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- can'
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OpinionsPlease,

So your friends sold their stocks in 2001 and then paid cash for their properties, right? That's really good for them that they did that. If you have enough cash to pay cash for your property, then by definition it is never a bad time for you to buy.

It's true that here in the Bay Area, and probably in nicer parts of LA and Vancouver, there's a lot of wealthy immigrants from China and India who are doing that.

But outside of the Asian enclaves on the coast here, and aside from your five friends, probably most of the "stock money" that rotated into real estate either went into REIT funds, or the those securitized mortgages. If it went into a house purchase, it was probably a downpayment, the rest of the purchase capital coming from investors in those securitized mortgages. I'm acquainted with a few of these "investors", buying homes to rent out. They all got some financing.

As home values fall, is the US heading for the much-feared 'hard landing'?
By Rupert Cornwell in Washington
Published: 28 February 2007

"The latest figures yesterday from the National Association of Realtors if anything bear out this thesis. True, the median price of an existing home dropped to $210,600 (£107,500) last month, 3.1 per cent down on January 2006. But the number of sales jumped by a similar amount, suggesting buyers and sellers are adjusting to changed circumstances. "I've been hemming and hawing for the last few months on whether we've reached rock bottom," David Lereah, the NAR's chief economist, told the Associated Press.

Now, he believes, the nadir may have been five months ago. That too - at least until yesterday - was the mood of the markets..."

http://tinyurl.com/2l77y2

OpinionsPlease,

Asset bubbles do not always arise rationally nor do they always contract rationally. Several good books have been written on them. It is entirely possible for a bubble to run its course and simply have the zeitgeist change, even with favorable market conditions.
Do you know a Realtor named ConfusedRenter?

However, it is misleading to call it an APY of 60% since you will never be able to compound it because your company won’t let you :)

I used APY because I wanted to get the message across. It's not just that company won't let you compound, no matter how long the ESPP period is - quarter or six months - your gain is 17% (assuming 15% discount) for THAT period. If that period is 1 year, ESPP is not as great - as your return is 17% for 1 full year of investment.

So it's like a great CD which matures every X months. For that period it gives you 17% return - minimum, and almost guaranteed if you do a same day sale. How do you compare it with other CDs ? Either you divide that CD's APY by 12/X or multiply this ESPP return by 12/X to compare. That's what I meant.

"Wise in their own conceit, they imagined they could avoid his faults, carry on their schemes for ever, and stretch the cord of credit to its extremest tension, without causing it to snap asunder."

The South-Sea Bubble, chapter 2
Memoirs of Extrodinary Popular Delusions and the Madness of Crowds
Charles Mackay, 1841

Home Prices in Slide with 'No Sign of Bottom

The composite month-over-month Standard & Poor's/Case-Shiller Home Price Index of 10 metropolitan areas declined 0.8% to 222.01, unchanged year-over-year, S&P said on its Web site. The composite month-over-month Standard & Poor's/Case-Shiller Home Price Index of 20 metro areas showed a 0.7% drop in December, a 203.07 reading, and a 0.5% year-over-year gain.

"The slide at this point is a good deal steeper then we saw at the beginning of the decade and we don't see any sign of a bottom," David Blitzer, S&P Index committee chairman, told CNBC. "These are the worst numbers in at least ten years."

Blitzer also told CNBC that the impact of the subprime mortgage market could further depress home prices: "The damage from the subprime mortgage market probably hasn't shown up in home prices yet," Blitzer said. "That will take a lot of buyers out of the market, and fewer buyers probably means weaker prices and less hope of a turnaround."

"Annual changes in home prices are either in decline, flat or yielding negative returns across all markets," added Robert J. Shiller, chief economist at MacroMarkets LLC, in a release. "All metro areas are showing smaller annual returns than those reported for November...."

http://www.cnbc.com/id/17361391

1) Randall would you kindly delete the troll surfer-x comment above? "I dream of HARM and Peter P" While true, I didn't post it.

2) OpinionsPlease? I am of the opinion that your mother should eat less corn. I mean really fuckwad shouldn't you just go the fuck back to craigslist where you belong? Shooo Shooo little troll.

