patrick.net

The best thing about California is... Stockton!

Come to the Asparagus Festival next weekend. But stay close to the crowds because stragglers are killed and eaten.

Every night sounds just like the fourth of July. The Talking Heads described it perfectly in the oldy Life During Wartime: "The sound of gunfire, off in the distance, I'm getting used to it now."

pretty much a 360 degree change

wouldn't it be 180°? 360° would be back to how it was. heh :lol:

Did the notorious HH get disappeared? Or just sulking?

On April 18th @ 10:24 PM Girgl said:

Things to be proud of:

The work culture at some companies in the valley (and probably elsewhere, too). Some random attributes I can think of:
Freewheeling, gentle, non-authoritarian, innovation-fostering, multi-cultural, unbureaucratic, energetic.

I'm pretty sure you're serious. I don't work in the valley -- or apparently on the same planet as you do -- so I haven't a clue. I have had a handful of great supervisors through the years. And a few flamers.

Owneroccupier: This is the most diverse place on earth precisely because we have so many top talents from all around the world interacting with each other, bouncing ideas off each other.

Peter P: This is true. We need to make sure that the system will continue to encourage this.

This gives me hope when folks decry the loss of heavy manufacturing in America. Do we really want to be China with 16 of the world's 20 most polluted cities? Building new, cleaner and more efficient factories for the products we will use in the future is easier than building an educated middle class. We don't need to be the world's leading manufacturer of horse drawn carriages.

This gives me hope when folks decry the loss of heavy manufacturing in America. Do we really want to be China with 16 of the world’s 20 most polluted cities? Building new, cleaner and more efficient factories for the products we will use in the future is easier than building an educated middle class.

There was some heavy-duty chastising (sp?) going on a few threads back when someone gleefully wished for higher gas/oil prices. Your point is exactly why higher gas/oil prices can be a good thing, as hopefully market forces will drive innovation into alternatives to carbon-based fuels. There should be more pressure on industry to innovate, and there should be more incentives for innovators to gravitate towards the energy industry.

I've seen this urban legend/statistic:

Mexico city is the only city in the world with a larger population of Mexican citizens than Los Angeles.

Just out of curiosity, can anyone conclusively confirm or deny this? I don't know what the ultimate significance is either way. But if you want to know what the Golden State is about today, we have to start here.

About manufactoring... Over 11% of the state's population works in manufactoring related jobs.That's compared to 5% nationally. The sector as a whole comprises 1/5th of California's income. That is fairly signifigant since California has such a massive population. Imagine if this sector were to fold entirely? That's more people than live in some states. A loss of this sector would put a sizeable dent in the local economies of entire areas of the state that are heavily reliant on it's success.
Since 1990, 15% of this industry has either folded or moved away, either to other states or other countries. This rate has accelerated since 2001 years due to obvious cost factors related to environmental regulations, taxtation, cost of living and wages demanded by their employees,and even power costs, which can be as much as 2/3 cheaper in other states. Add to the fact that other states offer millions in tax cuts, incentives, and cheap land and according to one california economic newsletter I susbscribe to, and the general feeling is not if they will move, but when and where.
I see other vulnerabilties in the tech sectors, where industries that were once specialized and therefore fully able to pay very high wages to these specialized employees are now just a few of the countless national and international companies and R and D facililities that can do the same and more for less with a fresher, younger staff. The fact that the CA housing boom accelerated the cost of housing out of relation with actual wages is what caused this severe vulnerability. People in the region say wages are down, but in reality, if wages were down, then the cost of living should have come down as well to reflect the change in industry expansion outside california.
The above statement is what I use as a gauge to measure how far housing might come down. I think California could potentially be in for not only a severe correction in housing costs, but a correction in the cost of living as well, as their once specialized industries become further absorbed into the nationl mainstream, hence California may actually come in line with the rest of the country, and in the end, this will be better for the state, which will benefit from not being so out of whack in relation to cost nationally that other states and countries can take such easy advantage of it's talent, erroding its future.

