patrick.net

pkennedy says

You may think firing someone is a simple task, but when you’re working in a big outfit, firing someone means you hired incorrectly. So in other words, if you hired someone, you’re an idiot who can’t do their job. Would you go around saying I need people, but I do a really crappy job at hiring them? No. A right to fire, doesn’t mean you can fire. Some managers can’t get rid of people because they lose the position. Some managers won’t fire because it makes them look bad.

California has at will hiring and termination. Any employer can fire you at will for what ever reason.
Any employee can lose their job because of missed quota in Sales, unethical conduct, bad coding by engineers, missed QA, VP overspending, accountants not following FASB/SOX quidelines..and the list goes on. And I seen plenty of that recently. Regardless of any single person, mass terminations with good or bad employees do happen. Add to the mix restructuring/exiting of product line, M&A, customer losses. Much of this is driven not by operations but FPA folks. So be very friendly with the FPA folks! May save your job one day.

pkennedy says

I’ll flip back some questions at you. Which company is making large profits and letting people go en mass? Intel? Amd? GE? Which ones are you seeing that are doing well, and letting people go to keep the numbers up?

AMD had over 10,000 people in SV, they are down to somewhere around 800 today and Intel had plenty as well back in the day. They have what is left, a token of a few today. Compare the many numbers of companies we once had, but all gone, todays numbers are not much to crow about.

Some old names like Logitech and Seagate are not California/US based companies. Their headquarters are offshore. Others get tax benefits from establishing Ireland Headquarters. As such they are required to staff with Sales/Admin to keep that tax benefit
LOL! Your next boss may be a screaming Irishman from Dublin. Times do change.

"There was a reason why the value of shares of companies went down."

I agree. Excessive optimism had pushed prices too high.
They were overvalued at Dow 13,000+, so they slid.
At about 10,000 I believe the market was reasonably valued.
However, the crisis and financil panic caused a fear-driven sell-off.
Prices then went too low, driven by excessive pessimism and fear.
Now we have seen the bounceback from that excessive pessimism.
Many people remain very pessimistic.

@thomas.wong1986

Just because you can do something, doesn't make it a good business decision. Just because you can screw over a loyal customer for 20+ years because he's one day over the return period, doesn't mean you should.

Same with firing. Firing people doesn't not sit well with the rest of the company, unless it's real obvious to the other employees why it's being done. Firing because of "financial troubles" or other issues only leads to issues with your remaining employees. It doesn't take much gossip to start a wild fire in a company.

You are correct about AMD and Intel employees. Did they do this in 2008? Did they go from 10,000 to 800 in 2008/2009 or was that a trend? If it's not related to the recession we're in, then it's not really related at all, and part of business for them.

They aren't going to be pulling recession related lay offs is what it comes down to. They have the profits to keep businesses running today, while times are lean. They want to be ready to jump in when times are booming. Small companies sometimes don't have this luxury and thus need to wind up and down employees according to the market. The thing is, the big companies are done with this. They're semi-stable. They're offering stability for other companies, who now know how many burgers they are going to sell every friday afternoon to the party that comes in. The people who make pencils can estimate how many are going to be needed. The water delivery service knows it's going to be servicing X number of people and won't lose business. It's all part of stabilizing. The businesses know how much capital they have left, as you pointed out, some companies lost lots of money. That isn't happening now, it's back to "normal" levels. Banks are going to go under, pay checks can be paid for sure. We're at some stable level. Not everything is stable, but most people are stabilizing and could now operate at this economic level forever, just without any growth.

Companies / Investors have one primary goal. Maintain capital levels. Secondary goal, create investment growth. Goal number one is primary. So right now, goal one has been achieved for many. That is huge, and one of the reasons I would consider this to be the bottom of a recession.

"Reports on general business and industrial conditions during the first weeks of March show evidence that buisness has been improving. While downward movements are still to be found among business indicators, upward swings in basic industries, passing seasonal expectations, must be noted as strong elements in the current business picture..."

