patrick.net

Fewlesh,

as a west valley native, do you know of any nearby places with really beautiful setting, least earthquake risk, and NO brand name (or least brand name), so when things tank I don't have to compete with other IPO lotto winners, trust fund kids for a good piece of land. School district is not an issue with me, I plan to send kids to private schools. I prefer something on the west side, commutable within 45 minutes to San Jose.

Fewlesh,

why can't Fed just buy the federal long-term treasury outright through open market operation? At least in the short term, that will stabilize the long rates. In the long term, we all know that USD is doomed.

Fewlish,

thanks for the link on electronic manufacturing, that is a big help.

Do you know what is holding up SLV ETF? I think the price is going to explode once it is available. Perhaps that is the problem.

USO is already trading.

Returning,

Try "Analysis for Financial Management" by Higgins. From there, if it's what you're after, try "Principles of Corporate Finance" by Brealey, Myers & Allen.

I think what you're after is Corp. Finance, not really economics. Econ is all theory and won't help you evaluate individual companies on their GAAP reports. Econ will help you to evaluate the strategies of companies in some depth and determine if they're full of shit or not, especially smaller companies (harder with larger, multinational or conglomerates).

One more, "Valuation" by Mckinsey & Company is very good at getting into the mechanics of how to take GAAP statements and comparables then determine a value for a company, which helps you determine things like merger opportunities, EPS and PE reasonability, and value from glamor stocks. For example, I ran a simple WACC valuation on Google just for Giggles. They need to find gold buried under their campus to justify their share price.

The_Scum,

Many posters -- and at least one notorious moderator -- bring more heat than light. In and ideal world we are purely rational beings. We rise above our fear, greed or anger. Even love can lead to irrational behavior.

But we need to get emotional to do anything important. We certainly have to listen to our hearts.

Huck Finn knew he was damned for helping his friend Jim escape. He knew it was wrong because Jim's "owner" had never done anything to Huck. He tried hard, but Huck just couldn't bring himself to do the right thing by turning his friend in.

The "spring bounce" in the BA will closely track Barry's batting average and slugging percentage. His OBP is still high because opposing pitchers and managers remain in awe of his historical "past performance." But when they've gone after him this spring he can't get it done -- so far. It just seems like something's missing. What could it be?

If Barry keeps slumping, they'll keep testing. Either he finally breaks out or they'll eat him alive when they know it's all gone.

When the psychology of fear and greed reaches its logical conclusion, prices will move.

And all will be well in the garden.

Garth,
To add to that, now everyone finally believes that Barry's past performance was "pumped up" artificially. Balco=seedy mortgage lender. Didn't his surge in power start in the late 90's?? Hmmm, coincidence?

It is no mystery to me as to why the top 10% of the country has the majority of the wealth. All one has to do is look at basic American business practices to see that the system essentially works to constantly cut off it's arms one by one until nothing is left. If you look at the last 50 years you have American companies slowly shifting most manufactoring jobs overseas. We've come to expect that everything is now made in China. I don't know a soul who works producing a physical object.
Now it's programming, research, technology, and to my amazement- even some graphic design and hollywood movies being outsourced more and more. I just read an article in Eweek, and the cover mentions outsourcing IT and tech jobs to India. It doesn't mention the extreme obvious, which is that many people are going to lose their jobs or be unable to afford to ever live in California due to this migration of talent, but instead frames it as something companies "Must" do if they want to stay ahead of the game.
The company I work for is strictly against doing any outsourcing. We have a call center in TX, an office in SF where the IT, marketing, and design work is done. We are very profitable, and doing just fine. The companies that want to outsource want to show a quick buck and fast profits, and that's it. In the end, what is this all about? It's about making sure CEO's of large multinational companies can stuff as much money into their pockets as possible, regardless if what they are doing in the end will wreck yet one more industry. It won't matter to them because in the end they'll be the ones on the yachts in Greece while the rest of us eventually have to flip burgers for a living.
I went to college and got a degree specifically in design and creative marketing for the prime reason that A: It is art, and B: Job security. I get emails almost every day from some company in India with entire web sites they will sell you for $50. I know that the day is coming when even our damn art will be "outsourced". It makes me wonder if there is any job that cannot be outsourced. Hell- even medical work is being outsourced, which can only mean that Lawyers, investors, and everyone else is just as easily replaceable by cheaper labor. Eventually the system will have to be changed, for the way things are going now, the US cannot continue on this path unless they want an entire country under the poverty line.