Has anyone else been perusing the just-released minutes to the most recent Fed meeting and the media/market responses? Very interesting stuff:

http://www.federalreserve.gov/fomc/minutes/20060328.htm

Uniformly, the media outlets have been portraying the minutes as a signal that the Fed is "nearly done" raising rates this go-around. I don't think this is correct, if you read the entire minutes. At the risk of a long post and quoting out of context, here are a few key statements:

House price appreciation appeared to have slowed from the rapid pace of the summer, but price increases for both new and existing homes remained well within the elevated range that has prevailed in recent years.

Since the available indicators showed that the economy could well be producing in the neighborhood of its sustainable potential and that aggregate demand remained strong, keeping rates unchanged would run an unacceptable risk of rising inflation. Most members thought that the end of the tightening process was likely to be near, and some expressed concerns about the dangers of tightening too much, given the lags in the effects of policy. However, members also recognized that in current circumstances, checking upside risks to inflation was important to sustaining good economic performance. The need for further policy firming would be determined by the implications of incoming information for future activity and inflation.

My naive interpretation of this document is this: First, the economy is more or less where they want it to be. However, keep in mind inflation can still rear its ugly head, and we'll have to raise rates as a result. Yes, we want to signal to you investors in particular, that we MAY be near the end of rate increases, but we won't say "told you so" if we decide to continue rate increases, based on economic data.

The wall street response to this yesterday seemed to be sheer exuberance. But interestingly, the very next major econ indicator out today is CPI, up to 0.4%, core 0.3%! Maybe Ben and co. are pure geniuses, able to walk the line between preventing wall street sheer panic and continuing to justify rate increases, or maybe there really IS some conspiracy going on. Yes, DinOR in particular is upset that the Fed has been dicking around with tiny rate increases, but my interpretation is they are very cognizant that anything more drastic is going to send investors panicking.

An important side note to all of this is that housing's slowdown gets a very hefty mention during the meeting - the Fed is clearly aware of what's going on in the housing market, and again, to me they're saying yes, housing may be slowing down, but we've got bigger fish to fry.

Sorry for the long post.

"House price appreciation appeared to have slowed from the rapid pace of the summer, but price increases for both new and existing homes remained well within the elevated range that has prevailed in recent years."

It seems like this report was written just like every other report- with the key langauge being written for homeowners. There's a lot of obvious conclusions left out of it. It almost sounds like there isn't anything to worry about at all, as if housing prices are through rising and will simply level off and continue rising on a slower scale. BS. I agree with your statement that anything else would cause sheer panic and a massive selloff, so perhaps making a rosey report like the one above is good disaster control for the masses.

The FT this morning had a small column about economists disagreeing (apparently quite intensely) over what the Fed is really signaling, or even if they are signaling at all. Being a Fed watcher is about as fun as being a Supreme Court watcher. You sound real smart talking about this or that factor, precedent and signal; but you're often wrong (just when you most need to be right).

Randy,
Either way, it's fun stuff. Despite the fact that even the "experts" are often wrong, the concept of reading into Fed signals and what not clearly have a large impact on market behavior, as we saw yesterday. I'm sure doing it is a full time occupation for more than a few economists, and it's kept them employed for quite some time!

Vincent,
While California's cost of living will probably not degrade to the level of other states, the fact that CA has on average 7 times the number of people than the avg US state tells me that there are virtually entire frontiers of new land available for future opportunities. California's greatest contribution will be it's outward movement of young people with their skills to be applied to new regions. I am a firm believer in this.
Someone mentioned that unlike Europe and Asia, Americans were far more likely and willing to relocate for better potential sucess in other states, and that's exactly what will continue to happen unless the cost of living here comes down. As we speak, it is over 4 times the cost of the country avg. It was double that in 1992, so While some people expect as much as a 50% correction in housing costs, I wouldn't be surprised if the cost of living came down as well due to legislative changes in state operational policies in order to stem the tide of business out migration.

nomad,
Yes, I agree that a lot of what the Fed puts into these minutes/statements is to make sure the masses are placated/sedated so they can keep on truckin'.

nomadtoons,

If I recall, Americans are 20 times more likely to relocate than western/southern Europeans. Americans are also dramatically more likely to move great distances from their birthplace, whereas Europeans are more likely to remain near where they grew up. Americans move for economic reasons first, and family reasons second (usually marriage-related).

