patrick.net

justme says

thomas.wong1986 says

Dell to buy storage provider 3Par for $1.13B
And some not very happy folks going home today….

Why not happy? The premium was 87% over the closing price yesterday.

That's a fantastic price for the shareholders, which is likely employee and executive heavy for a small cap such as this one.

3PAR is not going to be a standalone company anyway, the fact that it was purchased at a 87% premium vs. liquidations makes a big difference. At least, every employee will benefit financially in some ways.

In companies such as 3PAR, most exexs have expensive buyouts upon acquisitions, most of these will be in the 6 digits for the execs and 7 digits for top management. Most likely, the board of directors will negotiate on behalf of their employees for an enhanced severance as part of the package. It's why employees work for 3PAR, no one expects them to be a standalone anyway and await the payday.

In the end, most of the operations will be merged with Dell, 3PAR will be marketed and leveraged with Dell and gain leverage over EMC. Former employees will either stay if offered by Dell or do something else, it will be a good 6-12 months before layoffs happen. Good news, bad news scenerio.

justme says

thomas.wong1986 says
Dell to buy storage provider 3Par for $1.13B
And some not very happy folks going home today….
Why not happy? The premium was 87% over the closing price yesterday.

One less employer in the valley, is always bad news.
LOL! If you held it its great, but when marketing folks run these deals open a
to lots of pain. You may recall how Ebay bought Skype or Sun bought MySQL.
As such a premium was paid, we call it goodwill which is tested annually. In the case
of Sun they overpaid by 100%. Within 2 years Sun tested the goodwill and impaired
it by Half a Billion taking it straight into current earnings. Same was true with Ebay.
In the past we would just amortize it over 30 years. 10-15% is a better premium with
little risk to future earnings. But 75-100% runs a major risk of future earning drops
by acquiring company.

SF ace says

In companies such as 3PAR, most exexs have expensive buyouts upon acquisitions, most of these will be in the 6 digits for the execs and 7 digits for top management

LOL! and they will need it. No one is hiring around here. Unemployment is 10%. 6 digits will eventually vanish over the next 2-3 years. I know two VPs of Finance and one CFO who have been out for the past 2 years. No one is looking to hire exec these days, why would they?

sybrib says

Compared to the whole population of China and India, The Fortress is tiny, and so it only takes a relatively insignificant proportion to skew the market.

LOL! I never thought that the whole 2.5 billion Chinese and Indian are planning to buy home in Silicon Valley. Then the overpriced real estate in Silicon Valley definitely makes sense. ;)
Wait a minute, half of the population in those countries are poor.

Some time back Patrick posted a property from one of those Fortress Area: 1227 Fulton St, Palo Alto.

2007 purchase price: $1.7M
Now listed (sale pending): $1.35M

Doesn't look like much of a Fortress. There are plenty examples like that.
The concept of "Fortress Area" is nothing new. In 2006 the whole Silicon Valley was considered Fortress. Then 2 years back only handful of cities. Now we are talking about a few blocks of a few cities. You are right - it's getting "tiny" indeed.

sybrib says

I work in the trenches, the individual contributors in the trenches. Without thinking hard about it I know five of my colleagues, all of them recent immigrants, new Fortress buyers since 2004. There’s probably more if I really thought about it. Doesn’t stop with the house: the cars, the travel to “back home”, the private lessons, etc. Some of these I know personally well enough to know it is their personal situation: their families “back home” are loaded.

Please define "loaded". Did you meet their parents and know what kind of business they own? And how much (or how tiny little) their so-called wealth/assets become when you convert into US dollar? Or adjust their net worth according to US living cost? Let me give you some example.
My dad is a retired professor. My parents have a fulltime maid who does cooking, housekeeping and if required does daily grocery too. Then of course, my parents can't drive car. So they have a fulltime chauffeur to drive around. Sounds very "loaded", isn't it? But, believe me, my parents are just middle class people. The labor cost is just cheap there. They can afford lots of things there which you couldn't afford with $200K salary here. Different place, different living costs. Can my "loaded" parents help me to buy a $1M home in Los Altos. No, they can't...unfortunately.

And about private lessons. Being Asian I know something about Asians. It's all about priorities in life. Those priorities dictates lifestyle. Probably you won't find that many Asians shelling out $200 for super-expensive dinner every evening. Instead they will save it and use for their child private piano lesson.
Even I visit my parents every year. But then unlike one of my colleagues, I don't spend $1000 for flying lesson either. I can't ski, so I don't spend $500 for ski trip to Sierra either. See, saving $1500 air-fare is not all that difficult. :)

It is not just Bay area. Entire OC homeowners thinks this is the best place in the world to live and prices will never go down in OC.

