Bits Bucket And Craigslist Finds For November 11, 2006
Please post off-topic ideas, links and Craigslist finds here.
The Housing Bubble
Examining the home price boom and its effect on owners, lenders, regulators, realtors and the economy as a whole.
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This is what DL said yesterday about the resale market:
http://tinyurl.com/yblqd8
[prices are] projected to increase 1.5% in 2007
Not setting the bar very high for next year, are we? I imagine a lot of FB’s will be quite alarmed by that estimate.
Exactly; so, where is the pressure to buy? It’s not like you are going be priced out or anything. Moreover, 1.5% is below inflation and not a very attractive pay off for an investment . In addition, if you live in one of those ‘hot boom’ areas like I do, prices will certainly fall.
“Do not use history as a guide when talking about this downturn,” he said. “This is a unique housing cycle we find ourselves in” because job growth remains steady, interest rates remain low and housing continues to enjoy “good economic fundamentals.”
Unique=”It’s different this time” and all because “job growth remains steady”. If we’re to believe the job creation numbers, is this the next metric to take a hit? Nevertheless, there are 2 problems with employment reporting;
1) The numbers can’t be trusted as we all know they are skewed to sustain the credit insanity
2) Employment at BurgerWorld and WalMart does not constitute full employment
3) Donning the blue smock won’t get you the income required to float the monthly mortgage ticket.
Oh, don’t forget that the majority of new jobs created in Bubble Zones are RE related.
Right on to Captain Credit and JWM. The 4.4% unemployment, which is lower than the average unemployment rate in the 1990s is all about construction jobs, and jobs at Wal-Mart and Starbucks. Hey, they are hiring at the Starbucks I go to. I would consider it since I’m scheduled to lose my job December 31! Let’s see. A steady Starbucks job. At age 47. Maybe I should check into an interest-only mortgage on one of those 54,000 MLS homes for sale in Phoenix! LOL! I’m an engineering consultant by trade and have been employed the last 21 years in my field. But I take outsourcing seriously. I’m not against outsourcing, capitalist that I am. I’ve adjusted to free world trade over ten years ago by ridding myself of a house and vowing to never to take out a loan equivalent to 1/5 my net worth. So I passed on this RE bubble.
I wouldn’t diss Starbucks as an employer. For one thing, there’s damn few companies in that sector who provide the level and quality of benefits that Starbucks does for their baristas.
I was not too proud to work for Starbucks when I was in need of a job that fit in with my grad school schedule. I ended up enjoying it. You might too. There’s far, far worse places to work.
I still recall Thornberg’s presentation on job growth in California. It was
#1 People who build homes
#2 People who do the while collar work on home transactions (white collar for builders in category #1)
#3 People who sell durable goods for homes (furniture, home depot)
#4 Medical
All other categories net zero jobs (some shrank, some grew, net is zero).
I think medical will keep growing. The others are overstaffed by multiples.
As to engineering outsourcing… I too have just accpeted it. I’ve automated away several of my past jobs. That’s a good thing. It means I now manage people doing the work that used to take many more.
The world changes, adapt to it. Oh, I want to buy… but there is a reason historical home prices varied in a narrow range compared to income. (I’m not talking salaries; we all know that passive income is important too.)
Neil
I’m not deriding Starbucks. There is also an Einstein’s Bagels on the opposite corner from that Starbucks. Pays $8 (or $10?) per hour, which is better than minimum. I’ll actually find another software engineering job paying well. I have enough savings to live several years without a job and lots of flexibility to move anywhere anytime. But I’m thinking of chilling in January in sunny warm Arizona while most of the U.S. is freezing their Heinee’s off.
“Do not use history as a guide”…”Do not look behind the curtain”…”Do not question the Emperor’s wardrobe”….
It sure is different; prices are so out of line not even good employment, reasonable interest rates and improving wages can reverse the downward trend in prices. It is unique, absolutely unprecedented.
“Do not question the transparency of the Emperor’s attire.”
Moreover, let’s see how those unemployment look after the full impact of the real estate market collapse is felt throughout the REIC. And then it remains an open question how much collateral damage will be inflicted on indirectly related industries.
Consumers don’t base decision on their present employment status, but rather what they expect their employment status to be in the future. If one expects to be laid off in the next year (or at least sees it as a very real possibility), he/she will curtail discretionary spending in anticipation of that (not necessarily save more these days, but he/she will be more debt-averse). In other words, the collapse of real estate markets will most likely prove to be self-feeding, a facet of this that DL is either too stupid or too disingenuous to acknowledge.
“Do not use history as a guide when talking about this downturn,” he said. “This is a unique housing cycle we find ourselves in” because job growth remains steady, interest rates remain low and housing continues to enjoy “good economic fundamentals.”
Translation=Never let the truth get in the way of a good piece of bull$hit.
My co-worker saw this artice yesterday and said to me “hey, I just read the housing market is bottoming!”. I looked at the article and went on a rant about David Lereah and the NAR and my co-worker said I was being too negative on the housing market. I just shut up at that point…
Amazing how people still believe whatever these guys spin!!
