The Housing Bubble

Especially given that it’s the Berkman Center for technology/internet…

I think Russ Roberts usually records these from his house in Maryland using Skype. The only in person interviews he used to have was when it would be Don Boudreaux or Tyler Cowan when Russ was a prof at George Mason. Now I think he’s only affiliated with Stanford/Hoover Institution/Library of Economics and Liberty.

Spook, look up his podcast with Thomas Sowell, it was pretty good. He also has done podcasts on the “prison industry” and other offbeat topics like trying to purchase a car in the Laurel, MD area (about the economics of what is really reflected in a car price from a dealer).

You really expect better from Harvard? They gave us the Kenyan-born Sharia Law gay rights President *and* a First Lady who is illiterate and yet uber-elitist.

You really expect better from Harvard?

No I don’t. Outside of Obams, they also gave Bush and Gore.

Harvard is a joke!

Agreed, P is clearly the cream. Bill Bradley should’ve been the nominee instead of Gore, he would’ve prevented the travesty of the Bush years because he’s not a robotic, sycophantic moron. And Joe6Pack would’ve connected with Bradley because of his Naismith Award, Olympic Medal, and NBA hall of famer status.

I think that Glenn Beck traced our current problems back to Woodow Wilson, a former president of Princeton.

Well if Glenn Beck says it, it must be so.

Obviously schools produce people on both sides of arguments, so my “P is superior” was tongue in cheek. For example, Alito went to P, but so did Sotomayor and Kagan. Anthony Kennedy went to HLS, but so did Scalia and Roberts.

Joe and people get mad at me for calling him Ohbewanna!

You really expect better from Harvard? They gave us the Kenyan-born Sharia Law gay rights President *and* a First Lady who is illiterate and yet uber-elitist.

aNYCdj, please never change. I was laughing at loud at this for a solid 2 minutes. It made my week.

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Joe and people get mad at me for calling him Ohbewanna!

You really expect better from Harvard? They gave us the Kenyan-born Sharia Law gay rights President *and* a First Lady who is illiterate and yet uber-elitist.

Cloud BS? And here I was, thinking I was the only one who held that opinion.

The cloud isn’t BS, the only thing that kind of stinks in most people’s eyes are the “cost savings” associated with it. For mid/large companies, the cloud is often going to cost more than on-premises hardware.

The reason, IMHO, that companies continue to push towards the cloud is that they simply cannot recruit the people to run an internal DC. Those people are far too expensive and you need way too many specialized folks to run even a moderate size DC. Kind of the same reason that people have GM build cars using robots rather than build them at home. It’s too expensive to get someone to program the robot for you, and the device itself is very pricey and has a limited usable lifetime.

The “push” to the cloud, IMHO, is driven primarily by labor shortages in the IT industry. If you could hire good people for 50-80K to do DC work, you wouldn’t see as much desire. However, as it currently stands, even a SMALL DC is going to require at least 5 people (network, storage, server, applications, infrastructure) with an average fully loaded salary >100K each.

Owning computers is becoming much like owning a Gulfstream. Yeah, it’s nice, but it’s so blindingly expensive that it’s only for those who are totally price insensitive.

The network cloud used for critical data is a bad idea that will bite us all in the but.

Big time.

“Owning computers is becoming much like owning a Gulfstream.”

Uh… no. This is market(ing) BS eaten up by the gullible.

“Uh… no. This is market(ing) BS eaten up by the gullible.”

For some companies, I would agree with you. For a lot of SMBs, it makes no sense what-so-ever to own hardware anymore except for very corner case situations. If you look at a cloud that costs 35K a month, or even 50K a month, there’s no way you can hire the very base minimum people to do the care and feeding of that infrastructure (forget about power, cooling, space, etc) for MRC associated with the cloud.

Now, large enterprise; fed government.. Here, I agree with you. A lot of the companies adopting cloud have data centers that rival the cloud providers. They have 1000s of servers and PB of data. These guys should not be looking for a utility model, there’s no savings in “scale” and they already have 24X7 support staff wrapped around their infrastructure (probably at a lower cost). Interestingly, this is where most of the market is today in cloud; it’s the people who benefit the least financially who are the fastest to “suck it up” and move it to the cloud.