I don't understand how high prices help the economy, that means the buyer needs more money to allocate per month for mortgage and lesser for everything else (eatouts, concerts, travel, charity, anything else at all).
Bay Are would be full of stingy people soon :-) , who would barely afford to pay their high mortgages in 2 families/per house ghetto neighborhoods.

dadab says

It is not just Bay area. Entire OC homeowners thinks this is the best place in the world to live and prices will never go down in OC.

I lived in Irvine for a few years. People in Irvine, Mission Viejo think that they are the center of Universe. And what do they think about Bay Area? A place full of code-monkeys who work 24 hours 7 days and lazy hippies who does nothing for the whole day.

When some people in Bay Area says "we are special", that reminds me the very same breed. They just live in different places - some in Bay Area and some in OC.

P2D2 says

dadab says

It is not just Bay area. Entire OC homeowners thinks this is the best place in the world to live and prices will never go down in OC.

I lived in Irvine for a few years. People in Irvine, Mission Viejo think that they are the center of Universe. And what do they think about Bay Area? A place full of code-monkeys who work 24 hours 7 days and lazy hippies who does nothing for the whole day.
When some people in Bay Area says “we are special”, that reminds me the very same breed. They just live in different places - some in Bay Area and some in OC.

...and the bulls argument here in OC is "there are enough Asians(Koreans,Chinese and Indians - with lots of cash) than houses available for sale"

sybrib says

The whole world wants to live here, and it is different this time.

What a bunch of rubbish.

sybrib says

the whole world wants to live here.

Yeah, All the Hatians(no offense) wants to live in Bay area too. Just that wishful thinking is jacking up the prices of Bay area.

I just bought some properties in Roswell, New Mexico. I heard the multimillionaire aliens are buying up properties there. The whole galaxy wants to live there.

sybrib & I have gone back and forth on this regarding this mythical foreigner propping up real estate prices and he has yet to provide any concrete proof of such phenomenon.

I say again, Bay area is not a place where the rich international want to live. Say a wealthy family in India is worth say 20million: that basically makes you royalty in India, living in palaces, having an army of servants, etc etc. Would someone who grew up in that environment want to live in your typical Cupertino McMansion and toil away in a cubical working 10+hrs a day in the Silicon Valley? Why would you want your kids to compete with the commoners in Cupertino? Why do that when you can work the family business, send your kids to the most exclusive private schools taught by Oxford educated teachers, etc etc.

Ok, how about a family who is modestly rich, say 2million net worth. That is still top .01% of India, and you can live there lavishly and get excellent education with your kids having an excellent chance of getting a tech job in your home country with your family. Why would you want to devote a significant portion of your family fortune for something you can buy in India for a fraction of the price?

Just because you know of one person who came from a rich family doesn't make it a trend. Its easy to make an assumption and believe it to be true if you don't have any way to verify that assumption.

I know all about the Asian culture. Yes, they tend to value saving, spending money on education and family, and recent immigrants also value image (ie flashy cars, cloths etc). It does not mean they have unlimited resources. As huge as China is, a huge majority of the population lives in poverty and wealth is highly concentrated in the extreme wealthy families. They fall prey to the same economic realities as home grown Americans. They don't have magical investment skills, they still get laid off, they still lost money in the dot com bust, they still own underwater homes, they still buy retarded investment homes in Fresno. In some ways they are even more naive when it comes to investing then most sophisticated Americans, All they know are either poverty under communist rule or explosive economic expansion of recent years and have no concept of valuing assets by fundamentals.

It sounds like Sybrib is not a Foreigner and is only speculating on things he doesn't quite understand.
Why don't you listen to other posters here who ARE immigrants and live within the immigrant community before proclaiming such speculations as facts.

FACT, most Asians living in the Bay Area came here first on student Visas, came from modest back grounds, fared relatively successfully due to past booms and the growth of the Silicon Valley. They do not have unlimited resources from home, or else they would not be here.

