buyers salaries are hardly able to catch up with existing prices so forget about increase in home prices,may be 10 years from now.

E-man says

bubblesitter says

Yeah, Japanese are smart a$$ people and they couldn’t correct their bubble. Economics of nature. I don’t see any reason why US could quickly buy their way out so fast without producing goods and service to counter the bubble money.

Bubblesitter,
Your chart is missing the last 5.5 years of housing data. How can we continue the debate when you’re presenting only 1/2 of the info??????

Come on haven't you learnt pattern in your primary school? You know where it is heading. If it shot back to your imaginary line of 200 then post your chart and we will discuss further.

E-man says

Real estate is local people.

Hmm. Interesting, San Francisco had the biggest "Bull Trap" rebound. That's probably where most of the Bulls are going to be trapped, then.

E-man says

With the current rate of price declining in the housing market, free house for everyone by the end of this year

Good for ya. You are getting some free investment properties.

dunnross says

bg says

I am often amazed by the things that people do that make little financial sense.

Hi bg. Maybe you misunderstood me. I agree with you too. Most people do do things which makes little financial sense. That’s why 75% of underwater mortgage holders are not defaulting now, thinking there is some kind of a return to normalcy. That makes very little financial sense. However, as the bubble transitions from “return to normalcy” phase to “fear” and “capitulation”, you will see more and more of these 75%’ers defaulting. The majority of them will be defaulting at the trough of the housing market, which, again will make absolutely no financial sense at all.

I may have misunderstood something there.

It will be heart breaking if folks pay for some period of time and then give up to default in a trough. Is that typically how trends work when asset prices drop?

Do you think we are in the "return to normalcy" part of the transition? or maybe some fear?

dunnross says

1st of all, the “Bull Trap” did not last for 3 years. It lasted from Apr, 2009 to July, 2010, that’s not even 1.5 years.

He's in denial that prices have been falling since last summer. He attributed it to winter seasonal variation.

klarek says

dunnross says

1st of all, the “Bull Trap” did not last for 3 years. It lasted from Apr, 2009 to July, 2010, that’s not even 1.5 years.

He’s in denial that prices have been falling since last summer. He attributed it to winter seasonal variation.

That doesn't even make any sense. If he denies that prices have been falling, then why would he he need to attribute the falling prices to anything?

dunnross says

Gold at $250/oz was also not a result of any fundamentals, where it cost $400 just to take it out of the ground.

I recall that a revolution forced a despot out of power in Iran and then shortly afterwards (about two months) was the nuclear accident in Pennsylavania. Next came gold going parabolic and our one-term president lost his job in the following election year.
Somebody I think it was maybe Mark Twain said that history rhymes.

Nomograph says

Do you honestly think some graph on the Internet is going to predict the future?

Why not? Does the graph showing a trajectory of a comet in space, predict where that comet is going to be 6 months from now? Does a graph showing change falling concentration of blood glucose tell doctors that the patient might die soon? Economics is a science just like astronomy or medicine. People who ignore or don't understand these graphs or correlations are simply not learning anything from history.

Wrong, the spike in listing prices we are seeing now is the lag of the huge spike in selling prices we saw last summer. That was followed by a drop in selling prices starting in the fall. The fallout of that will be seen in the drop in asking prices 3 months from now. You are the only infamous "Emperor of Disingenuity" on this board, and if you continue to lie and weasel out of every argument, like you have up to now, while foaming at your mouth, soon most fellow patricker's will realize that your have no clothes.

mthom says

And it certainly doesn’t seem to be crashing down to the 97 price

Peoples incomes dropped to the 1997 ranges. Prices will follow. It will take several years, it always does.
Minimum wage is higher so it looks like average income is higher, but all it did is move the low end ceiling up a bit. from 4.75 to 8something.

There are almost no first time home buyers out there. Out of all the sales, which are not many, only 6% are FTHB. Prices are too high, and I think an average person is not interested in indentured servitude so that some ahole flipper can make his easy retirement at the expense of another citizen.

ChrisLA says

mthom says

And it certainly doesn’t seem to be crashing down to the 97 price

Peoples incomes dropped to the 1997 ranges. Prices will follow. It will take several years, it always does.

Minimum wage is higher so it looks like average income is higher, but all it did is move the low end ceiling up a bit. from 4.75 to 8something.
There are almost no first time home buyers out there. Out of all the sales, which are not many, only 6% are FTHB. Prices are too high, and I think an average person is not interested in indentured servitude so that some ahole flipper can make his easy retirement at the expense of another citizen.

There has never been a genuine bull market carried by speculator-only buying. That's what we are seeing now in housing, and very soon, all these speculators will find out that there will be no people willing to live in their newly acquired investment.

This thread is hilarious, good comic relief entertainment for a rainy weekend.

You guys can probably cherry pick all the data you want to for making the cases for your arguments.

In the broader context one would question the spin from anyone who would claim to pay $3500 per month for a rental with a gardner and a pool in Willow Glen (where we don't have real summers to enjoy the pool like they do in places like Chicago).

But then nor should we take too seriously the spin from who too often refers to some he disagrees with "liar" or "lying" even though he boasted that he and his lawyer spouse fibbed on a legal document about their intention to be owner occupants, except, to consider the source of the argument.

I don't get why asking prices predicting the short term direction of closing prices, or visa versa, is even relevant.

They say nothing about the long term trend.