Manias always take place in a upmarket /high employment /easy credit times creating over-inflated values of assets . It seems like Dl is using the current high employment as grounds for a soft landing but I think employment was high right before the big stock market crash of 1929 also . Mania asset bubbles crash regardless of the employment picture ,especially if credit/high margin buying was used to purchase the over inflated asset .
DL has to continuously proive that he is full of $hit. Now he is trying to pacify the deer on the street with headlights rioght on his face. This apparent rationale talk won’t help when the fear is abundant and people with equity in their Big Bubble areas bought one, two, three, and even streets after street in the non so Bubble area. Guess what happens next!
Can’t you just imagine David Lereah candidly talking about what he does?
Q: Tell me about yourself.
DL: I’m the economist for the National Association of Realtors. As such, I am tasked with providing informative information with regard to the housing market, and real estate in general.”
Q: “So you are hired by realtors to talk up the market?”
DL: “Well, I wouldn’t put it so simply. What I do is interpret the statistics. It is obvious that someone has to make sense of all of these disparate figues. I make sense of them in a way that helps the prospective buyer feel confident in his/her purchase, yet promotes the real estate industry and the economy as a whole.”
Q: “Give us an example.”
DL: “OK, it’s pretty easy. Say you have irresponsible commentators nattering on about “how housing is historically overpriced, and affordabilty is at an all time low, even including the newer mortgage products.” and you want to help out. All you do is say “”Do not use history as a guide when talking about this downturn. This is a unique housing cycle we find ourselves in” because job growth remains steady, interest rates remain low and housing continues to enjoy “good economic fundamentals.”
Q: “What?!”
DL: “See? Pretty easy, works almost all the time.”
Lest we forget.
Hmmmm, an hour and a half and no bites.
Maybe November 11 is Oz/UK-specific (Canada?).
No, the little ceremony went off here in Oak Park, IL at 11AM in Scoville Park near the War Memorial.
The old men march slowly, their bones stiff and sore
The forgotten heroes of a forgotten war
And the young people ask me “what are they marching for?”
And I ask myself the same question.
A house on Moron Street:
http://louminatti.blogspot.com/2006/11/connecticut-real-estate-crash.html
Atlanta is boom light……One of the highest foreclosure rates. Building everywhere. Preowned homes languishing. Builders offering incentives not only granite but closing costs. Auctioning of condos with many empty. Many for lease with no takers. Open houses empty for the most part. Dead construction sites…many still building in Bum F Egypt. Boom light….I don’t think so. I was prequalified and let my relative who is the real estate agent know. She was salivating while gazing at me unnaturally.
“She was salivating while gazing at me unnaturally.”
ROTFLMAO! That is the funniest bit I’ve read in days. Lucky for me the coffee mug is empty.
From Today’s Honolulu Star-Bulletin:
“Units at the planned Trump International Hotel & Tower in Waikiki sold out for more than $700 million in just eight hours, setting world records for the total dollars and number of units changing hands at a residential development on a single day.”
“About 40 percent of the buyers were from Hawaii and Asia, and the remainder came from all over the world,” Ivanka Trump said. Many buyers came from a database of investors who have bought into other Trump developments, she said.
Buyers paid an average price of $1.5 million. Units were priced from the mid-$400,000s for studios to more than $9 million for a three-bedroom penthouse.”
Prices on Oahu have tripled since 2000. I sold my house last year and am renting, waiting for normality. I may be out of luck, I see also in today’s paper:
“Honolulu had the third-lowest foreclosure rate in the third quarter of 100 U.S. metropolitan areas reviewed by RealtyTrac”
“Honolulu had a rate of one foreclosure for every 3,068 homes in the July-September period. ”
So are we immune to the laws of sane pricing or are we just behind the mainland by a few months? I see lots and lots of price drops, triple the inventory and slow or no sales in the areas I watch.
I’m getting antsy and wondering if prices will ever go down here.
I wouldn’t worry. I am in Hilo and see lots of homes for sale wih no buyers. In the islands we are at the back of the line, money will implode in CA which will drag HI down. I would say foreclosures will start mounting next year, this stuff seem to turn on a dime but it actually builds over time. Banks have been very leinent to borrowers. Take away the money from the mainland and HI will fold. I wouldn’t worry too much about Trump either, word on the street is that the condos were mostly business investment buying only
Sorry got cut off.
only
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Spoof on “Millionaires in the Making” section on CNNMoney:
http://www.adventuremoney.com/2006/11/07/money/hundredaires-in-the-making/
Don’t laugh. I actually know people like that.
Don’t laugh, I actually use to be like that.
Ah, youth. Wasted on the young.
Is this the reason that it is impossible for those with families to buy an affordable family-sized home in California?
——————————————————————————————–
Investing in a Home
After getting married last year, the Spendalots set their sites on a home in Manhattan Beach, CA. They finally settled on a five bedroom, four bath house for $1.6 million.
“My father always used to say that a home is a great investment,” says John. “And I wanted to be responsible, so I figured we should get the biggest house we could find.”