I enjoyed the metaphoric paragraph on the Puplava website today. (http://www.financialsense.com/Market/wrapup.htm)

Like a plate of Rice Krispies, the theme of the day is Snap, Crackle, Pop, as in “Snap” goes China, “Crackle” goes Freddie Mac, and “Pop” goes the Sub-Prime Market. The end result will be a messy brew of another breakfast cereal, this one a soggy bowl of Captain “Credit” Crunch. Within the Credit Markets, we see a contagion well underway. Just look at the destruction on New Century and Novastar Financial. Piloted straight into an asteroid belt, in both cases, we see the proverbial “wrecked” ship with a dead crew. Yet, the ripple affects reverberate up the quality chain, as Wall Street is loathe to mount a brave front in the face of invading hordes.

I'm late to the party, but I figure it's not too late to chime into the Bubblehead roll call.

I'm 30, single, debt free and work as an engineer. My current position is heavily cash and money market (I haven't liked the stock market lately), but I do have an overweight position in tech. I rent an apartment. The housing bubble is hard to read here--prices never went through the roof in Northern Colorado, but jobs are stagnant and the area is teetering with so many foreclosures. Prices have to come down. If they don't in two or three years, then maybe I'll buy anyway ($100-120/sq.ft. for a nice SFH is still reasonable to me). I don't currently need the space so there's no pressure, although my own job situation has stabilized a lot in the past year.

If I had $3M, I sure as heck wouldn't buy a McMansion in california, I would buy this: http://www.luxuryrealestate.com/565677 :)

Oooch ya wee b----rds, get off me firth afore ah fetch me claymore!

pack up the house and sell the children. We are headed for recession.
If you didn't see it coming the last few weeks, you were slapped upside the head today.
I'd put the 401k in the money market fund. It's not great but it may be the best damn thing available.

Surfer-X dreamed of me?

I miss Sir Surfer. :(

His mac-n-cheese with prosciutto from the last blog party was excellent.

What do hedge fund managers drive?

My wife was arguing with me about that on the way home.

jt: As with anything else, it does take some interest to get good at money. I rather enjoy math, psychology and money, so I spent hours each day reading about the stock market and other finance. If you don't like managing money, you should consider hiring someone like DinOR to run your books and make good decisions (on a fee basis, not a percent).

Not investment or legal advice.

I recommend random walk down wallstreet as a good place to start.

Every college grad should be forced to accept the random walk theory.

Looks like the China Slide isn't over yet. More fun to come!

jt in sf Says:

> How do people learn about finance? I should learn too.
> I’m a scientist, we don’t earn jack. People look at us as
> if we must be smart, but I could earn more in HR, or
> almost any other field. It’s really lame. People talking
> about puts and stays? Did you study in school, get MBAs,
> read Wall Street Journal? It all seems so boring.

Everyone with a MBA does not make enough to buy $10mm homes in Pacific Heights (like the Biotech MBA that bought the place in SF Woman’s neighborhood last year). The guys that make the big money are usually the guys that are able to raise the big money (not necessarily the smartest guys). There is a small group of guys who can pull together $300mm to try and develop a new cancer drug.

Before commercial landlords allow a firm that is not making money (like most Biotech firms) to sign a lease they will get a full package (with Resumes, CVs and salary information of all employees) from the firm to calculate the “burn rate”. I am always amazed when I see that the IT guy with an AA degree from a JC will make more than a brilliant scientist with an undergrad degree from Harvard, a MD from Stanford and a PhD from UCSD…

P.S. You might want to try reading the WSJ again since the new format (and new size) is designed to make it appeal to women and guys who are not “finance guys”…

jt in sf

Thank you for sharing. Your lack of formal education is in finance is an asset: it means that you haven't been dumbed down in Business School, nor brainwashed by the mainstream finance media.

Just use your scientific inquiry and skepticism as you read up on stuff, and don't lose sight of the experience of the common working stiffs as you make your own assessments of the big picture.

SP Says:

> Beyond that, there are educational sections of sites…

This reminded me that Bob Brinker (who is on AM radio all over the US every weekend talking about finance and investing) has a good list of finance books on his site. Take a look at the list and go to Amazon and read the reviews and pick out a couple that may interest you.

http://www.bobbrinker.com/books.asp

sfbubblebuyer mentioned on here that the China Slide continues, but I just looked on Yahoo finance, the Shanghai composite index was up as of about 10 PM California time. So was the Taiwan index, a province of China.

But it is interesting, all of the other asian-pacific indices are down. I don't really trust Communist dictatorships, so I wonder if there's some manipulation in the Chinese market today.

Just as expected, the Chinese government immediately came out to "clarify" that there would be no capital gains tax levied. In fact, there was such a plan, I guess the 9% plunge just nipped it in the bud.

Fund houses closely linked with the government were also "advised" to buy. Now the Chinese stock index is up 3.x%, nothing to see, move along, move along.