Think about this, and tell me what you all think of my thinking, Lets say by 2016 we have healed to the point that a barrel of Oil is say $250 (I mean it is $80 in a GLOBAL recession for gods sake) Say we have enough healing to have interest rates at say (Fed Funds) 6.25% so that means if we have a private mortgage market it should have a larger spread then the current 2.75 so lets say that 30 Mortgages are 8.50 - 9.50 so now all the suburbs that were Created by "cheap"fuel to travel to your job, that "advantage" is gone, due to expensive FUEL, FOOD, TAXES, Interest rates, I can't expect anything but lower MUCH LOWER housing prices by then, say 50%-70% lower then now, and the overall home budget will still be max due to the redistribution of monthly monies needed for FOOD (China, Brazil, all the populations that coming to eat meat) will push food to maybe the largest part of our monthly budget thus making housing by force a much smaller part as it will have to be.,.. at least I can see and understand that. what do you think? What is wrong in this line of thinking ??? in your opinion?

cvoc13 says

Say we have enough healing to have interest rates at say (Fed Funds) 6.25%

Healing to me means getting rid of debt burdens somehow. Repayment, default, forgiveness, or inflation. With the amount of private debt we have now (mortgages, student loans, credit cards, ...) , now more ever before in history as compared to the economy, that is going to take a long time. Longer that 2016. The stimulus minded Democrats are about to be swept out of power, so deflation is very much in the cards.

I think you're right to look at oil costs and wonder what that means. I never hear the media talk about it ever. Some people think that's due to monetary policy and "inflation", but they are idiots. It's diminishing supply, and growing demand. It's econ 101.

Cost of energy and food growing, while crowding out and causing deflation everywhere else? Very possible, and that's my long term outlook. Commodities have been in a 50 year bear market due to cheap energy, and that that trend has clearly reversed in the last decade. It's uncharted territory, though, and something unseen will likely intervene before the inflation/deflation scenario fully plays out.

Serpentor says

I know all about the Asian culture.

People come here over the past 10 years and see Asians yaking away in native language, unaware these same people have been here for decades.

PS. Dont let my logon fool you, im a white guy...LOL!

MarkInSF says

I think you’re right to look at oil costs and wonder what that means.

For many, it means they load up car with gas on weekend, do some grocery shopping and head back home. They are done spending.

Lol@ the screen name if you really a white guy.
Yes the ones that have been here for decades are probably faring the best demographically. They're the ones who can afford their kids driving expensive cars, go on vacations, and designer cloths because they've worked hard and saved. they lived through the growth of tech and saw their homes values explode while their tax base remains low thanks to prop 13 It's not rich foreigners with unlimited wealth back home.

sybrib, the market is determined by the people that buy and sell, not by the people who are "set" in their homes. Those long established immigrants do not set the price of the market. By the large explosion of prices in the fortress areas during the bubble days and the frenzy of sales activity during that time, there are plenty of "NEW" people in the "fortress" areas who are hanging on for dear life. Even if a young couple each make $120k, $1.2M mortgage payment is pretty tough to make with the traditional 20% down 30yr financing. It has been said time and time again that the Alt-A type resets typically recast in 5 yrs vs 1-3 years for the sub-primes explain why the higher prices haven't gone down yet. What happens when that dual income couple decided to have kids? What happens when one of them gets laid off? Have you priced child care in the Bay Area? There are a lot of young families who appear "well off" but in actuality hanging on by a thread. True, many of them have some family support, but the ones that are going to determine the market are the ones that are house poor with no savings and live paycheck to paycheck while making 6 figure salaries.

Serpentor says

sybrib, the market is determined by the people that buy and sell, not by the people who are “set” in their homes. Those long established immigrants do not set the price of the market.

Agreed, that is what I am saying. The recent buyers on the other hand must be loaded, it is the only rational way to sustain all that spending. And as I said, I personally know some such examples for whom that is indeed the case.

My partner and I paid 20-child years of high quality childcare. The overall cost was on a par with a private university tuition. It ain't cheap, you pile that on a Fortress Property Tax bill, and well, you get the picture.
Loaded.

1. One anecdotal case does not make it a trend.
2. the one rational explanation is Alt-A interest only loans, cheap credit, Helocs, no retirement savings and living to paycheck to paycheck.

btw, regards to people thinking you are rock star because you are from California. They are most likely thinking of Hollywood, Beverly hills, Malibu etc. I know when I first moved from the East Coast to CA, thats what most people thought I was going to, I had to explain that not all California is movie stars and Bay watch.

Bay Area Prices in 2012 will be 30-40% LOWER with ease, then likey 1-4% declines a year for next ?? X Years likey till 2018 then the Avg will be under 200 as it should be.