Bay Area Newcomer,

Wow! What can I possibly add to that post above! Says it all for me! Some time back the topic of what people thought would be a reasonable entry point and I tried to cut to the chase by simply saying that any discussion has to start with "pre-bubble" prices. And I'm not talking about working through some scenario that has 2002 for a starting point! I like the means you deployed to arrive @ Delta b/c mine was so primative. That baby should be in Patrick's preface to interject some sobriety into the discussion!

No. The FED doesn't care about some busted specuvestor in AZ! One of the arguments that has really plain worn me out is this notion that b/c so many of us are up to our privates in debt and so over leveraged that some "White Knight" is HAS to ride up and re-inflate the bubble! And why not? We've bent over backwards to create it! As long as the banking system and publicly traded home builders are intact the FED has done their job.

Oh yeah, and just for a goof I've asked a few mortgage brokers about the new 40 and 45 year loans and they lower your monthly payment by about 50 bucks (and add a several LARGE to your pay-off). Great.......

monadtoons2,

Uh, I don't know how to break this to you but I was watching a special last week where China has bascially street vendor artist in an assembly line sweat shop "recreating the masters" Want a Van Goh? That'll be 50 bucks Mr!

Bay Area Newcomer,
Just also wanted to step in and say that I agree with Dinor. That equation just about sums up the potential ( hopefully true) future.

Garth Farkley,

Randy H and I get chided about our midwestern "leanings" but I'll just say that the "Big Hurt" was hitting about 35-38 HR per season before the "doping" and then guys were hitting like 65-70 HR's per season! Notice how the numbers (league wide) have come down. Frank Thomas SHOULD be laughing! And he just looks great with that new Championship Ring!

Now that we're weaning mortgages off of steroids will see just how much of an impact they ultimately have on prices!

And uh, GO CHISOX!

Robert Cote,

Finally, the FED -needs- to bust home equity. As an inflation protected asset home equity stymies Fed efforts to manage the economy.

Interesting point. I personally require a lot more convincing beyond a logical motive. But this motive is logical.

So, the assertion is that the Fed has encouraged easy credit in order to buy down the home equity stake Americans hold in aggregate? And the assumption is that the macroeconomic risks created by this strategy -- quite significant risks -- are justified by the marginal increase in monetary control that the Fed gains.

Like I said, I'll need to see more data points before I can buy into this.

SFwoman,
I don't think we have to edcuate anyone about the bubble. Everyone who got into this mess knew it was a bubble from the start, knew they could lose a lot of money, and knew they were taking big risks buying things they couldn't afford. We might as well fly to Vegas and tell the gamblers they could lose their life savings, yet since 1 in 1,000,000 gamblers makes it big there, that doesn't stop the hordes from going. All it takes is one person " that such and such knows" who made a bundle on a concept or idea, and the masses follow like cattle.
There were risk takers and those like myself who chose not to gamble, as well as people like yourself, already in, but wanting a better future for your kids. To me this is simply a game. The game gets played over and over, and the cycle serves to cripple one group long enough for those disadvantaged to swoop in and take care of themselves. Humanity thrives on opportunistic principals. It's too romantic to assume otherwise. I'm not going to lie and say that I don't look forward to seeing masses of people defaulting on their payments not because I want " revenge" or because they deserved it after making unwise decisions, but because I've waited my turn and now it is time for us to make it to the front of the lunch line for a piece of chocolate cake. I even feel bad saying that, but it's the way I feel. (today at least)
Idealy it would be great if everyone was positive, community minded, and always thinking of ways to better the lives of the future generations. I know I'll do as much as I can, like try to vote towards laws that repeal protective principals that halt building and digression towards overgentrifying of entire regions,even after I have bought my own home, but in all liklihood, there will be generations after mine who will also have great difficulty as a result of those in the sweet spot, hording as much for themselves.
So now we have arrived at the end of another cycle, prices will drop, people will lose money, and those who didn't have a chance will do so. So the question now is what do we do to prevent this from happening again? Or should we just accept it as a given?
I admire people such as yourself who already own, who have their financial situations in order, who still have genuine concern for their community and the effects of current trends and what they might do to the future. Perhaps that is why you may be more optimistic than I.

