patrick.net

Fake P is our friend. We miss him!

Now where is Jack?

http://www.counterpunch.org/whitney08302006.html

The Great Housing Crash of '07
By MIKE WHITNEY

This month's figures prove that the so-called "housing bubble" is not only real, but that its cratering faster than anyone had realized. As the UK Guardian reported just yesterday, "the orderly housing slowdown predicted by the Federal Reserve will (soon) become a full-blown crash".

All the indicators are now pointing in the wrong direction. Consumer confidence is down, inventory is at a 10 year high, and the number of homes sold in July was 22% lower than last year. As Paul Ashworth, chief economist at Capital Economics said, "Things seem to be getting worse very quickly. Freefall is a strong word, but I think it's the right one to use here." (UK Guardian)

The housing bubble is a $10 trillion equity balloon that will explode sometime in 2007 when more than $1 trillion in no-interest, no down payment, adjustable-rate mortgages (ARMs) reset; setting the stage for massive home devaluation, foreclosures and unemployment. ("By some estimates housing activity has accounted for 40% of all the jobs created since 2001". Times Online) July's plunging sales are just the first sign of a major slowdown. The worst is yet to come.

Robert Cote,

Huh? Congrats and everything to you for having a great life, but what does that have to do with west coast stockbroker hours? I was just trying to illustrate that the Left Coast does not have major stock or commodities exchanges.

I miss Jack too. Then we can restart the discussion on Marin intangibles and how high they can go. Then we can go through MarinPOS's selection of high priced shacks and go find intangibles...it'd be so much fun!

And then I'll go OT and start bashing marble kitchen counters, Jack will come in and defend marble countertops and then I'd be forced to apologize and say that some marble kitchen counters are actually quite cool, especially if they're black and overlook the Bay.

http://www.lewrockwell.com/orig5/duffy8.html

Gary Shilling and Brian Wesbury squared off on CNBC to discuss the current state of the housing market. Wesbury, the younger and far more frequent guest over the past eight years, was bullish: the market is simply "correcting back to normal." Shilling, the bear, subscribes to the housing bubble theory. As evidence, last year 40% of home sales were speculative in nature – that is, to second home buyers and investors. According to Shilling, it would take a 35% drop in housing prices to restore the long-term balance between median home prices and the Consumer Price Index. What caught our attention was the essence of Wesbury’s assuredness: there never was a bubble because most people are rational.

I know of a co-worker who is a mediocre performer and has an unimpressive resume, went to 5 interviews and got 4 offers. What is the world coming to?

So what? I have recruiters calling me at work. I just have to turn them away.

Have you realized that performance gets you nowhere? It is all about chemistry and astrology.

Fake P,

You'll enjoy Ha Ha's presence here (I don't know if he was here when you were). He keeps saying $160K is lower middle class or something and that he can't buy anything on that income.

This late coming job bubble is isolated to the BA. In DC/NoVA, the job market is already cooling down a bit and quite a few projected expansions are getting cut or scaled down, esp. in anything related to RE or the defense department. Still some overhanging demand, but it's going fast.

Last time someone told me the job market was hot we had a recession within a year. Silly Valley is not smarter than everyone. It is just too optimistic to see mines on the ground.

Though on the other hand, it was nice while the job market was decent for a change. It's about time that workers started getting some benefits from higher productivity and after years of stagnant wages (supported by RE asset inflation). The hangover of the RE asset inflation will not be pretty.

Fake P. enjoy your dope.

Boy those Raiders sure looked good last night…for the first two minutes.

Yep, it didn't take long to make the Seahawks look like crap. Reminds me of the good ol' days. As for the rest of game, it's preseason so I didn't really pay too much attention to the game after the first few series of play. But congrats on the win...I guess.

Go Raiders.

Though on the other hand, it was nice while the job market was decent for a change.

Not exactly nice. Think traffic. And worse of all, restaurant wait-time!

Meritage Homes, hee hee. Meritage...

I’m sorry, my properties (Pac Heights and Sonoma) have increased 4x in price since I bought them in ‘94.

why haven't you sold those suckers at the top of the market? 8O

why haven’t you sold those suckers at the top of the market?

Houses are not necessarily investments. Quality of life is more important.

I try to plan my day with commute time in mind and I'm not really rich enough to eat out that often, so I'll take a good job market please!

