patrick.net

I know you are joking, but isn’t that meteor that hit Yucatan what killed the dinosaurs?

Yes, my joke was wildly inaccurate. BTW, this discussion reminds me of movie promos for 10,000BC. I suddenly feel the urge to see it now when it releases next week. Maybe I should eat some organic Vegan popcorns and drink caffeine free diet coke while watching it.

that movie looks awsome 10k bc

imagine if you could go back in time to then and invent money, then fractional reserve banking - youd be king of tha world (or head of the federal reserve as its called now)

10,000 BC? Are you talking about the film where R. Welch walks around in rags that amazingly enough barely cover her yet never fall off?

In general, anyone who went back in time would have great difficulty surviving for more than a few hours.

And if you went back as an established downtime identity, statistically you would be almost certainly be an impoverished peasant burdened with enormous taxes.

Most people who imagine going back in time imagine going back to membership of a tiny, tiny elite.

That doesn't stop the idea being an SF staple, however.

One of the most interesting takes on the theme IMHO is the reader/contributor community that's grown up around the "1632" series (Eric Flint/David Drake), where the supposition is that a whole town somewhere in West Virginia gets transported back to the middle of the 30 Year's War.

The level of peer review means that the whole thing stays historically reasonable, but even with the resources of an entire (backwoods) town it's interesting to see what can and can't be done, and how SLOWLY things happen.

While on the subject of bailouts, not to mention globalisation, it will be interesting to see what happens to the refuelling tanker deal now the USAF has had the temerity to pick a consortium with a non-US member.

You need to be aware that outside the US (and especially in SouthEast Asia) there is a lot of interest and not a little anger that the same financial gurus that were telling the likes of Thailand to suck it up 10 years ago are now screaming for bailouts when their OWN constituency gets it badly wrong.

Peter P Says:
The purpose of many species is for the culinary enjoyment of humanity, the master species. :-)

Do you mean "To Serve Man", in other words...? :-)

In general, anyone who went back in time would have great difficulty surviving for more than a few hours.

And being burned as a witch when they discover your tooth fillings, casio watches, and oversize bodies. You would also look much younger for your age than the locals. Your strange insistence on sanitation, plus your innoculations will spare you from diseases locals around you get. The locals will wonder why so many of your women with children still have all their teeth.

While on the subject of bailouts, not to mention globalisation, it will be interesting to see what happens to the refuelling tanker deal now the USAF has had the temerity to pick a consortium with a non-US member.

Didn't they choose the "US"-101 over the S-92?

I agree with Headset that by the time our Adjustment is done, the sky won't have fallen down.

As Headset put it, we'll get back to living the way we should've been living all along, "... more like the 1950s-1960s lifestyles of one car per family, smaller houses, shared rides to work, home economics like meatloaf, etc. ."""

It sounds like a very high standard of living when compared to much of the world, including even an industrial place like Japan.

But there will be some differences between post-Adjustment living and what Headset described from the 50's and 60's: in the future, it will take two (or more) adults per household working outside the home full time to sustain it. And, there will be no illusion of a decent retirement, no taking for granted affordable health care, and outside of a working life of servitude to student loans, no path to college education for youth from working class families.

But other than that, it will be good. And at least the new economics will be fairer with respect to race and gender.

@Headset,

Exactly.

And a LOT of the plot points in the book series and commentary forum I mentioned above are about public health.

I must admit I have lurked on the forum, and been fascinated by the technical discussions on what it would be possible to do (and NOT do) if you had late-twentieth century general knowledge and things like school textbooks/encyclopediae, but seventeenth century materials and production methods (except for what happened to be in the town itself).

@Peter P,

All I know is that all the newspapers here are saying the Northrop Grumman/EADS consortium was the winner over Boeing, and that a lot of political hot air is being generated about the decision.

http://themessthatgreenspanmade.blogspot.com/

After more than seven years, today is my last day at Teradyne, Inc. (NYSE: TER), a major manufacturer of test equipment for the semiconductor industry.

I'd like to thank all the great people I've worked with over the years and I wish you all the best of luck in the future.

Since joining the company in January of 2000, time spent here has been mostly enjoyable - writing software for a world-class semiconductor test platform has had more than its share of excitement and challenges.

