patrick.net

so VMWare is a good product after all ; )

'm not usually one for posting warnings about potential scams but I had a close call yesterday.

I walked into a Home Depot at lunchtime and some old guy dressed in an orange apron asked me if I wanted decking.

Fortunately, I got the first punch in and sorted the b*stard out. Those less suspecting might not be so lucky.

Spread this warning on to all your friends.

Sashimi, Omakase style with a purist Tokyo style chef is one path to nirvana.

Omakase is the way to go. Sometimes, you just have to surrender yourself to the universe and be one with the mystery fish. :)

I predict that we will soon have an opportunity to buy quality cheap---but we will be scared to do so. Remember after the tech bubble burst you could buy Amazon for $7/share. But they were still in their cash-burn stage, so everyone was afraid to own the stock.

After all the dot-coms blew up, a few quality companies remained--notably Ebay, Amazon and Yahoo.

It is hard to know which companies will be left standing in this case, because the financial engineering is so opaque. However, I sleep well owning Berkshire Hathaway and index funds.

Here are (rounded) PE ratios for the top 20 companies in the S&P (by market cap):

Exxon - 12
GE - 18
Microsoft - 20
AT&T - 20
Citibank - 10
Bank of America - 10
Procter & Gamble - 21
Cisco - 26
WalMart - 16
Johnson & Johnson - 17
Chevron - 9
Pfizer - 10
AIG - 10
Google - 41
IBM - 17
JP Morgan - 9
Altria - 13
Intel - 24
Conoco Philips - 12
Coca Cola - 24

Weighted Average = 16.6
Implied earnings yield = 6%
Yield on 10 year bond = 4.7%

Large cap US stocks look pretty fairly valued to me right now--even if we are currently at or near peak earnings for this cycle. Especially when you consider that these companies are usually well capitalized, earn income all over the globe and have massive economies of scale. A single share of an S&P index ETF is likely to retain its purchasing power more than its equivalent in current US dollars, in my opinion.

That said, the current market environment looks very choppy and I would not be at all surprised to see the major indexes drop another 25 or 30% before the shakeout is complete--eg S&P at the 1000 - 1100 range vs. 1400 today. (I would guess that there is maybe a 20 or 25% chance of this happening). I am keeping most of my long term money in the market and taking my lumps. I'm not putting any new money in the market at the moment (mainly because I am already 90% invested). But I will go all-in if the market really tanks.

I will be very happy if DOW falls below 11000 ....

"artickle"

SP, right on the money. Nice catch. Had the scenario been set in "Boca Vista" Florida* or Las Vegas more of us would've called BS right out of the gate. Cash Back @ Closing comes to "the Fortress"!

Good news, CountryWide share (CFC) is now down 3.30 (15.50%)

Countrywide: stop being a cry baby.

they go out and buy bankrupt mortgage shops, increase the volume on their side and run out of money and come crying on street.

NEW YORK (MarketWatch) -- Troubled mortgage lender Countrywide Financial said it has been forced to tap an $11.5 billion credit facility to fund its operations as difficulty raising money in the credit markets threatened its business. The firm also said it has accelerated its plans to migrate its mortgage production operations into Countrywide Bank, FSB. "For many years, Countrywide's liquidity management framework has focused on maintaining a diverse, multi-layered assortment of financing alternatives," President David Sambol said in a press release. "A primary component of this framework is a committed, unsecured credit facility of $11.5 billion provided by a syndicate of 40 of the world's largest banks. In response to widely-reported market conditions, Countrywide has elected to draw upon this entire facility to supplement its funding liquidity position," he said

In light of the stock market's recent sell-off, what is your current strategy?

Buying 33%
Holding tight 56%
Selling 13%

381864 Votes to date

In somewhat of an ironic twist, to some degree at least, homebuilders are now competing with banks that are dumping foreclosed homes that were built just a year or two ago.

Why the irony?

Because, over the last year or so, homeowners have complained about having to compete against homebuilders who were lowering prices or adding huge incentives for the next phase of construction - now homebuilders have to compete with banks and the poor homeowner looking to sell must compete against both homebuilders and banks.

As was the case in states such as California during much of the mid-1990s, get ready to look at half-finished housing developments for the next few years or so as builders begin to halt construction leaving swaths of empty lots next to swaths of brand new, unsold homes.