“Yeah, we don’t have any kids, so we don’t really need five bedrooms,” says Jane. “But there’s a chance one day we might decide to have kids; maybe when we’re done practicing law. Although, I guess I might be too old by that point. Maybe we’ll adopt one of those poor kids like Angelina. I love her.”
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I like this:
The Mortgage
When it came time to financing the home, the Spendalots selected a zero-down, 30-year mortgage, with interest only payments the first ten years.
“I was flipping through the channels one night and that Susie Gorman lady was on CNBC. She was talking about how mortgage interest is deductible,” says John. “I figured the more interest we paid, the larger our tax deduction, so we’re saving money there.”
‘We’d look like schmucks in Jettas. In Porsches, we look good.’
ROTFLMAO
How the hell is McDonalds able to have a TV commercial advertising its breakfast crap, and showing someone cracking a fresh egg into a skillet?
Because if you saw how and with what they actually made it then you would not buy it.
Just like if you actually saw how and with what they made a $1 million McMansion you would not buy it either.
Cement prices post large fourth quarter Increases.
According to Engineering News Record, strong demand has once again allowed producers to ignore tradition and push through some hefty price increases during the historically calm fall season. In November, portland cement prices tracked by ENR increased by 0.7%. This, together with a 0.2% increase in October, helped to cement September’s large 1.5% gain. Prices for ready-mix concrete followed a similar trend. Asphalt paving prices posted another 1% increase this month, helping to push prices 37% above November 2005’s level.
Sorry, this is all I have this early in the morning.
Yeah, I know.
This is playing out in the Oz sharemarket as we post. A CSR spinoff called Rinker is currently under takeover offer by a (Mexican?) company called Cemex.
Rinker is quite big in the Florida and Arizona cement/aggregates markets.
Needless to say every “financial expert” over here is quoting the script from Rinker management. “Opportunistic bid”, “undervalues the company”, “recommend you reject” etc.
The current share price here is about 8% over the bid price (an added complication is that the bid price is in $US rather than $A).
If I had any Rinker shares then by now I wouldn’t.
Cemex already owns/controls Rinker out in Sacramento, CA. That happened back in April or May. They’ve acquired a couple of other smaller companies as well. The merger has been a disaster as far as customer service is concerned, as the various departments have been woefully uncoordinated.
At the start of the year I had seven concrete companies in my rolodex, now we’ve got four (1 went out of business, 3 got bought out by Cemex, which just entered the market). So Teichert and Cemex are pretty much the only game in town except for a few small mom-and-pops (Hastie’s and Landgraff’s). The consolidation has kept prices sky high all year plus delivery and other fees have also increased substantially in a very short period of time.
I guess that these cement prices are mostly a result of inflation (e.g. increased energy/transport cost) creeping through the system and not a result of skyrocketing demand.
Residential construction doesn’t generate most of the demand for concrete, rather its commercial construction and public projects. And for the time being, commercial construction is still quite strong (except new retail space) while public projects should be strong for the foreseeable future as well (especially since CA passed the bond measures providing funds for highways and roads).
Some of the high price is driven by fuel costs and some of its environmental laws that seem to get stricter each year. But its mostly because increases in demand have exceed increases in supply for 5 years now. Moreover, the first half of 2007 still looks to be a plump year for commercial, industrial, and institutional projects. If we go into recession, obviously that cannot be sustained past 3Q07 or so. But for the short-term, there is sufficient demand in the Sacramento area to keep concrete prices pretty much right where they are (seasonally adjusted).
We have a lot of freeways in California, and ongoing massive debt-funded infrastructure construction / reconstruction projects…
I still expect cement/concrete prices to revert to the mean as the bubble deflates.
Anyone checked lately, but energy prices are off significantly on slowing demand.
Not sure, because there is a good chance the govt will use massive infrastructure construction to offset the loss of housing construction jobs, in order to make aggregate construction look better.
Rinker is a major pain in the ass for anyone who regularly drives 528, the “Beachline,” between Orlando and the Cape or Cocoa Beach. Trucks full of Rinker gravel are constantly on the road, dropping rocks that bounce and ruin your paint job or crack your windshield. Some even have the gall to put a “Keep back 100 feet — not responsible for stone damage” sign on the back of the truck. They are a scourge to motorists in these parts.
Why don’t they have a cover your load law? Sounds like your state needs one. Here we have had people killed by rocks dropped/thrown from trucks. And the cops and DOT enforce the law with stiff fines. A few months ago I was in a line of traffic behind a truck dropping rocks on the road. Somebody in the line must have called the cops because the truck was pulled over by two cops that were waiting for the him up the road. I must admit it was one of the few times I was happy to see flashing blue lights.
Keep posting these types of updates.
Very valuable.
Links would also be appreciated.
DL is writing his final book:
How YOU can Profit Bigtime from the Nonboom Stallers, Nonboom Gainers, Boom Lite, Average Boom and Hot Boom Markets in the Midst of a World of Hurt. And Come Out Smiling!
How about “How I Made Millions–Investing in Vaseline Right before the RE Crash. And I’m Still Smiling!”
Walt-Nice one!