I can't say that the last year or two have been as enjoyable as some of the earlier ones. Maybe it was because I was distracted by other interests.

Maybe too it was because "perpetual fire drill" is no way to live and there's been a steady stream of talented engineers out the front door. Despite assurances heard by employees, the attrition rate doesn't look normal to me.

Yes, I know things are changing - good luck with that.

I really can't complain - Teradyne has been pretty good to me. I'm just tired of software and tired of Southern California - it's time to move on.

No, Not Alan Greenspan

Retirement in 2007 had been planned for many years. Sometime early last year I started counting down the days. I think the countdown started after we were shown a presentation from Broadcom (NYSE: BRCM) about how we software engineers need to be more productive. This would enable Broadcom to be more productive and the bottom line for both companies would swell and some of the profits would trickle down and the stock price would go up and we'd all live happily ever after.

With more irony than could be appreciated at the time, Alan Greenspan's picture was on the opening and closing slides and at first I was waiting for everyone to say, "Surprise!", but it never came.

Everyone was so serious.

Alan Greenspan's mug was there alongside a quote extolling the virtues of increased productivity and how we could play a larger role. That's when I started crossing off days on a calendar.

It seems that, along with many other engineers, I've been just a little cog in a big wheel that has contributed to the great borrow-and-spend consumption binge that characterizes our era. Being more productive to enable more businesses to profit from the manufacturing and sale of more consumer electronics that most people don't really need and have to borrow money to pay for, well, this just doesn't sound as good as it did a couple years ago.

And if I'd learned that Teradyne equipment tested chips that go into those ridiculous BlueTooth ear dongles that people wear like they're on the set of a Star Trek movie, I may have been long gone by now.

Stock Options, Stock Purchase, Stock Grants, Stock Buybacks

Coming from a mostly staid aerospace company in 1999, I was at first taken aback by all the stock trading that went on in cubicles up and down the aisles of the engineering department. That changed rather quickly as 2000 drew to a close.

Not surprisingly, the stock options I received when joining the company expired worthless, however, there were a few other opportunities to profit in company stock during my stay. But not too many.

A big part of the reason why my wife and I are able to retire now is shown in the chart below. The natural resource sector is the new bull market, though I continue to be surprised at how few people realize this. It's been going on for five years now and shows little sign of slowing down, though the ride can get pretty bumpy from time to time.

The stock purchase plan was pretty good at Teradyne in 2003, but aside from that, it's been many disappointing years in a row. I can't believe some people got laid off a few years back and had never sold any of their stock - rode it all the way up and all the way back down.

Technology is so last century.

No More SoCal, No More Software

We will be leaving the crowded environs of Southern California this spring, not likely to return soon or often. I can't imagine what driving on these freeways will be like in five or ten years - so many angry young drivers that seem to get more reckless every year. The young men in big pickup trucks are sure to get angrier as their career prospects dim along with the housing industry.

We'll be settling in an area where a quick mid-day break might result in a view such as this, rather than the sights and sounds of the 101 freeway with cars buzzing by at 80 miles an hour.

We'll be renting for a year. There's no hurry to buy any real estate anywhere in California this year.

My software programming career officially ends today. I'd complain about having to train Rammohan, Rajasekar, and Vijayakannan last year, but I'm mostly over that now.

That last thousand lines of code I wrote might require a little attention in the year ahead. I can't say that it received my undivided attention as this day drew closer, but it should be pretty good.

I learned a little more about maps (yes, Wikipedia has an entry for this too) and the multi-headed PinInfo hydra. I'm proud to say that I completed my entire career at Teradyne without having to understand what upside-down inheritance is. At yesterday's going-away luncheon, word came that I'm better off for it.

Anyway, this missive has gone on far too long already. I have to make that drive in one last time to do an "exit interview" and then it's official.

Goodbye Teradyne.

Full Disclosure: No position in TER or BRCM at time of writing

So....Is there an effective way to protest against bailouts????

not sure whether this has been posted before... here is a quick
analysis on the state of a particular wamu alt-a mortgage pool.

http://tinyurl.com/2lwcr9

Permarenter said:
"I’m proud to say that I completed my entire career at Teradyne without having to understand what upside-down inheritance is."