Robert Cote'

O.K, that's fine. Perhaps 94-96 was crater for CA. The REST of the country was at or near the mean. Go peak to peak or trough to trough, but for it to mean anything it has to be a point in chronology that precedes 1997. After that everything becomes contorted b/c we went quite mad.

nomadtoons2,

I agree, it would be futile to "council" those that have already taken the plunge. But if you have someone that you care about (client/friend) and they have walked away a winner and now they're tempted to go BACK to the table? Yeah, I don't stand on a street corner with a "sandwich" sign saying the end is near and I haven't been able to "save" everyone but if you can help keep one person off "dope" isn't this a better world for it?

Newfreak,
The interesting thing about the H3 is that the size aspect is mostly percieved. It's actually the same size as a Honda Pilot, and you never hear people badmouthing those since it's a... Honda. To me, the H3 is sheer ingenious marketing.. make something that looks exactly like it's monsterous cousin the H2 and the even bigger H1, and bingo- people seem to think the thing is HUGE when in reality it is average with a V6 that gets 21-23 MPG. So the truck-drivin' deer-huntin' dudes that want the look of a H2 can have a baby version, and still get the same effect.

nomad,

Everyone I know who bought investment RE or bought a bigger house than they can afford truly believe that RE never goes down. They either dream of being RE moguls in 5 years or they believe that they'll be locked out if they wait.

newsfreak,

The idea would be, as I read it (and note that I am unconvinced of this theory at this time):

When people build home equity it is a form of savings that is inflation protected. When you put money into your savings account, you will only keep it there if interest rates are high enough to make it worth your while. Otherwise, if the Fed loosens money and drops rates, you'll pull your money out of savings and spend some and "invest" the rest into other things which do promise some greater return.

Remember that at one point money markets were earning barely over 1% and even long CDs weren't worth while. During that period holding cash was a losing proposition because it had negative real return.

But, when people have the ability to pile money into home equity they can save at a potential return rate not controlled directly or even indirectly by the Fed (home prices don't correlate well to bonds). Further, home equity is _usually_ inflation protected (again because of correlations, not anything magic).

The conspiracy part: Perhaps the Fed seeks to shift a significant portion of home equity savings into adjustable loans, thereby gaining control over how much Americans are prone to save (put into equity) or dis-save (pull out of equity). The primary reason I even give this theory time of day is because the primary savings vehicle of Americans is home equity, so this isn't a completely crazy notion, just a bit unlikely in my opinion.

SFWoman'

I'm O.K with "We ARE the pin" but I especially like George's "nail...... meet coffin".

Would it be rude to just have a pin in your lapel? I mean I've seen all kinds of "pins" and broaches over the years. Everything from AIDS to 9/11, cures and causes of all shape and form. But a pin? Just a pin?

As in: Hey DinOR! What's the pin for?

Bwahahahahahha!

nomad,

There's something about a Hummer that just screams nuisance value. As you say, H3 = Honda Pilot (and H2 = F150) people who buy H2s and H3s are buying it to flaunt and piss other drivers off. In reality, they're no better or worse than people who buy Pilots and F150s but don't need them.

I always figured if people buy based on opinions on oneside, without checking out the other side of the story, they're pretty much doomed already. My mom, on the other hand, thinks there's no such thing as a bad deal if everybody else is doing it.

SFWoman,

I'm picturing Excalibur itself, reduced to 1/4 the size of a letter opener. Small, but mighty! The bigger your bubble, the quicker the slaying.

newsfreak,

The Fed's mission is to control manage the monetary policy of the US. In such, they consider macroeconomic variables and attempt to maintain equilibrium. Therefore they need levers (as listed above, there are three) in order to affect those variables. Home equity as a form of savings is a variable which the Fed cannot easily affect with any of their three levers; in fact, home equity becomes more attractive as the Fed seeks to cause dis-savings by lowering rates.

Otherwise, I don't ascribe any particular diabolical intent to the Fed's actions. The Fed doesn't control Fiscal Policy, your elected officials do that. The Fed just has to react to Fiscal Policy and try to keep things coordinated and running smoothly.

"Or perhaps, a 666 pin, see what the 6th of June does for home sales."