“Are You Missing the Real Estate Bust?: Why Property Values Will Continue to Decline Through the End of the Decade - And How to Profit From Them”
Come on guys and gals - in reality it may be:
“Why You Should Use A Realtor To Invest In Real Estate: 50 Ways To Profit From A Declining Market”
followed by his cookbook
“50 Ways To Wok Your Dog: A Guide To Korean Cooking”
From Today’s Honolulu Star-Bulletin:
“Units at the planned Trump International Hotel & Tower in Waikiki sold out for more than $700 million in just eight hours, setting world records for the total dollars and number of units changing hands at a residential development on a single day.”
“About 40 percent of the buyers were from Hawaii and Asia, and the remainder came from all over the world,” Ivanka Trump said. Many buyers came from a database of investors who have bought into other Trump developments, she said.”
And,
“Honolulu had the third-lowest foreclosure rate in the third quarter of 100 U.S. metropolitan areas reviewed by RealtyTrac”
“Honolulu had a rate of one foreclosure for every 3,068 homes in the July-September period. ”
So are we immune to the laws of sane pricing or are we just behind the mainland by a few months? I see lots and lots of price drops, triple the inventory and slow or no sales in the areas I watch.
I’m getting antsy and wondering if prices will ever go down here.
In the last downturn we ran about 2 years behind the mainland. With the instant information age we now live in and blogs like this IMHO that gap will shrink. My guess is that we will run less than a year behind this time. However I don’t think we will ever see “sane” prices. But I believe that we will go from obscene prices to just insane prices.
MasterBrand, “the #2 kitchen & bath cabinet business,” has informed employees at their Grants Pass OR plant that there will be 150 people laid off. Gave some of them their final check at lunch break Friday and let the rest go home early. Have a nice weekend.
That’s serious….there’s little in Grants Pass providing jobs above minimum wage besides repair shops/garages.
Oregon got hammered big time in the last recession.
Another bigger Grant’s Pass employer, will also enjoy some hard times.
http://www.bentwoodfurn.com/
I have some of the mission pieces, very nice and kinda expensive.
Ladies and gentleman, in preparation for a soft landing please stow all tray tables and return your seat-backs to the full upright position.
Tuck your head between your legs and kiss your a$$ goodbye. Thank you for flying NAR Airlines.
A couple of months back I wrote a post about my company’s business prospects.
This is an update.
As you may recall, I work for a manufacturing company that supplies building components. Business has been falling since about early summer and continuing to decline. As of a couple of months ago, things were down about 30% and falling. We are down a little further now.
My best metric is what is shipped out. I have gotten into the habit of stopping by the warehouse and checking trucks at the dock. At our peak, last year, we were shipping out 2-3 semi trailers of materials everyday for delivery to vendors. There are additional shipments by FedEx and some Pick-up items.
As of now, we are shipping 1 truck per day. We are lucky to fill a single trailer. About 2 days a week we ship a full truck, the other 3 days, about 60-80% full, if that.
The initial reaction some months back was to not “re-hire” vacant positions unless the need could be demonstrated and the work could not be shifted to other persons.
My department has only 5 people, myself included. I lost my only senior person (the well educated, experienced and competent one) about September when he got an offer he couldn’t refuse. I wrote him a glowing letter of recommendation and bid him farewell.
That reduced my department by 20%. We are support staff, but integral to production and customer service. Thursday, the “cuts” started. We only cut one person from the division, but others had gone that were not replaced. I took the day off yesterday to take advantage of the good weather, so don’t know how many in other departments won’t be there when I return on Monday. We are a mid-sized national firm.
I have cautioned some in “senior management” for over a year that the “good times” would probably hit a wall this year. Marketing/Sales couldn’t see it. They thought they were some kind of geniuses with generous projections about this year’s sales.
It hasn’t panned out, though we have not done poorly due to high sales early this year.
But, the discussions now, after being blinded to the slow-down are that we expect not to have a resurgence in sales until late next year. I think our “management” finally gets it. Unfortunately, they were still hiring new positions in the Springtime. So, I will get a feel on Monday how many people at Corporate provided services “no longer required”.
From the trenches.
Diogenes.
Thank you! That’s great information. Appreciate it.
I await Monday’s instalment.
Good luck. Unfortunately this is a trend that I expect to see replayed time-after-time-after-time across the country over the next 18-24 months. Its going to get very ugly.
Thanks for the update! The anecdotal evidence is what allows this blog to stay 6-12 months ahead of the MSM reporting!
Ditto.
Great details, Diogenes!
I’d love to hear from other insiders on:
1) municipal depts are doing to prepare for the coming storm: building/code inspectors, approvals & licensing related to R.E., appraisals, tax collections and foreclosures (liens, etc.).
2) how the pension funds (both municipal & private pensions) are dealing with short falls (and planning for further drops in): hudge fund closures/declines, sinking prices of HB and other R.E. stocks, REIT dividends cut backs & shutdowns, MBS “recalls” (or whatever the term is called) and soon to come municipal bond failures/bankruptcies. How about them CDSs (credit default swap)?
