And I don’t think even the ‘Shug couldn’t find much in the way of good news to post links to these days.

Oh, I don’t know. It looks like his Zillow value got a great little spring bounce:

Looks like it’s up about 2% since April! To the moon!

To be fair, there isn’t really much to argue with

So, as an alternative – as an asipring troll, you can come here and do a few things
1) call people “losers” (or my personal favorite “”loosers”)
2) brag about how much money you made on real estate you bought in the 70’s, acting as if that has great relevance today and is imminently repeatable
3) make fun of Tim’s fund raising – thus spurring another round of donations

And I don’t think even the ‘Shug couldn’t find much in the way of good news to post links to these days.

In the collector car market, they say “you didn’t pay too much, you just bought it too soon”.

My basis for believing prices would drop was based on income levels. Results have been consistent with my model. My model predicts future drops, but because I don’t have very good data on income I don’t know exactly where the bottom will be. And I accept that I might be wrong.

The great thing about this though is that we aren’t arguing about religion or something else unknowable. Time will reveal the truth even if it does so at a snail’s pace.

I’ve been making and losing and making and losing a fortune short-selling banking, housing, and brokerage stocks.

I miss the open threads as they were the best opportunity for general education regarding the issues surrounding Seattle real estate.

It’s also not the same without ‘Shug. He was fun to smack around and was the best illustration of what is wrong with Seattle RE.

This thread was general enough to get a good discussion going.

I don’t have a SB “program” so I don’t know who the modern players are. Who is the modern “Meshugy?”

Glad to be missed.

Where the hell have you been?

I, for one, miss your input!

The Romans had the steam engine, but it was never developed because 1/3 of the Romans were slaves.

How many Mexicans have been sent back? The Bush Administration has had almost zero workplace enforcement of immigration laws. It is a disgrace, but that’s what you get when the Chamber of Commerce is running the country. Even if your theory is correct (and it isn’t), there are more Mexicans living in the US today (June 12, 2008) than at any time in our history, so lower end properties should be selling as soon as they hit the market.

Recessions are caused by excessive debt to GDP production. They always have been and always will be. Debt needs to be worked out, and that is the job of the recession.

This recession is long overdue. The debt/GDP ratio is off the charts and in record territory, and we technically are not in a recession. When the GDP drops, the ratio will spike even higher.

Cheap labor is always a short-term benefit, and a long term problem.

HI-B visas make American sources of IT harder to come by, thus requiring the need for more HI-Bs, which disincentifies kids to want to go into IT, which makes Bill Gates lobby for more HI-B…

To me, recessions are a result of a lack of transparency that causes companies to make overly optimistic investments. There is also the problem that competitors will over-invest trying to grab market share.

The Fed must have some forecasts of how deep it is going to go, but there is a lot of unknowns because there is no way to really know when we will reach time bottom nationwide.

The demand for real estate in those classes was driven by speculative demand. Once the speculation ended (and it always does), the bubble popped. The Mexicans were a small part of demand in those price brackets.

The failure of the immigration reform (or amnesty) didn’t change anything. If the demand was caused by the Mexicans, they would still be buying. Their status has not changed one bit.

http://anon688.googlepages.com/Mort.xls

Click on that link for a basic spreadsheet that illustrates why you can’t have real estate run ahead of incomes. At some point, 100% of income will be consumed by debt service, and that person still needs to buy food, energy, medicine, tax amnesty, insurance, transportation, etc.

All bubbles pop. It’s what they do. Housing is in a bubble and the top has been seen.

Immigration patterns did not drive this. Speculation did.

If anything, the peculiar lack of economic downturns made this inevitable. If businesses never go out of business, then the herd becomes too large for the economy to sustain. If we had normal economic downturns, we would lose productive capacity, which would raise margins for the survivors. They would be able to pay people a wage that would afford them a lifestyle according to their productivity.

As the field becomes saturated, margins compress. This forces businesses to look for lower wages to help stay profitable. As long as an inexhaustable supply of cheap, non-union labor is available, businesses will hire them and avoid CH7. This squeezes the local labor sources and they resort to gambling to make ends meet.

Look back at the history of American outsourcing and immigrant labor and plot it against the growth of the finance and gaming industries. You will see that they correlate quite nicely.