"The value of new building contracts awarded during the first part of March showed an increase over the previous period..."

"During February residential contacts began to rise, which, taken with the increasing contracts for public works and utilities, resulted in a more than seasonal advance for the industry at the opening of March."

"General industrial production, according to the weighted index of the Federal Reserve Board, rose from the January level by 3.7 per cent ."

"The output of manufactured commodities increased from the January level by 4.9 percent."

"Employment increased in most industries during February in respect to January."

--- United States Department of Commerce, Washington, Survey of Current Business, No. 116. April, 1931

pkennedy says

You are correct about AMD and Intel employees. Did they do this in 2008? Did they go from 10,000 to 800 in 2008/2009 or was that a trend? If it’s not related to the recession we’re in, then it’s not really related at all, and part of business for them.

Nope, its not related to "this" recession, it is related to the 20 years or so of existance. Dropping employees is just another day in Silicon Valley. That is the nature of the business. The curse of having two global titans so close together ultimately erupts into price wars. As avg selling prices erode costs are cut to be competitive. Eventually jobs vanish for cheaper regions to keep prices and margins in line. And the cycle keeps repeating itself.

thomas.wong1986 says

Nope, its not related to “this” recession, it is related to the 20 years or so of existance. Dropping employees is just another day in Silicon Valley. That is the nature of the business. The curse of having two global titans so close together ultimately erupts into price wars. As avg selling prices erode costs are cut to be competitive. Eventually jobs vanish for cheaper regions to keep prices and margins in line. And the cycle keeps repeating itself

Or you keep innovating and stay ahead of the curve...

The point is, GE is making money. They aren’t losing it, they’re making it. Profits aren’t bad for them.

Well, that was really not the point -- at least not mine. My original counterpoint was that they are not doing so great, despite their Too-big-to-fail status, and that layoffs with large conglomerates are not yet something you can write off as a distant memory.

Morale among in the employees in several of the companies I interact with is, in fact, at an all time low.

You may think firing someone is a simple task, but when you’re working in a big outfit, firing someone means you hired incorrectly. So in other words, if you hired someone, you’re an idiot who can’t do their job.

In a hyper-generalized context, maybe. If I terminate someone for taking too many sick days or showing up to work inebriated, then it necessarily follows that I was an idiot for hiring someone? It may reflect badly if it was your cousin or BFF and you vouched for him. In which case, you'll probably get a promotion. I have never seen accountability come into play where turnover is concerned. Asskissing and coming in under budget is the best job security for upper-management.

Unless you’re in a job that can be replaced by any idiot, you’re company has an incentive to keep you happy

.

In an ideal world, this statement is accurate. However, when contracts are awarded, price is usually the foremost concern -- not quality. When has quality dictated the sensibilities of anything in the West in the last couple decades? The same principle behind bargain shopping applies to human resources and labor arbitrage. This is the age of CHEAP my friend.

You’re right, often companies let go of a lot of good people, the riff raff is 2nd. But they ask for a riff raff list first. Then they work on which dept need to go, or entire offices. In which case it’s no ones fault, it’s just a segment of the business that has to go.

A company that was acquired, letting people go? That isn’t from a recession, that is normal business practices.

However, acquisitions and mergers are most rampant during recessions, and given the likely scenario of a protracted recession helped by our relaxed anti-monopoly laws (thanks, Reagan!) I think you will hear of even more acquisitions/mergers, meaning even more newly minted unemployed. My hypothesis.

A company that is going IPO? You don’t sell off a company unless you’re in a really good position. Raising capital during a recession? Going IPO isn’t a trivial thing. People want to get hte most bang for the buck.

The company is in good shape, however, they want to keep a tight ship going into the next quarter or two. The drawbacks for the staff have so far been manifold.

I’ll flip back some questions at you. Which company is making large profits and letting people go en mass? Intel? Amd? GE? Which ones are you seeing that are doing well, and letting people go to keep the numbers up?

