patrick.net

I'll repost my rant on the neverendingtopic, SactoQT's last one.

Rant reposted on "Social effects of the bubble" thread.

I’ll repost my rant on the neverendingtopic, SactoQT’s last one.

Yes, bring it to 800 please. Show the thread-bubblehead that there is no thread-bubble!

There clearly is no thread bubble. The increase in the number of comments stems from a chronic shortage of blogspace, coupled with historic low low prices on bandwidth, and a desire for the non-english speaking world to participate in english language conversations. So, if you analyze it, you will find that there is no thread-bubble, it's simple supply-side economics. Low supply/high demand equals a high amount of comments. One only need to look at the high demand for Java programmers, and webpage developers to see that blogspace is at a chronic shortage. The amount of comments can only go up, what you saw on this thread was an cleverly planned attack by the blog-bears, their doing so only reinforces that fact there is no thread-bubble.

I'm still hoping some of you finance/cap mkt experts and RE experts can comment on my first post near the top of this thread. I've been trying to figure these guys out for a couple days now (and they're still waiting for my comments on their idea).

She rather baby-sit a house that won’t sell than be fired? Looks like someone prefers “water torture” to “drop hanging”.

Sounds like a huge waste of time to me, unless the owners get realistic.

Btw, did I ever mention that last month some fool bought a 3 BR condo here for $990K?
Granted, it was waterfront--but everything was 30 years old--floors, cabinets, bathroom fixtures. Oh, butt-ugly too. That sale now seems especially crazy in light of that Corte Madera house for $1.15M. People should know better.

I’m still hoping some of you finance/cap mkt experts and RE experts can comment on my first post near the top of this thread. I’ve been trying to figure these guys out for a couple days now (and they’re still waiting for my comments on their idea).

I am an expert in pretending to be an expert when the true expert is not around. If that counts...

I think the scheme is probably a smaller scale OTC derivative contract between you and that "stealth" company. As in the case with all OTC contracts, there is considerable counter-party risk. In this case, this risk is large because their ability to offload market risk is severely limited.

I would not touch it with a 10-foot pole if they do not have a reasonable hedging strategy (which cannot possibly exist IMHO). If and when the RE market tanks, how can they fulfill their "guarantee"?

Btw, did I ever mention that last month some fool bought a 3 BR condo here for $990K?

There are 2BR non-waterfront condos in San Mateo that cost 2M+. We will see how this thing ends.

RE: stealth

It sounds like a scheme to capture possible housing price gains while taking no risks as a limited liability entity to me.

Just want to add, hedging strategies for that type of products may exist next year with the introduction of MACROs and CME housing futures.

I love The Thin Red Arrows.

Especially FNM. :-D

If that were the case, the housing market in the US would be indistinguishable from that in Mexico, which has no MLS and no licensing for realtors.

I thought the main difference is the mortgage industry.

Not directly housing-related, but relevant nonetheless. Anyone ever heard of the "hindenberg omen?"

http://tinyurl.com/d6bgx

Quite a down day for markets today....

We all know what comes after Paul Von Hindenburg. It is not going to be pretty.

I think perhaps Mr.Up has the simplest explanation of their scheme. It's really a sale and repurchase as joint owners. So, the co-owning "stealth" company has a private agreement with the original owners regarding terms of payment for the cashed-out equity, etc. But, Peter points out that there is still massive counter-party risk because if this company ever went bye-bye, you'd be stuck as the remaining co-owner with the whole bag of obligations and (I think I'm right here), the residual claimants of "stealth" company would have claim on a portion of your home. Assuming this ever happened, you'd be forced to buy out the claimants portion of sell your home as a court mandate of "stealth's" bankruptcy.

What a terrible scheme! It's brilliantly devious and bound to attract lots of unwary people, I have no doubt! What a wonderful scheme! I wish I were a grifter.

Also, the "stealth" company will most likely go bye-bye exactly when you need it, namely a significant "market correction".

So let's start a bunch of these "stealth" jobs ourselves. If we can IPO them fast enough, we can create then a hedge fund that trades them short, wait for the correction and create our own money machine. Of course, we'll need to move to the Cayman Islands, but hey, who said you don't get something for nothing?

Of course, we’ll need to move to the Cayman Islands, but hey, who said you don’t get something for nothing?

No need to move ourselves. As a "foreign" entity, we will only need to fly to Toronto for the annual meeting just like LTCM.

Should we call ourselves LTCM - Long Thread Capital Management? ;)

I love Bill Gross. My husband brings home his articles for me to read (he gets them at work) and I always find them very informative-- I've learned a lot from them.

I have not read much Bill Gross before, but I will definitely do so in the future.

Buffett and Soros also offered great wisdom long ago.

Soros - reflexivity of the market, boom/bust cycles of credit
Buffett - dangers of OTC derivatives and risks they pose to the market

Pop!

Such investment advice is difficult because it is voodoo to time any market, the stock market being one of the worse. The fundamentals and technicals are right for a correction, but they have been before without correction and corrections have occurred outside of these indicators; so it's your gut feel in the end.

Simple diversification away from high beta funds should be sufficient to protect most people, I think. But remember, your 401k (for most of us here I assume) is a very long-term investment so year-on-year movements up and down are to be expected.

Beta: http://www.investopedia.com/terms/b/beta.asp
(taking an earlier request for definitions)

***not investment advice***

Simple diversification away from high beta funds should be sufficient to protect most people, I think. But remember, your 401k (for most of us here I assume) is a very long-term investment so year-on-year movements up and down are to be expected.