Plus, higher wages would just be taking over from people HELOCing or flipping their RE holdings, without rising wages, the restaurants would now be empty because people can no longer liberate home equity for $9/piece sushi.

"...jack hammer the foundation, break structural items, plumbing"

You would only be hurting yourself, wouldn't you? My understanding is that your outstanding debt is reduced by the value of the house when the bank takes possession.

"I think credit is all better after 5 or 7 years."

In most cases you would still owe the money.

Should we set up a support group for the prodigal homeowners? I think we should probably accept everyone.

Yeah, strong job market...

Intel May Announce at Least 10,000 Job Cuts Next Week (Update3)

By Ian King

Sept. 1 (Bloomberg) -- Intel Corp. Chief Executive Officer Paul Otellini may cut at least 10,000 jobs next week, or about 10 percent of the chipmaker's workforce, in his efforts to slash $1 billion in costs this year.

Otellini will discuss the results of a 90-day internal review with employees on Sept. 5, said Patrick Ward, a spokesman for Intel. In an interview today Ward called reports on job cuts ``speculation.'' Mark Edelstone at Morgan Stanley is among analysts who predict at least 10,000 reductions.

Intel, the world's biggest semiconductor maker, is wrapping up its most sweeping overhaul since the 1980s as Otellini battles market share losses and falling sales. He decided to fire 1,000 managers in July to restore profit growth, marking the biggest cuts at the Santa Clara, California-based company in four years.

``It would be seen as lame if Intel does less than 10,000,'' said David Wu, an analyst at Global Crown Capital in San Francisco. He rates the stock ``overweight'' and owns shares. Wu is advising investors to buy Intel's stock because he expects recently introduced products will help recapture market share.

Shares of Intel, down 22 percent this year before today, rose 14 cents to $19.71 at 10:58 a.m. New York time in Nasdaq Stock Market composite trading. The Philadelphia Semiconductor Index fell 1.1 percent.

Market Share

Otellini, 55, is eliminating jobs and selling businesses after forecasting the first annual sales drop in five years. While Intel tried to create new markets for its personal-computer microprocessors, the company's closest competitor gained ground. Sunnyvale, California-based Advanced Micro Devices Inc. now has more than 20 percent of the market for chips that power PCs.

In addition to the 1,000 management reductions in July, Intel announced the sale of two communications units that will shave 2,000 more people from the payroll.

``You're probably going to see them go back to the core business, the company they were three or four years ago,'' said Chris Caso, an analyst at Friedman Billings Ramsey & Co. in New York. He raised his rating on Intel this week to ``strong buy.''

To win back sales, Intel this week introduced a version of its Xeon server chip five months ahead of schedule. Otellini has accelerated the introduction of products and says his Xeon chips are faster and more efficient that Advanced Micro's Opteron.

In the second quarter, Intel reported its biggest profit drop in more than four years and said it is unlikely to meet its 2006 sales forecast. Revenue will probably decline more than the 3 percent Intel forecast in April, the company said last month.

`Low End'

More job reductions may reverse a hiring binge that has added more than 20,000 employees since 2003, according to Morgan Stanley's Edelstone, who is based in San Francisco. He predicts 15,000 to 20,000 cuts including previously announced reductions.

``Ten thousand would be at the low end of everyone's expectations,'' said Doug Freedman, an analyst at American Technology Research in San Francisco who has a ``buy'' rating on Intel's shares and doesn't own any.

Before this year, Intel last announced a round of workforce cuts in 2002, when the company shed 4,000 jobs. Intel ended 2005 with 99,900 workers, according to a regulatory filing. That was a gain from 79,700 in 2003.

To contact the reporter for this story: Ian King in San Francisco at ianking@bloomberg.net

Last Updated: September 1, 2006 11:01 EDT

SFWoman,

It's great that you bought as a lifestyle investment. All this bubble stuff really gets people confused between investing in a lifestyle/home and investing so you'd make $250K every two years with no effort.

Also, you're getting really low property tax. Once the market adjusts (below current price level but way above where you purchased it), you might make good money just renting your current place out and take advantage of the lower taxes.

I live in my places.

a poor excuse indeed.... :P

sorry, i thought they were 'extra' properties - for some reason using the word 'property' connotes investment to me, tho i don't know what alternative word you use to indicate personal use - 'places' or 'homes'? 'my homes', hmm

if you were a gambler, you could sell the apartment at the top, then buy a hollywood mansion for the same amount post-crash. in the interim, you could sell the apartment and lease it back ;) maybe sell your mom and lease her back too, i did that to my grandmother once, i wasn't heartless enough to sell her outright...

