patrick.net

Harm - Just wanted to state for the record two things:

1. We are not in the Bay area - I rent near Pasadena

2. Not trying to show off my fancy codpiece - I just wanted to point out that although we can afford to purchase a house at these prices, it would be insane. The fundamentals are SO out of whack it makes buying seem foolish. I am not buying a $800k house despite our houshold earnings/savings.

I hope the market tanks and validates our decision to sell and rent...

If it slips to a full 10 percent correction, I wonder how the ’spring bounce’ is going to look?

This 400+ drop is a BIG psychological blow. In BA the mood is a lot more dependent on stock market than many other parts of the country. (Not counting NY, Chicago etc.) Suddenly the stock options and ESPP are no longer that valuable.

I am not sure we will see 10% correction soon. But if that happens, BA market will be more affected than most of the country. The house are not appreciating any more. Now if people think that the stocks also won't appreciate, they will be less inclined to take a big risk.

I always look at stock market corrections as happy little moments for my IRA and 401K. Each deposit buys a little more than at the peak...

The fact that I'm late sending in my IRA makes me giggle right now. My wife is mailing hers off today, so she'll get a little 'buying boost' from the drop if it sticks for a few days, which I think it will.

"ESPP are no longer that valuable"

My husband's ESPP program has been suspended due to a stock option investigation. Are many companies still offering ESPP?

Most real companies of any size have ESPP as a benefit. By 'real' companies, I mean companies that have at some point or another produced profits for multiple consecutive years. :)

Peter P :

Realized loss is better than unrealized loss.
Unrealized gain is better than realized gain.

That's a primary reason to buy a house for many people :-)

"What did I do to deserve this!"

Two words:

Saggy

Perky :)

tannenbaum,

Or why not just BUY Oregon? :)

You know us right? (Washington's "Mexico"?)

Wow, today was /fun/. Since the market seemed to be climbing so well for so long, I had told myself that I'd wait 'til just before March to start buying puts. At least I got some orders in late last week!

Anyway, to speak to the topic, I'm still renting and don't plan on buying until I can afford a place with a decently sized yard (i.e. quarter acre). I'm still hoping that things will unwind over the coming year, possibly with some sort of credit event to make things really exciting. Of course, even if it doesn't happen, I don't see giving myself the mental greenlight to buy until 2010 or so.

On ESPP:
Yes, the real companies offer them. I opted out a little while ago when the company shares started representing too large a chunk of my portfolio. (I've been wondering if it makes more sense to ramp up the buying, and set up rolling sell orders to take advantage of the minimum 15% discount while keeping the proportions balanced.)

After the market closed, I watched a little of the commentary ad nauseum on TV. Most of the discusssion was not about the market, but MBS, Freddie, and FB's. Interesting that on a correction day, that would be the center of attention.

One of the guests was the head of Century 21. Just so you know, it's "official"......'06 was the RE market's correction, and it's over now. He's GOT to know, after all, Suzanne researched this! :)

requiem,

15% discount to avg. price for that particular qtr?

The RE correction has not really started yet...

DinOR:

I believe it's lower of 85% of purchase price date or 85% of subscription date value (for the given offering).

Downtown Palo Alto is full of demons (bums).

No it's not. That's Downtown Santa Cruz.

requiem,

Oh, o.k. There are a few different ways to calculate that. My wife's co. left "the lower of" part out. Who administers your plan? Their plan was w/Merrill and they didn't give a rip about executing any type of sell order strategy.

ESPPs are pretty good deals. You get to buy, usually at a favorable price, and it works out as 'enforced savings' the way 401(k)s can.

If you LIKE your company and believe in the fundamentals of the company, once you've 'rebalanced' by not buying for awhile, get back in at a lower level and make sure to buy more to balance.

If you get a REALLY good deal on your company stock, a rolling sell might make sense. I try to avoid selling unless I'm unloading a stock just because I hate fees and taxes.

SFWoman,

I got the same KBHomes email today.
Here are pics of the ad:
http://new.photos.yahoo.com/jtfrankl/album/576460762391505683

The ad reminds me of an old Dennis Miller joke. Bunch of hicks are sitting around the ice fishing hole/campfire/whatever. One of them cracks an ice cold Old Milwaukee and says "it don't get any better than this".
Dennis: "Oh yeah? Then why don't you just shove that gun of yours down my throat and pull the trigger right now!"

I spoke with a parent at school, she and a few friends at HP were just given early retirement this week.

Regarding ESPP, even if you are overweight in your company stock, why would you NOT stay enrolled and simply do same day sale? It is FREE money. Who cares if is taxed at a higher short term rate? It is a minimum 15% gain with almost no risk if you do same day sale.

You guys can all complement me on the genius of my "BA = 1650 Spain = Alexandrian Macedonia" comment later :)

You guys can all complement me on the genius of my “BA = 1650 Spain = Alexandrian Macedonia” comment later

Of course astrid is a genius.

I am going to eat cakes.

