patrick.net

tatupu70 says

2 years of going to school at night for naught…

You got a B- on this one . . . Apple only has a monopoly on *new* iPod-brand music players, since monopolies deal with specific markets and not products per se.

Also, they are close to inferred monopoly market position in new music players, which has been taken to be 70-80%.

Troy says

You got a B- on this one .

That's a bit harsh I think.

Troy says

Apple only has a monopoly on *new* iPod-brand music players, since monopolies deal with specific markets and not products per se.

Definition of a market is pretty arbitrary to begin with. You can certainly argue that ipods aren't a market--I just took the question at face value.

Troy says

Also, they are close to inferred monopoly market position in new music players, which has been taken to be 70-80%.

We could debate this but I think I'd win. Market share alone does not constitute a monopoly. There must be other characteristics--usually very few substitutes, extreme pricing power, etc. In this case there are obvious substitues--a vast array of mp3 players. And Apple has had to reduce price--their pricing power is limited.

Hugh Hendry claims to have a play against China where the risk is about 2% but the reward is greater than 100%. He's basically playing the CDS swaps on Japanese companies that do business with China.

http://www.businessinsider.com/hugh-hendry-short-china-2010-10

Vicente says

KentM,
Your TRUTH EAGLE frightens me. He stares right into my soul.

The Truth Eagle sees all.

I understand the eagle was favorite symbol for the Romans as well. Thats partially why the Nazis adopted it.

Eagles are a favorite of eagles

robertoaribas says

Listing prices kept going up at the end of the bubble dimwit duck, while sales volume dropped. THEN sales prices dropped.
back your charts up to 2005…

Not even 2005. I want to know if there is any correlation in a normal market, like before the bubble. This micro, 2-year view is extremely selective and covers a time frame of tax credits, scheduled expirations, extensions, and an eventual expiration.

In over 300 documented historical cases, paper money has ended up being worth virtually nothing. In fact, it's happened twice in the USA; the Revolutionary War's "Continental Dollar" and Lincoln's Civil War "Greenbacks." Our current Federal Reserve Note, i.e. "dollar" will end up on the same trash heap, IMO. When Nixon closed the gold window in 1974, he in effect ended the Bretton Woods Agreement of 1944 that established the Dollar as the world's reserve currency. In that agreement, the world's major currencies were linked to the U.S. Dollar and in effect, were tied to gold because the U.S. Dollar was. There were also strict limits as to the ratios of paper currencies allowed to be printed in relation to the amount of U.S. Dollars in circulation. America’s printing & credit binge has led to an increase in like manner in all the major economies. With the removal of the link to gold, paper money can obviously be created out of thin air, allowing politicians to spend recklessly (“officially” $14 trillion & counting) while achieving and maintaining power over those that want handouts from the government, etc. Inflation becomes the politician’s best friend because it is, in effect, a secret, gradual tax on the, for the most part, unsuspecting people. Considering human nature, paper money can only lead to its ultimate failure at some point.

RayAmerica says

Considering human nature, paper money can only lead to its ultimate failure at some point.

I know this is not what you mean, but paper money is already gone. My job pays my digital money into my digital bank account that I use to buy things digitally with my credit card.

Who cares if paper money fails? We will just replace it wtih something else just as all the previous paper monies were replaced.

Gold is FAR too inefficient to be used as money in a modern world. Real estate in free countries? That is a bit different. If the dollar needs to be backed by something, backing it with real estate makes a hell of a lot more sense.

Nomograph says

theoakman says

Hugh Hendry claims to have a play against China where the risk is about 2% but the reward is greater than 100%

That’s a good reason to stay as far away from Hugh Hendry as possible.
Flashback to 2005: Wanna buy some mortgage-backed securities? There’s a great return and almost zero risk!

I suggest you read the article and find out who Hugh Hendry is. He returned 50% in 2008. He cleaned up shorting the crap out of Greece last year. And back in 2005, he bought that shiny metal you hate so much. He's well aware of risk which is why he didn't want to short Chinese stocks because of the potential losses involved in a miscalled market. He placed a bet that consists of 2% of his money. The maximum amount of money he can lose on this play is 2%.

The only thing that chart shows is that every time the asking price/sf increases the actual sale price/sf decreases. So, apparently the wishful thinkers are raising their prices and that historically means the properties that are priced lower/sf are the ones that sell. From this chart, the time to beware is when the ASKING price/sf goes down. That seems to trigger people purchasing properties for higher prices/sf than they had when the prices were lower/sf.

SoCal Renter said:
>>>My job pays my digital money into my digital bank account that I use to buy things digitally with my credit card

and THE Eagles, too.

"You can check out any time you like but you can never leave." Prescient or WHAT, huh?

shrekgrinch says

Sorry. I know you can’t deal with this so you try to change definitions and obfuscate. Most liberals on these forums do so when confronted with reality.

Oh, and: blah, blah, blah...

Average income in our area is 60 to 70,000 per household. Houses are floating around 399,000 or 499,000.

