patrick.net

EBGuy,

So what exactly sent these high end buyers packing? To walk away from that kind of money takes real fear! Uh... was this the first they'd heard there "might" be a housing bubble? When their 10% down payment wasn't going to be enough? What do you MEAN our loan didn't go through!?

"and enough empty tables to accommodate me :)"

Yes, there's nothing like the feeling of being the waiter's only shot at a tip!

Yeah, Bay Area home price steady my ass.

I saw something that I never saw throughout my 15+ years in the Bay Area, open house at night. There was an open house sign on Almaden Expressway turning into Almaden Road saying Open House 5-7PM. I drove by that neighborhood but was not curious enough to follow the sign.

Then when I think about it, this is truly an ominous sign. What kind of traffic does the realtor want to draw with such adhoc open house? I searched online, this open house was not even listed.

SIPC covers $500K, but isn't theoretically impervious to failure. It's not the same as FDIC, which I believe is a direct extension of a Congressional act and therefore must be honored as a matter of law.

But I think Peter P hits the nail on the head: just put your money somewhere that cannot be allowed to fail. Banks like BofA, Wells Fargo, Citi will not be allowed to fail. Money markets at brokers like Vanguard and Fidelity will not be allowed to fail. Putting your money in excess of FDIC/SIPC all in some regional, local or small bank/fund is a risk because such institutions can and do fail. But the big boys have lots of institutional cash, and that won't be allowed to evaporate. Think of it this way. How much cash do the big pension funds alone cycle through big institutions? You think any politician in his or her right mind would allow that cash to disappear? Not if they don't want 45mm seniors rioting in the streets with their walkers and canes.

On the success of VMWare IPO, a reader comments to the Mercury News:

Silicon Valley does it again. It never ceases to amaze me. I guess this explains why we are immune to the "housing bubble". The weather, abundance of smart people, culture of risk takers, network of people who's "been there and done that" ... As an east cost native, I'm wondering why everyone in the whole world doesn't live here. If nothing else, for the weather. It sure is nice being able to ride my motorcycle 12 months out of the year (most of the time).

"Banks like BofA, Wells Fargo and Citi will not be allowed to fail"

Didn't hear Wamu mentioned in there? (Evidently in Randy's mind they didn't make the cut?)

OO

I've seen quite a few weird 'open house' hours on Craigslist. 5-7 or 6-8 on weekday nights. I have no idea who they're trying to get to show up at that time of night.

Randy,

but what if the money is almost fully invested at these brokerages? Let's say I am holding 1M shares of C at a no-name online brokerage, if that brokerage goes under, I am still holding the stocks, or maybe I am being too naive?

OO,

Most full service firms provide additional insurance for their clients up to 25 mil. I can't speak for the discount houses but my guess is that if they go under the accounts will be bought up by either another discounter or broker and you'll be assigned a new account number and get a "welcome letter".

I have heard of rare instances where no one wanted some "gut bucket shop's" accounts so they go through a "paying agent" and certificates are issued. PITA. It can take months.

But brokerage accounts only pay around 2% in comparison of the 5+% of banks/CUs. Any money not being invested in my brokerage account gets skimmed off pronto and goes into the CU.

You can also use your brokerage account to participant in Treasury auctions.

Real banks are for the very rich (private banking) and the very poor ($23.67 checking accounts).

Dow at 12,861.47. I predict that it will fall down to 12,000 at least, if not 11,000. The bubble bursting is finally having its impact. Home prices will follow suit, no doubt. Perhaps we'll see some deflation as people can't afford the basics when they lose their jobs and their homes.

Let’s say I am holding 1M shares of C at a no-name online brokerage, if that brokerage goes under, I am still holding the stocks, or maybe I am being too naive?

Why would you go for a no-name online brokerage when Fidelity charges around $10 per transaction? :)

Perhaps we’ll see some deflation as people can’t afford the basics when they lose their jobs and their homes.

You have too much faith in our central bank. They will simply print more Peso.