Robert Cote,

Oh come on! You like your kids, you like your house and you seem to like your job too. That sounds like a fine life you're built for yourself, and one that you're rightfully proud of.

As for geopolitical importance, CA is far from the finance and political centers of the US.

I agree that the Left Coast is much more pleasant than the Right Coast in many respects, especially for weather and natural scenery. But pleasantness does not make for geopolitical significance...unless one considers Hollywood blockbusters (financed and approved in Hollywood but usually filmed in Canada or Bulgaria or Australia nowadays) or San Fernando Valley videos or apricots to be of geopolitical significance.

John Haverty,

I was responding to your proposal to disallow rates below 7.5% EVER. That's exactly the thinking that took a deep recession paired with an asset correction and turned it into an all out disaster. I think you'll find the prevailing philosophy, pre FDR, was "let the bad companies die, the bad banks fail, and the bad people go broke". After that hit about 1/5 of the population of the country someone wisely decide to rethink that strategy.

Sometimes shocks are necessary to break feedback loops. I don't want to see one of those options gummed up by ill conceived laws.

The real answer is .... (drum roll).....

Virtuous leaders and vigilant voters. Sometimes I feel like we're falling all over ourselves to avoid the obvious white elephant:

We have no leaders. We have stupid voters (or stupider non voters). Without fixing that, all the rest is fiddling to the flames.

America doesn't have stupid voters, we just have a combination of extremely self interested voters, religious "rapture me up" voters, and stupid voters. To obvious solution is to (1) break America into smaller countries so we have better voter-government interest alignment; (2) set a "now or never" date for the Rapture and make it soon; and (3) make people pass a basic logic test before they can vote.

Yeah, it's not actually gonna happen and we're all doomed and we'll never get that fresh water based rocket to Mars off on time. :-/

Virtuous leaders and vigilant voters.

How about divine intervention?

We have stupid voters (or stupider non voters).

Apathetic non-voters. And fixed elections...

punishment should be slow and lingering …

flogging with wet noodles...

KurtS,

I'm smelling a hard fall coming in Marin. Almost 2 years ago, when my move from San Mateo cty to Marin was eminent, I started doing some stats (thinking I was going to be selling and buying again right away). I wasn't sure if there was a bubble yet then. But I did find that Marin minus Novato & Marin City was range bound to a maximum of 8% over the BA as a whole, but that it had jumped to nearly 25% starting in 2000. Simple mean reversion told me that Marin would need to slow relatively (given I couldn't find any real fundamentals that would explain increased Marin demand).

Now tack onto that the regional & macro bubble effects, and Marin may be due for a double whack as it reverts to the mean regionally and also corrects with the rest of this insanity. We're already seeing 30%+ drops in Belvedere and Tiburon (of course for homes over $5M). But I'm seeing stuff for $1.4M that previously people were trying to get $1.8M+ for just 6 months ago. I just don't have that many examples of direct home-on-home price reductions, so it's all just my own judgement.

Now Girgl, you delete my Office Space Nazi flair reference but let the troll fly? Dude, stay on troll patrol. Delete all trolls upon posting.

Ok Troll, I am willing to enter into a formal legal contract with you. I will buy any house in the areas you listed above. I will hold house for 1 year and sell. If house rises in value you keep all profits with no risk. If house falls below your projection, you cover all my expenses so I break exactly even.

Come on troll put your money where all the shit comes out of. And now it's not your backside as it is filled with corn from all the asspacking you get.

surfer-x says:
Now Girgl, you delete my Office Space Nazi flair reference but let the troll fly? Dude, stay on troll patrol. Delete all trolls upon posting.

Yessir. I'm sorry I failed you sir.

ladi says:
Remember, take your rent X 1.5 to get your gross rental cost. You’re “sweet” $2,000/month rental is really $3000 in gross dollars. hahahhaha.

Still better than $9000 in gross dollars. Dumbass.

