September 8, 2017

Past Tense About The Great Disturbance

It’s Friday desk clearing time for this blogger. “Local realtors, at least the ones that talk to the Denver Metro Association of Realtor’s Market Trends Committee Chairman Steve Danyliw, agree: The housing market is turning. ‘Over the last two months, I’ve personally spoken to dozens of realtors and asked them a simple question: ‘Is the housing market turning?’ Danyliw wrote in DMAR’s September report. ‘Over 95 percent responded with a quick YES. One responded, ‘The feeding frenzy has lessened.’”

“Amazon has been blamed or praised — depending on your perspective — for Seattle’s historic real estate boom. But now that the company plans to open a second, ‘equal’ headquarters somewhere else, what does that mean for Seattle’s housing prices, rents and development boom? ‘Everyone has looked at Amazon as the harbinger’ of the city’s record growth, said developer Jake McKinstry. ‘People have really banked on that.’ He said he’s concerned about a potential luxury-apartment bubble; those units require a constant influx of well-paid newcomers to fill them.”

“The number of homes sold on Kauai increased 27 percent compared to July 2016, according to Title Guaranty’s residential sales report. ‘The market is strongest in price ranges where there’s the most demand,’ said Ron Margolis, broker at KW Kauai. ‘In an area like Kalihiwai Ridge, where six homes maybe sell a year and there’s currently 17 homes for sale, that means there’s a lot of inventory.’”

“The city of Dayton will head back to the drawing board after its solicitation to redevelop vacant lots in the Wright Dunbar Village area received zero responses. Home values in Wright Dunbar have risen more than in most Dayton neighborhoods, and the city sometime soon will get another crack at finding a developer for the vacant properties, said Dayton City Commissioner Jeff Mims Jr., who moved into the area several years ago. ‘There’s no reason for us to panic, because clearly, the value of the area continues to grow,’ Mims said.”

“Along a one-block stretch on Mt. Prospect Avenue, the unkept corners of homes hang loose. Windows are boarded up with crumbling plywood. Abandoned and vacant homes are a headache for cities across the country and not just in urban centers like Newark. ‘It’s hard for the city to track down who really owns this. They’re owned by these banks or mortgage entities,’ said North Ward Councilman Anibal Ramos.”

“The average sales price of a New York City apartment fell in the four weeks leading up to August 1, in addition to the number of sales. According to CityRealty’s Monthly Market Report, which analyzes sales and trends in Manhattan, apartment sales dropped 21 percent, from 1,207 to 948 units sold. The average apartment price also dropped, this time by 9 percent from $2.3 million to $2.1 million.”

“The average sale price of new developments was $3.9 million in the month of August. The average price per square foot came out to $2,074, which was an 8 percent drop from July. Year-over-year, this calculated to an 18 percent drop. There was a decrease in development sales, from 156 recorded in the previous month to 106 for August. The difference between new and non-new development prices was $314, a plummet from last years $785 difference.”

“Over a third of UK homes on the market have had their asking prices slashed by nearly £25,000 on average, according to new research. House sellers are starting to cut bigger chunks off their original asking prices. In London, some 36 per cent properties for sale have had their asking price reduced, with an average discount of £53,457. ‘On the whole, the heaviest discounts in recent times have been in central London where the market started to slow around two years ago,’ Lawrence Hall, a spokesperson for Zoopla, told the Sun Online.”

“Those hoping for a property market slump next year to allow them to ‘get into the market’ need to be careful what they wish for. Some may be offering little prayers to the god of the real estate sector, Mammon, that the slowdown in Sydney house prices in last week’s CoreLogic survey will spread and become a full-scale rout. The Reserve Bank, which helped inflate that debt bubble, is now virtually sidelined. It can’t cut interest rates for fear of blowing the bubble bigger, and can’t raise them for fear of bringing the whole house of cards tumbling down.”

“In that context, wishing for a house price crash is like dreaming of economic hara-kiri. Not only would plummeting house prices ravage consumer confidence and consumption spending, but they would hurt hundreds of thousands of small businesses who unofficially use their home mortgages as a backdoor way to finance their businesses.”

“Brian Kavanagh was on his way home when he got a call at 9.45pm on September 13th, 2007. The banking executive, who had set up UK lender Northern Rock’s Irish deposits gathering business eight years’ earlier, was told by his boss in Newcastle that the company was applying for emergency funding and that the BBC was about to break the story on the News at Ten. ‘I was surprised, because there was no sense of panic at all,’ recalls Kavanagh.”

“‘I came into the office just before 6am the morning after the news and I didn’t see anyone at that stage. But others coming in at about 7am said that people were already starting to queue,’ said Kavanagh. ‘Customers were visibly upset. They genuinely thought that their life savings were gone.’”

“‘I remember being at a conference on housing finance in Oxford in September, two days before Northern Rock collapsed. The place was full of economists who were quite expert on British housing and, while there was some discussion about the prospect of a meltdown, they were breezy about it and were largely saying the situation was very much under control,’ said economist Patrick Honohan. ‘I remember asking rhetorically at the post-conference reception what if a big bank went down. Such a possibility did not seem to be much on people’s radar then.’”

“Honohan, who would become the Central Bank’s governor in 2009, said the period between the Northern Rock run and the implosion of the US investment bank Bear Stearns the following March was similar to the eight-month ‘phoney war’ period from the start of the second World War where very little happened.”

“‘There was a widespread view at that time among many of the world’s financial policy experts that the worst was already over,’ said Honohan. ‘I went to a couple of conferences on the crisis in London around that period, particularly one in early March 2008, where speaker after speaker was talking more or less in the past tense about the great disturbance and how lessons had been learned.’”