I'm sure there's some corollary in there that Americans are more likely to marry someone from outside of their region than Europeans also. Of course, it helps we all speak the same language, watch the same TV shows, and shop at mostly the same stores.

The only reason the comparison to Europe is interesting (in my opinion) is because of the EU. Despite open borders and work rights within most of the Eurozone, Europe has had a real problem because people just won't move to where the jobs are. Actually, some Europeans will, but it's almost exclusively the Eastern new entrants, which is causing lots of social strain.

Randy,

The union friendly laws of Europe also pose an impediment to European mobility. A person born and raised in a particular region has significant advantages over an outsider for local jobs.

This is less of a concern on the upper and lower end of the job market.

Randy,
While everything you mentioned is dead-on, EU has the same regionalism that exsists in the US. Basically the big popularity contest that occurs between CA NY, and the rest of the country is similiar in the EU,with Germany, Britian, and France being the big guys, while some of the others are given the dim light. The migratory and immigration issues there are also similiar except many of the bug guys are totally opposed to cheaper labor, hence why France didn't sign the EU pact this last summer over what they considered a threat of a flood of immigrants from Poland, Turkey, and Other less wealthy members. So in essence, the immigration situation is opposite in terms of where immigrants go( for now) in the US. I see the same patterns over in the EU, except as mentioned, if Americans feel shafted in one region, they'll pack up and leave pretty fast.
If one were to reason why CA and NY have so much presedence in the US public, it's because MOST of the media we see on TV is produced in these 2 regions and shoved down our necks day after day. Take those TV shows and film em' in say- North Dakota, we'd no everything and anything you'd possibly want to ever know about that state and more. Even when Hollywood places films and shows in alternative regions, most often it is the stereotypes of those areas that are romanticized, whether it be done in a apple-pie way like in O' Brother where art thou?, or from some other non-modern standpoint. When was the last time that you saw a film about modern Atlanta, Detroit, nashville, Phoenix,Austin or any given number of other regions? Probably not many if any at all.
The media is a powerful tool, and the only reason we had a housing and tech boom, and why Americans are in severe debt. Basically, everyone wanted to live just like Californians and New Yorkers, because that's what they see every time they snap on the TV. When I go home, all I see are fat dudes riding around on harley's with that stupid Jessee James Iron Cross on the rear fender.

astrid,

There are a few reasons for that, not the least of which is what you point out.

A big problem in "Old Europe" is that the "middle class" there are almost exclusively unionized labor or protected government worker employees. In Germany, more heavily manufacturing unionized labor, in France more heavily government workers. But the effect is the same: creating preferential employment for natives; sometimes even for regional natives even _within_ the country.

I think more interesting is the social/cultural aspect which in Europe which is exactly opposite of what nomadtoons believes is occurring in the US. In Europe, Westerners _will not_ move to Eastern Europe, even for economic reasons (which are just now starting to appear). Of course some enterprising Germans head East, and you can read about them, but overall essentially no Westerners will leave the West. Since the skills, educated knowledge workers, and know how for many new industries are in the West, it will be very difficult for the East to reach parity. Right now they're mainly just exploiting labor arbitrage. Some former Soviet countries have nascent IT/software centers, but nothing on a scale or depth approaching the established high-tech centers in Scandinavia, Benelux, Germany and France.

It's like this: The American Randy will move anywhere in the US (except Ohio) if given ample economic motivation, either good or bad. The Dutch Randy won't move to Hungary for any conceivable reason, and will force his government to subsidize him staying in Rotterdam for the rest of his life even if he'd be more wealthy and productive in Budapest.

Nomad,

I like your line of thinking. I'm trying to figure out what makes coastal California so expensive. I don't live in CA, but anyone with experience living in CA and elsewhere, please fill me in on the cost differences.

housing
gas prices and fuel (based on cost per month)
utilities
insurance (home, health, auto)
food
entertainment (incl. cable, movies, plane trips)
education

Based on my observations, I don't think California is outrageously expensive other than in housing and in children's education. At the risk of being called a racist pig, I'd say a major contribution to both are illegal immigrants and marginal legal immigrants. They tend to have large families and don't (usually can't) prepare their kids for school. In areas with high immigrant populations, these kids' unpreparedness brings down the entire school.