When you’re looking at very small shops (5-25 servers/VMs), the cloud is a no-brainer. Costs to do it “right” locally (redundant everything, enterprise grade hardware, etc) is many times the cost of doing it in the cloud. That’s no marketing BS, that’s the reality, I see it every day. Spend on IT goes from 1M/year to 300K/yr (hardware costs) all the time for these smaller customers.

I think the Gulfstream analogy is a good one. The only way to have a jet make sense is to keep it in the air moving all the time (lowering the cost per hour flown). Same thing with servers. Buying an infrastructure and loading it to 15% of capacity is a huge waste of money, and yet, it’s very common with small/medium size customers. Storage arrays that can support 500TB of data that have 50TB online; massive overallocation; this is what the cloud helps with. If you’re going to buy and use 50 blade servers and 500TB tomorrow, you’d be better off owning it. If you think you might get there 3 years from now, but today you need 50TB of storage and 10 servers, that’s a whole different ballgame.

Just the very basic infrastructure, a tier 1 or 2 SAN and core switching is going to run >1M bucks. And that’s before you’ve done anything; no people costs, no racks, no management, etc. A lot of customers who were looking at a 1M dollar refresh are running on clouds for 20K/mo. The breakeven is “never”, but the time the purchase would start to cost less than cloud, the hardware would be EOL and need to be replaced.

I agree with you that the technology is grossly overhyped, and, also, I’d agree that in many cases customers don’t see much/any cost benefits. But it does have it’s place; a very high percentage (60%+ would be my guess) would see huge cost benefit moving to the cloud.

Until the company they are using has a massive date breach and they are blamed for not having their own infrastructure which they could have held to a higher level of protection. The cloud companies are such huge tempting targets where the medium sized business wouldn’t have been worth hacking at all.

“For some companies, I would agree with you. For a lot of SMBs, it makes no sense what-so-ever to own hardware anymore except for very corner case situations. If you look at a cloud that costs 35K a month, or even 50K a month, there’s no way you can hire the very base minimum people to do the care and feeding of that infrastructure (forget about power, cooling, space, etc) for MRC associated with the cloud.”

+1 I totally agree.

The unrealized benefits are scalability and continuity of operations. Rapid growth often involves lots of waste as consultants are called in late well *after* TSHTF. A natural disaster or riots can quickly drag a firm’s IT infrastructure to its knees. Working with a services provider and data center is a smart move, IMHO.

The network cloud used for critical data is a bad idea that will bite us all in the but.

Big time.”

They are not doing that, they are placing data centers on site , going out and back in with data is not desired.

At least thats what fast talking marketing guy was telling us our high speed data chips where going to be deployed. In the basement of big Bank buildings.

It won’t be Huawei equipment in these Big Banks if the US government has it’s way it will be CISCO

Huawei will setup back door spyware in their telecom equipment

good point but i wouldn’t be living here with a car like that gimme and open road and no speed limits….

t i wouldn’t be living here with a car like that gimme and open road and no speed limits….

Says the guy who ‘can’t’ leave NYCity because his girlfriend can’t drive.

Or is the car enough to make you dump her?

But I’ll bet in a pinch i could sell the T bird quicker and maybe even a little profit.

I was never into cars. I appreciate a good looking high performance car, but my concern is just getting where I need to go.

And I thank those that have nice cars and keep them shiny. When you are riding in your car you don’t get to see how nice your own car looks. But those of us driving next to you do.

Shoulda said Takoma Park, not Takoma. But I still wonder what enclave is giving up $550K houses. I saw one last spring that was for sale for $525K: 4-level split with nice finishes. But it still was a 4- level split, not a Craftsman or a Tudor Revival like near the Takoma Metro.

The “nice area” near Wisconsin/Bethesda is Chevy Chase. You have to get further east to get to Sliver Spring. There are nicer parts of Silver Spring. There are also some very mediocre ones.

want open immigration and lots of regulation on businesses.

Isn’t that a position of a certain political party, too?

does that mean i’m destined to be a wage slave for the man?

In the same vein…..