I can comment on one little municipal department. In my town the downturn in building has gone unnoticed by the elected officials, so no preparations are currently being made. In fact, spending seems to be increasing. We’ve discovered a new way to finance items we can’t afford- it’s called lease/purchase, which is essentially borrowing money to buy something you can’t afford. Sound familiar? It’s very similar to a HELOC. We buy police cars, fire trucks, trash trucks, and anything else legally possible, with the hope revenues will continue to increase in the future to cover the lease payments. I wonder if a bank would actually repo a fire truck if a payment is missed? Building permit-related revenue is down 28% over the same period last year. I see no hope that it will recover in the near future.
Thanks crash1: This week, Kalifornia passed bunch of bonds, going into more debt, too. Spending as if tomorrow won’t come due…
If it sucks so bad in Kalinfornia, please leave ASAFP!
It’s late, but I’ll add whatever insight I have regarding a small city in San Diego County, FWIW.
The city is aware of the slowdown, but says revenues are increasing (probably because nobody’s petitioned to have their prop taxes reduced, YET, and houses are likely still selling for more than their prior assessed values). I personally have warned them (council members and mayor) about the housing bubble and possible implications re: tax revenues, recession, etc., and some have said that they are aware and prepared.
That being said, they are going full-speed ahead on capital projects (some of which I think are not completely necessary), even adding designer touches which can cost the city significantly more. (I’m a function over form kind of person.)
They’ve recently increased wages pretty much across the board. We’ll see what comes during the next round of contract negotiations.
Thanks for the update, D. I hope things work out for you.
http://starbulletin.com/2006/11/11/news/story02.html
and
http://www.honoluluadvertiser.com/apps/pbcs.dll/article?AID=/20061111/BUSINESS/611110337/1071
Are we immune to the bubble?
Carol Lloyd who writes the column “Surreal Estate” for the SFChron, devotes today’s article to the ridiculous NAR “It’s a great time to buy or sell” ad. I suspect Lloyd is reading this blog as she covers the same ground we have here, but still, the article is well-written and funny and full of truthiness. The column is dated Friday Nov 10th but I don’t recall anyone mentioning it here…
Don’t Delay! Buy Or Sell Now! Right?
By Carol Lloyd, Special to SF Gate
Friday, November 10, 2006
Last week, when I received an e-mail press release from the National Association of Realtors previewing its $40 million ad campaign with the slogan, “It’s a great time to buy or sell a home,” I had to read it twice.
Was this a joke? Was there something I didn’t understand about the current market that would engender this kind of overweening confidence?
Now the NAR, like the majority of the agents it represents, is known for its positive spin on the market. This is why its members pay dues to the association: to support, promote, lobby, boost real estate in all its myriad manifestations. Just as we don’t expect Merrill Lynch to recommend closing your stock trading account to buy a nice duplex around the corner, it’s unrealistic to expect real estate agents to recommend avoiding the property racket.
URL: http://sfgate.com/cgi-bin/article.cgi?file=/gate/archive/2006/11/10/carollloyd.DTL
Her column last week was about “bubble bloggers,” this one included. She also picked up on the Casey Serin story fairly early on. She’s undoubtedly a reader of blogs, although how deeply and how often she reads them we don’t know.
Fantastic article! She even mentioned the parody version posted here yesterday (though the link to it didn’t work for me)!
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“Do not use history as a guide when talking about this downturn,” he said. “This is a unique housing cycle we find ourselves in” because job growth remains steady, interest rates remain low and housing continues to enjoy “good economic fundamentals.”
—–
“Those who cannot learn from history are doomed to repeat it.” - George Santayana
Those who believe what David Lereah says are doomed to learn from history.
Maybe better to say “doomed to relive history”…
Maybe just “doomed.”
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Bull! 144 Stupid Statements from the Market’s Fallen Prophets
by Greg Eckler and L.M. Mac Donald
March 1999: Harry S. Dent, author of The Roaring 2000s
“There has been a paradigm shift.” (Translation: “This time it’s different— a New Economy!”)
October 1999: James Glassman, author Dow 36,000
“What is dangerous is for Americans not to be in the market. We’re going to reach a point where stocks are correctly priced, and we think that’s 36,000 … It’s not a bubble. Far from it. The stock market is undervalued.” (Warning, don’t choke on your popcorn!)
December 1999: Joseph Battipaglia, market analyst
“Some fear a burst Internet bubble, but our analysis shows that Internet companies account for only 7% of the overall Nasdaq market cap but carry expected long-term growth rates twice those of other rapidly growing segments within tech.” (The Internet Index lost two-thirds in the next six months.)
December 1999: Larry Wachtel, Prudential
“Most of these stocks are reasonably priced. There’s not reason for them to correct violently in the year 2000.” (Fact: The Nasdaq lost 50% in 2000.)
December 1999: Ralph Acampora, Prudential Securities
“I’m not saying this is a straight line up. I’m not saying you can’t have pauses. I’m saying any kind of declines, buy them!” (He also predicted a 14,000 Dow by the end of 2000 and an 11-year bull.)
February 2000: Larry Kudlow, CNBC commentator
“This correction will run its course until the middle of the year. Then things will pick up again, because not even Greenspan can stop the Internet economy.” (He’s still an economist, hosting his own show.)