I have a colleague who bought a 1.3 million home, in my 4 years of working with him i have never seen eat out.
what kind of richness is this ?
I don't think that most chineese and Indians are so called "loaded" , they sacrifice their life for living in Cupertino/Saratoga/Los-Altos

But is this kind of life sustainable ?
If more and more people start to live their lives like this then how the heck the restaurants etc are going to be in business any more ?

cloud13,
some of them probably are in hock up to their eyeballs,
But many of them are not. Remember, that area you mentioned is very small compared to the massive urban cities of Asia. And remember, a very small portion of the homes in the small area you mentioned change hands each year. For them it is not a sacrifice.
Back to those poor fools hocked to their eyeballs: many of them are suffering under the assumption that they can buy their kids a better life by living in the enrollment area of public schools with High Standardized Test Scores. They may think they are helping their kids but they're not: those kids would be high performers anywhere they go, and by sending their kids into "ghettoes of like minded kids from like-minded families" they are actually denying their kids an opportunity to learn to live and achieve and perform with exposure to broader cross section of our society. It is not a choice between going to a school with nothing but like minded 4.2 GPA academic superstars versus going to one where gangsta thugs that will beat / drug / impregnate their youths. There's a lot of other possibilities between those two extremes.
What is important is that the kids have the opportunities to excel in high school, meaning that there's enough other high performer kids in the school to set the demand for a broad offering of challenging courses. This is routinely achieved in high schools and middle schools all over California, not just in the schools that have High Median Test Scores / "API".
Throwing money after chasing after enrollment in schools with extreme API's is kinda like lazy parenting, kinda like worshipping the "median house prices" is intellectual laziness about the individual valuation of an individual property.
Their kids would do just as well academically in schools with API's a notch below; the API score is about other people's kids, not your own. And then living in a school enrollment area like that, there would be cash left over for college or fun or savings or whatever.

sybrib says

That very small number of homes changing hands, at Fortress prices, is a huge bargain (as SF Ace pointed out) for the (as Serpent pointed out) small percentage (but huge in numbers compared to the size of The Fortress ) elite from “back home”. A small minority of homeowners being recent buyers, yes, but a small number of homes changing hands in recent years, which sets the property values for everyone else in The Fortress. It’s not about the “typical resident”, it’s about the “typical buyer in recent years”. That is why The Fortress is a Fortress and that is why it is propping up home prices in it and in the areas nearby.

A very vague commentary. Very little substance.
It does not sound like you did some basic research or analysis before making such a claim.
Define Fortress Area. You say "very small number of homes changing hands". Please quantify. Is Palo Alto considered Fortress Area? Atleast one year back it did. I already gave an example to demonstrate how price is sliding.
So, before making such a vague commentary like "home price won't drop because so many buyers and such little inventory", please define neighborhood/city which you consider Fortress Area. Let's see how it is doing. I also would like to checkout how many Chinese, Indians, aliens, extra-terrestrials are buying in those neighborhoods.

cloud13 says

I have a colleague who bought a 1.3 million home, in my 4 years of working with him i have never seen eat out.
what kind of richness is this ?
I don’t think that most chineese and Indians are so called “loaded” , they sacrifice their life for living in Cupertino/Saratoga/Los-Altos
But is this kind of life sustainable ?
If more and more people start to live their lives like this then how the heck the restaurants etc are going to be in business any more ?

All they did was over pay the seller so the seller will be well off and retired years earlier.
There will be plenty of soul searching for years to come.

robertoaribas says

with all of the ‘bay area is different’ clung too like a mantra, you’d think data showing bay area home sales slump just like everybody else after the tax credit ended would draw some responses…

Well, it was different, for good reason, but that was some 20-30 years ago.
Not many people paid much attention back than. Now they pay attention,
but its too late.. there isnt any good reason to justify prices today.

Seems most people are late, really late, to the party!

sybrib says

cloud13,

some of them probably are in hock up to their eyeballs,

But many of them are not. .

and I'm saying exactly the opposite of that , there are only very few who really well off but most of them are really screwed and waiting for things to get better for them.

Speaking of corporate acquisitions (3PAR, above):

Intel buying McAfee for 7.x billion is just mind boggling. Really stupid, if you ask me.

But perhaps there is a clever plan behind it all. Most AntiVirus software is a huge consumer of CPU cycles, churning through the hard disk looking for real and imagined threats, and setting off false alarms left and right. In this picture, what is not to like for Intel, who would be happy to sell you more CPU cycles, at a price.

Sometimes I think Antivirus software is more security theatre than anything else. Sort of like some of the airport TSA screening procedures.

..."Those who chose option (c) will not be purchasing another home for five to seven years."

I wouldn't be too concerned about tomorrow's personal credit judgement day or being shut out of the mortgage market due to a exit decision taken today. The mounting pressure on the economy to breathe correctly, due to propping an economy up on policy, ensures they'll need you more than you need them.