I liked the tone of that letter - but this was where the guy lost my vote. He began to sound like a typical old-fart who can't get his head wrapped around a new concept, so he gets all snobbish and "proud of not understanding it". As if his inability to deal with it is somehow a great loss for all mankind.

U/D inheritance is not a complicated thing, just requires a relatively open mind to let go of existing assumptions and see things slightly differently.

RaiderJeff Says:
So….Is there an effective way to protest against bailouts????

I think someone posted before, but the biggest missing link is a coordinated effort that pulls together the (allegedly) large number of weak dissenting voices into one strong, consistent and continuous message. We need either an old-fashioned messiah (with a combination of Ron Paul's conviction and MLK's appeal), or some form of viral social-web movement...

Right now, the pro-bailout camp is well-organized, well-connected and has a strong motivation to go out and make it happen. What does the anti-bailout camp have??? A few blog-forums and a lot of bile.

There HAS to be come anti tax non profit lobby that is anti bailout.

Like these people maybe.

http://www.ctj.org/html/ctjdesc.htm

with a combination of Ron Paul’s conviction and MLK’s appeal

Ron Paul looks plenty appealing to me. My wife thinks I am crazy though.

Right now, the pro-bailout camp is well-organized, well-connected and has a strong motivation to go out and make it happen.

There will be a "bail-out for the homeowners" but there will be no bail-out for the homeowners. Don't worry. The Fed cares mostly about the banks. This is their job.

What does the anti-bailout camp have???

The anti-bailout camp can calmly assess the situation and speculate accordingly.

Not investment advice

SP,

I disagree. The "Chron" article had several noteworthy organizations (The Center for Tax Policy) for one and the OFHEO Director has been VERY vocal about taking a stand! Note that the builders did *not get their $10,000 buyer CREDIT implemented into the Stimulus Plan?

You're right in the regard that it's definitely uphill... but not insurmountable.

We probably knew this already, but wisdom like this should be repeated:

"We’ll see what happens, but over the many years we’ve been in this business, we’ve noticed that, when all is said and done, things rarely end up as bad as they may seem. Even though there may be many valid reasons why a worst case scenario could evolve, it rarely does. Markets survive, economies survive, people make money and they lose money, markets move up and they move down, change is inevitable but that doesn’t have to mean disaster is coming. Most important is to keep an open mind and stay flexible. Allow for surprises and don’t stubbornly hold onto an idea because you think it’s right. The markets will tell us what’s happening and if a market changes, we’ll change with it."

http://www.kitco.com/ind/Nadler/feb292008B.html

Say good-bye to granite countertops
High-end kitchen and bath renovations just aren't boosting a home's value the way they used to. Sellers who succumbed to home over-improvement syndrome are feeling the pain.

The granite countertop's glory days might be over.

During the housing boom, updating a kitchen with high end materials like cherry wood cabinets and a Viking stove was a sure bet to boost a home's value. Homeowners often recovered about 80% of the cost when the house was later sold.

But with so much more inventory on the market for buyers to choose from, they just aren't as impressed with the bells and whistles. Now most upscale renovations are returning less than 70% of their cost, according to a recent survey from the National Association of Realtors (NAR).

"Pay-back for high-end projects has declined over the past few years," said Kermit Baker, chief economist for the American Institute of Architects (AIA). "People planning to sell shouldn't over-improve," he said. "They won't get the money out if they sell in the next two or three years."
...
"I definitely saw a lot of tract houses built in the 1970s, in developments with three basic floors plans, get expensive renovations," he said. "We did a lot of radical projects, moving walls around, installing granite counters instead of Formica and cherry wood cabinets instead of oak."

The numbers made sense. In 2005, a fancy kitchen renovation on the West Coast returned an average of 93% of its cost. Even if the owner got only a year or two use of it, the close-to-break-even return made it worthwhile. By 2007, the return had declined precipitously to 74%.

Bill Gates has asked the following question in LinkedIn.com:

How can we do more to encourage young people to pursue careers in science and technology?

There are 2564 answers.

http://www.linkedin.com/answers/technology/information-technology/computers-software/TCH_ITS_CMP/179866-21879399?goback=%2Esrp_1_1204330946472_in

But when there are just too many homes on the market, not having a modern kitchen may not receive any interest at all.