In response, the middle class (even the working class who care about their kids' education) try to squeeze into good (too expensive for poor immigrants) school districts or send their kids to private school, which instantaneously sends their cost of living sky high. Due to this squeeze on "acceptable middle class living", places like California will probably always be higher relative to low immigrant areas.

Do I sound like I'm a white flight apologist or what? I'm not saying poor immigrants are bad people, but they do affect the quality of life for their neighbors.

I think the Bay Area compares to the other top-5 US large metro areas in cost of living. Even real-estate isn't out of line when compared to the other large metros.

2000 Census:

1. New York-Northern New Jersey-Long Island: 21,199,865
2. Los Angeles-Riverside-Orange County: 16,373,645
3. Chicago-Gary-Kenosha: 9,157,540
4. Washington-Baltimore: 7,608,070
5. San Francisco-Oakland-San Jose: 7,039,362

I used to think Chicago wasn't in a RE bubble, but the HSBC report shows otherwise. In that report, all the above have bubbles, and the BA isn't the worst.

The entire table:

RankMetropolitan Area NameStates2000 Pop.
1New York-Northern New Jersey-Long IslandNew York, New Jersey, Connecticut, Pennsylvania21,199,865

14Phoenix-MesaArizona3,251,876
15Minneapolis-St. PaulMinnesota, Wisconsin2,968,806

I don't think CA is all that more expensive than anywhere else in terms of food, utilities, and travel. For one, certain things like alcahol and many fruits and vegetables are cheaper here than in many other regions because A: other regions charge taxes on alcahol and might have to ship fruits and vegies in. TN has NO income tax... so they make up for it by having high consumer goods taxes. Wine is about 20% more there, so as a result, I bring cases of wine on the plane with me for mom!
The lack of need for heating is another saver. I am warm natured, so the heat stays off all winter, plus I live in Alameda which is 20 degrees warmer than SF. Back home we heated with a wood stove, and the wood was leftover scraps of lumber from a timber frame outfit my dad's friend owned. So our costs were minumal. But for everyone else, thanks to TVA, the heat of choice were electric heat pumps, which cost anywhere from 150-200 a month in the winter.
One more interesting observation about EU is that MANY jobs that pay decent in the US, like my job as a graphic designer, pay CRAP in EU. I basically would be a little higher than the gas station attendant on the food chain. Thus there doesn't seem to be as much flexibility to move up there, so perhaps people don't even have the ease to make geographic changes to start with.

nomad,

One more interesting observation about EU is that MANY jobs that pay decent in the US, like my job as a graphic designer, pay CRAP in EU. I basically would be a little higher than the gas station attendant on the food chain. Thus there doesn’t seem to be as much flexibility to move up there, so perhaps people don’t even have the ease to make geographic changes to start with.

That's a direct result of the governments (and organized labor which is a government partner in the EU) attempting to allocate capital instead of allowing the market to do it. A lot of tech jobs there are underpaid but also in extremely high demand. Same is true in other professions like finance. If you're any good at either, then you won't work for prevailing wages and instead head off to the UK or US.

In fact, I believe that European professionals are more likely to move to the US or UK than elsewhere in the Eurozone, although this may have changed post Iraq invasion, as there has been a sea change in the attitudes of the entire younger generation towards the US/UK (those too young to remember much or anything about the USSR and the Iron Curtain).

@nomadtoons2 and RTBA,

I have travelled around the US a fair amount. Not extensively like some, but enough to know the differences/similarities among the states. One thing I noticed about the south vs cali is not visually tangible. The first time I encountered it, I was surprised, then I experienced it multiple times and I started to wonder.