“Financial regulations have been tightened considerably in the past year and politicians, in Ireland and abroad, insist lessons have been learned. But Kavanagh, who now works in the anti-money laundering sector, says this will be tested when the next cyclical economic downturn occurs. ‘You’ve got a production of The Great Gatsby running [in the Gate Theatre in Dublin] at the moment, reminding us of the roaring 1920s in America before the Great Depression. Do we ever really learn the lessons?’”

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Comment by Ben Jones
2017-09-08 07:42:18

‘wishing for a house price crash is like dreaming of economic hara-kiri. Not only would plummeting house prices ravage consumer confidence and consumption spending, but they would hurt hundreds of thousands of small businesses who unofficially use their home mortgages as a backdoor way to finance their businesses’

First their business should make money. Second, wishing doesn’t do anything.

Comment by BearCat
2017-09-08 09:57:14

Note how conveniently his list of reasons matching RE interests. No talk about how high mortgage payments (or rent payments) effects people, such as less money to spend on consumption or save.

Same with low interest rates - there’s never any talk in the MSM about the negative effects of this (OK, maybe a bit now since Trump is Prez)

Comment by sleepless_near_seattle
2017-09-08 10:31:02

“…ravage consumer confidence and consumption spending…”

Or, rather, it will shake loose the gobs n gobs of cash I’m hoarding. Bring it.

Comment by Lurker
2017-09-08 15:21:55

Just because real estate cheerleaders can point to one group of victims when the bubble pops doesn’t mean there aren’t many more victims of the housing bubble itself, the one they argue in favor of so passionately.

So it’s mean-spirited to want the cost of housing to fall down to a level people can afford? Which, by the way, seemed to work pretty well for hundreds of years?

Well I say it’s mean-spirited to orchestrate a global propaganda campaign aimed at keeping housing totally unaffordable - undermining our prosperity, crippling our economy and damning ordinary citizens to lives of subsistence and precarity - simply to preserve the fictional net worth and borrowing capacity of a small minority of gamblers, speculators, investment funds and real estate professionals, every last one of whom is partially responsible for the miserable impoverishment of the 78% of full-time American workers who now live paycheck to paycheck thanks primarily to the high cost of housing.

Who is representing the interests of that 78% who get poorer every year as the FIRE sector elite and their paid-for politicians siphon off an ever-greater percentage of workers’ income? Oh, no one is? Because anyone with a public platform is too busy lecturing us on how unkind it is to consider our own best interests over theirs?

It’s a global disgrace that citizens of civilized countries are maligned as bad people for sticking up for themselves when no one else will.

Comment by In Colorado
2017-09-08 19:26:54

Just because real estate cheerleaders can point to one group of victims when the bubble pops doesn’t mean there aren’t many more victims of the housing bubble itself

That’s the problem with bubbles, you end up in a damned if you do and damned if you don’t kind of situation.

Comment by HomerSimpsonRocks
2017-09-09 06:14:28

Bravo! Well said.

Comment by Neuromance
2017-09-09 08:28:29

I recall reading an exchange where an economic bull was saying how great things are, how the financial crisis had little or no impact, and one person responded with, “Well if it [Financial Crisis] was a such a good thing, we should do it again soon, eh?”

It has been very good to select groups of people and the FIRE sector. The Dow Jones index has doubled in 6 years. Lloyd and Jamie became billionaires.

On the other hand, if market forces had been allowed to work, Wall Street in its current form would have been destroyed. There are some negatives to that but many positives. But instead, the government and central bank redistributed the nations wealth to bailing out these companies and making them yet stronger and more influential.

And that has consequences. An advocacy piece is only going to present the positive points of the thing its advocating for, not the negatives. It’s not going to report the consequences.

Comment by Ben Jones
2017-09-08 07:46:11

‘Over the last two months, I’ve personally spoken to dozens of realtors and asked them a simple question: ‘Is the housing market turning?’ Danyliw wrote in DMAR’s September report. ‘Over 95 percent responded with a quick YES. One responded, ‘The feeding frenzy has lessened.’

Hmmm, same guy at the Denver Post:

‘Metro Denver’s heated housing market continued to show signs of cooling in August, with single-family home sales and median home prices dropping for a second month, according to a monthly update Wednesday from the Denver Metro Association of Realtors. “Overall, I feel positive about this market even though we are transitioning toward something that looks more normal,” said Steve Danyliw, chairman of the DMAR Market Trends Committee in a statement accompanying the report.’

Comment by rms
2017-09-08 07:56:28

“The feeding frenzy has lessened.”

Will the fed chum the waters?

Comment by Jingle Male
2017-09-09 03:47:54

San Diego condo listing count in 92101 zip =

260 today September 9th

It was 225 on May 17th,,,,,up 15.5%

Leading indicator, it typical fall inventory increase?

Comment by Parker
2017-09-09 14:33:06

He’s talking out of both sides of his mouth to warn the realtors and at the same time milk the dupes as long as possible.

Comment by 2banana
2017-09-08 07:48:47

2banana’s Rule:

Long term democrat rule + public unions + free shit army = misery, ruin and bankruptcy

“There is very little room for further cuts, given the reductions in services the city has already made and its fixed costs and education mandates,”


Not ONE pension has been touched…


Hartford Warns It Could File for Bankruptcy
Joseph De Avila - Sept. 7, 2017 - Wall Street Journal

City officials warned Gov. Dannel Malloy, a Democrat, and state lawmakers that Hartford, which has a deficit approaching $50 million, wouldn’t be able to pay all of its bills within 60 days. Hartford officials said it would file for chapter 9 bankruptcy at that point unless the state legislature passes a budget that gives the city more funding or otherwise provides it with more cash.