There is another reason why a stock market crash is not "allowed". The communists are about to have its 17th Pow wow shortly, everything has to look prosperous and cheerful at the pow wow showdown of the Chinese achievements.

Are there any DINKs here who make less than $200k?

OpinionsPlease,

I appreciate your reasoning. There is a component of age and case that plays into one's "utility curve". Or in other words, 'what money's for'. I think Peter P says it best: buying at any time regardless of market conditions is not necessarily a bad idea as long as you know what you're getting into.

I'm still going to wait a while yet though.

The most recent market report from Stratfor claims that the drop in China was engineered (at least at initially), saying: 'On Feb. 26, China's State Council launched a new "special task force" that accurately could be referred to as the "get-those-idiots-to-stop-borrowing-to-gamble-on-the-stock-exchanges" team."' (The impact on other markets being an unexpected side effect.)

Expected future drops could come from Beijing wanting to bring down their overvalued exchanges (more engineered crashes), people realizing Beijing did this intentionally, or just because the stocks are still massively overvalued.

Anyway, tomorrow is one morning I plan on waking up early.

jt in sf:

How do people learn about finance? I should learn too. I’m a scientist, we don’t earn jack. People look at us as if we must be smart, but I could earn more in HR, or almost any other field. It’s really lame. People talking about puts and stays? Did you study in school, get MBAs, read Wall Street Journal? It all seems so boring.

You don't need an MBA to learn about finance. An MBA focused in finance will help if you want to make a living off of it.

But scientists are smart, usually. Assuming you are such, just read some of the good finance primers and apply it to some stuff in real life for case-examples. I have a couple good books on my blog (click my name). Actually, the little WSJ guide to finance is really good. It comes off as a little bit "Dummy" series with all the graphics and pictures, but the content is stellar. The higgins book is also a big recommendation if you want to understand market and corporate finance stuff.

Finance is easy for scientists, and others who can do math, to understand. It is accounting that perplexes otherwise smart people. Luckily, you probably don't need much of that. And economics...well...we won't go there. Everyone thinks they know economics. Economists wake in cold sweats fearing they don't.

I think one HaHa was defined as $100k.

I could be wrong.

requiem,

I highly doubt that they engineered something with such a deep plunge. The #1 thing that Chinese care about is face, particularly the Chinese government. They want to look prosperous, rich, doing well even if others are not. So it might have been an engineered effort to calm the market a bit, but something must have gone off the plan when the market took a sharp dive.

But anyway, the current uptick is certainly the Chinese PPT at work. I expect the American PPT get back to work tomorrow morning.

How dare you, one Ha Ha = $150K @ '06 dollar. One HaHa equals how much Ha Ha made in 2006. in fact it was $160K, but we decided to round it up for simplicity reason.

Yah, when I looked, it was on the down side as it opened. Now it's back up quite a bit after the government said "No no! We won't make you pay taxes on capital gains!" Apparently the mere idea of paying taxes is all it took to spook 10% off of the market over there.

The most "intriguing" part of the bounce on the Chinese market is, most of the upward movements are pulled by the real estate sector, which is clearly a dog, because supposedly the Chinese government doesn't want the housing price to stay so high, at least in public. A lot of the real estate developers, closely tied to the government, are buying back their shares.

That's why I said that this whole notion of Chinese government attempting to mop up the liquidity is very questionable. They WANT liquidity. China is struggling to fend off deflation as we speak, the only spike in price in the economy so far is confined to agriculture, gas, telecom, water, etc. essentially all sectors that are monopolized by the government. If the government genuinely cares about controlling inflation or mopping up liquidity, why would it instigate such price increases in the last few months?

Well, looks like they recovered a bit of their 9% down day, but the rest of asia tumbled further.

My stock loss yesterday probably topped 10k. More to come, I'm sure.

Hey Co-oper, a shout out right back at you.

Which house did you live in? My wife and I originally met in Chateau in 1990. I was interested in her then, but she thought I was too old for her (six year older). Ten years later we started dating, after a co-op reunion.

I too think that the Chinese market is heavily manipulated. I think I am going to sell my LFC puts, which went up 500% yesterday (but only doubled from where I bought them in late December, alas).

Here, I thought you would all be amused.

It is the sub-prime morgage index:

SFWoman et al,

True, the median price of an existing home dropped to $210,600 (GBP107,500) last month, 3.1 per cent down on January 2006. But the number of sales jumped by a similar amount, suggesting buyers and sellers are adjusting to changed circumstances.

