patrick.net

Buster says

Run away deflation on the other hand, will wipe out everyone,

I don't see that.

If you have cash, deflation is wonderful.

Yes, if you have cash, deflation is wonderful, I agree. However, most folks are not in all cash positions. E.g. retired, all savings in cash or cash equivalents, no real estate holdings, stocks, or dependence on income from investments of any kind. So yes, if you are quite wealthy with mattresses stuffed with cash, you have it made. Most others will not.

Of course there are additional downsides to inflation for sure. But given the choice, I believe the fed will, as they always have, favor the inflation side of the coin.

Comes down to jobs. Private sector jobs. They are going nowhere fast. Public gravy jobs will evaporate when private gigs can be off shored. Next I hear Von's workers (for example) will go on strike for health benefits. That is coming here soon. All the major markets will be on strike again. And guess who is waiting in the wings to come to the rescue starting January 2012? Walmart-(retail space already bought and ready to roll) to simultaneously open all across the state, and eliminate those nasty union jobs that pay 20 bucks an hour. Damn union jobs.

Two incomes used to be enough to purchase a home in the outskirts of L.A. Now you'll need 4 or 5 to compensate for the low wages. I would love to ask for a raise, but I am lucky to even have a job. Who needs cartoons anymore? They can be shipped to India or China. All animation is already. And my job 'used' to be very well paying. In addition--there are hundreds of kids a year being pumped out of colleges with high hopes of getting into animation. They pay a lot, and can't get a job either. I see a massive downward swing when radiologists' reports are being emailed in India to review MRIs that radiologists could do here. Same goes for lawyers, architects, proof readers and tech. Sorry. A few will continue to be rich. The rest of us, not so much. That equals a paucity hopeful homeowners, and lingering housing blues.

shazzy says

Damn union jobs.

Union Jobs - Third from the bottom - BLUE

TMAC54--
Glad you caught my sarcasm. Private sector union members ('cept nurses) don't rake in the massive dough. These check out clerks are just trying to keep their health insurance. Many are heloc'd just to pay for the last strike...which got them nothing. They do not make much and frankly, I am supporting them.
-The public sector unions are a very different story. I have a feeling they will be crying the blues in a few more years...going from 100K police retirements to something a lot less enticing. Me? about 2 grand a month for 35 years in the animation business. Not much, when social security age is raised to 70 years old, while the firefighters and cops retire at 52. Little Greece, anyone?

Los Angeles Renter says

FortWayne says

Comparison lies in underlying value. Everything comes back to what it's worth on the free market. Building a box with a door isn't exactly rocket science, just like growing a tulip.

You can't build the land under the box...

Have you ever been outside a major metropolitan area? There is plenty of land out there.

If you have cash, deflation is wonderful.

Cash and enough of it to support you for the rest of your life. Because finding or keeping a job will be difficult.

Ok, here is the canary in the mine shaft that I eluded to in my post just 24 hours ago about the fed wanting to spur inflation in the future. This by Paul Volcker no less; (I believe that the short sided temptations to spur inflation in the future will be irresistible. Dumb of course, but look at the 2012 DC lineup :) ).

http://www.nytimes.com/2011/09/19/opinion/a-little-inflation-can-be-a-dangerous-thing.html?_r=1&hp

The siren song is both alluring and predictable. Economic circumstances and the limitations on orthodox policies are indeed frustrating. After all, if 1 or 2 percent inflation is O.K. and has not raised inflationary expectations — as the Fed and most central banks believe — why not 3 or 4 or even more? Let’s try to get business to jump the gun and invest now in the expectation of higher prices later, and raise housing prices (presumably commodities and gold, too) and maybe wages will follow. If the dollar is weakened, that’s a good thing; it might even help close the trade deficit. And of course, as soon as the economy expands sufficiently, we will promptly return to price stability.

FortWayne says

Have you ever been outside a major metropolitan area? There is plenty of land out there.

Land yes.. but jobs? The majority of high paying big city jobs aren't going to migrate to Montana, just because there's some land to build on out there.

Los Angeles Renter says

Land yes.. but jobs? The majority of high paying big city jobs aren't going to migrate to Montana, just because there's some land to build on out there.

You mean like Intel to Middle of Washington, Arizona and upstate New York, Ebay and Yahoo to Nebraska. Seagate to Minnesota. And plenty moved to Texas. These regions are frankly a gold mine of cheaper labor and lower cost facilities.
Plenty of State incentives and easy plug in to start...

They dont drink expensive California wines in these parts.. just cheap beer.