With a growing inventory, buyers can afford to be picky.

I know I want a viking range and a sub-zero fridge even though I don't cook. ;)

How can we do more to encourage young people to pursue careers in science and technology?

Let the market drive those young people!

Why do we want to encourage young people to pursue careers in science and technology anyway?

>> I liked the tone of that letter - but this was where the guy lost my vote.

Tim Iacono is a smart man and he is doing far better:

After completing the end-of-the-week model portfolio tally for Iacono Research, the companion investment website that has received far too little promotion lately here at the blog, the following table was clearly in need of an update.

Contrary to what you'll hear from investment advisers or what you'll see in Money Magazine and other personal finance publications, the model portfolio's current asset allocation is only about one-third equities and most of these are mining stocks.

Of course, an all-palladium asset allocation would now be up 56 percent so far in 2008, so there's definitely room for improvement.

To learn more about investing in natural resources using commonly traded ETFs, stocks, and mutual funds, see this description at Iacono Research. Or, sign up for a free trial.

Read More...

Summary only...

With respect to the REIC tactic of enticing unsophisticated home buyers to buy because interest rates are going up, what about pointing out that in a asset market of declining prices, the real interest rate is the financing rate plus the percentage decline? All those years during the boom, when Realtors were pointing out that the effective interest rate was negative because the asset price appreciation out-stripped the financing rate, did they not realize that calculation works in reverse as well?

did they not realize that calculation works in reverse as well?

I sure they realized it works both ways, but certainly we should not expect the realtors to point out a detriment to a sale.

Imagine the NY Times Headline and excerpt:

"NAR Says 2008 is a Terrible Time to Buy"
NAR President Richard Gaylord advises home buyers to delay purchases until mid-2009. "House prices may be more in line with earnings by then."

Wouldn't that restore some faith in the realty industry?

PermaRenter Says:
"High-end kitchen and bath renovations just aren’t boosting a home’s value the way they used to."

I doubt they ever actually did - house prices were going up anyway, but the home-improvement industrial-complex needed to convince gullible home-owners to spend money, so the correlation between pergraniteel and "home values".

My modest little tract-home went up in "value" by about $400K in two years during the mania - no granite was added. I probably took about 1000 showers (give or take) in that timeframe. So each time I took a shower, my house's "value" went up by $400? Exactly...

# DinOR Says:
You’re right in the regard that it’s definitely uphill… but not insurmountable.

Of course, I was only pointing out what I perceived to be a shortcoming in the anti-bailout camp. Not insurmountable, but if nothing is done about it, it's effectiveness will be limited.

March 2, 2008
Economic View
How a Bubble Stayed Under the Radar
By ROBERT J. SHILLER
ONE great puzzle about the recent housing bubble is why even most experts didn’t recognize the bubble as it was forming.

Alan Greenspan, a very serious student of the markets, didn’t see it, and, moreover, he didn’t see the stock market bubble of the 1990s, either. In his 2007 autobiography, “The Age of Turbulence: Adventures in a New World,” he talks at some length about his suspicions in the 1990s that there was irrational exuberance in the stock market. But in the end, he says, he just couldn’t figure it out: “I’d come to realize that we’d never be able to identify irrational exuberance with certainty, much less act on it, until after the fact.”

With the housing bubble, Mr. Greenspan didn’t seem to have any doubt: “I would tell audiences that we were facing not a bubble but a froth — lots of small local bubbles that never grew to a scale that could threaten the health of the overall economy.”

The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets in the United States and around the world. If people do not see any risk, and see only the prospect of outsized investment returns, they will pursue those returns with disregard for the risks.

Were all these people stupid? It can’t be. We have to consider the possibility that perfectly rational people can get caught up in a bubble. In this connection, it is helpful to refer to an important bit of economic theory about herd behavior.

Three economists, Sushil Bikhchandani, David Hirshleifer and Ivo Welch, in a classic 1992 article, defined what they call “information cascades” that can lead people into serious error. They found that these cascades can affect even perfectly rational people and cause bubblelike phenomena. Why? Ultimately, people sometimes need to rely on the judgment of others, and therein lies the problem. The theory provides a framework for understanding the real estate turbulence we are now observing.