Also, remember dollar-cost averaging?

Bill Gross' article: he uses a 50% consumption rate for the 7% of all aggregate personal disposable income (total consumption) that is funded by people cashing out equity in their homes. This is _tremendously_ conservative. The consumption rate is much closer to 100%, probably well above 90% by any measure. Therefore you can extrapolate that his prediction of a 0.5 -1.0% hit to GDP would could be double that amount. I think he is dead on, but a bit optimistic about hoping for the 1-2% GDP growth soft landing scenario.

When the housing ATM'ing stops, recession is inevitable, IMO. A lot of economic restructuring has been delayed because of RE equity-driven consumption. By the way, this is why I believe economists are correct that building home equity is not investment activity, but savings activity. No capital is created or accumulated, only paper valuations which are ultimately consumed or saved elsewhere.

Vaguely on-topic, I watched my first four episodes of Flip This House or whatever it's called recently, and there was a bizarre pattern. Dippy real estate investor chick goes out scouting for houses, does a quick drive-by, doesn't even get out of the car to look at the house, buys it on the courthouse steps, then starts remodeling the crappy old run-down house.

Then everyone is quite shocked to discover that Crappy Old Run-Down House has...mold!...water damage!...termites!...wiring problems!...more termites!...structural problems! Why doesn't she ever figure out ahead of time that the house is going to have termites? Everything costs way more than expected in the remodel, but in the end, Dippy Real Estate Investor Chick's house often sells for a hefty profit.

I'm not sure what this says about the housing market. It seems to me it might encourage even more amateurs to jump into flipping houses, figuring, hey, if that dippy chick can do it and make money, so can I.

In other bizarre news, did anyone see the article recently about the mad rush to buy land on the Mississippi gulf coast?

http://tinyurl.com/dh5gr

I dearly hope these are the last death throes of the housing insanity.

I saw a comment early on the Japanese property crash and another after asking how many people will end up living under trees...

SactoQT this one is probably of interest to you.

Take a look at this picture, I took it late last year in Tokyo, the people are literally living under trees, most of the them are Japanese, not immigrants - you see men getting up and putting on threadbare suits so who knows what their story is?

http://tinyurl.com/7cohz

Anyway it's not something you would have seen previously in Japan. Maybe I should title it 'The new wave in affordable housing' :)

Where are you going to find any information on the rate of sales (market turnover) and sales prices?

You’re not.

You can purchase all that data and more from DataQuick.
http://www.dataquick.com/default.asp

DataQuick data is cross validated and far more accurate than MLS derived data. In fact, even the Chief Economist for the California Association of Realtors uses DataQuick instead of MLS data in her reports.

Take a look at this picture, I took it late last year in Tokyo, the people are literally living under trees, most of the them are Japanese, not immigrants - you see men getting up and putting on threadbare suits so who knows what their story is?

I saw those people there in late 2003 too.

I saw some of those homie's in Shinjuku in 2003 also. Shared an Asahi with one of them.

I saw some of those homie’s in Shinjuku in 2003 also. Shared an Asahi with one of them.

That's where we stayed in 2003. Maybe we met before? ;)

Way off topic, sorry, but I love Japan. Going again this fall. What's amazing is how affordable Japan is now, got to love 14 years of deflation. I found it cheaper in Shimokitazawa than in SF. Dinner for 6, including enough great saki to make you do the moonwalk, 140 bucks. No tip required. Wait a minute, on topic, the inflated real estate values in Japan aka the japanese miracle are what ultimately caused the deflation.

Way off topic, sorry, but I love Japan. Going again this fall. What’s amazing is how affordable Japan is now, got to love 14 years of deflation. I found it cheaper in Shimokitazawa than in SF. Dinner for 6, including enough great saki to make you do the moonwalk, 140 bucks.

Food can be very cheap or very expensive.

No tip required.

Yep. Gotta love it. No complex multiplications and additions.

Peter P, probably:)

My realtor said that she could get me something similar in the Marina for $990k, she said she won't even think about any offers for less as the market is about to pick up again around December when all the merchant bankers buy them for their wifes. Maybe we should pick up a few?

My realtor said that she could get me something similar in the Marina for $990k, she said she won’t even think about any offers for less as the market is about to pick up again around December when all the merchant bankers buy them for their wifes.

Mine said that even if the market drops 2% this year, it will go up 12% next year so there will still be good appreciation. Buy Buy Buy.

Mine said that even if the market drops 2% this year, it will go up 12% next year so there will still be good appreciation. Buy Buy Buy.

Mine turned out to be a raging alcoholic, so I had to fire her. Given my situation (bubblesitting), I don't really need one anyway except to keep an eye on the properties I'm directly tracking (because Marin MLS is totally gamed, as we discussed earlier). ...you know, she was entertaining to eat sushi with, though. she could really put away the sake.

Mine turned out to be a raging alcoholic, so I had to fire her.

She sounds like a pretty good realtor - after all 'raging alcoholism' is probably cutting edge stuff so she knows how to stay ahead of the curve, after all it won't be long before all the other realtors join that movement...

you know, she was entertaining to eat sushi with, though. she could really put away the sake.

Randy, where do you live? Perhaps we can have sushi together.

If you are ever down in Alameda, stop by Angelfish sushi, amazing.

If you are ever down in Alameda, stop by Angelfish sushi, amazing.

I will.

Pink Godzilla in Santa Cruz, Kotabuki in Piedmont...yummy!