The state of Connecticut is facing its own fiscal challenges and has yet to pass a budget for the current fiscal year that would close a two-year $3.5 billion spending gap. Since July 1, state operations have been funded by an executive order signed by Mr. Malloy that has slashed funding for cities and towns across Connecticut.

Rising fixed costs for health care and pensions have been driving Hartford’s fiscal challenges. The city is on the hook for nearly $180 million in payments for debt service, health care, pensions and other costs for the current fiscal year. That is more than half of the city’s budget, excluding education.

“There is very little room for further cuts, given the reductions in services the city has already made and its fixed costs and education mandates,” Moody’s said. “Hartford would likely be eliminating, rather than reducing, core services.”

Comment by taxpayer
2017-09-08 08:08:05

will they get bail while trumpf is in a bipartisan mood
the 2x hurricane spending bill should show everyone
divided gov is good gov
when they agree the spending goes way UP

Comment by 2banana
2017-09-08 09:29:59

Under obama, a super majority of democrats controlling the house and a filibuster democrat majority in the senate…

We had our very first TRILLION dollar yearly deficit.

Comment by taxpayer
2017-09-08 08:13:22

here they can retire at age 55
55 is JIVE !

they always hand out raises to teachers first,then the rest over the next year.

Comment by 2banana
2017-09-08 10:19:55

It’s for the children….

Comment by aNYCdj
2017-09-08 14:29:47

I still say that was OK when 40% of the population were smokers, a lot would be dead by 65 70 tops, but now they live to 75 85 and more, and never adjusted this so CT has 29,000 retirees and 40,000 present employees

Comment by Jingle Male
2017-09-09 03:55:28

Holy cow Batman, that’s a boatload of payroll for zero productivity….

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Comment by Senior Housing Analyst
2017-09-08 07:58:48

Highland, UT Housing Prices Crater 5% YOY

Comment by OneAgainstMany
2017-09-08 13:36:13

My wife is from Highland. Housing prices in Highland UT are very much intact. The flood of silicon valley money has hit Lehi/Highland/Alpine. Wages and home prices have gone up tremendously due to tech boom.

Comment by Mafia Blocks
2017-09-08 15:43:53

And now falling. Wages haven’t gone up either. See for yourself.

Comment by taxpayer
2017-09-08 07:59:05

The average price per square foot came out to $2,074, which was an 8 percent drop from July. Year-over-year, this calculated to an 18 percent drop.

tell HA-if it’s not $ per sq ft no one cares

Comment by Mafia Blocks
2017-09-08 08:11:45

DebtDonkeys and Housing Hens

Comment by jeff
2017-09-08 09:36:54

Brays of terror

Comment by Ben Jones
2017-09-08 14:34:59

I was looking at this:

This storm doesn’t seem to be turning north.

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Comment by Ben Jones
2017-09-08 16:21:59

This is about 30 minutes later:

The eye is almost on the coast of Cuba. Heck a quarter or the hurricane is on the southwest side of Cuba now. It could past right over, get into the warmer water of the gulf and go back to finish off those Houston apartments.

Comment by Carl Morris
2017-09-08 16:46:53

And refineries.

Comment by Lesser Fool
2017-09-08 17:09:18

Great, early move-in for the prospective tenants!

Comment by Ben Jones
2017-09-08 17:31:29

So 3 hours after I first posted that and the eye is still moving due west. Seven more hours of this direction and Miami will hardly get wet. There could be some egg on faces.

Comment by jeff
2017-09-08 18:19:30

“Seven more hours of this direction and Miami will hardly get wet.”

That’s what it is starting to look like.

When they fuqe up like this they try to move the cone slowly as not to look like Al Gore and his failed predictions.

Comment by GuillotineRenovator
2017-09-08 18:21:42

When they show the “trail of destruction,” it’s a bunch of rich peoples’ yachts.

Comment by Ben Jones
2017-09-08 18:25:17

‘they try to move the cone slowly’

The eye dipped south-west at the very end of the last animation. In the next hour or so we should know. The computer models are all wrong already. I was looking hard for what exactly made them think it would turn north at all. I didn’t see any wind or anything that suggested it.

Comment by GuillotineRenovator
2017-09-08 18:30:32

Uh-oh, looks like the storm which was going to “devastate the United States” isn’t materializing.

22 mins ago:

“Hurricane Irma’s forecast cone shifts farther west”

“Category 4″

Comment by Ben Jones
2017-09-08 19:18:14

Now at the end of the satellite loop (2:15 UTC) the eye takes a decided dip southwest.

A couple of hours after the models said it would make a sharp northern turn.

Comment by palmetto
2017-09-08 19:24:06

Glad you posted this, Ben. I, too, have my suspicions about this so-called northward turn and these computer models. Not to mention the “cone”. As someone who lives in the Tampa Bay area, the pre-landfall stress and disorder created by the media is off the charts.

Of course, the media and the goobermint is having a field day here.

Comment by Ben Jones
2017-09-08 19:34:03

LIVE Mallory Square Key West Florida

No rain. Not even very windy.

Comment by palmetto
2017-09-08 20:32:02

Still diving into Cuba.

Now the turn’s supposed to be tomorrow at 8pm. Or not.

Comment by jeff
2017-09-08 20:34:26

10 PM Update has some center lines in the Gulf.

Big storm though, the eye wall is hitting Cuba and there are feeder bands hitting the coast up in Fort Pierce way the hell north of Jupiter.

Palmy you stay safe.

Although if it moves as far west tomorrow as it did today neither one of us will be able to get a kite off the ground come Sunday.

Comment by Ben Jones
2017-09-08 20:44:36

2:45 UTC update, even more southwest movement.