CODSWALLOP

Even Lareah notes in the NAR release that the January sales numbers, while "seasonally adjusted", have probably been positively impacted by the unusually warm weather.

He also notes that the bad weather in February is likely to make next months seasonally adjusted numbers low.

While I am still gobsmacked at the fact that the NAR is carefully explaining away good news, I do note that this new-found determination to tell the truth does not extend to telling the whole truth.

Consider that 3.1% YOY drop. When I heard that number, a little bell went off. "Wait a minute" thinks ajh, "I seem to recall that last month's EHS report stated that December YOY prices were flat?"

Indeed it did, although, since the NAR's numbers are now to the nearest hundred rather than the nearest thousand, the revised December 2006 figures show a slight YOY fall.

So, that 3.1% YOY drop is also a 3.1% MOM drop!! Wouldn't take too many drops like that to spoil an FB's whole year.

Now if that isn't dramatic enough, there are significant regional variances in the median change. To pick a region at random (not ;)), the Western region median for January 07 is $27,000 lower than December 06.

This is a 7.5% monthly fall. OK, I know medians do not tell the whole story, but a fall of that magnitude has to be saying something.

On another blog some US Census figures from 2005 were quoted during a discussion about income distribution.

If the quote was accurate, something like 1.2% of US household incomes are above $250,000/year. Another 1.6% of household incomes are between $200,000 and $249,999.

Assuming the rate of dropoff is roughly constant, a household income of $300K would put you in about the top 0.5% nationwide. That may not fit the "live well on unearned income" definition of upper class, but by any other measure a household on that level of income is well above middle-class.

ajh,

The weather has been so miserable the past few weeks I can't imagine anyone out looking.

I think part of the SF definition of 'middle class' and 'upper middle class' really has to do with people comparing themselves to neighbors who either 1) are making astounding, heart wrenching amounts of money ($50,000,000/yr-truly) or 2) live far beyond their means.

You see an article about Mr. $50,000,000/year and you think you are poor, or you look at the toys and clothes that the 'live beyond their means' neighbors have and you think that you are less well off than you actually are.

People here spend a great deal of time comparing themselves to other peoples' stuff. Self esteem seems to have a very, very strong material focus here. Maybe it's like that everywhere in the US, I don't know.

sybrib,

Your 6:42pm post from yesterday described the dollar flow exodus from equities and into REIT's/MBS w/perfection! Victory Lap please! :)

What made things worse was that many people REFUSED to contribute anything to their IRA's. I couldn't get anyone in our funds div. to provide any data but our calcs from the retail securities side were absolutely awful!

Given our core client demographic (Nike, Intel, Mentor Graphics, Columbia Sportswear etc.) employees in their 40's and 50's ret. contributions for 2001 and 2002 were almost non-existent. It's hard to say how much of it was from outright fear (but I suspect) much of it was done out of protest. Of those that DID make a contribution, they INSISTED it be left in cash so it was done grudgingly and purely for tax reasons.

SFWoman,

I just know you weren't referring to daytrading "southsiders" now WERE you? :)

ajh Says:

> On another blog some US Census figures from
> 2005 were quoted during a discussion about
> income distribution. If the quote was accurate,
> something like 1.2% of US household incomes
> are above $250,000/year. Another 1.6% of
> household incomes are between $200,000
> and $249,999. Assuming the rate of dropoff
> is roughly constant, a household income of
> $300K would put you in about the top 0.5%
> nationwide. That may not fit the “live well on
> unearned income” definition of upper class, but
> by any other measure a household on that level
> of income is well above middle-class.

Remember that $20K a year will put your household in the top 1% of the WORLD (there are a lot of poor countries out there).

The guy who makes $300K in rural Ohio from his successful welding company will feel like he is upper middle class (since he will be making more than almost all of his friends, relatives and enployees)…

The kid who is pushing 30 living in a tiny Manhattan apartment working long hours as an analyst will feel like a complete failure and a poor loser if he is only making $300K (less than almost all his friends and co-workers)…

Brand,

I'm truly flattered that you would consider me a resource for new investors but I don't post here in the hopes of generating business. This is my "water cooler" and I enjoy the exchange of information (and abuse).

FAB's description of Bio-Tech "burn rate" as applied to a lease is worth the price of admission alone! Bio-traders are obsessed w/burn rate (but we seldom think about from the perspective of some LL stuck w/un-paid rent as a consequence of yet another FDA disapproval).

Ha Ha pay raises are to BA prices as New World gold was to 1650 Spanish economy...