FortWayne says

Have you ever been outside a major metropolitan area? There is plenty of land out there.

That is how and why Silicon Valley got started.. cheap land. By 1994 we had 315 public companies, 400 by 2000,
and today down to 215... too expensive to hire around the bay area. Better luck elsewhere.

thomas.wong1986 says

FortWayne says

Have you ever been outside a major metropolitan area? There is plenty of land out there.

That is how and why Silicon Valley got started.. cheap land. By 1994 we had 315 public companies, 400 by 2000,

and today down to 215... too expensive to hire around the bay area. Better luck elsewhere.

Yep, there is no more land left in metro area but that is not helping CA balance the budget. :)

Nomograph says

Wrong. It was a combination of available space, a highly skilled labor force, proximity to top universities and research labs, and a desirable place to live with good weather, schools, and recreation.

Why CA...Lax patent enforcement... and still happening today, the only thing that hasnt changed...

"Historically, Silicon Valley had been pretty casual about patents and patent law. Bill Hewlett and David Packard preferred to compete rather than sue. And when a maverick group spun out of Shockley Transistor, taking the semiconductor "cookbook" with them, they weren't pursued. Even the founding event of modern Silicon Valley—the explosion of Fairchild Semiconductor and the subsequent creation of scores of competing chip companies—drew nary a cease and desist demand, much less a major lawsuit."

http://www.scu.edu/scm/summer2011/the-big-idea.cfm

Nomograph says

If it was just about cheap land, why isn't there a Silicon Valley in Kentucky?

Or maybe Boston ? --- Route 128.. bigger than SV, more employees, more pay, more employers, and universities research labs, But Route 128, very strick patent and non-compete enforcement laws, which CA didnt. Jumping ship to a competitor was very easy. OK in CA, not so in other states. So today, they ship their R&D far and wide, no longer can you interview across the street on your lunch break.
Ah, the good old days.

"Recreation ?"

Ha Ha Ha Ha ... surely you jest ... these people (geeks/nerds) didnt date or party.. Pathic losers who worked very long hours for weeks on end on things no one ever gave a fuck about. Or are you talking about the Cook and Hip after all has been done.

They actually made a movie about it.. funny!

I dont see $5B being spent in Santa Clara.. does anyone else see this ?

Intel to invest $5B in new Arizona semiconductor plant
Date: Friday, February 18, 2011, 1:32pm MST

Intel Corp. .. executives announced today that the semiconductor manufacturer plans to build a $5 billion factory in Arizona that could bring in at least 1,000 permanent jobs in addition to thousands of construction jobs.

Intel plans to build Fab 42 in Chandler as the highest-volume chip plant in the world. Construction is expected to begin near the middle of this year and be completed in 2013.

While Intel officials would not say how many people it would hire, Josh Walden, vice president of Intel's Technology and Manufacturing Group and general manager of fab manufacturing, said facilities of this size typically employ 1,000 or more.

"This (fab) harnesses our network for future growth," he said.

I said I wouldn't be back but a comment that is so full of ignorance requires attention.

thomas.wong1986 says

They dont drink expensive California wines in these parts.. just cheap beer.

That one IMHO doesn't know what the hell he is talking about. That comment reminds me of the losers in Florida who make 20K a year but drop $20. on a drink on Friday night to look cool and pretend they are something they aren't. Were you born in this country? Because clearly your knowledge of USA social behaviour is extremely limited.

For the poster's information unlike California that is drowning from Los Angeles to San Francisco with wannabe rich and social pretenders, there is plenty of Old Money in many of those areas you mention that just drink "cheap beer," especially Upstate New York where no many don't drink expensive California wines (they are not that stupid) because they have REAL money, they are secure, they don't have to prove they are something or anything by drinking overpriced slop to impress social climbers.

bubblesitter says

Yep, there is no more land left in metro area but that is not helping CA balance the budget. :)

Not true! There is plenty of land. You're just not allowed to build on it. Density in the Bay Area overall is a joke because of so much "open space", even though density in the populated areas is quite high. Even the prototype for open space, the Marin Headlands had a proposed 9600 persons/sqmi development at one time (http://en.wikipedia.org/wiki/Marincello). Apparently this will not be fixed until Starfleet Academy is built there.

Nomograph says

Wrong. It was a combination of available space, a highly skilled labor force, proximity to top universities and research labs, and a desirable place to live with good weather, schools, and recreation.

If it was just about cheap land, why isn't there a Silicon Valley in Kentucky?