"More Price Stabalization in Bay Area (Worried calls to 1170-AM radio station)"

Back a few years, 2006 or 07, Michael Finney, on KGO 81 stated SF (City) home prices have never fallen. Wrong then Wrong now... many of these radio people just havent a clue. They are in one industry disconnected from all other major industries.

Common Sense says

I wouldn’t be too concerned about tomorrow’s personal credit judgement day or being shut out of the mortgage market due to a exit decision taken today. The mounting pressure on the economy to breathe correctly, due to propping an economy up on policy, ensures they’ll need you more than you need them.

Dude(fist pound)

thomas, I remember hearing Michael Finney say all that crap too. During the same weekends I would hear Bob Brinker parse his words very precisely so as never to say that house prices were too high, though anyone listening between the lines would understand his point.
I also remember lots of radio ads for real estate, mortgage services, etc. during those broadcasts. Not disconnected industry, but too well connected industry (connected to advertisers).

define fortress: it seems to get smaller and smaller. If by Atherton, Hillborough etc then yeah I agree (Although there also a few well publicized foreclosures in areas of the same caliber)

Concord is definitely not fortress. (although its pretty well crashed so the downside is not as bad as say, Mountain View, RWC, or San Mateo)

Nope, Concord is not the Fortress. (Nor is the part of San Jose where I live). The Fortress is ya'know, those places where the house prices are still high like some of the ones you mentioned, because of the supply and the demand. It is an abstraction also including similar such neighborhoods in the other big city areas along the coast (Nomograph mentioned, for example, La Jolla).

sybrib says

The Fortress is very small, someone on this thread even proved my point about the kinds of people buying here, one of them was SFAce talking about his father in law and the other one was someone else who’s college professor parent employed servants waiting on them.

If the bold letter words are about me, you grossly misunderstood my point. I don't think you comprehended what I said.

sybrib says

Nope, Concord is not the Fortress. (Nor is the part of San Jose where I live). The Fortress is ya’know, those places where the house prices are still high like some of the ones you mentioned, because of the supply and the demand. It is an abstraction also including similar such neighborhoods in the other big city areas along the coast (Nomograph mentioned, for example, La Jolla).

Good to know that the in 2010 the closest Fortress Area from bay area is La Jolla. :)

sybrib, you say you are a housing skeptic but everything else you post contradict that. By the way the subject we are talking about is "Price Stabilization in the BAY AREA", not "price stabilization in FORTRESS AREAS." First you argue "foreigners are going to prop prices up", then you say you agree that Concord and San Jose are no fortresses. Well guess what, San Jose is in the Bay Area.

Just a couple years ago, the entire northern California was considered "Fortress", then it shrunk down to just the "Bay Area", then it shrunk down to "Desirable places in the Bay Area, now people are arguing over which Neighborhood in select towns are "Fortress". Seems like there's no such things as fortress when it keeps collapsing on itself.

A fortress dessribes something that is barrier by forces where people are protected. In the context of war, it may be a moat, with high walls. In the context of housing, high prices keep people out.

Where are the places where prices are so high that your average citizen are excluded. In the North, Tiburon, Salsuilito. In San Francisco, they would be districts such as Marina, Pac Heights, Presedio, and areas around the hill manor. In the peninsula, I consider Hillbobough, Atherton, Los Altos (hills), Palo Alto, Menlo Park, and most parts of Burlingame with lots of semi fortress like Cupertino. In the eastbay, I consider Berkeley Hills, Lamorinda, areas of Pleasanton, Danville as fortress.

The fact of the matter is households living in single family home in these areas are extremely small. They may represent about 100K household. the bay area has 2.5M+ household which makes the fortress just 4% of the entire stock. There may another 250K properties that may be considered semi-fortress making the stock 10-15%.

Over time, bad place gets worst and good place gets better. this is especially apparent in a wide diverse of people who are on welfare, works at Low paying job yet there is a substantial pop who are rich and makes more than 250k. The gap between prime and non-prime locations always follow.

The rich has not gotten poorer, poor and portions of middle class people has gotten poor. The unemployment rate for 100K employees are around 2%-3%, the unemployment rate for the non-degrees are close to 20%. Wealthy foreigners are more wealthy comparable to a few years ago because real estate and stocks are outpacing those in the US and as their currency is strenhthening vs. the US dollar. There are more millionaires now than ever.

Some 10-15% of the transaction are foreignors, CA is the #2 state as far as foreign transaction and asians make up 45% of CA transactions. There is a fair amount of transaction from foreignors buying prime properties. That doesn't mean they are overwelming the transaction front, it means they own more than ever, slowly

That doesn't mean prime properties are not declining, just stating some observations.

Define foreign transactions and site the sources of your statistics sf ace