Mr. Bikhchandani and his co-authors present this example: Suppose that a group of individuals must make an important decision, based on useful but incomplete information. Each one of them has received some information relevant to the decision, but the information is incomplete and “noisy” and does not always point to the right conclusion.

Let’s update the example to apply it to the recent bubble: The individuals in the group must each decide whether real estate is a terrific investment and whether to buy some property. Suppose that there is a 60 percent probability that any one person’s information will lead to the right decision.

In other words, that person’s information is useful but not definitive — and not clear enough to make a firm judgment about something as momentous as a market bubble. Perhaps that is how Mr. Greenspan assessed the probability that he could make an accurate judgment about the stock market bubble.

The theory helps explain why he — or anyone trying to verify the existence of a market bubble — may have squelched his own judgment.

The fundamental problem is that the information obtained by any individual — even one as well-placed as the chairman of the Federal Reserve — is bound to be incomplete. If people could somehow hold a national town meeting and share their independent information, they would have the opportunity to see the full weight of the evidence. Any individual errors would be averaged out, and the participants would collectively reach the correct decision.

Of course, such a national town meeting is impossible. Each person makes decisions individually, sequentially, and reveals his decisions through actions — in this case, by entering the housing market and bidding up home prices.

Suppose houses are really of low investment value, but the first person to make a decision reaches the wrong conclusion (which happens, as we have assumed, 40 percent of the time). The first person, A, pays a high price for a home, thus signaling to others that houses are a good investment.

The second person, B, has no problem if his own data seem to confirm the information provided by A’s willingness to pay a high price. But B faces a quandary if his own information seems to contradict A’s judgment. In that case, B would conclude that he has no worthwhile information, and so he must make an arbitrary decision — say, by flipping a coin to decide whether to buy a house.

The result is that even if houses are of low investment value, we may now have two people who make purchasing decisions that reveal their conclusion that houses are a good investment.

As others make purchases at rising prices, more and more people will conclude that these buyers’ information about the market outweighs their own.

Mr. Bikhchandani and his co-authors worked out this rational herding story carefully, and their results show that the probability of the cascade leading to an incorrect assumption is 37 percent. In other words, more than one-third of the time, rational individuals, each given information that is 60 percent accurate, will reach the wrong collective conclusion.

Thus, we should expect to see cascades driving our thinking from time to time, even when everyone is absolutely rational and calculating.

This theory poses a major challenge to the “efficient markets” view of the world, which assumes that investors are like independent-minded voters, relying only on their own information to make decisions. The efficient-markets view holds that the market is wiser than any individual: in aggregate, the market will come to the correct decision. But the theory is flawed because it does not recognize that people must rely on the judgments of others.

NOW, let’s modify the Bikhchandani-Hirshleifer-Welch example again, so that the individuals are no longer purely rational beings. Instead, they are real people, subject to emotional reactions.

Furthermore, these people are being influenced by agencies like the National Association of Realtors, which is conducting a public-relations campaign intended to show that putting money into housing is a reliable way to build wealth. Under these circumstances, it’s easy to understand how even experts could come to believe that housing is a spectacular investment.

It is clear that just such an information cascade helped to create the housing bubble. And it is now possible that a downward cascade will develop — in which rational individuals become excessively pessimistic as they see others bidding down home prices to abnormally low levels.

Robert J. Shiller is professor of economics and finance at Yale and co-founder and chief economist of MacroMarkets LLC.

On CNN's business website, there's this guy talking about something called M3. He says M3 is the measure of the total money supply in the system. He then goes on to say the Fed stopped reporting M3 in March of 2006. His point is that '70s style inflation is headed our way.

He is full of $hit or not?

http://tinyurl.com/3dvraj

Ultimately, people sometimes need to rely on the judgment of others, and therein lies the problem.
LOL.

His point is that ’70s style inflation is headed our way.

Mortgage and credit card interest at 20% plus? That should put a damper on Joe HowMuchAMonth and allow saver friendly prices on homes and cars. Plus, savers can get a decent return on bank/credit union accounts.