Comment by jeff
2017-09-08 20:45:11

The local news weather dude showed the rain band in Fort Pierce and said it was from Irma but looking at palmetto’s loop the local weather dude is wrong too.

Comment by Ben Jones
2017-09-08 20:50:23

Dry as a bone in Key West:

Comment by Ben Jones
2017-09-08 21:04:03

3:15 UTC even more SW movement.

Still up on the weather channel:

‘After blasting the northern Caribbean, deadly Hurricane Irma will turn toward the United States, unleashing destructive winds, flooding rain and dangerous seas across Florida starting on Saturday.’

“Unfortunately, there is no way the United States is going to avoid another catastrophic weather event,” Dr. Joel N. Myers, founder, president and chairman of AccuWeather said.

“There will be massive damage in Florida. [It will be] the worst single hurricane to hit Florida since Hurricane Andrew in 1992,” Myers said.’

‘The current track of Irma will bring the most severe impacts to the eastern side of the state, including Miami, West Palm Beach, Melbourne, Daytona Beach and Jacksonville. However, with the forecast track now taking Irma right up the Florida Peninsula, hurricane-force winds will reach western parts of the state as well, including Tampa, Fort Myers and Sarasota.’

‘If the track shifts even a little bit to the west, the most severe impacts of the storm would impact western Florida and the lower Keys.’ “Irma remains a very powerful and destructive hurricane,” AccuWeather Hurricane Expert Dan Kottlowski said.’

“Impacts within the projected path of Irma include life-threatening wind, storm surge and flooding rainfall hazards,” Kottlowski added. Conditions will deteriorate rapidly across South Florida and could turn life-threatening Saturday into Sunday. This is when rain and hurricane-force winds will intensify quickly.’

Also on this channel:

Florida braces for Irma’s wrath
Deadly Irma slams Cuba, the Bahamas
Terrifying video shows strongest earthquake in a century rattling Mexico
Irma smashes records as Category 5 hurricane; Los Angeles wildfire creates apocalyptic scene
Monster Hurricane Irma to bring catastrophic impacts to Florida
A state of emergency has been declared in Florida, Georgia, South Carolina, North Carolina and Virginia as millions of people across the Southeast brace for the life-threatening impacts of Irma.
Interstates are gridlocked and gas stations are blitzed with vehicles as people flee out of Hurricane Irma’s path.
Hurricane Katia will continue to unleash dangerous and life-threatening impacts across eastern Mexico into the weekend.
Many gas stations in the state of Florida are struggling to keep up with high demand as evacuees stock up heavily on fuel in preparation of Hurricane Irma.


Comment by MacBeth
2017-09-09 06:22:27

Good luck to Jeff and Palmy!

I have elderly parents in Venice, Florida. Their place is boarded up- leaving town in a few hours. Located about a mile east of I-75, right where I-75 bends.

The assumption is that they will be wiped out.

Jeff and Palmy - do you guys know of any phone number to call that informs residents when they will be allowed to return to the area? I’ve called police departments, Sarasota County, etc.

Thanks in advance for any info.

Comment by MacBeth
2017-09-09 06:38:14

Some phone numbers for you (assuming you have cell phone access, I thought maybe some of your neighbors without access could use the following info. in their wallets/purses.) And thanks, Ben.

Florida Insurance Claim Hotline: 1-800-277-8676.

Florida Emergency Info: 1-800-342-3557. 24/7 on that. Good place to call; I’ve already contacted them.

Elder Affairs: 1-800-963-5337

FEMA Registration: 1-800-621-3362

Comment by Mafia Blocks
2017-09-09 08:09:59

Homeowner insurance. The only possible hope for millions of underwater home debtors to remotely break even.

Comment by jeff
2017-09-09 08:24:54

Brays of terror

What do you mean I don’t have Flood Insurance.

Comment by 2banana
2017-09-08 08:02:26

I discussed this a few days ago.

It could be the biggest impact from President Trump on the economy so far or a big nothing burger.


Trump’s Historic Opportunity With The Federal Reserve
Zerohedge - Sep 7, 2017 6:05 PM

And then there were three.

Yesterday Stanley Fischer submitted his letter of resignation from the Federal Reserve’s Board of Governors, effective next month, the second such resignation of Donald Trump’s presidency. While Fischer’s term as Vice Chairman of the Fed was set to end next year, he had the ability to serve as a governor through 2020. Along with Trump’s decision next year on whether to replace Janet Yellen as the Fed’s chair, this means Trumps will have the opportunity to appoint five of seven governors to America’s central bank.

Given that the position holds a 14-year term, it is unusual for a president to have the opportunity to make so many appointments.

As Diane Swonk of DS Economics noted, “It’s the largest potential regime change in the leadership of the Fed since 1936.”

Unfortunately, even if Goodfriend doesn’t get the nod, it’s unlikely Trump will nominate anyone who understands the negative consequences of our artificially low interest rate environment. Though Candidate Trump demonstrated remarkable savvy when it came to how the actions of Bernanke and Yellen hurt Americans, as President Trump he has consistently indicated a desire to keep the “big fat bubble” going. Such a desire obviously fits the self-interest of the White House, but with long-term consequences for the base that elected him.

Comment by taxpayer
2017-09-08 08:09:23

10yr and mort rates to drop ,just in time

Comment by Ben Jones
2017-09-08 08:13:36

‘Are Banks at Fault for the Property Glut?’

‘One reason why there is a glut of commercial space in Malaysia, especially in Klang Valley, is that banks have given out loans for such projects in the past five years without thoroughly studying the supply and demand for such premises, claimed property expert Ernest Cheong.’

‘He said property consultants had warned that there was an oversupply of commercial space as far back as 2012. But lenders still granted loans for commercial projects in the past years without conducting due diligence by themselves.’