"Real banks are for the very rich"

The rest are at Wamu? I know that sometimes CU's can offer higher yields (generally) but mmkt yields don't have as big a difference a Dennis implied. I remember when I first started in the business they would let you "pitch" the mmkt b/c it didn't require a license. I used to know the prospectus inside out!

Obviously I have a lot to re-learn about how they function today?

The Dow is below 13000, Countrywide may face bankruptcy, Homebuilder confidence yet lower on the latest survey, S+P 500 erases all of its gains for the year.

Another typical day in the "great credit/real estate unwind"???

Another very profitable day.

Peter, I use Scottrade, I don't know why anyone would use anyone else. Check them out, I can vouch for their service.

Peter, I believe as long as you have the certificates of your holdings you can move them pretty effortlessly. When I was with Ameritrade they used to describe the proces on their page, but I'm not certain what the documentation is. As I recall I think you had to actually have the stock certificate themselves.

I am watching Kudlow and Company in complete disbelief! Kudlow claims to be a capitalist, yet he a socialist all the way through. If I were his boss, I would force him to hold up a copy of the “The Communist Manifesto” and goosestep around in front of the camera. He will support capitalism if it works in his favor but turn socialist when he and his rich buddies can’t afford their lavish life styles.

Where the world is the personal accountability the “conservatives” keep preaching about? I rate right wing people as socialist morons when they talk about the “fed” saving the day. I say let the chips fall where they will and if this means “deflation” then so be it. If people have their homes taken away and they have to *gasp* rent like me, I will support it even more. I hope there is no bail out and the banks that survive will learn from the past and have a 20% down payment requirement that is nonnegotiable in the future. Hell an economic reset might be good for us in the long run! Our trade imbalances with the rest of the world can’t continue and will hurt more later than taking our lumps now.

Kudlow, Capitalism does not mean Private Profit and Public Risk you socialist fool!

RE: the Chronic-le article about the jumbo mortgage squeeze on high-end buyers, what I found interesting was that the prospective buyers had a 10% down payment on a $2.45m home. That's asinine. They are supposedly living in a $5m home. Even if they are full of equity to the hilt in the primary residence, borrowing over $2m for what I can only assume is an investment property is retarded. At the very least, you'd think they could spring for a 20% down payment to at least avoid PMI.

Yes there are those with lots of money who prefer to park the cash in other investment vehicles rather than tying it up in a home, but how does servicing a $2m mortgage make any sense? Am I missing something?

Peter, I use Scottrade, I don’t know why anyone would use anyone else. Check them out, I can vouch for their service.

I have heard good things about them too. I personally use Fidelity. But any brokerage with a large number of physical branches should be fine.

I believe CD's placed in trust under the name of a family member (parent, sibling ) is also insured to 100k.

skibum,

I think I told a story here before of someone I know who took on a almost $2M mortgage on a $3M home on his primary residence. And that someone is working at a hedge fund, expecting his annual bonus to keep marching high from 05 onwards. Contrary to what you would have guessed, he doesn't have enough savings to cover his loan. He also took on an ARM.

It is quite amazing how one's risk perception can be so out of whack.

I use Schwab and Scottrade, and I am afraid neither of them may qualify to be "too large to fail". I have very little cash at any bank, only enough to cover monthly expenditure.

Ah, it's wonderful to come back just as I am seeing the predictions that most people here have been making for the past couple of years.

Despite what my neighbors and a couple of Realtor friends are saying I predict that people who can't afford houses without 20% down payments won't be able to buy them, which will substantially release the nutty upward pressure that we have seen on prices, even in, gasp- prime areas of San Francisco.

I also noticed the oddity of people putting 10% down on a $2.45 million house. There's no tax advantage to be gained from the large mortgage. Perhaps they have cash tied up in investments that are doing better than the lower rate, but not as well as the 8% on the new mortgage?
I'm guessing that's not what was going on, but that the people merely appeared to be rich and are simply leveraged. Had they really liked the house and had the cash they would have just upped the downpayment to keep the lower rate. Once the leveraged-living people are out of the game they high middle/lower upper houses will have far fewer people lined up to buy the houses and the prices will decline.