That's not how it works. You made some sweeping generalizations -- therefore, the burden of proof is all yours. I don't prove why I think you're wrong, you prove to me why you are right. However, just a cursory glance at the local Business Journal this morning revealed that Freescale (semiconductors) are laying of 200 people here in town. That's not nothing, particularly in Austin, the panacea of all economic blights!

I’m going with basic news here. I’m not digging in deep to the numbers of each business, I’m only scanning the headlines looking for tell tale signs of problems.

That's a slippery slope, since most news gets it news from the news. You have to dig a little.

Lay off numbers are pretty big, and they hit the news headlines pretty quickly. I haven’t seen any good lay off news for awhile now.

I think news is in the business of packaging and selling news that sells to a target demographic. Do you hear much about the two wars we're involved with much these days? Not really. But we can't get away from news about Kate Hudson's fake titties. With some notable exceptions, journalism is at something of a nadir right now.

You seem to think companies are always doing evil intentionally.

That's oversimple. I merely point to the a gradual chipping away at labor standards and income equality in the US, the reasons for which are myriad. I see little to nothing which allays my fears that this trend will decrease in the following decades. Let's see what happens. Naturally, I hope I am wrong.

Austinhousingbubble says

Well, that was really not the point — at least not mine. My original counterpoint was that they are not doing so great, despite their Too-big-to-fail status, and that layoffs with large conglomerates are not yet something you can write off as a distant memory.

I guess you're just a glass half empty kind of guy, aren't you? Making $600MM during a tough economy seems OK to me.

How did you know? Indeed, I have a thirst, so will make this the last volley. Suffice to say, you have an over-fondness for red herring. You should diversify a bit.

tatupu70 says

Austinhousingbubble says

Well, that was really not the point — at least not mine. My original counterpoint was that they are not doing so great, despite their Too-big-to-fail status, and that layoffs with large conglomerates are not yet something you can write off as a distant memory.

I guess you’re just a glass half empty kind of guy, aren’t you? Making $600MM during a tough economy seems OK to me.

Depends if this is the sixth or just the second inning.

GE's running a 7% net margin right now, largely thanks to paying a negative $1B in income tax this year. If it had to pay taxes, it would be more like a 4.5% net margin.

I don't know what GE's business lines are, but they had to cut $16B in overhead in 2009. If income stays at 2006 levels they've got another $16B in overhead to cut to get back to 2006 profit margins.

This looks like "going down", not the "going up" of the thread title.

The question is, are they at the bottom, or are they improving? Over the next year, will they drop from here, or go up? If they drop 16B to increase profits, they are increasing profits, and going up. At a cost, but they are going up. If they maintain the same profits, they are staying the same. If they improve they are going up. If they all of a sudden drop and start losing money, then they are going down. Your statement says "To get back to where they were in 2006 they need to do this..." that is true. It doesn't mean they haven't hit bottom, it means they haven't recovered to where they were before this mess.. So far, evidence is showing they've hit bottom... and stablized..

tatupu70 says

thomas.wong1986 says
Nope, its not related to “this” recession, it is related to the 20 years or so of existance. Dropping employees is just another day in Silicon Valley. That is the nature of the business. The curse of having two global titans so close together ultimately erupts into price wars. As avg selling prices erode costs are cut to be competitive. Eventually jobs vanish for cheaper regions to keep prices and margins in line. And the cycle keeps repeating itself
Or you keep innovating and stay ahead of the curve…

"Innovation" is a word thats abused these days. It doesnt help when many others also are equally innovative, but they can drop their prices more readily then we can. Innovation didnt help Netscape or Sun as their competitors dropped their prices. Yes, we make products faster and better but we have no influence over prices as unit pricing declines. Why buy $1500 laptop when you can pick up a netbook for $300? Why pay Microsoft $300 when you can run LinuxOS for free?