‘Cheong alleged that the feasibility studies were more often done by developers instead of banks engaging their own third-party consultants to look into the business plan.’

“It’s one thing for a developer to show they can pay back the loan based on projections of sold or rented out units, but how accurate are these projections? Is there really a demand? Obviously there isn’t enough,” he said.’

‘He pointed out that there are currently many shopping centres, office units and other commercial properties with vacant spaces, while some are nearly deserted.’

“You walk around some malls and office lots, and you wonder, who actually patronises these places or occupies the office lots. If there are no occupants or insufficient occupants, then how will these places be maintained?”

‘Cheong also noted that the oversupply could get worse as Bank Negara expects an additional 4.9 million sq ft of office space would be completed in Klang Valley by 2018.’

Comment by Ben Jones
2017-09-08 08:18:17

‘Labour’s Phil Twyford told TVNZ 1’s Q+A programme that after the Pre-Election Economic and Fiscal Update (PREFU), Labour’s modelling for KiwiBuild is accurate.’

‘Phil Twyford told Jessica Mutch, ‘Amy’s putting on a very fine gloss on what has become in this country a housing basket case. We have the lowest rates of home ownership now since 1951. It’s virtually impossible for a young family to get a 20% deposit together for the median house in Auckland. People can’t save $150,000 or $200,000. It’s impossible. The dream of home ownership is dead, Amy.’

‘AMY We’re now seeing 100,000 houses being planned over the next three years. We’re now seeing the highest proportion of first-home buyers coming into the market than we’ve seen for a long time. We’re seeing the support for first-home buyers tripling or quadrupling, in fact. And, actually, if you look what’s happening in Christchurch, we’re a few years ahead, because post-earthquake, we freed up a large amount of land supply. We’re seeing absolutely how that pays off. Prices are coming down. Buyers are coming into the market easily. In fact, there’s some talk now of a housing glut. We’re seeing rental prices come down. So we know that these things work.’

Comment by Ben Jones
2017-09-08 08:44:55

‘Everyone has looked at Amazon as the harbinger’ of the city’s record growth, said developer Jake McKinstry. ‘People have really banked on that.’

I looked through amazons financials for a couple hours yesterday.

The quarter ending 6/30/17, in thousands:

Total Revenue 37,955,000

Cost of Revenue 23,451,000

Gross Profit 14,504,000

Selling General and Administrative 13,877,000

Operating Income or Loss 627,000

Most (if not all) of this is profit cloud biz. Now from Kroger, quarter ending 5/20/17 in thousands:

Total Revenue 36,285,000

Cost of Revenue 28,281,000

Gross Profit 8,004,000

Selling General and Administrative 6,646,000

Others 736,000

Operating Income or Loss 622,000

Call me crazy, but amazon retail is a fly spec compared to wally world and the big grocery chains. And they lose money on every box. Oh, but they’re expanding!

Comment by Mafia Blocks
2017-09-08 08:49:59

That outfit is a disaster.

Comment by Rental Watch
2017-09-08 08:52:34

I thought a recent article about Target leaving AWS was particularly interesting.

Why would a retailer subsidize a competitor’s ability to destroy it’s business?

Amazon has proven one thing only….that pure online retailing isn’t all that profitable, and you must have other business lines to support it.

Comment by Ben Jones
2017-09-08 09:11:44

Their cash flow is kinda shaky given what they are biting off overseas. Incredible growth has risks: grow in the wrong ways and/or lose money doing it. The only thing remarkable about amazon is the PE ratio. There may be some future sad pandas in that stock club.

BTW, they borrowed the money to buy whole foods. If you look at their balance sheet equity, they make a lot more money selling stock than stuff and services.

Comment by Rental Watch
2017-09-08 09:27:46

A good friend of mine works for Amazon. He’s a bit of a tech hitman…experienced software engineer who has experience managing large teams, so in Silicon Valley he could easily find other work. I’ve known him to work at many different companies over the years, everywhere from early-stage start-ups with a handful of people, all the way to massive multi-national firms. Despite being a techie, he doesn’t have his head in the sand with respect to financial matters. I’m going to grab dinner with him in about a week…should be an interesting conversation about his perspectives on Amazon from the inside.

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Comment by Prime_Is_Contained
2017-09-08 23:14:22

I look forward to hearing your report, RW…

Comment by Jingle Male
2017-09-09 04:32:58

Me too. It’s always fun to get the ground level.perspective!

Comment by In Colorado
2017-09-08 10:06:43

I’m not sure they’re making all that much money in AWS

But here is an example of how the lunacy is spreading:

Oracle bought out Sun Microsystems some 9 years ago. They were able to grow the business at first, but it plateaued and is in a slow and steady decline.

While the Sun business is in decline, it still brings in over 1 billion in profit per year, plus it enables Oracle’s other on premise software businesses, which generate even more billions in profit.

So what did Oracle do?

They killed the Sun business, by laying off 90%+ of R&D. and are putting everything into their cloud business.

Now, while the killed the Sun business, the lucrative service contracts for that line of business are good for 10+ years.

So they killed the cash cow, which for all we know would have made a comeback after the cloud hype passes, to pursue a low margin, highly competitive business where there is a decent chance that they will fail.

Last year, Oracle made 10 billion of profit. and very little of that came from their cloud business.

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Comment by Ben Jones
2017-09-08 10:10:38

I didn’t say they are making much money on their cloud biz, I said most or all of their tiny profit is there.

Comment by Carl Morris
2017-09-08 10:32:00

So they killed the cash cow, which for all we know would have made a comeback after the cloud hype passes, to pursue a low margin, highly competitive business where there is a decent chance that they will fail.