Caught In The Cyprus Crossfire: Small Businesses Suddenly With Zero Cash

One of the prevailing false conventional wisdoms about the Cypriot cash confiscation is that it primarily affected rich, tax-evading individuals of Russian origin. Alas, those same individuals are likely to have been least affected, as subsequent discoveries of capital control breaches by the “richest and best connected” reveal, while increasingly it appears that the uninsured depositors on whose back the nation of Cyprus was bailed out are small and medium corporations, who had been parking cash for net working capital purposes with Cyprus’ banks, cash which is now gone forever to feed the creeping insolvent Euro-monster, and which can’t be used to fund such day to day business activities as payroll, purchases, and business operations.

does that mean i’m destined to be a wage slave for the man?

Only if you are lucky, you will be a wage slave for the man. If you are VERY lucky than you will work for the government.

Isn’t that a position of a certain political party, too?

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Both.

Exactly joe. I’ve been trying to get this message across for years.

People keep blaming gov when it’s the big corps USING the gov to restrict competition.

But you can’t fix our kind of stupid.

the uninsured depositors on whose back the nation of Cyprus was bailed out are small and medium corporations, who had been parking cash for net working capital purposes with Cyprus’ banks, cash which is now gone forever to feed the creeping insolvent Euro-mon

Interesting to watch the Germans completely muck up the handling of the economic crisis, the euro, and the European banking system. Is there some subtle goal they are pursuing that most of us can’t perceive, or are they just making ‘no mistakes but the largest’, which is what I think Churchill accused them of.

Standing by his misrepresentations is your problem, not joe smiths.

I’m not disregarding him, merely pointing out his RE puffery.

‘Puffery’? If you say so.

He brings a lot of data is what I see mostly.

You’ve value misrepresentations. Good for you but you’re in the wrong place.

You know what they say about data/statistics, right?

Economic data is ripe with half truths, overstated “trends” and so forth.

The correct use of economics, IMO, is descriptive and naturalistic, not normative or predictive. Hayek, Friedman, and others would agree, btw. Unfortunately, economics — esp as used by business — has been bastardized by our age of CNBC convincing everyone that they can be an expert if only they study the “data”.

Actually ibbots, I’ve been on the RE investing side of things for a bit over 15 years now. It’s just that during the bubble, we avoided residential RE like the plague–HBB was one of the few places that I could keep sane while everyone around me was talking about “insatiable demand”, and “permanently high plateaus”. Post crash, we stepped back into the residential market–primarily buying land on the cheap.

“buying land on the cheap”

LOL

Uh huh…. and you’re going to find out just how bad you got ripped off.

So now the truth comes out. You have a stake in the direction of prices, hence your incessant stream of lies on a daily basis.

Thanks for walking into that one.

I think Rental Watch’s objection was that the CPI calculation is flawed and variable, thus long term (housing) price graphs are going to be flawed.

But, regardless of the accuracy of that point, one can see that in spite of a percent or three difference, that the price growth for the last 30 years has been extremely dramatic, going parabolic starting in the late 90s.

Caution though: Looking at things in the aggregate can hide important details.

One has to wonder why the increases in prices. Well, one has to look at Lew Ranieri and the advent of mortgage securitization. This allowed lenders to separate themselves from repayment risk, creating a core perverse incentive in the debt markets. That perverse incentive was to create as many big loans as possible, minimize costs associated with creating the loans in order to get the largest possible profit. This model blew up in the late 2000s.

However, instead of forcing losses on market participants, and winding down the system, the Fed and government stepped into save the system. It was in politicians interest to do so. The Fed also believes the system is worth saving.

The core driver behind bad debt in the world today is the ability of lenders to separate themselves from repayment risk, because of the perverse incentives that creates. AND, instead of the market forcing discipline on this flawed system, governments and central banks step in to save it because they believe it’s in their interests.

Are there other factors involved in house prices? Certainly. Population growth and raw demand. BUT - I remember researching Baltimore City’s population growth through the height of the bubble. It had, and has been been consistently losing population for decades. Yet prices were going parabolic. 30,000 dollar rowhomes selling for nearly 300K dollars, that sort of thing.

