patrick.net

FunnyBayAreaBuyer says

Buy when things are crashing, wait for a while for prices to go higher.

Only problem is that when they want to draw you into the bubble, the prices will rise only gradually.

When the bubble pops, you'll hear about it on your smartphone after it's happened.

tr6 says

homaswong.1986 says

Goog. Yahoo, Face and Twit are all media companies..

You need to spend more time understanding how the cloud works. Networking is becoming virtual and much cheaper to do in the cloud putting serious pressure on Cisco. Why pay for a big router, when Amazon, Google, or Microsoft can do it much cheaper. Same with HP, why pay for a big server, when you can buy much better compute power in the cloud for cheaper.

Amazon, Facebook, Google are certainly technology companies. Twitter and Yahoo are media companies.

I been at this for 30+ years...it pretty obvious what is and isnt tech... what you call "cloud" is no more than shared services based on the IBM model.. back when I started my career in tech, we didnt have these whore marketers it was all a straight forward Industry.

thomaswong.1986 says

Amazon, Facebook, Google are certainly technology companies. Twitter and Yahoo are media companies.

I been at this for 30+ years...it pretty obvious what is and isnt tech... what you call "cloud" is no more than shared services based on the IBM model.. back when I started my career in tech, we didnt have these whore marketers it was all a straight forward Industry.

Calling it "no more than shared services" just demonstrates your ignorance and claiming there were no "whore marketers" in tech 30 years ago is ridiculous coming from a guy who quotes Larry Ellison

thomaswong.1986 says

I been at this for 30+ years...it pretty obvious what is and isnt tech... what you call "cloud" is no more than shared services based on the IBM model.. back when I started my career in tech, we didnt have these whore marketers it was all a straight forward Industry.

With the cloud, you could have someone in high school with good knowledge of javascript and basic information design, build applications that store and process petabytes of data with tiny upfront cost. This is not even close to IBM. Simplifying this as move from client to shared services server is not understanding it.

Oracle and Cisco missed the boat on the cloud; Google has higher revenues that either Cisco or Oracle. HP, ironically advised by board member Marc Andreessen, spend a lot of money for the wrong software (10B for Autonomy was plain stupid).

I am not saying that it all clear for the cloud business model. For example Amazon is taking on capital risk by providing infrastructure for many start ups that might not ever make it and eventually will not be able to pay the bills.

tr6 says

With the cloud, you could have someone in high school with good knowledge of javascript and basic information design, build applications that store and process petabytes of data with tiny upfront cost. This is not even close to IBM. Simplifying this as move from client to shared services server is not understanding it.

Exactly. Capital spending on hardware is dropping to almost nothing. The difference that makes in building a technology intensive company is huge.

I think we are getting somewhere here.

Assuming "real hardware technology intensive" companies are not with us in the bay area anymore ...

does that make the prospects of the bay area worse? or better?

I mean, less cost in hardware ... more profits ... more big fat RSU bonuses for the googlers and face bookers ... isn't that right?

More efficienciy concentrated in the bay area, higher salaries ... higher house prices. Is that right?

Or, are we increasing the risk in the bay area by bringing more efficiency and less hardcore technology?

ramonp says

I think we are getting somewhere here.

Assuming "real hardware technology intensive" companies are not with us in the bay area anymore ...

does that make the prospects of the bay area worse? or better?

Right now, it makes them better. The big threat to the Bay Area would be a shift of money to biotech or some other field where we don't have the proper concentration of talent and VC knowledge.

ramonp says

I mean, less cost in hardware ... more profits ... more big fat RSU bonuses for the googlers and face bookers ... isn't that right?

I think that's the way it's going right now. You need fewer talented people to do more. John Chambers at Cisco always focused on revenue per employee. Well Google has more revenue per employee than Cisco ever achieved. Some of the smaller companies like DropBox might even have much higher revenues per employee.

JFP says

The big threat to the Bay Area would be a shift of money to biotech

We have a really good infrastructure for biotech (industry, universities, and VCs). Biggest biotech, Gilead, is here. The threat to established biotech might come from "bio-hacking" in the next decade.

ramonp says

I mean, less cost in hardware ... more profits ... more big fat RSU bonuses for the googlers and face bookers ... isn't that right?

as an employee you get a salary.. what extraordinary work have these people done earn additional compensation ? all of them. for these companies there is always someone behind the main candidate that will do the work for less... we dont have a supply issues today, nore are we in some infancy of tech revolution... we are way way past that...