Oh, I was assuming same day sale was standard. My plan has a 15% discount, same day sale allowed, price can be locked for up to 2 years. I generally take the money and run.

astrid,

We DID give you credit for calling the China Meltdown correctly now didn't we? :)

DinOR,

LOL! Yeah, thanks. :)

I need a smile - I probably lost $1,000 or so from my Roth IRA - 401(K) today.

Most real companies of any size have ESPP as a benefit. By ‘real’ companies, I mean companies that have at some point or another produced profits for multiple consecutive years.

I know someone who made a million on ESPP, ESPP was offered before the company went public, people loaded up on $5 shares, of course, during the dot com everything went up 2000%. Funny the company isn't so real, they re-instated earnings for 2 or 3 years from the second quarter they went public.

Different ESPP have different rules, some are 5% whereas I think most allow 15% discount, some take the lower price of the beginning and ending period while some just take 5% off the ending period.

Here's a good link about tax implication:
http://turbotax.intuit.com/tax_help/employee_stock_purchase_plans_turbotax/article

Doug H,

Sorry you were offended I did not generalize the whole south. Just sharing my and my partners experience since we moved down here. I've also met some very hospitable folks. I guess I'm a little geocentric I'm far from arrogant I don't have enough money or contacts.

GC,

I'm actually not too depressed about losing money, but I bet all my Shanghai relatives lost a bunch. Hopefully they'll still afford to buy me dinner.

I’m actually not too depressed about losing money, but I bet all my Shanghai relatives lost a bunch. Hopefully they’ll still afford to buy me dinner.

It lost less than 10% of value after years of extraordinary gains. I am sure the market there is not dead.

I think China is a lot more than 10% over-valued...

I feel bad for the pension fund investors they have no choice. The private investor that's another story. The market was way overdue for correction those who play generally have enough wealth so that a loss such as todays' won't put them in the poorhouse. The rest of us working stiffs are lucky to have enough by retirement. Whatever the case gambling is gambling whether in Vegas or the market. I think this is the beginning of the fall we've talked about for years. Time to hunker down...

HARM, sweet delicious hate mmmmmm, there is a store in $anta Barbara that is selling 24k gold plated cod pieces, all the blink for less buck. I was going to order one but they were all out of gynormous

Man, I need to learn to spel.

Thanks for the ESPP comments. Over here, it looks like it's just Computershare (formerly equiserve). Holding time for more favorable tax treatment is two years from subscription date and one year from purchase date.

I do get the feeling that taking the 15% gain even with taxes would make more sense than not. Let's see... $150 per kilodollar into the plan (maxing out) gives about $22.50/kilodollar of paycheck. Take out taxes, and it looks like a pay raise of a little over 1%.

Oh, WRT China, Mish linked to a truly disturbing story:

http://www.latimes.com/business/la-fi-chinastocks16feb16,0,6712382.story?coll=la-home-business

"After emptying his savings account, Lu Gang borrowed funds from his mother, relatives and friends. Now he's planning to mortgage his home."

No points for guessing where the money was going.

requiem :

IIRC, the 2 year period does NOT change anything with the 15% (or 5% or x%) discount that you got on the purchase date. The discount is always taxed as income no matter how long you hold. (I could be wrong here.)

And the gain is not 15%, it's much more. First it is in 6 months. So annualized it is like 30%. But wait, you did not put all the money upfront and waited 6 months for it to grow 15% (or 30% APY). You put $X first paycheck, $X second etc and $X on the last paycheck - just 1 day before getting 15% on that last $X as well. So average time it took to grow 15% is like 3 months. That is 60% annualized.

This is if you sell, and hence it's not a bad idea at all to sell every single ESPP stock the moment you get your hands on it. Keep doing that year after year, every pay period.

How many of anyone's investments return 60% annualized ? ESPP is the best investment most people would make, and they don't even know that.

* Not tax advice, not investment advice, not anything you can use to sue me.

ER,

A smarter guy realizes that housing prices are pushed about as high as they can be from low rates anyway. Houses (at least in my area) are poised to lose up to 50% in five years. Inflation would have to hit 20%, and the Feds are not going to leave rates low like that in such a situation.

Aww... my comment is stuck in moderation. It's such a classic example of a FBer about to implode in a shower of pain.

SP, alien :

Mish was mentioning that the shock of Yen appreciating will be monstrous. He also posted comments from a trader who was going long on Yen.

He might be right, he might be wrong. But the amazing thing is such logical, strong arguments almost NEVER come from financial journalists. All you get from WSJ, Barrons and host of others is middle of road, bland and "balanced". Never anything that is original and thought provoking.

Blogsphere has done more wonders than one can name.

OMG!!! This is very scary!

Incidentally, the 'falling down the hill' $200k+ foundation replacment house I mentioned before is also now for rent. Make sure you carry renter's insurance there!

I understand trying to rent them ease the cash bleeding, but do you think these people are really ready to wait 5-10 years renting at a loss? I feel sorry for anybody who rents these places then gets kicked when the place gets foreclosed.