April 2000: Myron Kandel, CNN
“The bottom line is, before the end of the year, the Nasdaq and Dow will be at new record highs.” (Later in September he predicted a rally to 12,000 by election day.)
September 2000: Jim Cramer, CNBC commentator
“SUNW probably has the best near-term outlook of any company I know.” (Within four months Sun Microsystems went from $60 to $30, down to $10 in a year, below $3 in two years.)
November 2000: Louis Rukeyser on CNN
“Over the next year or two [the stock market] will be higher, and I know over the next five to 10 years it will be higher.” (We crashed, fell into a recession, and in two years tech lost 70%.)
December 2000: Jeffrey Applegate, Lehman strategist
“The bulk of the correction is behind us, so now is the time to be offensive, not defensive.” (That’s a sucker’s rally.)
December 2000: Fed Chairman Alan Greenspan
“The three— to five-year earnings projections of more than a thousand analysts, though exhibiting some signs of flattening in recent months, have generally held firm. Such expectations, should they persist, bode well for continued capital deepening and sustained growth.” (And the curtain opened revealing the Wonderful Wizard of Oz.!)
January 2001: Suze Orman, financial guru
“In the low 60s here, I think the QQQ, they’re a buy. They may go down, but if you dollar-cost average, where you put money every single month into them, I think, in the long run, it’s the way to play the Nasdaq.” (The QQQ fell 60% further.)
March 2001: Maria Bartiromo, CNBC anchor
“The individual out there is actually not throwing money at things that they do not understand, and is actually using the news and using the information out there to make smart decisions.” (Yes, she’s serious.)
April 2001: Abby Joseph Cohen, Goldman Sachs
“The time to be nervous was a year ago. The S&P then was overvalued, it’s now undervalued.” (Unfortunately, the markets continued down for another 18 months).
August 2001: Lou Dobbs, CNN
“Let me make it very clear. I’m a bull, on the market, on the economy. And let me repeat, I am a bull.” (Within a year the Dow and Nasdaq lost a third more).
June 2002: Larry Kudlow, CNBC
“The shock therapy of decisive war will elevate the stock market by a couple thousand points.” (He also predicted the Dow would hit 35,000 by 2010.)
The Dow didn’t bottom until October 2002. The Iraq War started in April 2003. Soon after, Enron, Spitzer and Sarbanes-Oxley were distracting us from all the B.S. of the 2000 crash, the bear market and the 2000-2002 recession.
And today we must listen to reruns, replayed over-and-over in B.S., the official language of all Wall Street cycles.
Great post Gekko! I know you DCA into index funds, but you and I know that we bought at great prices in the early 2000s. All those famous people pumping equities even after the market jumped over the cliff!
Gekko ” “Those who cannot learn from history are doomed to repeat it.” - George Santayana
Do you think GEBush ever read a book? TV Guide does not count.
Actually, it may be stylish, but it is only monkey see - monkey do to diminish GWB’s intelligence. George W. Bush has a higher IQ than fellow Yale graduate John Kerry. I wonder what the average IQ of Bush deriders is? I’m talking about the peanut gallery, not the politicians. I bet that average is lower than 100. I voted for Bush in 2004, but would have voted Libertarian had I known of his propensity to spend like a Democrat.
Bill I stand by my statement GWBush is unread. He was a product of gentlemen “C’s this was well noted. Personaly I was smart enough to have never voted for him. That is not saying much but on the other hand you were dumb enough to have voted for him.
Enjoy your champion, enjoy your war, enjoy the debt this wastrel has encoured. Glad you stood up to get counted! Moron.
Encoured? Not a word. Incurred is. Careful who you call a moron, moron.
You resemble you namesake.
Yesterday was the one year anniversary of the last “News” post on the condoflip.com site. Yep, that business must be setting the world on fire.
Bubbles are for Bathtubs
Tens of thousands of RE speculators are now coming to realize how true this is…
Bathtubs are for bubbles, not asset markets.
Apologies to the grammarians out there; try
“Bathtubs, not asset markets, are for bubbles.”
A big fart can cause one heck of a bubble.
This was a small layoff of 20 in Kingman AZ from 10/23/06, but it is a national company - Southwire.
http://tinyurl.com/ykk2s9
“It’s one of those things, it’s kind of a necessary evil that was just not good business sense to have half a plant worth of employees to be standing around doing nothing,” the employee said.
“It’s just something that hurts everybody,” but “most everybody has a really good attitude.”
Southwire is one of the largest wire and cable manufacturers in the world. It specializes in residential wire and cable, such as those found in new homes in the Kingman area. Because the new home market has slowed, in Mohave County and nationwide, demand for production at the local plant is down.
“What’s funny is that they’re still building houses, but so many of them remain open,” Dewbery said.
Southwire has had significant quality control problems for years, which has created problems for them staying competitive. It started when they moved the bulk of their manufacturing operations to Mexico in the late 1990s.
There was a graph a few months ago in one of the trade mags that showed tons of raw copper versus profits, and they were well below West Penn (the other major wire supplier in NA). I would not be surprised if these layoffs turned out to be the first step in a major restructuring of the company.