While driving around the Dallas/Ft. Worth area, I noticed my rental running low on fuel, so I exited the freeway and consequently got lost after finding a gas station. I asked as politely as possible (have to say this because my mom is a japanese native) "Excuse me, how do I get back to I35 West?" The woman I asked was probably working class and african american. She looked like a dear caught in headlights when I approached her. I saw more of the whites of her eyeballs than anyone else in my life. Now, I do NOT look like "the man" nor will I ever. I am not white, not tall and at the time, I was not wearing a business suit or tie, just jeans and a t-shirt. But she was scared of me. I never had anyone look at me as if they were frightened so badly and I felt really bad. I don't think that Dallas is so small and un-metropolitan that there are no asians. I finally did get some directions, but this woman clearly felt like I was going to hurt her in some way. I experienced similar things while travelling through Mississippi and other southern states. I encountered a number of african americans that were afraid of me; as if the Jim Crow days were still in effect and I could lynch them if they looked at me the wrong way. Maybe to some less educated, poorer folks, an asian IT consultant represents white power. Looking at me in jeans and a t-shirt, how could anyone know that's what I am? Perhaps its the way I carry myself, perhaps I just look like a mean SOB(I really don't think so). I went to a predominantly african american high school in the east bay, where no one was afraid of an asian guy. So this was very new and strange to me. And it was also very sad.

Say what you will about the south being friendlier than Cali, it is ~ I will not argue that point. The south also has a lot of small town cultural activities that are very cool to a non-native. But the south is FAR away from Cali when it comes to racial integration and lack of oppression. I am not saying this out of lefty smugness; it is just my experience. Because of this experience, I perfer Cali ~especially the BA.

The US is still an enormous magnet for talent and innovation. We can argue about which US region is responsible for what (I am a long-term Silicon Valley bull). But, the fact is that the US has a flexible, mostly merit-driven, risk-rewarding economic culture. Not that this system is perfect by any measure -- it has lots of problems and generates its share of pain and losers -- but I'll take it to any of the socially planned societies any day; and apparently so will a lot of other highly skilled people from around the world.

Scott,
The irony to me is that everything you said is very familiar to me as I have been living with this myself for 7 years in the Bay Area. I cannot tell you how many time people just assume I'm a slack-jawed idiot. I don't think I have what one would call a heavy accent, but apprently, it's enough for people to say some very bizzare things to me.
You would not believe some of the things people have said to me, even hostile comments during the last election since many just assumed I was a Bush lovin, Gay Hatin' redneck.I have never felt that at any job I've had in the BA, people have taken me very seriously even though I have developed some rather innovative marketing campaigns singlehandedly.If I changed my accent, I have no doubt things would be very diffrent. Even yesterday, I was mowing the yard and here comes this woman with her husband. She was curious about the plum tree in the front yard. She approached me and as soon as I started talking, I could see her expression change- the " oh god.. deliverance!"
Racism and stereotypifying exsists on every square inch of the planet... even in the good ole' bay Area.

skibum,

Exactly. This is part of the Virtuous Circle Economy that the BA, Boston and NYC have managed to create. All have vibrant talent engines, world-renowned research-oriented universities, risk and institutional capital infrastructures, and a supportive culture.

This is almost impossible to duplicate through government action. It has to grow naturally. Sophia Antipolis is a great example of a failed attempt to replicate Silicon Valley.

nomadtoons2,

Funny (and sad observations)! I've run into that more times than you can shake a stick at. What makes it even more ignorant is that I'm most often mistaken for a New Yorker? This is a mystery to me. Chicagoans (particularly south siders) have a speech pattern and a meter that is totally different from New Yorkers! I've even been mistaken for a Bostonian (and these are educated people)? Either way being "detected" is not good! This means you have all of the hurdles everyone else trying to sell me something has, plus a few more! I've actually ran into situations where I later found out it was a "deal killer". All just part of the open mindedness of the west coast I suppose!

Randy, Nomad, SFWoman,

Thanks for your feedback. They ring true with my observations. It sounds like education of child (either directly or by buying into exorbitantly priced good school districts) is the major cost impediment to BA’s middle class.

Thake a look at this new book:

http://www.amazon.com/gp/product/1403968594/002-4789095-3272821?v=glance&n=283155

It is about Greenie.

California, my adopted home state, has given me cradle to grave high-quality, low cost education, from public grammar, middle and high schools to CSU and UCLA law.

I would never say "My country, right or wrong." But it's damn close.