Reminds me of StorageTek, which is now part of Oracle via Sun. In 1998-99 they decided that the boring old business of selling storage hand over fist was never going to make the 20% margins their investors were demanding. So they put it all on the back burner to become a “services” company. And the rest is history. For all I know it could be the same people making the same decisions again because this time it’s different.

In 99 I took the voluntary layoff and went to Mylex->IBM->LSI->Engenio->Netapp.

Comment by oxide
2017-09-08 13:27:51

Good story, Colorado. Laying off R&D has been the trend for the past 30 years, especially in physical sciences. Management figures they have everything figured out, so it’s time to optimize the process, ship off to China for mass manufacture, and call it a day.

STEM simply doesn’t pay. Physical STEM is out of style and digital STEM is all H1-Bs. And yet they are still trying to get young kids to be”passionate about science.” Especially the girls. It’s maddening.

Comment by Carl Morris
2017-09-08 13:51:15

And yet they are still trying to get young kids to be”passionate about science.”

And complaining about shortages of talent to anyone who will listen. Yes it is maddening.

Comment by Lurker
2017-09-08 16:44:51

“So they killed the cash cow… to pursue a low margin, highly competitive business”

“StorageTek…decided that the boring old business of selling storage hand over fist was never going to make the 20% margins”

Interesting! Kind of like factories getting off-shored even when it would be equally profitable and a lot easier to stay in the US. All examples of the PE bubble, for sure. But also fashion displacing rational profit-seeking behavior; a consequence, I think, of ideology being artificially infused into every aspect of society through the politicization of the mundane.

Sort of related, this is a really great essay about the problems of “heroic capitalism” (exemplified by Ayn Rand’s writing), wherein businesses pursuing grandeur/fashion/”big ideas” over profitability actually function more like communist administrations rather than capitalist entities:

Of course that doesn’t even factor in the incentives of easy credit and shareholder value maximization encouraging businesses to embrace a fashionable and risky business model over a boring and profitable one

Comment by rms
2017-09-08 18:07:06

“Physical STEM is out of style…”

The 9/11 events destroyed infrastructure spending. Someday we’ll look back at the middle-east spending as a huge mistake.

Comment by Mafia Blocks
2017-09-08 10:16:45

tech hitman….. He has a plastic penholder and tape on his glasses so be careful.

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Comment by Ol'Bubba
2017-09-08 14:56:29

I believe the correct term is pocket protector, not plastic penholder.

Comment by BearCat
2017-09-08 09:55:07

I know of a tech ops guy who says that cloud computing (such as AWS) rarely makes financial sense, especially for smaller business.

Part of it is that AWS still charges by the hour per instance, not by usage, so if you have a bunch of AWS instances going at low utilization, you’re paying quite a bit.

And writing software to handle AWS spin-up/spin-down, fail-over, and such is non-trivial.

Comment by Ethan in Northern VA
2017-09-08 12:34:13

It’s not that difficult to code to the AWS APIs.

It is expensive though, in bulk. But can be reliable if you engineer things properly.

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Comment by Mike
2017-09-08 12:38:53

and Lamba looks to be a *very* low cost option to run

Comment by BearCat
2017-09-08 12:57:00

The point wasn’t about writing to the AWS API’s. He was saying it was difficult to do high reliability, highly scaleable software with AWS, especially for a typical enterprise (think main business isn’t internet)

I don’t know enough to judge.

Comment by MacBeth
2017-09-08 17:12:57

A few days back, I posted one of the few articles I’ve seen pro-offered by MarketWatch that was actually worth reading.

It was about Amazon, and how small their market share actually is at the retail level.


Comment by cactus
2017-09-08 08:53:14

Apartments: Overall steady fundamentals with slow to moderate same-store growth. Healthy demand will be weakened by supply, particularly in top 25 MSAs. Location will be the primary desideratum of an apartment’s success.

Industrial: High supply, but even higher demand for strong same property NOI growth. While the conventional wisdom is that a warehouse can be built quickly, the permitting process can be rather tricky, and modern logistics facilities require massive amounts of land. Those located in densely populated areas with less available land will likely fare better.

Retail: In agreement with the market, we do see a tough patch ahead for retail, but I think the nature of difficulty will be different than most are predicting. Retail REITs should be able to keep vacancy rates low, but it will require massive capex to morph existing locations into something shoppers want to experience. Those with healthy balance sheets and flexible management will outperform peers.

Office: Employment data suggests better demand for office space, but employers are getting more savvy at reducing their footprint per employee. Oddly enough, office supply remains fairly high despite the tepid demand. We lean bearish on the sector.

Hotels: 2017 RevPAR is all over the place, varying greatly month to month and by location. There could be some margin pressure from wage growth, and we dislike the power that online travel agencies have to capture hotel’s revenue. That being said, I think there is opportunity in the deeply discounted hotel REITs as M&A is picking up. Those trading below NAV could have a nice payday.

Storage: Consensus seems to be that strong demand will be matched by high supply leading to slow or moderate same store growth. We agree about the supply, but the strength of demand seems less certain to us. Thus, we are bearish on the sector with exception to those leveraged toward development.

Comment by Rental Watch
2017-09-08 09:22:25

We have heard the same thing about industrial entitlements (they are getting more difficult), and have experienced the same with a few of our investments.

Real estate usually gets in trouble when there is overbuilding.
I read PLD’s earnings call transcript each quarter, paying particular attention to the CEO’s comments…he’s generally regarded among the smartest (if not THE smartest) when it comes to industrial RE.

Interestingly, two quarters ago, he noted that a few markets appeared to be ahead of themselves with respect to building ahead of supply, but that unlike the past, rapid information flows and conservative capital would identify this issue and stop quickly. I mentioned this to my partner, and his reaction was similar to mine “I’ll believe it when I see it”.

