patrick.net

H.Z.,

I have both IRA and 401K, but I don't seem to have any problem in choosing the ETFs (GLD, CEF), at least nobody stopped me from buying them. Perhaps my old companies have more things to worry than keeping their ex-employees conservative :-)

I am sure you are aware that for the past two decades gold did not even keep up with inflation. It actually dropped even in nominal value.

Very true. Unless one wants to "rotate" among stocks, bonds, and gold...

I can speak for LG since I live there. The whole area had a sudden spike around 1999-2000 when people who wanted to move to Saratoga or Monte Sereno for prestige suddenly found themselves priced out due to the dot com bubble, so they turned to the neighboring areas like LG foothill and Cupertino foothill, causing a spike in these two areas as well. But both Cupertino and LG are two LARGE suburbs, and such a small move in the nicest parts of these two suburbs in turn drove the rest of the suburb up in price. But in fact, some parts of LG and Cupertino are no different from average San Jose. People who pay that kind of pricing premium purely for zip code show-off reasons.

Since LG has a nice downtown area, probably the nicest in South Bay, such a name-brand effect is particularly apparent. I know of a colleague who moved two blocks just so he can have a LG address. And of course you have other morons from LG who moved two blocks so that they can have the Saratoga address. Don't get me wrong, I love my neighborhood, but looking at what idiots pay to get in just makes me laugh. Nobody should pay that kind of money to get into ANY neighborhood, especially for a 1300-sft, 70-year-old shack.

Peter - still holding those Fannie puts? It’s party time for the RE bears… I hear that raging Grizzlies were seen storming Toll Bros. HQ today, pulling out the bulls and chowing down. What a day!

Yep. I do not usually buy OTM options, but the Jan-06 40 Put is quite tempting. I need to "diversify" into HBs and subprimes very soon though.

H.Z.,

No, I have one 401K account that didn't stop me from buying anything, and another one with an ex-employer that only allowed me to buy their stock, plus a few stupid mutual funds. So I rolled that one over.

Well, the 20 years of bear market of gold was precisely the reason why I want to get into gold. I think the spike of gold to its record high in 1980 along with oil during the last oil crisis was the source of my inspiration. Here are some interesting charts just about everything that you can look up. They are only updated till 2002, but serves as a good reference anyway.

http://www.sharelynx.com/chartstemp/historical.php#PRECIOUS

Peter, I’m pissed with myself for not shorting a builder or 2 on the recent bounce.

I did not either. But this is going to be a long bear market. Lots of opportunities.

Can you describe how MLS is gamed in Marin or point me to the thread where its discussed?

The Marin discussion is in here:
http://patrick.net/wp/?p=90#comments

Just do a Ctrl+F for Marin and that starts the discussion on Marin shenaningans.

I'd love to have Sushi sometime Peter P.

...on another topic, why do Realtors(tm) come here with thin skins and get worked up when they're challenged by intelligent argument? This is a housing bubble blog, no? Aren't there new paradigm cheerleading blogs somewhere? I don't know all that much about real estate, after all, just whatevernomics. Seems that a good RE agent would welcome the impending crash to clear out the riff raff that have infested their ranks. Happened a few years ago to programmers and "engineers" (who usually weren't), happened to stockbrokers and traders before that. It's natural; it's healthy; it just is.

I don’t know all that much about real estate, after all, just whatevernomics.

How about ergonomics? ;)

Peter P… lotsa great sushi places in dowwntown Vancouver… cheap too

I know. Too bad I am not there. :(

Whats all this inflamed off-thread talk about sushi? Cant we all just get along?

There will be difficulties. Some prefer tuna, some prefer salmon, some like clams. The differences are there.

Whats all this inflamed off-thread talk about sushi? Cant we all just get along?

You insolant hippie, didn't bother reading the thread now did you :)

even less offensive thread. (New Thread: “Beige”.)

Oh, I see, just got to bring "color" into it don't you Jack? Or should we call you jack-the-colorist?

even less offensive thread. (New Thread: “Beige”.)

Oh, I see, just got to bring “color” into it don’t you Jack? Or should we call you jack-the-colorist?

I once told ask my manager for a black Dell instead of an older “Beige” box. She told me not to judge a computer by its color.

Btw, sushi talk makes me miss tokyo. I was there a couple of years ago and after many years of deflation, the tokyo food price is even lower than us, if you compare low-end to low-end, high-end to high-end, etc.