Yes, I'd agree with this. The first few things mentioned are incredibly important. That's why Research Triangle is a mini-Silicon Valley (with much lower costs of living, of course) - UNC, Duke, and NC State, and it's not as hot as Austin. That's why Boston does well despite the weather. That's why even Huntsville does better than Kentucky. Otherwise, you develop only pockets of the coalition of the willing to move -- e.g. Idaho, where Micron has been for years and years, but some companies have found a small niche.

The real question is whether Silicon Valley has the staying power of say finance in NY. Most of my friends in finance argue that finance is incredibly mobile these days, but the big financial centers have really stuck around (London, HK, Singapore), and it's hard to create new ones (Reykjavik? Dubai?). You might be able to move from NY to HK, but are you really going to move from NY to Almaty?

thomas.wong1986 says

By 1994 we had 315 public companies, 400 by 2000,
and today down to 215... too expensive to hire around the bay area. Better luck elsewhere.

I don't think that's necessarily the best metric all on its own. In the 1990s, several companies that are currently still private or just became public would have been public several years earlier than the current plan.

thomas.wong1986 says

Why CA...Lax patent enforcement... and still happening today, the only thing that hasnt changed...

First of all, patents are enforced in federal court, not state court. As even the link you gave us pointed out, there's a balance between strict enforcement of patents (which really only happens in the Eastern District of Texas -- again, federal court, not state), and allowing freedom to develop. In the past, the competitive environment (notwithstanding the law) was leaning more towards broad cross-licensing as opposed to massive patent infringement suits but it's not like the current patent struggles are anything new. Wannabe monopolists have always tried to stifle their competitors, and the patent landscape changes in cycles.

The non-compete thing -- is it really fair to take away an individual's livelihood? Again, you can strike a balance between protecting confidential information and taking away someone's ability to work. You're certainly seeing lobbying efforts around Massachusetts non-compete requirements (http://www.massachusettsnoncompetelaw.com/2011/01/articles/noncompete-debate/new-momentum-to-limit-noncompetes-in-massachusetts/), and any state that has too strict a non-compete precedent risks losing employees to somewhere like California anyway.

The types of things you're talking about are things that do limit competition. There is a balancing act involved in dealing with them, and pretending that these one things are the answer risks making an ideological statement.

commonsense says

I said I wouldn't be back but a comment that is so full of ignorance requires attention.

I once asked a Texan what kind of resturants they have in Austin like Sushi... They laughed and said..what "Fish Bait".

I had a great time with my Texan friends drinking cheap beer.

corntrollio says

I don't think that's necessarily the best metric all on its own

Any kind of metrix you use its all the same.. growth vs shrinking local economy.
It was one thing to be here 30 years ago and witness the growth..
today looks like crap.

corntrollio says

First of all, patents are enforced in federal court, not state court.

Yes, When its extreme and a Lawsuit is brought to the courts, but many get away or are settled out of court when caught.. AMD copies Intel 386, never pays a dime, Google pays Yahoo for infringing on Yahoo Patents.. and lots of other examples you never hear of.

corntrollio says

You're certainly seeing lobbying efforts around Massachusetts non-compete requirements (http://www.massachusettsnoncompetelaw.com/2011/01/articles/noncompete-debate/new-momentum-to-limit-noncompetes-in-massachusetts/), and any state that has too strict a non-compete precedent risks losing employees to somewhere like California anyway.

Silicon Valley’s eclipse of Route 128 helped by lack of non-compete clauses says new study

http://www.siliconbeat.com/2008/08/18/silicon-valleys-eclipse-of-route-128-helped-by-lack-of-non-compete-clauses-says-new-study/

thomas.wong1986 says

Yes, When its extreme and a Lawsuit is brought to the courts, but many get away or are settled out of court when caught.. AMD copies Intel 386, never pays a dime, Google pays Yahoo for infringing on Yahoo Patents.. and lots of other examples you never hear of.

Federal court is federal court. California vs. Massachusetts has little bearing on this except if a case gets to the jury and CA juries vs. MA juries would act materially differently (I doubt they would) in applying the law. The Markman hearing is still done by a judge on the federal bench, and that's a critical part of a patent suit. What does settling out of court have to do with CA vs. MA?

thomas.wong1986 says

I dont see $5B being spent in Santa Clara.. does anyone else see this ?

Silicon Valley is primarily R&D not manufacturing.

The manufacturing facilities generally go to the lowest cost location.
Those jobs are not exactly high skilled labor, it's mostly assembly line type work.
Arizona may beat California but general you dont want an economy based on cheapness because
at some point the entire operation will just be moved to India and you'll end up with another Detroit.

toothfairy says

Silicon Valley is primarily R&D not manufacturing.