So - maybe CPI is flawed by a few percent. But even if totally true, one can still see the parabolic price increases. And one can still see the global debt crisis caused by the generation of bad debt, enabled by the lender’s ability to shed repayment risk and government guarantees of private debt and backstops of private companies.

The CPI flaws compound annually.

A 1.3% understatement for 15+ years makes for a big difference (from just after the Boskin Commission).

Including or excluding this understatement is the difference between concluding that home prices are still way above the inflation adjusted “normal”, and concluding that we are at an inflation-adjusted trough.

And PW, I’ve never hid the fact that we bought land post crash. I’ve simply been sharing data that are the key drivers to our thinking.

And you paid massively inflated prices.

And you have a stake in the direction of prices.

What’s odd here is we all see your inability to see your own corrupt thinking.

http://www.lincolninst.edu/subcenters/land-values/metro-area-land-prices.asp

Download the spreadsheet and study it, especially inland CA (Sacramento and San Bernardino markets). Land values reached NOMINAL ~30 year lows in the inland CA markets during this crash. Since due to NIMBYism and land constraints near the coast, this is where the faster growing markets have been located, and where faster growth will resume.

Yet little new land has been processed for entitlement during the crash…as growth resumes in these markets, there will be an imbalance of supply/demand for approved land in these markets.

You’ll note a tick up in values starting in Sacramento and San Bernardino in Q2 and Q3 of 2012.

“Economic data is ripe with half truths, overstated “trends” and so forth.”

Data are just data. Only until they’re organized into some form do they gain value and have useful purpose. The issue boils down to who is organizing these data.

BTW, Neuromance, I don’t object to the flawed nature of the CPI calculations–I object to their variable nature.

If the flaw is a consistent flaw, then over time, the trendline created may not be correct in absolute terms, but it will be based on relative terms, and you can still draw a conclusion as to where we are relative to the trendline.

When they start changing how CPI is calculated in the middle of a data series…that becomes problematic with respect to where the trendline should be.

“Land values reached NOMINAL ~30 year lows in the inland CA markets during this crash.”

And they were still massively overpriced but you paid it anyways.

And now we know why you’re here for the last 18 months lying about the market.

“…CNBC (et al) convincing everyone that they can be an expert if only they study the “data”.”

Data that you are only getting PART of.

Which is where the Internet comes in. And even then, you still have to sort through a lot of BS.

He brings BS that fits into your realtor dogma.

It means don’t buy.

nice bob and weave Pimp, i used to know a HOA management guy who could deflect anything thrown at him, nothing would stick, used to call him Teflon man.

You got the right answer…. You just don’t like it.

It means don’t buy is exactly the answer.

Especially if you don’t know how to shop.

Bingo

Gold nuggets. Stupid Maxipad!

Most expensive partner I’ve ever worked under was Mary Beth Forshaw who was billing at a shade under $1000/hr. back in 07. (I was in LS at the time, spent the summer at STB.)

I’m not going to lie to you, she was worth it to the clients. One of the best at what she does, and in what she does, the pools of money at stake are enormous.

The way partners really make money isn’t just on their own billable time, it’s on how much work they can bring in and parse out to associates and of counsel.

Partners at places like Wachtell Lipton probably rake a lot more per hour because they’re being paid by the underwriters of deals. And the work they do is very innovative. (You could argue that the innovation is bad because it serves the wishes of the .01%, of course.)

Second best probably Mary Kay Vyskocil. Also worth $1000/hr.

Both of them you named are women. Do they also provide other “services” beside legal?

How inappropriate!

partners at 700+/hr

some are worth it…most aren’t. Was on call the other day with a big NY tax partner at a big law firm. He was an idiot.

same firm though a few years back…worked with one that was the smartest frackin tax person I have ever met…worth every penny. He ripped a part a Deloitte tax memo in 15 minutes that two DT tax partners (and staff) spent several hours reviewing and preparing.

Both of them you named are women. Do they also provide other “services” beside legal?
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Not much to look at, to be honest.

If I named the big players at current job, all 3 are men. And I don’t know their billing rates, I have only seen bills out of the corner of my eye.

Billable hours - reminds me of a story.

So a middle aged lawyer is walking down the street and BAM! hit and killed by a street sweeper.