I am wondering would it be a good time to pick up Tokyo properties? The only thing is as a foreigner, I can't borrow money in Japan. Japanese banks only loan to Japanese citizens, we gaijins are considered risky customers who may get kicked out when the next earthquake hits or something.

I was there a couple of years ago and after many years of deflation, the tokyo food price is even lower than us, if you compare low-end to low-end, high-end to high-end, etc.

Probably true. Especially the lower-end. There is amazing Japanese food here though.

I think we have food price compression in the US as well.

On "ism's" I think Ferris Buehler said it best,

"I do have a test today. That wasn't bullshit. It's on European Socialism. I mean really, what's the point? I'm not European. I don't ever plan on being European, so who gives a crap if they're socialists or not? They could be fascist anarchists for all I care. It still wouldn't change the fact that I don't own a car It's not that I condone fascism. Or any ism for that matter. Isms, in my opinion are not good. A person should not believe in an ism, he should believe in himself. I quote John Lennon 'I don't believe in Beatles, I just believe in me.' Good point there. After all, he was the walrus. I could be the walrus and I'd still have to bum rides off of people. "

Peter P., if you’re ever in Vancouver, let me know. I’ll take you for sushi. Heck, you can all come.

Thanks in advance.

It sounds like the psychology has turned down there, much as Peter P. predicted for October.

Honestly I kind of hope for a soft landing if it is still possible.

Actually, all my stuff has been black and white for 30 years. Oh god, I can see the next one coming as I post this….

Art is never "black and white"--that's so absolutist!

Come to my gallery showing this weekend...beige paint on beige canvases.
We'll be serving Zima...bound to please the "beige crowd".

On “ism’s” I think Ferris Buehler said it best, ...

So, you believe in anti-ism-ism?

Come to my gallery showing this weekend…beige paint on beige canvases.
We’ll be serving Zima…bound to please the “beige crowd”.

I am going to have a painting, "Black crow in absolute darkness". Dare you find a flaw.

I am going to have a painting, “Black crow in absolute darkness”. Dare you find a flaw.

I kid you not: there are paintings in the MOMA like that, and should be titled
"the art of the sale"

I kid you not: there are paintings in the MOMA like that, and should be titled
“the art of the sale”

I have seen them. Incomprehensible. But I know nothing about art...

Absolutist? Someone who drinks Absolut(tm)?

Principal is protected and you get the upside of gold price, if there is any.

How about downside? Is it a free option?

Kurt, I did not say that I was not a hopless cliche… Absoulutist? Sounds good. Lets go with that. I better look it up first, but I think I can accept that label, art wise.

Jack, I'm sure there's no cliché; just joking w/ya (no "absolutes" in art, right?)
I used to be a b/w "f-64 style" photographer myself, now mostly drawings...some monochromatic too. The minimalist angle intrigues me too, mostly from an architectural angle. Course, simplicity can always be taken too far, such as "black crow in darkness", "beige slacks in the sahara" etc.

RE: MarketSafe(SM) CDs

They also have an S&P 500 CD with principal protection. The only downside is the 5-year opportunity cost of the principal, which is not negligible.

So it seems there is no “nominal” downside. There could be “real” downside if inflation runs amok as you earn 0% on your capital. But high inflation and gold going down are probably mutually exclusive.

But the real return on Gold can still be negative...

But “too far” is where all the action is! hahaha (evidently…)

Sometimes...or you end up with Chihuly, Leroy Neiman-Marcus, Kinkade...a gold-festooned Trump mansion.

Perhaps here's another future thread topic: once McMansions™ are passé, what are some future housing trends?

Owneroccupier, thanks for the scoop on Los Gatos.

"Perhaps here’s another future thread topic: once McMansions™ are passé, what are some future housing trends?"

I would like to see this as a thread topic too. I'm obsessed with architecture trends. As traditionalist as I usually am, I have to say, I am in love with the concept behind these Eco-Friendly houses:

http://www.cleverhomes.net/designs.htm

I don't think holding Gold forever is a good strategy. However, with tons of currencies of any kind floating around in the market, one needs to find some hard asset to park them, one of them being realty (which is so overvalued now), and then the oil money (getting there), and gold. So before gold is at par with oil money, I believe there will still be room for appreciation.

