patrick.net

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...

I think it takes skill to be able to live on 50k a year. There are a lot of people who make well into the upper middle class wage who have raging debt and feel poor. It's not the amount it's the mentality and how you make your money work for you. I've had a six figure HH income at one time and a bad marraige too It didn't make my life better. I have a lot less material things now but am still content. You'll never be happy with more unless you can live with less.

BTW, I think the whole "rich neighbors" inflation factor is a fine argument for punitative luxury or high income tax... At a certain point, not only does their last $100M not give them much utility, but it's robbing utility (feeling of well being) from their comparatively poorer neighbors.

FAB said,

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)…

Take a road trip to rural Ohio. $300K/year would make one quite wealthy anywhere in Ohio, let alone in the hinterlands. You could count on one hand the neighborhoods in Cleveland, Columbus, Cincinnati which boast median households with higher incomes than $300K.

Again w/FB's and subprime meltdown getting the fasttrack! Enough already!

PAR,

'Busy Street'??? It's on Lombard Street, which the Realtor(TM) and CNN fail to mention is actually Highway 101 in between Cow Hollow and the Marina. That's right, buy your $1.1 million needs fixing house on the commercial strip of a freeway.

Anyone who would pay that to live there is an actual moron.

Actually the chart on CNN is bad. The really cute 'inner city Boston' house is actually in Charlestown. The Washington DC cute place is in Georgetown. Charlestown does not equal Georgetown, they should have put Beacon Hill or Back Bay up against Georgetown, and then perhaps a Russian Hill place for SF instead of a house on Highway 101.
They are comparing apples and oranges. I don't know the other cities well enough to compare.

New U.S. Home Sales Plunge, Biggest Drop In 13 Years
Topics:Real Estate | Housing | Consumers | Economy (U.S.) | Economy (Global)
By Reuters | 28 Feb 2007 | 10:47 AM

Sales of new U.S. homes fell 16.6% in January and prices were little changed as the
number of new homes on the market decreased slightly, according to a government report on Wednesday showing some weakness in the unsteady housing sector.

The monthly decline was the sharpest in 13 years, since a 23.8% drop-off in January 1994.

http://tinyurl.com/33fet8

I have a friend that lives in Charlestown and the streets haven't been updated since Paul Revere. Most are one-ways and the ones that aren't typically only allow for one car at a time b/c of all the on-street parking. The home he bought was built in the 1890's (so it's relatively "new stock").

SP,

However, that $50K is after tax. $50K gross would work out to be $30K after taxes, insurance, and SSI. Rent, student loans, car/car insurance -- it's not easy or cheap to be a young adult in BA.

However, a friend did survive on $20,000/yr in San Jose right out of college, while paying off student loans and car loans, so it's certainly possible...

GC,

The SF house (on the freeway) is a Marina style house. They are basically flats plopped on top of a garage. I think they were built as inexpensive starter houses in the 1920s.

GC,

The guy e-mailed me pictures and the street looked like a wide sidewalk! Their home was a tavern at one time and set them back 400k in SEP '04. (You can only talk until you're blue in the face).

skibum or Boston Transplant might have a better feel for this but I believe we've already punched through those price levels in MA.

SP,

Yeah, I agree with you. I was pointing out how high $50,000 net income happens to be. You need to be making nearly $100,000/yr just to have $4000/month income.

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

We were just under that this year. But we jumped off the fence in 2005. The house down the street from me just sold in January for the same price we paid. But it sold in a week. Seems the realtor lady may have underpriced that one. We put 10% down with 30 yr FRM (@ 5.85%).

I'm encouraged to hear about so many of the bubbleheads on this board sitting on so much cash and income. I thought HaHa and SFWoman were the only rich ones. Makes me think prices will remain pretty sticky here.

A few threads ago, I asked if anyone checked out Warmington Homes' Vantage of Palo Alto yet. I got no response. I wonder what the asking prices are like.

SP, how can your PITI be less than $3k/month? That means a mortgage of less than $500k. Must be a small place.

New to this blog thread. My wife and I were looking for quite some time to buy in the Bay Area. I couldn't pull the trigger. I just can't understand how recent buyers do it? I see young couples or single persons buy $800 - $1.5 Mil homes. Are they making that much money? That once traditional gauge of 3-4X income still in place? Is everyone in the BA making that much? $200, $300, $400K a year? Is that sustainable?

We make probably a little over $250. My wife and I are a workaholic so I think the companies that hired us are getting a great deal. :) We rent in a nice 2000SQ FT home 4/2 and a pool for $1900 a month. Landlord is great. Only see the guy once a year. I actually fix things around the house probono. Our friends look at us as if we have financial troubles because we have not bought a house yet. We have NO debt. Paying for a rundown home for $800,000 in the southbay scares the hell out of me. We will eventually pull the trigger but I think the time is not now. It looks pretty gloomy right now. I'm on the negative side in the consumer confidence polls.

Also a longtime lurker. I have owned 6 homes in my life, in every imaginable market with interest rates from 18% to 4.75%. In different cities, seen up and down markets, lost money and made money. Marin county native, back when the policeman, the teacher, the mailman lived on your same block and we rode bikes to school...not in the back of a 60K SUV with a movie playing! My last 2 homes where in the East Bay, sold one in 2001, bought another and sold in 2005 pretty near the height of the bubble. Got out...I now live in Colombia South America. The US is crazy and so is the Bay Area economy. The average person does not make enough to afford a shit-box house, and who wants to? Yes, sometimes I miss it but to work only to pay 50% of your salary to a structure and never have a vacation is not a lifestyle. Here, my husband and I have a business doing tours and paragliding. We have health insurance better than in US for both of us where the premiums are equivalent to $600 USD/year. Oh yeah, and dental care is fantastic...I have orthodontia and an aesthetic plan to redo everything in my mouth (I am 50 this year)...for about $800 USD. See, here orthodontists don´t live in Mcmansions and drive BMWS. US quote was $15,000 to $20,000 for the same work. We live in a paradise (it is rustic and I hang my clothes out to dry) but our rent is 400,000 pesos (about $180 USD month). There are better lifestyles to be had, and while the SF Bay Area is "special"...it isn´t all that special if you must be a slave. My prediction (ex bond and stock trader talking)...The numbers do not lie. An economy cannot continue with only the rich living in an area and the necessary workers...teachers, gardeners, police, waiters, busboys,firemen, nurses, having to live 2 hours away by car. Who will work in those nice restaurants? And when the generation that is 70-80 years old or older is dying and those children inheriting estates need to sell the parental homes to divvy things up, what happens? Those kids, and their kids, cannot afford to pay the prices for these BA homes. There will be many sales from this and from foreclosures on recent bad loans. Look for it to be like Japan...10 years or more of real estate deflation. The wages do not justify the real estate prices.

Randy,

we are in a similar timeframe as yourself.

We have been renting forever, but have a substantial downpayment. Can't see uprooting from our nice rent controlled townhouse complex to buy a house until the premium comes down around 20%.

I'm targeting around at $350,000 average in the local area for single family homes, in my dreams, but I may not wait that long.

If the local average comes down from $530,000 to around $400,000 to $415,000, we can start looking at places with rentals (suites).

Should happen by next year (I think), these economic trends in Canada seem to follow US trends, but about a year later.

So if there is a lot of housing pain in California this year, maybe next year will be the time here in Victoria.

Peace.

I’m still unsure of how long the correction will take. I’m still sure it is underway. I’m vindicated in my sticky price calls. I’m also sad I was right.

I think if it gets more stickier, I'm going to have to rename it the WD40 housing market!