Something else to think about regarding Innovation...

http://techdirt.com/articles/20071204/005038.shtml

Much of this discussion kicked off with AnnaLee Saxenian's 1994 book Regional Advantage that tries to understand why Silicon Valley developed into the high tech hub it is today, while Boston's Route 128 failed to follow the same path -- even though both were considered at about the same level in the 1970s. Saxenian finds that the single biggest difference in the two regions was the ability of employees to move from firm to firm in Silicon Valley. That factor, ahead of many others, caused Silicon Valley to take off, while the lack of mobility in Boston caused its tech companies to stagnate and make them unable to compete against more nimble Silicon Valley firms. Saxenian claims that the difference in mobility was simply due to "cultural" differences between the east coast and the west coast. However, the impact was massive. The frequent job changes helped speed up the process of innovation, as ideas flowed more freely, allowing ideas to quickly change and grow and build upon other ideas leading to faster and better innovation. In contrast, employees in Boston stuck with their firms. The firms grew bigger, but slowly, and new ideas didn't flow nearly as easily. There was less direct competition from firm to firm, so firms were able to rest on their laurels rather than increasing their own pace of innovation.

Ronald Gilson found this to be interesting, and followed it up with his own research suggesting that that it had much less to do with cultural reasons and much more to do with the legal differences between the two places, specifically: California does not enforce noncompetes, while Massachusetts does.

pkennedy says

The question is, are they at the bottom, or are they improving? Over the next year, will they drop from here, or go up? If they drop 16B to increase profits, they are increasing profits, and going up

This increase in profit is not an increase in wealth creation. It is transferring wealth allocation from labor (wage earners) to capital (shareholders).

It is not "going up", it is, at best, going sideways.

thomas.wong1986 says

“Innovation” is a word thats abused these days. It doesnt help when many others also are equally innovative, but they can drop their prices more readily then we can. Innovation didnt help Netscape or Sun as their competitors dropped their prices. Yes, we make products faster and better but we have no influence over prices as unit pricing declines. Why buy $1500 laptop when you can pick up a netbook for $300? Why pay Microsoft $300 when you can run LinuxOS for free?

I'm referring to creating new products, or adding new features to your product. Certainly if you are selling a commodity then price is king, but the goal is to make sure you never have a commodity...

Among the S&P 500 companies compared to a year ago: revenues are up 11%, profits are up 50% with 83% of the companies beating expected earnings.

This is not surprising given that GDP and consumer spending are rising.

Zephyr says

Among the S&P 500 companies compared to a year ago: revenues are up 11%, profits are up 50% with 83% of the companies beating expected earnings.
This is not surprising given that GDP and consumer spending are rising.

Yes, we've also put ~$2T of borrowed money through the patient in the past year.

I agree that nobody should be a permabear or permabull -- but get back to me when they stop extending unemployment benefits to 99+ weeks and actually start booting people out of the homes they're not paying on.

The current external national debt is $8.35T, a year ago it was $6.88T

I hope we can agree a +$1.5T/yr run rate here is unsustainable. Every $100B cut or tax will theoretically throw two million families under the bus (@ $50K each).

Actually, it is probably the case that the $1.5T/yr deficit expansion is entirely sustainable for the foreseeable future. Just look at Japan.

The fundamentals of our economy our sound -- we can produce enough food and goods, and have the labor skills and capital, to produce immense amounts of wealth at the push of a button and the swing of a hammer. The problem is that the intermediate layers are all gummed up, too many people looking for something for nothing, starting at GS and going right down the line.

Or you keep innovating and stay ahead of the curve…

Nice thought, but it's not that simple. When competition is primarily driven by bottom lines, innovation gets kicked to the curb in favor of bean counting and appeasing stockholders every quarter. Greed and stupidity are poor engines for innovation.

I like what Jared Bernstein (International Market Analyst and chief economic adviser for VP Biden) had to say about innovation: It's pure hubris to say that the US has the market cornered on talent and brains.