Temporary Open Market Operations

http://www.newyorkfed.org/markets/omo/dmm/tempprint.cfm

Temporary Open Market Operations for August 16, 2007
Last Updated: August 16, 2007 9:40 AM
Number of Operations Today: 2

Deal Date: Thursday, August 16, 2007
Delivery Date: Thursday, August 16, 2007
Maturity Date: Friday, August 17, 2007
Type of Operation1: Repo
Settlement: Same Day
Term of Operation2: 1 Day
Operation Close Time: 09:40 AM

Results Amount ($B) Rate (%)
Collateral Type Submitted Accepted Stop-Out3 Weighted
Average4 High Low
Treasury 7.550
0.000
N/A

N/A

4.50

3.75

Agency 21.850
0.472
4.90

4.900

4.90

4.50

Mortgage-Backed 36.075
11.528
5.07

5.104

5.15

4.65

Total 65.475
12.000

Top

Deal Date: Thursday, August 16, 2007
Delivery Date: Thursday, August 16, 2007
Maturity Date: Thursday, August 30, 2007
Type of Operation1: Repo
Settlement: Same Day
Term of Operation2: 14 Days
Operation Close Time: 08:30 AM

Results Amount ($B) Rate (%)
Collateral Type Submitted Accepted Stop-Out3 Weighted
Average4 High Low
Treasury 16.700
0.250
4.80

4.800

4.80

3.50

Agency 22.350
0.000
N/A

N/A

4.95

4.00

Mortgage-Backed 38.000
4.750
5.15

5.233

5.28

4.50

Total 77.050
5.000

Fed injects 5 bln usd of liquidity into banking system in 14-day operation
08.16.07, 10:45 AM ET

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WASHINGTON (Thomson Financial) - The US Federal Reserve today injected 5 bln usd worth of liquidity into the market, somewhat less than its typical daily intervention in normal times.

However, the Fed said the temporary 5 bln usd repo has a term of 14 days.

Some analysts have said longer-term, rather than overnight, operations might help stabilise the markets as the Fed adds liquidity.

Today's morning decision followed a statement saying the Fed believes it 'will need to provide reserves through RP operations on most days' and will re-evaluate each morning whether it needs to set up new operations.

'In addition, the Desk stands ready to arrange further operations as needed to facilitate trading at rates around the operating objective of 5-1/4 percent in reserve markets,' the Fed said.

It may not be time to pull up your tent stakes just yet, but E*Trade is down substantially. Herb Greenberg jokes that it's actually a REIT pretending to be a broker? After all, interest income over shadows transaction revenue.

This is a nice graph on housing starts from nasdaq.com

http://tinyurl.com/2jqeaf

It shows how grim things are now and if housing starts keeps following the current vector, things will get even uglier. As if all y'all didn't know this already!

Hopefully, we will see good restaurants at 75% capacity so that they can stick around for us.

Peter P,
Restaurant schadenfreude? Or just anticipation of uncrowded restaurants?

I think that consumer pullback will result in several restaurants around here to close up. Remember when University Ave in PA was full of empty storefronts? Those were the days...

>> I think that consumer pullback will result in several restaurants around here to close up.

Yes, this would be a welcome development. Bay area is full of Chinese/Indian/Thai crappy restaurants ....

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You guys realize that I'm having an outright Schadenfreude overload right now. All my Second Life stuff from half a year ago is now getting more hits than when I first published it. Keep your eye on The Economist for a brief mention of me also, if they use it.

Randy H,

Did you read the WSJ article about Second Life from last week?

well,
I
must
say,
the
market
of
late
makes
for
great
entertainment
for the
schedenfraudists
(is that a word?)
amongst us....

I spaced each word over to give the effect of a declining dow in the above post but everything went over to the left margin when I submitted the post. damn. And "amongst" should probably be "among". That being said, I'm still lovin' the market!

A ton of closed end funds are now trading at substantial discounts to NAV. Sure is tempting....

goober, it actually turns out to be a nice effect

I think that consumer pullback will result in several restaurants around here to close up. Remember when University Ave in PA was full of empty storefronts? Those were the days…

It is quite easy to tell, if a restaurant experiences increasing popularity with significantly increasing prices in the first few months, it will likely make it.

Popular restaurants with pricing power tend to be the best restaurants.

I know many "popular" restaurants are "popular" for pricing only. The moment the economy turns around for the worse, they will close down.

When do you think McDonalds will start offering McSushi for the down and out hip FB?