KurtS,

It is interesting that the "Marin Premium" isn't really in line with popular perception. In fact, this makes sense when you think about it. There are plenty of "prime" areas in other counties; Marin isn't really unique in this regard. What is perhaps a little unique about Marin is the geographical distribution. I was monkeying around with my old spreadsheets seeing if I could create a "prime set", which roughly cut out Marin City, remote, and everything north of "the big bottleneck". That pushes up the long term premium from about 8% to maybe 15%. But, then I see those prices have diverged by much more than 25%. It looks like about double that. So, ironically, prime Marin may be in for an even more amplified correction. Whereas, Novato has been restrained by traffic and proximity, and doesn't have that extra divergence from mean to work out.

This jives with what I'm observing on the ground. Biggest drops in Tiburon/Belvedere and upscale MV/CM/L.

To your point, we have been visiting bimonthly open houses in a new construction monster in Tam Valley sine it was completed and marketed in February. It's sat vacant, probably because it's too pristine to risk renters (really excessive upgrades in this thing). It first listed for $3.65M. The flyer read $2.98M a couple weeks ago. We were the only folks there during peak Sunday hours. Agent seemed surprised we even came in until he recognized us (it's been different agents many times). Before I could say a word he more or less blurted "throw in an offer of $2.5M and I'll see what I can do to get this thing sold!". I'm thinking, that's over $1M off in 6 months...at this pace I think I'll wait :) Also, this home shows days on market of 18 in MLS, and no price reductions. Lol. I'd maybe pay $2.5M if they could also get rid of the Tam Valley fog. lol.

Troll: (you know who you are, the guy who wishes he'd never quit his job as an investment banker to become a neophyte real estate broker)

Remember, take your rent X 1.5 to get your gross rental cost. You’re “sweet” $2,000/month rental is really $3000 in gross dollars. hahahhaha.

SUCKERS. PAy your land lord’s mortgage

Funny thing is that my landlord is subsidizing my rent; complains every month about how I'm not covering his mortgage...and he built this place in 1998. He failed to sell at the top when he could have got over $2M for this McTrashion. Now he's looking at $1.5M.

Landlord's return: -25% (less if you factor losses on cash flow)
My return, cashed out equity invested elsewhere: +14%

hmmmm. Who's the sucka?

You're an idiot. Was the HP12C too hard for you to use? You know, you could have always just bought a TI or pushed F1 in Excel.

up Tam past Sequoia Valley rd

It's tempting. We've looked at some stuff back that far, but the commute would be a killer. And you're basically stuck with Edgewood Rd. for access during tourist & surf season. I'm back behind Marin Dr./Ave. now and I've come to really hate tourists. I'm stuck, it's either 1@101 or Tam Junction. And people want $3M+ for homes back here. Give me a f*ing break.

astrid,

Agreed. I believe that about one third of the nations payroll is within a 2 hour drive of Lower Manhattan but being a west coast broker has it's perks! Sure our Mondays start in an abrupt and ugly fashion but Friday we're at the "Rock Bottom Brewery" no later than 1:15pm! After that, good luck getting the waitress's attention. The VQ (Veritable Quandry) and Moose Mulligan's have had fist fights start before happy hour started. I've seen heated arguments start in the elevator and spill out into brawls in the lobby. (Try that at 1:00pm in New York!)

But seriously the proof is in the pudding. Out west we had this now defunct firm some of you may have heard of called Robbie Stephens? Great "tech" analysts, traders and market makers. They get bought out by Fleet at the absolute DUMBEST time and they wind up blowing it out and put some of the sharpers guys and gals in the industry out in the street. So much for east coast brilliance.

Just look at Martha's broker Peter Bacanovic. The guy was more of a damn socialite than anything. What f@cking brilliance, he has an "assistant" Douglass Faneuil that I wouldn't have as a parking valet and then "pressures" the guy into forging doc's a sixth grader could decipher! Yeah, real brilliant. Out here we gotta work for it. No managing mom and dad's and their friends money until you get your feet under you! Out here it's sink or swim.

There's basically three schools of thought when it comes to wealth in this country.

East Coast: If you were meant to be rich it would have happened by now.

Mid-West: Keep your mouth shut and nose to the grindstone. Don't worry about money. Work hard, be loyal and when you're 65 you'll be a millionaire.

West Coast: Go WEST young man. An assortment of innovators, dreamers and pitch men that "believe" if they put together the right elements at the right time ANYONE can strike it rich! God love 'em.

Randy H,

What happened to the Robbie Stephens crowd? Up here in Portland we'd seen a few of them open their own shops and were pursuing their legal options against Fleet but what have you heard about those guys lately?