Their management can blame a slowing market, but the truth is that where they were once an industry leader, they are now a company that (like many American firms) imitates rather innovates. They haven’t been able to turn a lot of R&D resources in superconductors into the new highly profitable flagship product that they promised at the turn of century.
Economic slowdown (not a recession!) is predicted for SD in 2007, as a light bulb goes on in Alan Gin’s mind…
http://www.signonsandiego.com/uniontrib/20061111/news_1b11economy.html
but meanwhile, party on like it’s 1999 (or 1929)…
http://www.signonsandiego.com/uniontrib/20061111/news_1n11bars.html
Almost like speak-easys in terms of gala and exclusivity. The goodtimes may never run out for the extroverts that fill these type of stories. I do not even know why this stuff is news to print. Maybe the more distractions we can generate means the more opportunity for the patient, millionaire-next-door types eventually. I get contradicting signals all the time about this economy, both globally and domestically and the likelihood that we are distracted from long-term thinking and moderation. It probably has been like this since day 1 of history. Human nature,uggh.
Can anyone explain some of the presentations in layman’s terms?
http://www.moodyskmv.com/conf06/presentations.html
http://www.moodyskmv.com/conf05/presentations.html
http://www.moodyskmv.com/conf04/confpres.html
Here’s what caught my eyes as I was googling for CDS info:
http://www.moodyskmv.com/newsevents/mc/mc07262004_sin.html
Scary, isn’t it?
IMO, this is the elephant in the room.
A very pessimistic thread at SDCIA. Forget about the problem of the stuck flipper — read the time horizon these investors are seeing for any improvement in prices. Big change from six months ago, IMO.
The link:
http://www.websitetoolbox.com/tool/post/sdcia/vpost?id=1499971
I know a bunch of people who are “waiting for spring.” This makes me think spring will be a massacre. It’ll will be the first “spring” ever that starts in February, as everyone tries to beat everyone else to market.
___________________________________________________
Remember Spring 2006 was going to bring this market back to life. LOL. Keep dreaming Flippers!
Credit Spread Smoking Guns:
http://wallstreetexaminer.com/blogs/winter/?p=99#more-99
Anyone else watched Nightline: here’s a link to their podcast from last night (25 MegaBytes).
Realty Check: Surviving the slowdown. [the first segment: it seems that they showed a part(s) of this before]
And they mentioned 4 sales “gimmicks”:
1) let them eat cupcakes. Armed with desserts, offer cupcakes, water, etc.
2) slash prices: “ambitiously priced” turns out to be overpriced.
3) giving gifts: “incentives” like flat screen TV or vehicle. They quoted an economist claiming that throwing a car makes the home “sexier.”
4) Creative marketing: hiring actors to do birthday parties at model homes.
Stories from the ground floor here in LA. I work for a commercial bank so we have many commercial/business customers that bank with us. We are looking at bringing on a new client who has a lumber business. When I met with the owner he said “I have been through the down turn in RE 2 other times and we are preparing for the third. I employ 100 people but can scale down quickly.” BTW, the COO was in the meeting too. He just shook his head yes. So we called one of our client also in the lumber business for a reference point. He tells us he had his best two yrs in 05 and 06 but is projecting 30% decline in business in 2007.
Stick a fork in this economy in 2007 and beyond…it’s done. The fat lady is warming up. It’s all over but shouting…I mean it’s all over but the filling out the paperwork for BK.
This is why all that BS about “capex” and low unemployment means nothing. The day the consumer finally rolls over is the day the economy dies.
Just what FBs need: telemarketing calls about some worthless product from the jackass who got them into their present housing mess! From Sacramento Craig List P/T Jobs…
http://sacramento.craigslist.org/sls/233065586.html
Brokers, Insurance/Real Estate Agents
Incredible opportunity to make a lot of money in a down market. Work smarter not harder. We have agents making six figures in less than four months simply by utilizing their already-existing client base. Your commission split will be 80% and the best part is that you do no traveling or selling. We have a nine-year-old company that is launching a high tech product . The roll-out is expensive. Additional funding is required and you’ll be helping us saves us a lot of legwork. If you have a client base, you have already done the hard work. Why not prosper on what you’ve already got? This is not a scam or an attempt to sell you some “program” or “system”. No investment required or sought at any time. I will give you full disclosure and references if you are serious. Email me with your best phone numbers, and I will be happy to explain everything. Aggressive agents may enlist others under them and earn overrides.
This is bizarre — a 140 sq. ft. house.
http://tinyurl.com/vtb8y
I went to school at the University of Iowa (Iowa City, IA) - this guy is off the grid I think, too. They have been doing local articles about him for years. He is pretty interesting.
Chip posts “This is bizarre — a 140 sq. ft. house.”
Looks like the FBI is trying to sell Ted’s old house.
From Today’s Honolulu Star-Bulletin:
“Units at the planned Trump International Hotel & Tower in Waikiki sold out for more than $700 million in just eight hours, setting world records for the total dollars and number of units changing hands at a residential development on a single day.”