Hehe, we could research what happened in the year 6 or 1006...

newsfreak,

Welcome to the United States of Real Estate! This is why there are so many among us that are quite sure that the the FED would NEVER do anything detrimental to the bubble! This goes a long way toward explaining the mania of 2004 and 2005. Truly and totally unnecessary but without ANY fear that the Fed would raise rates in any meaningful way the party went on.

newsfreak,

A pin made of precious metal. How appropriate! I'm not an "Anglophile" in particular so being as how you're in PA a replica of those used at Gettysburg would be acceptable. We'll have Bubble Busting Campaign Ribbons with annual re-enactments of bears cutting down crooked appraisers and realtors.

SFwoman,
The CL forum is a little asanine. Those people are absolutly nuts and when I used to go there, it was fairly frusturating due to the large amount of anons. You had no clue who said what, or where the conversation was going. I have a theory that the CL forum is inhabited by Realtors who post anonymous posts of people who claim they want to buy regardless of the costs.

I don't attribute the Fed with bad intent, but I do attribute the Fed with appeasing the wishes of short sighted politicians and CEOs.

The FED is paranoid of DEFLATION, and seeks to maintain a lot of control over liquidity. When people refuse to spend or invest and instead save, the Central Bank cannot so easily force an economy out of deflation cycles. Japan is the most recent case study. The folks running the Fed are students of the Great Depression and Japanese Deflation.

Actually, what we're doing right now on Patrick.net is an example of price-deflation force at work. Assuming we aren't all wrong about the RE/credit bubbles:

We are refusing to make purchase decisions, or making sales decisions, because we PERCEIVE that a dollar today will be worth MORE tomorrow, at least as far as buying a home goes. So we'd rather put our dollar somewhere else than a home because we fear a dollar in a home will DEPRECIATE.

When this kind of thing hits general prices for everyday goods and durable goods, things can get bad real fast. Image people acting this way about (elastic) things like cars, refrigerators, home-improvements, clothes, designer bags, and trips to Disney. The Fed will use all its power to prevent this ever happening, at least in the current era of Fed leadership.

newsfreak,

and deflation becomes real if the price of everything is so high (from higher oil prices), that consumers cut spending?

Note quite. Prices are always relative, so high or low doesn't really affect the equation. It is what consumers perceive about the future direction of prices.

astrid,

Thanks for putting that to rest. If the FED truly had any desire to put an end to this misery (and I call it that because this will end with a lot of misery) we would have seen 50, 75 and 100 bps rate hikes. They would have been well within their rights to have done so. Had that been the case all that would remain to be done is to contend with the tax code and dealing with those that put themselves under water through equity extraction. It could have, should have been dealt with no later than the end of 2003! But I think there was a certain curiousity to see where this would all lead. How far would the American people take it? Just how far would we let this thing get out of control? Did anyone else notice a certain Dr. Mengele fascination this event?

astrid Says:

"There’s something about a Hummer that just screams nuisance value. As you say, H3 = Honda Pilot (and H2 = F150) people who buy H2s and H3s are buying it to flaunt and piss other drivers off."

As we talked about before most Hummer drivers are not trying to "piss people off", but trying to "feel bigger even they may be short (or have something else that is short)"...

Not in any way to trivialize those that suffered at the hands of Josef Mengele!

Astrid said,

"They either dream of being RE moguls in 5 years or they believe that they’ll be locked out if they wait."

Fear and greed haven't gone away. I am personally quite addicted to both emotions. They are the engines behind much of our decision making.

The question for each of us is which way we decide to steer in the hopes of assuaging our fear and slaking our hunger for the finer things -- a life of security, ease and comfort. And the greater question is which way the great mass of people will steer, which direction will the psychology of fear and greed turn them?

I read a lot about "sheeple" here. It rings false to me. Arrogant psuedo-intellectual superiority. Like it or not, we are part of the herd. If you don't accept it you're likely to get trampled or left behind. None of us is nearly as strong as all of us.

nomadtoons2 Says:

"SFwoman, The CL forum is a little asanine. Those people are absolutly nuts"

As bad as things get around here they are 100 times better than the best CL forum...

newsfreak,

I have friends in advertising too and can honestly say it is the most brutal environment out there. I'm o.k with that.

What I take exception to is the way that the consumer allows him/herself to be manipulated from the "womb to the tomb". Whay do we make it so easy for them to exploit us?