In other words, historically there hasn’t been that discipline in RE, so the CEO’s comment was like saying “it’s different this time”.

In the last quarter’s earnings call, the CEO noted that these few markets that might have started overbuilding really slowed down on their starts, and while the supply that is in the pipeline will be a bit of a pig in the python when construction is complete, that the potentially concerning trend of building too much didn’t continue.

I think among the most interesting stats on the page is the commentary about where the various property types are trading with respect to NAV…shopping centers and malls are trading at between a 20% and 33% discount to NAV…I think that is far overblowing the troubles in retail.

Comment by Rental Watch
2017-09-08 09:28:48

Should have said “building ahead of demand”….not enough sleep or coffee…

Comment by Jingle Male
2017-09-09 04:43:41

Not enough sleep or coffee…..might be a correlation there!!!

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Comment by Ben Jones
2017-09-08 09:14:46

‘Dayton City Commissioner Jeff Mims Jr., who moved into the area several years ago. ‘There’s no reason for us to panic, because clearly, the value of the area continues to grow’

Yeah Jeff, that’s why you got zero interest in 300 vacant lots. And when you say “us”, have you got a mouse in your pocket? Cuz I ain’t panicked at all.

Comment by Ben Jones
2017-09-08 09:19:17

‘The difference between new and non-new development prices was $314, a plummet from last years $785 difference’

This is price per square foot. If you look at the chart, May 2016 it was around $1,200 higher. And the trend isn’t looking good. Nothing like new build being cheaper than existing to mint some FB’s.

Also from that article:

“Average prices for condos were down from $2.3 million the prior month to $2.1 million this month. This decrease can be explained, in part, by the large number of closings—over $100 million in sales—recorded the prior month at one of the city’s priciest new developments, 56 Leonard St.,” Gabby Warshawer, director of research at CityRealty, told Multi-Housing News. “There were no new developments this month that had such a high volume of closings, underscoring the extent to which a large new development can affect the overall Manhattan numbers.”

So Gabby, what you’re saying is one of the priciest developments led prices down? Yikes!

Comment by ibbots
2017-09-08 09:37:27

Hurricane Harvey will send clouds through the entire Texas real estate market, slowing overall home sales and impacting prices.

The Real Estate Center estimates that 185,000 houses have been damaged or destroyed.

“Prices may go up even faster because it’s going to create a housing shortage in the Houston area,” Gaines said. “In the rebuilding process it might be time to think about how many of these really should be rebuilt.

As many as 55,000 apartments were flooded.

“The apartment vacancy rate in Houston just went to virtually zero,” Gaines said. “It’s going to be that way probably for at least the next two years - it will take that long.”

Comment by Ben Jones
2017-09-08 09:51:37

‘As many as 55,000 apartments were flooded’

There’s another way to look at it: 55,000 apartments just had their income eliminated. Maybe the owners can insure their way 2 years out. Still, cutting a little drywall out and replacing the insulation can’t take 2 years. Gaines=drama queen.

Comment by whirlyite
2017-09-08 09:54:58

Overheard in the office yesterday - hotel rooms going for $650 in the nation’s soon to be third largest city. Market rate pricing or price gouging?

Comment by 2banana
2017-09-08 10:18:28

Either you have markets rates that fluctuate depending on supply and demand - and a couple hundred thousand people needing a room for a week is definitely a huge spike. But it will be short lived if prices are allowed to meet market demand.


You have massive shortages like in south Florida now. Since you can’t “price gouge” on gas:

1. Many people went out and “topped off”
2. No supplies were coming in because it was not worth the risk/reward

So now we have literally thousands of people who can not leave because they can’t buy gasoline at any price

Pick one.

Comment by aNYCdj
2017-09-08 14:49:23

thats even scarier then an overheating car 90 degrees out on the Van Wyck in queens bumper to bumper traffic and no breakdown lane to pull over

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Comment by ibbots
2017-09-08 10:39:32

I spoke to someone in Houston recently. They had 3-4 foot of water in their house for 6 hours and it started to form mold right away. Houston is crazy humid. Some of these houses were flooded for days.

FEMA is pushing the Sheltering and Temporary Essential Power (STEP) in Houston like they did after Sandy. Contractors go in re-mediate the mold, tear out dry wall and hook up basic utilities if they aren’t working, and leave. FEMA allocates $18k per house for this….somebody’s gonna be making some money.

Any house that flooded that doesn’t get torn down will likely have a diminished re-sale value indefinitely.

For people that did have flood insurance, the deductible is often much higher than regular deductible, up to $10k in most instances apparently.

It should be interesting how all this shakes out.

Comment by 2banana
2017-09-08 11:03:19

Just a data point.

A friend has 6 inches in their house in Houston.

Not waiting on FEMA. The family ripped out all carpets and drywall (up to three feet).

It was a mess. But pretty well cleaned up after 24 hours of hard work.

And the sun did come out.

Comment by oxide
2017-09-08 10:45:39

The Weather Channel had a video just on the construction cranes near the financial district in Miami. He said that the cranes can withstand 130 mph winds, but that the funneling wind-tunnel effect between buildings could increase the wind speed and topple the cranes.

Gonna be interesting to see what Irma does to all those multi-million Chinese Laundry airboxes on Brickell Avenue. Maybe not so attractive to foreign investors anymore?

Comment by GuillotineRenovator
2017-09-08 09:40:52

“But now that the company plans to open a second, ‘equal’ headquarters somewhere else, what does that mean for Seattle’s housing prices, rents and development boom? ‘Everyone has looked at Amazon as the harbinger’ of the city’s record growth, said developer Jake McKinstry. ‘People have really banked on that.’ He said he’s concerned about a potential luxury-apartment bubble; those units require a constant influx of well-paid newcomers to fill them.”