499,000 / 70,000 = 7.1
399,000 / 70,000 = 5.7

Still a bubble since its above 3.0

cvoronin91335 says

Average income in our area is 60 to 70,000 per household. Houses are floating around 399,000 or 499,000.
499,000 / 70,000 = 7.1

399,000 / 70,000 = 5.7
Still a bubble since its above 3.0

Seems okay, considering the low interest rates. If it had been 600K+ purchase with 70K household income I doubt any bank would give that kinda money.

cvoronin91335 says

Average income in our area is 60 to 70,000 per household. Houses are floating around 399,000 or 499,000.
499,000 / 70,000 = 7.1
399,000 / 70,000 = 5.7
Still a bubble since its above 3.0

I agree. One should look at prices from various prespectives, not just rent equivalent. But ratios as you point out. Once the ratios get out of hand, a sure sign a correction is sure to follow.

http://en.wikipedia.org/wiki/Real_estate_bubble#Housing_affordability_measures

shrekgrinch says

Sorry. I know you can’t deal with this so you try to change definitions and obfuscate. Most liberals on these forums do so when confronted with reality.

Says the man with two cartoon characters in his name.

"obfuscate" ....... wow. I'm using that at the Thanksgiving meal table

You can not blame Madoff. After a while NOT taking advantage of anothers refusal to educate themselves would in turn BE stupid. We have all seen a time-line of mans existence on earth, and that time on a clock appears as about six seconds. If the same clock were used to represent RESIDENTIAL LAND, it would show about three seconds. Try this test. GOOGLE a satellite map of the United States, or any other country and Center over your choice of metropolitan areas (with out digital assistance). Zoom all the way in until you land atop a heavily populated area. It will take many attempts. ( new game idea) Point is, the people buying homes today are under the (marketed) impression that if they don't buy now, there will be NO land left to build on in the near future. O.M.Geeee !!!! My advise, as a " Land Agent. " GO FOR A PLANE RIDE !!!. ONE or TWO MINUTES off the tarmac and there is no civilization ! in MOST cases, for hundreds of miles. There are 2.3 BILLION acres of land in the USA. With 6 homes per acre we have built homes on about 18 million acres. Do the math and you will see 2.3 billion acres remain. Take another 20 million acres for ALL other building and OH OH !! we still have 2.3.........STOP ...... listening to sales people like Bernie and nem, or deserve to get berned.
As soon as we Bernanke depleets or treasury, Home values will return to their PHENOMENALLY set value which is 2.5 times that families annual income. Weather that income is based on the Dollar or bushels of corn ... Unless the next fantastic gadget is invented.

Nomograph says

theoakman says

He’s well aware of risk which is why he didn’t want to short Chinese stocks

Obviously HE is aware of the risks, but he tells YOU there is no risk.
That’s a good reason to stay as far away from Hugh Hendry as possible.

Umm, did you listen? The risk is that if you are 100% wrong, then 2% of your money is gone. He doesn't tell you there is no risk. He evaluated all the methods of shorting China. He concluded, even though he thinks there is high probability of a huge crash in the Chinese markets, he is not comfortable shorting Chinese stocks or Commodities because of the huge risks involved of the low probability of him being wrong. Unlimited downside on those types of plays. On the other hand, the CDS market in Japan has not priced in this scenario, so you can place an extremely cheap bet, and if China does crash, you will make money hand over fist. If it doesn't play out, you lose all the money that you put down. In Hendry's case, his bet amounts to a whole 2% of his portfolio. This isn't that hard to understand. If someone placed 100% of their money on this bet, you might have a point. Given the fact that Hendry hasn't, you have no point.

The worst possible scenario results in him losing 100% of his bet, which is 2% of his portfolio.
The best possible scenario (China crashing) has incredible upside.

The fact that you even compared this bet to someone trying to sell someone mortgage backed securities is laughable.

So he and his family decide to pay $132,000 per year... to protect themselves from prices going down!? What kind of apartment depreciates that quickly?

I think short excerpts for discussion are allowed under the "fair use" doctrine, but how short that has to be is up to a judge. The shorter the better, probably.

I think short excerpts for discussion are allowed under the “fair use” doctrine, but how short that has to be is up to a judge. The shorter the better, probably.

Look up the Righthaven lawsuits from the Las Vegas Review-Journal - it's claiming that any use is a violation of copyright laws. According to the Sun (competing newspaper), the headline and first 30 words is cool but after that it's a violation. But the RJ created this entity called Righthaven which searches the web and finds reposted stories - then if files a copyright and sues for over $50k and the domain name. It's won in several cases, but has settled with many others. It's driven mom & pop blogs out of business and cost thousands of dollars in legal fees.

robertoaribas says

posting large sections of an article without WRITTEN approval from the copyright holder is a violation of copyright law. NO POSTING THE LINK DOESN’T MAKE IT OK. Have some respect for Patrick’s blog, and don’t post illegal blocks to it. Simply provide a link, without the cut and paste.

Sure, RR can be a bit of a condescending ass sometimes (as are we all - gotta admit that), but he's right. We need to post a link, and we can paraphrase. But to repost stories is inviting trouble for Patrick. If push coames to shove, I wonder how many people would contribute to patrick's legal defense fund?