McSushi McNuggets anyone? Just take all the extra parts left over after processing, place them in a form press and presto... McSushi McNuggets. 99 cents will get you 5. as Homer would say.. mmmmmmmmmmmmmmmmmmmmmmmm tasty!!

When do you think McDonalds will start offering McSushi for the down and out hip FB?

I still think McDonalds can improve profitability by offering breakfast all the time.

Isn't schadenfreude kind of a mean emotion, to delight in the suffering of others?

There's gonna be some long overdue corrections which will hopefully cause a reversion to the norm in economics and in behaviors. It will be painful but overall a good thing just like working out in the gym.

But if I delighted in seeing the pain and suffering of other people then I'd be twisted and sick.

@sybrib,

We've discussed these "guilty pleasures" before but when you've had 5+ (easily 5+) years of Housing ATM wealth rubbed in your nose it's difficult -not- to get some... pleasure out of this.

We've expressed regret for blue collar guys that simply wanted to buy a home for their families but for the debt=wealth crowd? I have no sympathy.

A ton of closed end funds are now trading at substantial discounts to NAV. Sure is tempting….

You better have one hell of a balance sheet to play that game. You could be sitting under water for quite some time.

On Schadenfreude:

What many of us feel is not Schadenfreude at all, on a micro level, but is really justice, vindication, maybe even a bit of righteousness (in the purest definition, not the religious connotation).

But since we each cannot find the specific culprits responsible for the ridicule, pain, inconvenience, or losses we've experienced, we instead take those emotions out of the macro whole of the correction. The "nameless" FB who goes whining to some wild eyed reporter about how they cannot afford their $1.3mm mortgage on their $75K/year income. About their *right* to own a house.

When we feel pleasure seeing that situation it is strictly Schadenfreude because we don't really know that FB, their specific situation, the details of what got him or her to that point. In fact, that FB could truly be an innocent victim who was defrauded by someone else. However, we still feel some pleasure at seeing that FB squirm.

Call it a proxy for honest retribution, if it makes you feel better about not being "twisted". I believe all mentally healthy people experience Schadenfreude regularly, they just don't speak of it in polite company. Just like no one admits to masturbat1on.

DinOR Says:
Herb Greenberg jokes that [E*Trade] is actually a REIT pretending to be a broker?

Funny - that's what they used to say about SGI in the late 90's. That it was a commercial property landlord pretending to be a computer manufacturer. For a while they actually had rental income that was higher than their earnings from operations... although I must say their taste in workplace architecture was really good.

SP

My friend who does TIC deals says there is still a lot of interest in TICs. She does smallish (4-6 unit) buildings in different neighborhoods (Cow Hollow, Ashbury Heights, inner Richmond). She said that she tends to get 30-35ish professionals with good downpayments, and the units are inexpensive (

sybrib Says:
Isn’t schadenfreude kind of a mean emotion, to delight in the suffering of others?

Duuuude, quit harshing my freude, man. I've had a long decade and need to unwind...

SP

To paraphrase Irving Berlin... "Die Reinste Freude ist die Schadenfreude"

or more literally, Es gibt kein Freude wie Schadenfreude.

SP

Isn’t schadenfreude kind of a mean emotion, to delight in the suffering of others?

We are all mean people here. Aren't we?

Jealous. Bitter. Mean. Bubbleheads.

My friend who does TIC deals says there is still a lot of interest in TICs.

In a true capitalist, this would be considered an anomaly. Apartments and condos should be allowed to convert freely.

And there should be NO rent control.

Hey, half my comment was eaten...

I was going to ask if anyone else saw the NYT article about Americans financing their plastic surgery.

I think Shadenfreude is mean if we actually are quite happy that undeserved horrid things are happening to people, but rather natural if we see deserved or anticipated things happening to people (a sort of 'they got their just rewards' type of thing).

"Call it a proxy"

That's what I should've said. It's hard not to take it personally when you're pale, up-tight and just trying to get to the Post Office before the cut-off and you're surrounded by tan people in luxury SUV's that are in no particular hurry without a care in the world?

They're engaging in small talk about their extended vacation in Cabo and how they're looking at this, that or the other specuvestment and all the while you're agonizing over this, that and the other obligations you need to attend to! Sybrib, it's just that they were so smug about it. So self-assured that making money really was just that easy!

although I must say their taste in workplace architecture was really good.

Building 13. They had the best cafeteria down there too.