Austinhousingbubble says

Nice thought, but it’s not that simple. When competition is primarily driven by bottom lines, innovation gets kicked to the curb in favor of bean counting and appeasing stockholders every quarter. Greed and stupidity are poor engines for innovation.

Not at the best companies it doesn't...

Even the 'best' companies would rather pay for ten Ed Nortons than one Al Pacino.

Better companies see innovation as a path to enhance the bottom line.
I think they often overinvest in the hope of finding a silver bullet.
Silver bullets are rare, but they often do find something good.

tatupu70 says

I’m referring to creating new products, or adding new features to your product. Certainly if you are selling a commodity then price is king, but the goal is to make sure you never have a commodity…

Features are items the market (customers) have requested. Being in software industry our new features are driven by customer requests, not what someone in R&D cooks up as new features. A good example of bad innovation driven by internal innovation and not market demands is Microsofts Office new ribbon. As a result no one wanted to use the new Office products at corporate, so they use the prior version. Such moves only hurt revenue and profits.

Cloud Computing ? ... thats no different than IBMs mainframe shared services... Solar ? thats been around for decades past as well.

thomas.wong1986 says

Features are items the market (customers) have requested. Being in software industry our new features are driven by customer requests, not what someone in R&D cooks up as new features. A good example of bad innovation driven by internal innovation and not market demands is Microsofts Office new ribbon. As a result no one wanted to use the new Office products at corporate, so they use the prior version. Such moves only hurt revenue and profits.

Somtimes it's stuff the customer has asked for--but those are only very minor extensions of a current product. The good stuff comes from the creative minds within the company--products that the customer can't even imagine or doesn't know that he wants...

And wrt to your Microsoft example--not every product will be a winnner, obviously. Doesn't change the point though.

@austin

I'm sure there aren't enough bones in this article, but there is some good data.

http://finance.yahoo.com/news/Forecasters-optimistic-about-apf-856923229.html?x=0

one excerpt:

Wages and salaries also are improving. Respondents reporting higher pay more than doubled to 26 percent, while those reporting a decline in wages slipped to 6 percent from 7 percent in January. The net reading for wages and salaries -- planned increases minus planned cuts -- was 20, the highest reading since January 2008.

Hi thanks for your information. I think its very accurate. I would like to ad that Greece has a real problem with basic distrust of government because of their history. As a result greeks do whatever they can do to avoid paying taxes. Greek society has so many wonderful qualities they support strong families, encourage education, and work very hard but this basic distrust of government makes it
so difficult for them as a country to move forward. People do not think its their patriotic duty to pay taxes they think of it as naive. I think before the government is trusted they will have to restructure the way it works. The local government is full of nepotism and corruption. The government must become more transparent and be regulated by other institutions. yaisou!

Greeks have an unsustainable system which enables them to retire at age 58 with 14 "monthly" pension payments each year for the retirees. With the lowest fertility rate in Europe, Greeks don't have enough young workers to pay for these relatively generous pension benefits. Kind of like the CA pension disaster here in the US. When it was pointed out that Germans retire at age 67 were being asked to bailout irresponsible Greeks who retire at 58, Greek Prime Minister Theodoros Pangalos denounced the conditions of the EU deal on the grounds that the Germans stole from the Bank of Greece during World War II. http://www.time.com/time/world/article/0,8599,1968381,00.html .

How dare you tell us how to manage our finances! Just give us your money and STFU!

>>The good stuff comes from the creative minds within the company–products that the customer can’t even imagine or doesn’t know that he wants…

Nice to be able to agree wholeheartedly with you, tatapu70. In technology, innovation comes from people doing stuff that most customers could not fathom. Those who think that innovation comes from the marketing department are oh-so wrong. Sorry.

Austin,

>>When competition is primarily driven by bottom lines, innovation gets kicked to the curb in favor of bean counting and appeasing stockholders every quarter.

Also very true, but the greatest impediment to innovation inside a company is usually not even the bottom line, but rather the status quo of who is important and who is not. Innovation threatens the status quo, It's as simple as that.