So he gets up to the pearly gates and St Peter is there to greet him. Well, the lawyer is pretty miffed and registers the following complaint with St. Peter

“Look St. Peter I am not ungrateful to be here but what the heck? I am a hard working, honest 46 year old man, with a beautiful wife, great kids, living the dream, why me, why now???”

St Peter looks at his clip board and says “D’you say 46 years old? There must be some mix up. According to your billable hours, you’re 98!”

It is trendy to be against The Koch bros. that’s why.

I can’t tell if you talking about an ever expanding government that destroys liberty, freedoms and economic opportunities or not…

but you do, and their future is sh*t. and their kidz future is sh*t. it’s gonna get worse, and then it’s gonna get more worse. and we’ll do our part to help make it worse, because we’re not an al gore hypocrite about the environment.

I can’t tell if you talking about an ever expanding government that destroys liberty, freedoms and economic opportunities or not…

The problem is where were you when Bush and Cheney did the same thing?

The problem is where were you when Bush and Cheney did the same thing ??

Cheerleading thats what 2-fruit was doing…

A male cheerleader, just like his friend W aka “43″.

I agree that climate change isn’t going to screw us in the next 50 years, but when you and I are 65, if we leave our enclaves we will be surrounded by slack-jawed white trash teabilly spawn and other assorted detritus.

I think that is the far larger problem over our lifespans.

we are very much looking forward to burning half a tank of gasoline this weekend to spend several hours skiing and riding chairlifts powered by electricity from burning coal. and by doing so contribute to continued global climate change that means future generations will not have any snow to ski on.

you’re welcome.

Unfortunately I tend to agree with you Joe…I think the wealth gap, lack of real middle class opportunity are the driver…

that’s why it is irreversible.
I would term the process “self-correcting” as that’s what it does, one way or the other.

“selling carbon credits”

I think this is a bastardization of the true liberal dream. Carbon credits were a political compromise with the free marketers.

It may not have been too late to do something when Carter was in office. It may not have been too late when carbon credits were first proposed.

In terms of people breeding and their impact on the planet, we should be encouraging all forms of birth control. Free birth control and free abortions on demand.

I suspect many of the climate change deniers among the religious right understand this. If they can successfully deny the impact of humanity, they will not have to deal with fighting the proposed solutions that they find unpalatable.

They have allied with the industrialists in this fight, who do not want to have to absorb the externalities of their products.

Who’s the first?

Samuel L Jackson?

Hell no, Sam Jackson only plays one on tee-vee.

This guy has to walk around in the “real world”:

http://www.youtube.com/watch?v=F0sk4yGaEk8

“Hell is other people” - Jean Paul Sartre

We are most concerned about high altitude and high latitude animals’ loss of habitat and extinction.

The role of humans within the global ecosystem is like cancer.

The role of humans within the global ecosystem is like cancer.
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Just to see him argue this with you, I wish that Dio aka nick papagiorgio aka AQ Dan hadn’t been banished.

“Hell is other people” - Jean Paul Sartre

And the best way to decrease global warming is to put on a condom, but don’t expect immigrants from Mexico, India, China or Africa to agree.

Too many people. Way, way too many people. And awfully resentful looking people, I might add.

Goon, its like that everywhere. Major shortage. I know it sounds crazy, but I think we are the frogs in the pot of water. The optimist in me says that there will be cheap, cheap ammo in the years to come if collectively people realize they hoarded something only good for killin’ and scarin’ and woundin’ and target practice and not much else. The doomsday in me says that I will not be gettin’ to the choppa.

not sure how obama being born in kenya and my anecdotal tale of retail ammo shortage are related, other than that they both warrant sharing and discussion

if you’re racist against black people, then ‘obama born in kenya’ is effective. and if you don’t like muslims, then ‘obama born in indonesia’ works.

but the part about him trying to take our guns away is now unfortunately true.

oh please, he wants universal background checks and limits on the same guns as Clinton’s “Assault Weapons Ban”. not the most important issues, IMO, but not totally crazy either.

it doesn’t strike anyone else as interesting that the “3″ of them (all had hard ons for kicking brown people out of the country) disappeared at the same point in time?