I would think the lower costs of rent/mortgage and car payments would more than offset the rise in prices for milk/beer/butter. Plus. think how much the schleps will save when they make do with thier pefectly adequate car/TV/furniture rather than hock thier way into unneeded new stuff. We have been threatened with $4/gallon gas for years now. If it does come to play, so what? For a 15mpg SUV that drives 300 miles a week, that is only an extra $20 per week ($10 per week if you drive a Corolla, even less for a Prius). People who are that stretched can start driving less by avoiding or consolidating trips, car pooling, biking, and walking. Most cities have a very underutilized bus service.

Unlike Mister T, I don't pity the fools. The Joes are perfectly capable of making small adjustments and do not need policies that trash the economy just to put a lifeline on their debt financed overconsuming lifestyles.

@ Peter P,

That wisdom you quoted was actually the Aden sisters. They have been spot on with this long term gold bull market. They are very long term oriented and use the 64 week moving average to determine buy points and to verify that the bull is still alive.

I believe historically they did well in the 70's too but lost many folks when after calling the gold top in 1980 they didn't say the long term bull was over and I think still called for gold $2,000 after the sell off from 882 in January '80.

Cheers!
Paul

I doubt they ever actually did - house prices were going up anyway, but the home-improvement industrial-complex needed to convince gullible home-owners to spend money

Hmm, so home improvement is no more than the equivalent of getting a car detailed prior to sale. The underlying value probably holds within a very short range, with the "improvements" nothing more than some KY jelly to facilitate and expedite the sales insertion process. This is very obvious on the crown molding paint staging non sense side, SP you are probably correct in assertion that it also applies to the significant upgrades also. I've not seen any independent research out there that looks at this data impartially, all that fluff comes from the REIC.

I'm wondering if we will see a conventional wisdom trend change in the home improvement business over coming years, more "do what you like for yourself, its not an investment" than the smart ROI improvement non sense.

I doubt they ever actually did - house prices were going up anyway, but the home-improvement industrial-complex needed to convince gullible home-owners to spend money, so the correlation between pergraniteel and “home values”.

When I cleaned up my SJ house for sale I only added cheap things to make it "shine". I put in a new dishwasher because it was the only appliance in the kitchen which wasn't new or nearly-new. I put all new doorknobs on the doors - costing what, $200? I replaced the old tilt-up garage door with a metal roll-up one for around $800. The major costs were replacing all the windows with vinyl double-pane units and a complete tear-out remodel of the master bath. Everything came to about $18K. I won't say that this increased the value of the house, but what it did was entice buyers to bid over-asking in less that week of going on sale.

My modest little tract-home went up in “value” by about $400K in two years during the mania - no granite was added. I probably took about 1000 showers (give or take) in that timeframe. So each time I took a shower, my house’s “value” went up by $400? Exactly…

How often did you flush the toilet during that time? ;)

I know I want a viking range and a sub-zero fridge even though I don’t cook.

Those things are over-rated for home use anyway. Viking ranges and their ilk (e.g. Wolf) aren't really configured for home use. They aren't self-cleaning and require lots of upgrades to get permits for their installation. As they were not designed and approved for household use, expect to install giant range hoods with auto-fire-sprinkers to satisfy your local fire marshall. I'm perfectly happy with my upper-end Kenmore/Whirlpool gas range and fridge in the new digs here in Boise. The range has 2 regular sized burners, 1 super-burner for use with a wok, and 1 tiny burner for preparing sauces. Between that and a good gas BBQ (Barbeques Galore classic "Turbo" model) I can cook almost anything.

Headset,

I think a lot of people are already paying 20% interest on their credit cards. Has been for a long time.

If that's how much it costs for some others to borrow like the US Treasury in the bond market, or businesses big and small, then we're in trouble.

I believe historically they did well in the 70’s too but lost many folks when after calling the gold top in 1980 they didn’t say the long term bull was over and I think still called for gold $2,000 after the sell off from 882 in January ‘80.

Again, one should not be married to a belief. Let the market dictate the course of future.

I’m perfectly happy with my upper-end Kenmore/Whirlpool gas range and fridge in the new digs here in Boise.

I am sure that is fine with me too.

I need at least 4 pots to cook a meal:

One to make soup. (e.g. onion soup)
One to boil pasta.
One to cook pasta sauce (e.g. white wine clam broth)
One to braise veggie (e.g. rainbow chards)