The manufacturing facilities generally go to the lowest cost location.
Those jobs are not exactly high skilled labor, it's mostly assembly line type work.

Yes, some of these are factors dependent on the actual manufacturing.

Nonetheless, it's not like there isn't manufacturing in the area.

toothfairy says

Silicon Valley is primarily R&D not manufacturing.
The manufacturing facilities generally go to the lowest cost location.
Those jobs are not exactly high skilled labor, it's mostly assembly line type work.

Was primarily a Mfg and R&D... due to high cost, mfg was moved out.. R&D was spared back in the 90s for the time being. But that time if over now... you cant have high labor R&D costs, in a deflationary industry. Doesnt work around here. Never did! Besides whats the difference. R&D (cost center) work on long term projects and not involved in revenue generation nor operations.

On The Record / Carl Guardino

May 13, 2007

Q: So are those really challenges?

A: Unequivocally, yes. Not only to the CEOs in the boardroom, but to any family you talk to in their living room. What we hear time after time from CEOs as well as frontline employees is how incredibly difficult it is to come here and stay here. That truly does have an impact on a company's bottom line when the cost differential is so much higher here than it is in other regions around the state, nation and globe, or the ability to recruit top talent is also impacted.

You mentioned housing. It probably is the top concern we hear about in Silicon Valley from both CEOs and employees in terms of local issues. Does that have an impact? Let me put a finer point on it.

Hewlett-Packard and Dell are the top two computer-makers in the world. Corporate headquarters for HP are located in Palo Alto and Dell is in Round Rock, Texas. Obviously, they both have people and facilities around the globe.

In those two communities where their corporate headquarters are and where a lot of research and development takes place, the median resale price for a home in Palo Alto is about $1.6 million. In Round Rock, Texas, it's about $180,000, except the home and property are bigger.

We hear from HP all the time that a huge deterrent to the ability to recruit and retain people anywhere near Silicon Valley is the housing issue. We don't hear that from Dell, which is also a member company, about their operations in Round Rock. It does continue to plague us and we will continue to sound the alarm.

RESULT: HP exiting the PC business.. to expensive!

thomas.wong1986 says

RESULT: HP exiting the PC business.. to expensive!

Exiting the business to do things that are higher growth and higher margin. PCs are basically a commodity item now (and have been for while, and there isn't much R&D left with respect to the actual PC (although there might be for the components, which HP doesn't make). I see this as a positive for HP -- they can sell their PC business for cash like IBM, and focus on more sophisticated things, although that's not to say there won't be some pain to start out.

corntrollio says

I see this as a positive for HP -- they can sell their PC business for cash like IBM, and focus on more sophisticated things, although that's not to say there won't be some pain to start out.

How about expensive measuring devices, O-Scope, spectrum analizers, thier original business that started HP back in the day. The business they spun off as Agilent manybe ? Even as a commodity is has to support all its costs including R&D else it will perish.

Frankly IBM is an example of the future of SV. Workforce scattered through our nation and internationally. IBM isnt centered around a central hub. They took a mean sledge hammer to expenses thorough out the 90s.

Its pretty clear and from the top what the real problem is...

"In those two communities where their corporate headquarters are and where a lot of research and development takes place, the median resale price for a home in Palo Alto is about $1.6 million. In Round Rock, Texas, it's about $180,000, except the home and property are bigger.

We hear from HP all the time that a huge deterrent to the ability to recruit and retain people anywhere near Silicon Valley is the housing issue. We don't hear that from Dell, which is also a member company, about their operations in Round Rock. It does continue to plague us and we will continue to sound the alarm."

SFace says

Silicon Valley is getting about 40% of all the US VC dollar and CA aggregate more than 50% now.

And in return the VC sites on your Board of Directors, watching every nickle spent. They dont just write checks and forget about it praying for some next big thing. They watch over you every quarter, yeaer over years, comparing the budgeted amount they approved to be spent to actual spending. They approve how much headcount gets expanded and by how much. Its called Goverance.. God forbid you overspend and dont make up in cuts by year end.

And while we do get lots of funding, much of that is still burned off in overseas R&D. I rather have it here, but what can you do!

thomas.wong1986 says

We hear from HP all the time that a huge deterrent to the ability to recruit and retain people anywhere near Silicon Valley is the housing issue.

Sure, but that has very little to do with why HP is getting out of the PC business. Note your original quote that I pulled:

thomas.wong1986 says

RESULT: HP exiting the PC business.. to expensive!