DinOR, Nomadtoons-

Me, too. Not so much out here, because my working class Chicago accent (I have the South Side version, because most of the people I grew up with in the NW suburbs originally hailed from the South Side; however, DinOR, I say Chic-aaahh-go, instead of Chic-awe-go.) has faded over the years, but I took a lot of heat for it out east when I was in school there.

In law school my classmates would literally snicker when I talked in class. (Maybe it was becuase what I had to say was stupid, but I prefer to think it was the accent.)

I once turned heads while speaking to the bank teller in NYC. Literally everyone in the bank started gaping at the guy with the strange accent.

The thing was, the Brooklyn and New Jersey accents were just as unique, and there were a few people with those jaw-clenching accents in our class too, but my Chicago accent was the one that seemed unusual to the New Yorkers, so I took a lot of shit. I didn't let it get to me, though. I also dressed differently -- shorter hair, more colorful casual clothes (literally more colorful, I wore the same stuff as everyone else but in shades other than black and grey) and wore more conservative buisness clothes on interviews (I once showed up wearing the exact same tie as the security guard at the front desk, exceprt that mine was silk!) I refused to dress differently, though, if the NY'ers didn't like it I didn't care. Well, I did get different work clothes but they were still on the conservative side.

I found the people out east to be extremely provincial and hostile to outsiders. They were also very, very cold at first, which was awful. I came to terms with it after a few years, and even started to enjoy living there, but it took a long time. My first year in NY was probably the worst year of my life because the people were such assholes. After that I warmed up to them, and they to me, but it took a long, long time. I would live there again but it would still be a culture shock.

Interstingly, I find California to be much, much more laid back than the east coast. Out here no one cares where you come from. There is not much real hostility toward non-natives, all are welcome in CA. Well, some people are not that enthusiastic about the Mexicans, but that is mostly a function of their massive numbers, if there weren't so many of them no one would care.

This is one of the things I really like about CA. The people here can be provincial too, and certainly smug and bigoted toward outsides, but generally I find them to be very accepting and laid back. It is ten times better than out east.

Astrid-

If we have to relocate, that'll be the reason why. I can afford a house, or private school tuition, but not both. In other areas you can afford both, or buy a house and send your kids to good public schools. If we have to leave that will be the reason, I like it here and I don't mind the other stuff.

Here's a link to a Malcolm Gladwell article on how society perceive people who are different.

http://gladwell.com/1996/1996_04_29_a_black.htm

Joe Schmoe,

I never lived in NY but after your describing it I can imagine the grief! I definitely have the "south side" version w/Chic-aaah-go. It's our nature to take and d-r-a-w o-u-t all of our vowels and trail off on our consonants. I remember a guest Sunday School teacher trying to break us of this habit and it was just hilarious! Must have felt like trying to teach little hoodlums how to be angelic.

Jeezus luvs me dis I knoooooow (I heard it on da radiooooo)!

I did not do my schooling in the US so I am not aware of this issue - is it possible to bring down the level of the whole class or school if a couple of students in a middle school or high school class (supposedly unprepared immigrant's kids )cannot understand the material being taught ? This is the wind I am getting when people here discuss about high school education in California.

Phil-

Well, it's usually not just a couple. And one kid can cause a whole lot of disruption if they don't behave properly.

SFWoman,

I get those too once in awhile and when I follow up with a call the mortgage broker either doesn't understand it himself or they "gloss over" huge swaths of the program! I try to stay on top of this "pay option" ARM deal b/c when the crash becomes more apparent I'd love to roost in an "up scale" neighborhood and just make everyone else there miserable.

I think that it is considered unPC to track kids and it is considered detrimental to kids to fail them or hold them back so you do get classes filled with kids who aren’t prepared to work at grade level and have parents who can’t/won’t help.

Sad.

Also, I think we need to brink discipline back into the classroom. Kids should be told that they will burn in hell if they misbehave.

Perhaps it could be that californians are favorable to outsiders because most californians are not from california.

SFWoman,

I went to a HS magnet program that essentially resegregates the "good students" from the rest of the student body. I know honors, IB, and AP have essentially been adopted by public schools throughout the country for a similar effect. Does SF proper have such programs?

Also, if we double class size from around 30 to 45, we can increase school capacility by 50% without a proportional increase in costs. I really doubt academic performance will be affected by much.