The reality is that Seattle isn’t experiencing a constant influx of well-paid newcomers who can afford the luxury apartments. They never existed. In fact, much of the new tech force is of the H1B variety, the cheaper employees who are somewhat disposable. I’m tired of all the lies.

Comment by Ben Jones
2017-09-08 09:55:30

August 31, 2017

“New high-rise residential construction has been among the hottest areas for real estate investors, particularly those from abroad, with high-end products accounting for 8o% of all new construction. Yet this is not an entirely high-end country, and these products, particularly the luxury high-rises in cities, largely depend on a small segment of the population that can afford such digs. No surprise, then, that we see reports of declining prices in areas as attractive as New York, Miami and San Francisco, where a weakening tech market is beginning to erode prices, much as occurred in the 2000 tech bust, John Burns Real Estate Consulting notes. There have been big jumps in the number of expired and withdrawn condo listings, particularly at the high end; last year, San Francisco saw a 128% spike in the number of withdrawn or expired listings for condos over $1.5 million.”

“Almost without exception, the most expensive areas are precisely those that have the most high-rise buildings: New York, San Francisco, Seattle and Miami. More to the point, these buildings don’t tend to be occupied by middle-class, much less working-class, families. And in many cases, these units are not people’s actual homes; in New York, as many as 60% of new luxury units are not primary residences, leaving many unoccupied at any given time.”

Comment by Ethan in Northern VA
2017-09-08 13:17:15

They’re trying to get Amazon to build their east coast HQ here in Northern VA, since Amazon already has some 88 datacenters here.

Comment by Apartment 401
2017-09-08 09:55:39

Realtors are liars.

Comment by Mr. Banker
2017-09-08 11:04:38

“Realtors are liars.”

Realtors are useful idiots … unless there is a major RE turndown and they do not bring to me totally dumbed-down idiot marks to eagerly place their signatures over dotted lines as they are supposed to do, in which case their status is downgraded from that of useful idiots to the status of completely useless idiots.

Comment by Carl Morris
2017-09-08 10:38:47

‘I went to a couple of conferences on the crisis in London around that period, particularly one in early March 2008, where speaker after speaker was talking more or less in the past tense about the great disturbance and how lessons had been learned.’

He was talking about 8 months later. My prediction is that eventually the same will be said about this whole 8+ years since then. People talk about the Great Recession like it’s ancient history, but 2008 was just the side of the storm that was blowing out to sea. Here comes the other side.

Comment by rms
2017-09-08 18:33:09

“Here comes the other side.”

+1 Inevitable… just a matter of when.

Comment by GuillotineRenovator
2017-09-08 10:53:45

It appears that the 143 million Americans whose information was stolen from Equifax would essentially include all living, breathing adult legal citizens with a social security number who ever had a credit card or recurring payment obligations.

I think we’re all screwed. I don’t have credit cards, so I’m not worried about that aspect. I am, however, VERY worried about identity theft. Who the FAWK is Equifax, and WHY are they allowed to have MY personal information, especially my social security number? This is bullshit.

Comment by Ethan in Northern VA
2017-09-08 13:20:20

One of the three large CRA’s that have existed forever.

There were other names for the companies but mergers and name changes happened.

There are other companies that collect information on you to sell that you don’t know about outside of the Credit Reporting Agencies. Look up Information America, they were one of them.

Comment by palmetto
2017-09-08 13:56:45

That’s what it’s all about, identity theft. IMO, this was not a “breach”. This was a heist. Possibly an inside job, or assisted by a group of insiders.

I’d bet money that the customers who were “compromised” have higher credit scores or higher available credit than those who weren’t. Some commenter on ZH claims to have an 850 credit score and found out his info was compromised.

They probably had some sort of algorithm to harvest the good stuff and ignore the lesser quality stuff. Presto! A very selective breach.

Comment by redmondjp
2017-09-08 14:02:26

They are one of the “Big 3″ of credit reporting agencies:


And I agree - how is it that these giant corporations get to “own” our personal data and profit from it without our permission? And then ‘whoopsie’ become careless with our data - ????

That CEO should be fired or sent to N. Korea or something. It would put some fear into the other CEOs that they better have their act together.

Comment by whirlyite
2017-09-08 14:16:24

It was reported that the top level management unloaded their shares before the news was made public. Did anyone else hear that?

Comment by palmetto
2017-09-08 14:31:05

I read that. They pulled off one helluva heist. All their assets should be immediately frozen pending further investigation. This is a crime of epic proportions.

On the bright side of things, it’s a sign that our credit fueled society is about to melt down, big time. This is the sort of thing that renders credit scores and Social Security numbers meaningless.

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Comment by MacBeth
2017-09-08 16:47:21

It’s unbelievable.

Further, Experian knew about the breach on July 29. And the public only found about this yesterday, September 7.



I fully support throwing the CEO, CFO and others in jail. This is NOT a forgivable offense.

The IT department at Experian also is culpable. Where the hell were they?! How could they not notice? Throw them in jail, too.

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Comment by palmetto
2017-09-08 19:59:28

The IT department is likely culpable for this. All that info is now safely in Pakistan.

Comment by Apartment 401
Comment by GuillotineRenovator
2017-09-08 18:40:48

Remember when Millennials were supposedly the most financially prudent of all generations? So much for that horseshit. We’ve got Millennials with $900 per month car payments.

Comment by Mr. Banker
2017-09-09 03:12:46

What a bunch of dummies.

Comment by Senior Housing Analyst
2017-09-08 18:07:28

Denver, CO Housing Prices Crater 5% YOY

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