That's not a result of the Bay Area being too expensive. That's a result of the PC business not being a growth industry and better suited as a divestment.

HP could easily run facilities elsewhere like IBM, and it would still not involve their PC business.

SFace says

The VC gets one seat, out of 10? Mostly they are there to be on the inside and establish relationships, not run the show or really have the power to.

Depends on the deal and depends on the company. It would usually be more than 1 when you include all of the investors though -- e.g. there might be an angel investor with a seat, and a Series A investor with 2 seats. Then the Series B investor says, okay I want 2 seats, and the Series A investor gets cut back to 1. Most start-ups don't have 10 directors -- usually fewer. Also, even if the company has, say, 3 reps on the Board, the two founders and the professional CEO, the professional CEO may have been picked/recommended by the VCs. If the technology was spun out of a university, the university might have a seat, or at least have rights requiring consent for certain decisions.

The actual level of oversight by the Board can differ from company to company as well.

thomas.wong1986 says

In those two communities where their corporate headquarters are and where a lot of research and development takes place, the median resale price for a home in Palo Alto is about $1.6 million. In Round Rock, Texas, it's about $180,000, except the home and property are bigger.

I live here in Bay Area and grew up in Texas. This is a great description of my experience of housing. Hard to buy a crappy house here. So, I borrow the house not the money.

LAO says

've read some predictions that we wont reach 2006 bubble prices again in Los Angeles until 2024... Others are less optimistic and see prices heading back to mid-1990s prices and staying there until 2025. Which would mean we would have 30 years of ZERO housing appreciation from 1995-2025.

Zero appreciation adjusted for inflation is the norm. Anything beyond that has spelled "TROUBLE" be it 1990 or 2008. Have we learned anything yet ?

else skip buying a home and horde up on Gold, cause the Shi^ will surely hit the fan...

The first panacea for a mismanaged nation is inflation of the currency; the second is war. Both bring a temporary prosperity; both bring a permanent ruin. But both are the refuge of political and economic opportunists.
...Ernest Hemingway

Unless, of course, you win the war like we did in 1945.

In most countries you have the corrupt, and the landless. We're getting there.

The Answer lies in Globalization.
My guess is houses will drop 50%.
If we look at autoworker wages:
Detroit was $100 or $75 per hour
It moved to Tennessee and $55/hour
It moved to Mexico at $15/hour
It moved to China at $2/hour (China banned from auto sales in U.S.)
Jeep went bankrupt and emerged with new hires at $15/hour
Chinese auto workers got a raise to $3/hour

The best we can hope for is $15/hr or $30,000/yr which equates to a house or loan of $115,000 with 2 incomes $230,000. (fact check?)

Inflation is an unknown, Romney tariffs on China is an unknown, and if Japan's Yen is devalued to help break the Yuan/Dollar peg, that is unknown.

In a free global market the wages will equalize. Water seeks it own level.

Edit: in a free global market many foreigners can buy real estate in the beautiful Bay Area driving up prices.

robertoaribas says

Even in very poor parts of the world, a reasonable house with land costs FAR MORE than in most US cities.

Look for a drop in prices of 90% in all those poor parts of the world, across the board. Then we'll talk.

In our new system one guy can push a button and grab a trillion dollars worth of mortgages/deeds just because he can. No one can stop him and the carrying costs are just the property taxes. Say hello to the new rentier class. Formerly known as the nobility. I know he's doing it supposedly so my retirement check doesn't bounce. But how long will that fantasy last?

taxee says

In our new system one guy can push a button and grab a trillion dollars worth of mortgages/deeds just because he can.

See Sarbanes Oxley... Segregation of Duties, Internal Control over Financial transaction and IT access... but sometimes it happens.. rare, unauthorized, and will be caught/prosecuted.

robertoaribas says

. Even in very poor parts of the world, a reasonable house with land costs FAR MORE than in most US cities. visit Shanghai, Bangkok, Manila or Mexico city for comparison sake.

Smaller cities do attract industries and business, because they are more competitive.. as Arizona has from Silicon Valley.

Overall, Japan and German didnt skyrocket like many others... they already had their bubble in the 80s and 90s.

thomaswong.1986 says

taxee says

In our new system one guy can push a button and grab a trillion dollars worth of mortgages/deeds just because he can.

See Sarbanes Oxley... Segregation of Duties, Internal Control over Financial transaction and IT access... but sometimes it happens.. rare, unauthorized, and will be caught/prosecuted.

I don't see any indication that the fed will be prosecuted any time soon.

Things seem to be working quite well for them. The fed are fine, the hungry get food stamps. What could possibly go wrong?