“About 40 percent of the buyers were from Hawaii and Asia, and the remainder came from all over the world,” Ivanka Trump said. Many buyers came from a database of investors who have bought into other Trump developments, she said.
Buyers paid an average price of $1.5 million. Units were priced from the mid-$400,000s for studios to more than $9 million for a three-bedroom penthouse.”
Prices on Oahu have tripled since 2000. I sold my house last year and am renting, waiting for normality. I may be out of luck, I see also in today’s paper:
“Honolulu had the third-lowest foreclosure rate in the third quarter of 100 U.S. metropolitan areas reviewed by RealtyTrac”
“Honolulu had a rate of one foreclosure for every 3,068 homes in the July-September period. ”
So are we immune to the laws of sane pricing or are we just behind the mainland by a few months? I see lots and lots of price drops, triple the inventory and slow or no sales in the areas I watch.
I’m getting antsy and wondering if prices will ever go down here.
Many buyers came from a database of investors who have bought into other Trump developments, she said.
Oh… that’s clever. A pre-approved list of GF’s!
As to Hawaii being immune? No. Traditionally Hawaii feels the pain of its “host economies” multiplied. When Japan went into recession, Hawaii went down big time. Remember that? When the US goes into recession, even the Asian market cannot substitute for the pull out of US based investors.
This isn’t going to be a little downturn…
Wait. I know you’re antsy. Wait. It went from up, up, up to “going down” here pretty quick (Los Angeles). You’ll see the change in Hawaii by 2Q 2007.
Neil
Asians have one of the lowest foreclosure rates around and they are good loan risks usually ,( I’m going back to prior lending cycles of course ). It might be diffrent this time but I doubt it .
correction =different not diffrent .
Asians are still capable of shame for things like going bankrupt.
Sammy’s got it. However, and Chilidoggg will have to agree, this applies to East Asians (or Southeast Asians). He draws the distinction relative to India, Pakistan and Bangladesh.
Any Stock gurus here?
What happens to one’s “short sell” position if the stock is de-listed from the exchange? Thanks.
wawawa posts ” What happens to one’s “short sell” position if the stock is de-listed from the exchange?”
You win! You get the cookie.
Not a guru, but that’s about the best news a short can get next to a company BK filing. Most funds are prohibited from owning unlisted stocks, so de-listing forces all the major money sources to immediately divest. Congratulations!
Ok AE Newman & The Bear>
But are not the borrowed stock for the short sell supposed to be return to the owner of the stock? Technically that is what supposed to happen , right?
De-listing a stock only means it’s no longer available on that exchange.
If you have an online brokerage account it should continue to show at least partial pricing information after the delisting. You can also check pinksheets.com.
Here’s an article speculating on the future of USG (U.S. Gypsum, a maker of drywall) in light of the housing bust:
http://www.chicagotribune.com/business/chi-0611110081nov11,0,1241458.story?coll=chi-business-hed
Gonna’ build me a house. Gonna’ build it for less than it would have cost last year, and the year before that, and …
Was just reading an NYT article about how Ford “…needed several more days to finish restating previous years’ earnings, the first time in recent memory that the automaker has sought an extension for a quarterly filing.”
And then I think about Fannie Mae, and it makes me sick. Days, versus years.
This is kinna funny:
http://www.violentacres.com/archives/35/mcmansions-are-for-mcidiots
Another “bit” from Random Reading Night:
http://www.spiegel.de/international/spiegel/0,1518,446045,00.html
For those who think the Euro and Germany will trounce our currency. Maybe, maybe not. All is not well in the forests.
Casey Serin — just watched a YouTube video of his. Whatever Casey is, he’s most definitely not a retard. His English structure and usage, in a rambling and obviously extemporaneous presentation, and considering his age and immigrant-family upbringing, was pretty darned good. His judgment is a punching bag, but he’s no dope.
From Mish’s blog (but don’t worry, just keep on whistling past the graveyard)
—————————————————————————————————
Roaring 20’s Comparison
* Florida is once again ground zero on housing bubble bursting.
* The Fed admits it kept interest rates too low too long. See Confessions by the Fed.
* Credit derivatives are soaring.
* According to the International Swaps and Derivatives Association’s (ISDA) Mid-Year 2006 Market Survey, the notional value of credit derivatives outstanding grew 52 percent during the first six months of 2006 to $26 trillion. (see Economic Conditions and Emerging Risks in Banking)
* FDIC-insured institutions also reported a 13 percent increase in credit derivatives holdings, to $6.5 trillion, during the first half of 2006. (see Economic Conditions and Emerging Risks in Banking)
* Margin rules were relaxed.
* US credit quality is in 25-year retreat toward junk
* The US, Great Britain, Japan, China continue to be seduced by cheap money.
* Japan, China and other countries have interventionist monetary policies designed solely to help their exports and keep the US consumer borrowing binge going.
* Greenspan and the Fed simply refused to let the dotcom bubble play out. Instead we saw “Keynesian Folly” that did nothing but create an even bigger bubble in housing, putting off the inevitable one last time.
* The administration is telling everyone how great things are even as we slide into recession.