Just imagine our economy like this. We are all handed 100,000 free paper money by the Fed. The rule is, spend it on something before it turns into trash. Smart kids like us all know how to park the free paper in some hard assets that cannot increase in supply so easily. So we spend it buying houses for a while until the price is so high that it becomes unsustainable. Those with their free money parked in realty are happy now. But there are still many of us with nothing to park the free money. Then oil, now everyone is bidding up oil. Then all those kids who got their money parked in oil are happy. But when oil goes too high, the demand will definitely be suppressed. Then what? Those of us still left with a bunch of free paper money and little time left found gold, at least I did.

*not an investment advice*

You mean a high inflation scenario where gold goes up, but lags inflation? Do you think it’s a likely scenario? Not sure what you can do there.

As I understand it, the problem with gold is that it prices in _expected_ inflation more than it is reactive to observed inflation. This means that you have to be a contrarian investor to really take advantage of it by much. Meaning that Peter's scenario is actually more likely than it seems because gold will begin slowing then falling before inflation peeks if the professional investors see future inflation easing. This would also be why they'd be willing to offer you the nominal/principle scheme outlined above. They're just getting to use your dollars at a discount because you're behind the curve they're planning on and already invested in.

This is why I avoid commodity markets. It's a tough way to make a dollar.

I have to say, I am in love with the concept behind these Eco-Friendly houses..

Those are interesting! I've always liked cubist/modern designs that draw in plenty of light. I think prefabricated elements could be a trend, given the price-effectiveness and quality control. In time, these home should get below stick-built prices/sqft, which strike me as rather high in SFBA. Imagine neighborhoods someday that contain a variety of building styles and floorplans vs. the customary 3-6 tract options we see today? It would be a refreshing contrast to the "orwellian community" feel to many developments built nowadays.

@bayareablues, Re: MLS: I 100% agree, but again it’s NOT gospel!

Oh yeah. MLS is often deeply flawed and subject to several different kinds of manipulation. No buyer should trust a datum of it.

But it is the core asset of the entire business. I think the NAR is ripe for disintermediation, as we used to say.. Their business model is based on scarcity of information and barriers to its communication. That's a losing proposition.

Real estate data isn't a mass market product, so it might take a while, but...the NAR will change drastically, or die. Maybe both. I give them five years, starting as soon as the RE business is a good one to be in again...so maybe ten years from now.

I think the NAR is ripe for disintermediation

Disintermediation is one of the areas in which I do a lot of strategy and modeling work. Are the primary barriers to tunneling under NAR legal (copyright, patton, etc?), or are there also regulatory barriers? Like you said, scarcity of info. is not a sustainable barrier to entry. Putting together a strategy to take out NAR would be so fun I'm not sure I'd even need to get paid (well, ok...maybe I would...)

"I think prefabricated elements could be a trend, given the price-effectiveness and quality control."

Also, homes that are more energy efficient and design for good air flow to decrease the need for heating and cooling should be a popular trend.

"Imagine neighborhoods someday that contain a variety of building styles and floorplans vs. the customary 3-6 tract options we see today? It would be a refreshing contrast to the “orwellian community” feel to many developments built nowadays. "

I would love to see much greater variety of architecture in neighborhoods. My parents live in a neighborhood in the South where every house is completely different--everything from a weird half-sub-terranean house to English Tudor, to Modern, to cottage--because people just bought plots and built whatever they wanted. I've always thought that was the most interesting kind of subdivision. Some of the houses end up being clunkers, but that only makes the attractive ones look that much better. But they're also on very large lots so that they don't look so jarring next to each other.

But I will shut up now so I'll have something left to say if this becomes a thread topic.

New thread: Future housing trends

ScottC and I don't always agree, but he's definitely correct about MLS. It contains a great deal of information that can't be found in other sources. DataQuick has some of the same information, but not all..not even most. County records contain the least information, but are the most authoritative (though still sometimes incorrect).

These databases all have separate purposes, and separate "customers", so it should be no surprise that they contain different data. Realtor®s have the greatest monetary incentive to gather voluminous data, so it should be no surprise that MLS has the most information.

But yeah, the general snarkiness is getting a little out of control, isn't it? Maybe we need to bring back the visible enemy of productive conversation...where the Myopic Pretender when you need him?

My husband brought home a memo he got at the office today. It was written by the Global Securities Research & Economics Group ( so those who don't believe in economics should disregard this). Anyway this is what it said.

Will Home Prices Follow NASDAQ or the '87 Crash?

With the Fed continuing to tighten, the housing market looks increasingly unstable to us. We are underweight both Consumer Discretionary and Financial stocks.