Now, if we are talking about Grand Scale innovation, such as doubling the efficiency of mass-manufacturable solar cells from 20% to 40%, the science itself is the dominating impediment, but the other factors will still have a coolng effect.

Nice to be able to agree wholeheartedly with you, tatapu70. In technology, innovation comes from people doing stuff that most customers could not fathom. Those who think that innovation comes from the marketing department are oh-so wrong. Sorry.

I partially agree with this. But innovation must have its roots in understanding the users' needs. Sales and marketing types working daily with users hear valuable feedback, providing ideas that an isolated programmer would not otherwise hear. There needs to be a balance between user feedback/requests and "big picture" development ideas that customers can't yet imagine.

Apple, possibly the most innovative company in US history, makes up things the customer has never thought of.

Their innovation is to create something we didn't realize we needed, till we saw it...

the most marketing research of an automobile ever was the Edsel. So much for letting the marketing department set your directions!

azrob00,

>>Apple, possibly the most innovative company in US history.

I was kinda' waiting for someone to bring up Apple.

You've gotta be kidding me. Apple does very little but package other people's ideas in shiny aluminum and sprinkle "cool" pixie-dust on top of it. I'm oversimplifying here, but that is the essence of apple. I'm not saying they build bad products, but I am saying that very little of it originates in-house.

Apple buys pretty much ALL the hardware that goes into their products from outside sources. The only notable exception is the CPU of some of the new devices, which was based on designs from an acquisition that they made (Palo Alto Semiconductor). All the rest is innovated, designed and manufactured by Qualcomm, Intel, Texas Instruments, Broadcom, Atheros, Marvell, TSMC, Micron Technology and scores of other and smaller semiconductor vendors. Apple is about putting the pieces together and writing the software.

Again, I'm not saying they do a bad job at it, but 90% of what they sell are other people's innovations, 9% is recycled software innovations and maybe 1% is true innovation from Apple itself.

Apples seems to have struck a good mix though. They aren't trying to re-invent the wheel, they're trying to improve and make things better. They don't need to add a lot to take something from useless, to incredible easy to use.

From what I've seen, products developed without outside input are a disaster. Customers need to be included. In fact, whenever someone has a startup idea now, I tell them to get it out the door and to the customer immediately, because they can easily waste years creating something no one wants. It's cool, but no one wants it. If you're not sure about this, think tech bubble of 2000. I knew far too many companies building crap that no one wanted.

justme says

>>Apple, possibly the most innovative company in US history.
I was kinda’ waiting for someone to bring up Apple.
You’ve gotta be kidding me. Apple does very little but package other people’s ideas in shiny aluminum and sprinkle “cool” pixie-dust on top of it. I’m oversimplifying here, but that is the essence of apple. I’m not saying they build bad products, but I am saying that very little of it originates in-house.

True but this is missing the point. There are no other consumer electronic concerns that approach Apple's ability to productize technology. Sony comes close but they are dysfunctional in the typical conservative, hierarchal Asian way.

Take Apple's LaserWriter. It followed HP's LaserJet (which used the same Canon printing element) to the market by about a year yet it totally killed HP's offering in capability and thereby totally changed the way we created printed material. Apple was able to look deeper into what the available technology was capable of solving and put together the complete package that blew away the existing state of the art. HP didn't have the strategic vision or the artistic desire to see beyond Courier-12 and the serial port connection, while Apple saw that with another year of R&D on some tough problems they could create an end-to-end solution that would replace Linotype output, or close to it.

Apple making both ends of the chain -- hardware and software -- was the magic pixie dust here. They didn't have to get on a plane to Redmond to get OS support, they were rolling their own.

Apple is about putting the pieces together and writing the software.