JFP says

Calling it "no more than shared services" just demonstrates your ignorance and claiming there were no "whore marketers" in tech 30 years ago is ridiculous coming from a guy who quotes Larry Ellison

all cloud is providing, renting, it space.. thats all.. and yes Ellison is certainly a whore.. and how he managed to survive is beyond me..

tr6 says

With the cloud, you could have someone in high school with good knowledge of javascript and basic information design, build applications that store and process petabytes of data with tiny upfront cost. This is not even close to IBM. Simplifying this as move from client to shared services server is not understanding it.

thats what people did ... even I, accounting major, with limited programming experience/knowledge created my own apps, query big data to provide financial analysis. back in my AMD days we had armies of skilled professionals doing the same. What you called Cloud.. we called Shadow Files.

I know for a fact even Apple, Intel and HP were using the same tools and provided the same training to their employees to maximize productivity.

The 1929 market crash (Great Depression) recovered and we hit another recession in 1937, then a brief recession in 1946, another recession in 1949, then 1954.

If history is any indication, this housing cycle might top out in 2016-2017. If the Fortress didn't budge much during a Great Recession, what makes people believe it will budge during the next recession?

The data speak louder than any expert's opinion and yours, or mine. People vote with their pockets. If you cannot afford to buy in the Fortress, you, in fact, have been priced out. It will only get more pricey after each cycle. The weak will get pushed out further from the job center or have to settle for a smaller pad in a prime area. It will become a privilege, if not already, to own a single family on a 6,000 sq.ft. lot in the Fortress.

Look at San Francisco. They're building and selling 225 sq.ft. condos. It's time we start to adjust our expectation. Our standard of living will gradually decline in the coming years and decade. The market has spoken.

E-man says

If history is any indication, this housing cycle might top out in 2016-2017. If the Fortress didn't budge much during a Great Recession, what makes people believe it will budge during the next recession?

Pretty strong and valid argument. An I tend to agree with it mostly.

Can I ask comments about Prof. Schiller's opinions about investors?

http://www.cnbc.com/id/101228953

Anybody that agrees with Prob Schillers? and if not, why?

JFP says

The big threat to the Bay Area would be a shift of money to biotech or some other field where we don't have the proper concentration of talent and VC knowledge.

or competition from China and India. i don't think it's a good idea to buy in the BA long term.

E-man says

If history is any indication, this housing cycle might top out in 2016-2017. If the Fortress didn't budge much during a Great Recession, what makes people believe it will budge during the next recession?

but it did budge and budged, significantly. Prof Shillers above interview may
be more indication downside risk (further corrections/recover) are still in the cards.

we seemed to have forgotten BA prices fell between 1989 to early 90s. Is the Govt
policies blunting major corrections from occuring today.. most likely true.

http://patrick.net/?p=1235339

Wow, wow, wow!!

37% declines in SF and SJ? This was news to me!. I knew there was a correction, but I did not know it took SF and SJ all the way to 37%!!!!!

I tend to love this data! Brings certainly great glimmers o hope!. So, to avoid confirmation bias syndrome, let me say:

"This time is different!. In the 1990s and 2000s, people could not afford their purchases. Today, investors are buying all cash. There is almost no debt in today's real estate transactions. There is no faulty debt. Facebookers (select engineers inside Facebook) are an average Incomes of 200K-300K a year, similar to select engineering staff at Google, Linkedin and so".

"This time is different!. In the 90s we had the savings and loans crappy lending institutions. In the 2000s we had the subprime lending. Today, we have sound lending standards!!!"

Anybody cares to derail my "This time is different" arguments? What could possibly bring the bay area down? Layoffs? Investors pulling off? Google, linked in, and so going down? Could that ever be possible?

Oh, and another question:

Although SJ and SF came down 37% in the 90s. What happened to Cupertino? Los Altos? Menlo Park? Did they do as badly?

And hey Folks, you really rock!. Both Bull and Bear arguments are very strong here and it definitely helps in making an informed decision, or at least building a reasonable hypothesis. Wether you want to invest in the short term, or the long term, I have found precious information from both bears and bulls in this site. Thanks Patrick!

Oh, another question, Thomas.

Are these 37% drop in values in both SJ and SF: are they real drop in values? or nominal?

Cheers!

tr6 says

We have a really good infrastructure for biotech (industry, universities, and VCs). Biggest biotech, Gilead, is here. The threat to established biotech might come from "bio-hacking" in the next decade.

Thanks. That's what I really meant. Not traditional biotech.

:-) :-)

Cool. Understood. Thx much for the data. So the difference is in real values vs. nominal values.

Still, really good points of view from both sides folks. It looks a lot like it's better to pull the trigger, just as long as we are talking about the real bay area (los altos, palo alto, menlo park, cupertino, etc).

cheers!

FunnyBayAreaBuyer says

It looks a lot like it's better to pull the trigger, just as long as we are talking about the real bay area (los altos, palo alto, menlo park, cupertino, etc).

I recalled in 2011 when I was looking for houses, the price drop (from pre-financial crisis high to post-crisis bottom) in real bay area is about 15-25% and 40-70% for other parts of SFBA.