SFWoman!

Good to hear from you! And yes, I think you've summed that little scenario up quite nicely.

@Malcom,

I'm pretty sure you mean "statements" *not "certificates"? I don't know a lot of people that use certificates any more? If you had the physical stock certificate, likely as not you're the type that keeps them in a safe deposit box. Keep an eye on those bearer bonds! (just kidding)

Remember, NAAVLP stands for National Association for the Advancement of Very Leveraged People. Perhaps we can get a grant for the government to "reach out" to those poor souls. :lol:

I move for secondary useage in the glossary!

SFWoman

Back from your long holiday I see. I'll assume you were in France. Anyway, good to have you back. It's Schadenfreude time!

I primarily use (gasp) E-Trade. I know all the problems with it, but it gives me access to everything I want with reasonable fees for occasional activity. I move earnings out of E-Trade into Vanguard a few times a year. As a rule I never move money into E-Trade, only out of. Also E-Trade is where my wife's company puts her options and espp, and is where my past options all went. So it's kind of path of least resistance.

Anyway, E-Trade accounts are in the category of "someone will buy them" if they fail. Probably Scottrade. I just don't want to see him fly over in that damned helicopter when that happens.

Actually DinOR, I think it is the actual certificates that are needed to move your holdings. Not just a statement probably because that is just a snapshot in time. Like I said, I'm not positive how it works, but I got the impression that you literally have to get the certificates from your broker. I know in current times it is all tracked electronically but I suspect that you have a right to actually obtain a physical certificate from the corporation on demand.

In small non traded corporations, I've seen principals receive physical stock certificates. Randy probably can help confirm this, I suspect his startup is this type of firm.

LOL about the safe deposit box, I'd take it a step further and hide them in my walls, that type of person is probably suspicious of banks as well. :)

I second DinOR's motion.

Actually for Scottrade you fill out an application and send the most current statement. I suspect that it is verified, with the original brokerage, and some official movement occurs. Gotta love technology.

Funny about bearer bonds-

We had a client at work send in 40 year, zero coupon, CA water authority bonds from the late 60's signed by governor Ronald Regan.

http://atlanta.bizjournals.com/atlanta/stories/2003/03/17/focus3.html?page=1

This is from 2003, but it describes how some people insisted on having certificates in case their brokerage goes bankrupt.

I have a drawer full of quite impressive looking stock certificates from companies I've started or had founders shares in. The one from the dot-com I worked for back in the bubble has many many zeros in the number of shares. The most important zero, however, is the one you multiply those shares by.

I know that sometimes CU’s can offer higher yields (generally) but mmkt yields don’t have as big a difference a Dennis implied.

DinOr,

Beats me, but my TD Ameritrade account pays only 1.66% on the MM account whereas my newly-opened Banner Bank 13 month CD is paying 5.4% (5.55% apy) and my Zion's Bank MM account is paying 5.1%. When I want to buy something on DT A, I have to first move some money into the MM account and then place the order. NOT very user-friendly.

Maybe that's another reason to dump TD Ameritrade for Scottrade.

My primary reason is that TD Waterhouse / Ameritrade closed all their B&M offices within 500 miles of Boise. Heck the reason I went with them when I lived in SJ was that they had an office in the building across from Intel headquarters when I was working there. When I first got to Boise they did have an office but closed it soon thereafter. Scottrade, Schwab, et al. do retain offices in Boise.

Although I also have a UBS and Fidelity account. UBS is where Intel puts shares purchased through the ESPP and Fidelity is where Intel and BSTZ put their 401(k) accounts.

Welcome back SFWoman.

My Fidelity _municipal_ MM fund is yielding 3.23%. You should be able to get more with a fully-taxable fund.

The most important zero, however, is the one you multiply those shares by.

More importantly, the number of persons that will buy the shares from you. :)