Indeed. Funny how nobody is able to do what they do, or do it so well. When I came back to the states in 2000 I picked up a $200 mp3 player (Nike PSA play) from Fry's. it could hold about 10 songs. It had a real sh---y management front-end for getting music onto the device, really sucked. Later on in 2001 Archos was making 6GB music players with a 2.5" hd. They were transportable bricks with a worse UX.

Apple got lucky when somebody came to them with the right embryonic tech and strategic vision to capitalize on the upcoming 1.8" HDs from Toshiba. Apple then also brought the best music guy in the mac ISV ecosphere on board to rewrite SoundJam (as iTunes) which came out in early 2001.

Again, Apple was a year late to the party, as Archos's Jukebox came out in late 2000. But the Archos offering was saddled by an immense form factor (wouldn't fit in a pocket), sickly-slow USB 1.0 file transfer, and a real suck UX on the device itself.

Apple's offering -- the 1G iPod -- was engineered to SOLVE the problem, and it did. 50 MB/s file transfer over firewire. The clickwheel to navigate the UX, itself a Mac-like arrangement and attention to detail, and a 10hr battery pack and engineering to buffer songs to make the battery last.

So yeah, just some parts and some software . . . that captured 90% of the truly PMP market that didn't really exist before Apple "invented" it.

Innovation is not invention -- innovation is productizing invention. There is a difference, and it's the box Apple occupies, nobody (except Sony and Microsoft) comes close, and apparently nobody is capable of coming close.

pkennedy says

From what I’ve seen, products developed without outside input are a disaster. Customers need to be included.

Apple's secret is that they are their primary customers. They're making the machines that THEY want to use. That was why the Apple II and Mac succeeded, and the Apple III and Lisa failed, and also why the company lost its way in the 90s. They stopped making the machines that were good enough for them, shipping crappy crap instead to target an unfilled market segment.

The PCjr should be a lesson to us all.

justme says

Apple buys pretty much ALL the hardware that goes into their products from outside sources. The only notable exception is the CPU of some of the new devices, which was based on designs from an acquisition that they made (Palo Alto Semiconductor). All the rest is innovated, designed and manufactured by Qualcomm, Intel, Texas Instruments, Broadcom, Atheros, Marvell, TSMC, Micron Technology and scores of other and smaller semiconductor vendors. Apple is about putting the pieces together and writing the software.
Again, I’m not saying they do a bad job at it, but 90% of what they sell are other people’s innovations, 9% is recycled software innovations and maybe 1% is true innovation from Apple itself.

Absolutaly correct. Add to that their services (Itunes) just like Youtube and others utilizes plenty of other vendeors servers and networking products. And many of these vendors are not located in Silicon Valley.

re: post topic, interview with Gerald Celente...

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/4/24_Gerald_Celente_files/Gerald%20Celente%204%3A24%3A2010.mp3

Today's featured property is a lovely 3 bedroom home at 2413 Hickory Dr, Concord, CA that rents for $1450 per month. It features a spacious back yard for gardening. The owners tax basis is $140k. How low can you go?

There seems to be a band of rental prices, and I think Patrick actually had a decent graph on it, where most rents fit between a certain level.

It really seems that most rents fit between about $1000 and $2500. It doesn't really matter how crappy your place is, it isn't going below $1000, thus if you can buy a crap shack, you're going to get $1000 for it. On the flip side, if you buy too high, you're not likely to see much above $2500 either.

I'm guessing that the upper limit is probably caused by LL's who buy crappy 4br units, then rent them for no more than $2500. When "your" unit is compared with the crappy other 4br, it has to come inline with their prices, even though it might be a lot nicer.

We are in the window of time where home prices have bottomed and will likely be close to flat for 2-3 years. This is because shadow inventory will temporarily offset the slowly improving demand. Official unemployment will likely decline from the recent peak of about 10% to around 7% by 2012. At that point, shadow inventory will have dissipated and the rising demand will start to push housing prices up.

Roberto,

Your strategy makes sense, and should be lower risk.

But better current income is usually accompanied by lower appreciation.
It is a trade-off. A question of risk-reward and timing preference.