I think Mr. Lee should stick to his day job and stay out of the real estate forecastng business. I see 2 problems:

1. Isn't it a bit too late to sell your real estate to avoid price declines? Just to sell the apartment and re-buy it down the road will easily cost 12% in realtor fees, closing costs, etc. So just be BREAK EVEN, Manhattan RE must fall 12%.

2. How can Mr. Lee reasonably expect real estate to fall 12% + in value when he sold it for nearly the exact same price he paid in 2008? Should his apartment have fallen significantly in value during that time?

tatupu70 says

Definition of a market is pretty arbitrary to begin with. You can certainly argue that ipods aren’t a market–I just took the question at face value.

My question regarding Apple having a monopoly on Ipods was a trick question: the answer probably should have been that the question was invalid to start with. Regardless, you obviously understand the concept in general, so I'll give you a B+ average across both questions ... (As previously discussed in a thead... all in good fun... Hope you had a great TG!)

Michinaga says

So he and his family decide to pay $132,000 per year… to protect themselves from prices going down!? What kind of apartment depreciates that quickly?

Depreciation?

How about interest payments? Somebody that has bought on credit in the last few years is mostly throwing their money out the window to make money for their creditor. It's really not much different than rent, especially after you add in property taxes, etc.

Gotta wonder, what would your comment be about somebody in 1993 Tokyo, instead of Manhattan, who made a similar move?

(I seem to recall you're in Japan)

BTW, copyright laws, as they stand, are not only stupid, they are EVIL.

I will always rent from now on, been home owner since 1982 till 2008 in bay area ca. even and ends with bank taking it back... yea, for me... I tried, but failed and income fell off, sales.... job.

11000/mo apartment, the guy is spending $367/night.
I guess the market he is talking about is those over 2M places which succesful professionals would live, because 11000/mo = 2M loan @5% 30yrs. There're few such places in NY and NJ near Manhattan. There must be a reason. After all, this guy is a managing director at a major bank, and I assume a guy like that knew something we, ordinary joes, don't know about. So, what in that market made this rich worried? That's what I am curious about. Does that mean, it will be fun to watch what's gonna happen in high end market in Manhattan next year?

Renting is better for the next few years.

Nothing newsworthy here. The guy is math-literate, and his livelihood depends on his understanding of compound interest. So no surprise.

I always say "eschew obfuscation." Well, maybe not always, but I do have a bumper sticker, if that counts.

The thing about prices going down it only matters if you need to sell or need to refinance.

OK. Thanks.

As I said, my understanding is that the seller wants to see how the hearing goes before they decide what they want to do next. Would this be the time at which it is determined if the seller has the financial resources to stay in the home?

Also, if the lien holder(s) know there is a potential buyer, would that effect their decision to potentiality renegotiate the terms of the loan? At this stage, it is not clear (at least not to be) if the sellers bank is aware of my offer.

Where is this house you have your dreams pinned on?

On the East Coast, Near where I live now. :)

EastCoastBubbleBoy says

On the East Coast, Near where I live now.

Well at least he's pretty specific. :) I have my eye on a little piece of heaven on this backwater planet called Earth, It's on the edge of the Milkyway galaxy, far for all the busy rat race at the galactic core.

TMI.

Or it could just be that the building permits are running and construction has to begin. I also find it interesting that the full development of this project is spanned out for well over 10 years. My sense is the developer is under pressure to start this project and is hedging its bets by stretching completion out over a decade. During the boom years, this project would have taken 5 years at most to complete.

Appreciate the wishful thinking Nomo, but I fear that is all it is.

Sounds a little tight to me, You have 230 acres available to build on, you burning 67 acres on park space, that leave you with 163 acres, there's 43,560 sq ft in 1 acre giving them rough 7 million sq ft to work with. For 4,780 housing units, that leave less then 1,500 sq ft per unit without roads, parking and commercial space. When you subtract 1 million for commercial space, your left with about 1,200 sq ft per apartment. Naturally these buildings will be multi-story building but from the art pictures they are only 3 floor high at the most. By the time you add in roads and parking, it sounds awful tight to me. I wager that the "park space" will include the walkways between the buildings with some grass and a few shrubs on the side of the path. I very much doubt there is going to be a 60 acre park to enjoy, your park will be the walkways between the buildings.

hooch_raider says

During the boom years, this project would have taken 5 years at most to complete.

So if you would have started your project in 2002 at the beginning of the bubble, you would complete your project by 2007, after the market passed it's peak. I think it's a great idea to start construction during a recession, get all your infrastructure and basic foundations in place so when the next boom hits, your well positioned to take advantage of it. I just think this project is too much for the amount of space they have to work with. I think smaller development projects do better anyway, there less construction time, so you can throw up a couple of buildings and sell them as your expand your development, with a high rise building, you cant start selling units until most of the building is complete, you can leave some finish work for each unit, but overall the bulk of construction has to be completed before people can move it. You can pre-sell of course, but then you get people backing out of there contracts if the market falls before you can get them into the unit.