A good, nasty recession is EXACTLY what our economy needs to stay healthy. Our margins are too low and businesses can’t sustain themselves with local labor.

You don’t seem to understand where the $130B went. It didn’t go to real estate. It went to bank operating costs and short term loan maturities.

If the -130b wasn’t growing, you might have a point, but it is growing.

The system is unstable and getting worse by the day.

I went round and round on the immigration bill last year, so I know people didn’t like it. But less demand but for lower real estate lowers its value, and that may be what triggered the pop of the bubble. You might not think the US was getting enough value for the cost of the immigrants, but that was not my point. I agree that the financial engineering had too much leverage built in to it for the amount of positive feedback in the system. My only point was the drop in demand is what set that off.

The taxpayer doesn’t have the money to bail out all the banks. The banks are on the hook for serveral orders of magnitude above their market cap. Federal lending is a drop in the bucket compared to private lending. Seriously.

Your rosy scenario has quite a few “ifs” built into it. Look at where things are going, not where you want them to go.

The new facilities that came out in December were a result of non-borrowed reserves being drawn down below the limit. The facilities are a way to get around the statuatory requirements for those reserves, but at the end of the day, the reserves are still gone, regardless of what heading under which they disappeared.

Finally, equating immigration reform failure with Smoot-Hawley is the best belly laugh I’ve had in some time. Americans making more money while supporting fewer Third-world immigrants would be good for the economy. It is precicely because Americans can’t make the wages they need that all the speculation started in the first place.

Vegas is not the boulevard of dreams. It is the highway of desparation.

The financial implosion came from the popping of the real estate bubble and the supporting financial engineering on Wall Street. Banks loaned money to people that could never have paid it back. At some point, income is needed to pay down the debt that was created to buy homes for prices that could never have been sustained.

There STILL isn’t a free lunch.

http://www.gmtfo.com/reporeader/OMOps.aspx

The $40T is based on the economic value of the assets. If there is a liquidity problem, then yes the value will go down. That’s why they are lending the reserves, so that doesn’t happen. As long as the institutions remain working as they are now, the $40T in value will remain because that real estate has value based on it allowing people to live close to where they work. The value comes from the productivity of the US, and that is doing fine.

Even if the Fed runs out of money, the US Government will step in some other way to keep things running, using the credit of taxpayers as needed.

It’s interesting that the meltdown happened just about the time the immigration bill failed last year. I wonder if that was the cause, in the same way that Smoot-Hawley triggered the Great Depression. Fewer immigrants means less demand for real estate, which caused a credit contraction. I knew failure of that bill would be bad for the economy, but I didn’t expect it to be so fast or so deep.

Here are the relevant links.

http://research.stlouisfed.org/fred2/series/BOGNONBR

http://www.gmtfo.com/

http://www.federalreserve.gov/releases/h3/Current/

Long story short: the FED was doing just fine until December when commercial credit just flat-out collapsed. Banks could not renew the money they need to continue to operate, so the FED gave them their reserves. Then, it gave them more than their reserves. Then a lot more.

The slosh went up dramatically to force the EFF down. Because of the shaky condition of the banks, they didn’t want to lend money to each other, for fear of a default. This would have caused the EFF to rise, and forced the FED to hike the FFT. Had this occurred against the backdrop of the MLK-meltdown and BSC debacle, there would have been a financial panic.

As it stands, that panic was put off into the future, but it still accrues interest.

-130B in reserves needs to be paired with the slosh. With that, you have almost half of the FED’s assets being compromised by being on loan with insolvent banks. The FED has also taken non-USTreasury paper as collateral, which makes the crap being held by banks (CDOs and MBS’) valued at Treasury rates, rather than on the deep discount that the open market would bring.

(this is why CFC and BSC were taken under by BAC and JPM)

If these ever get revalued to their proper market value (close to zero), the banking system is finished.

Right now, we are only waiting for the FED to move to save itself. All the FFT drops have not moved the interest rates for homes. Ask anyone. It is much harder to get a loan today, and the interest rates are not dropping by any significant amount.

Anyway…gotta run and try to make some dough to feed the family.

That -130B is the amount of reserves the depository institutions have at the FED. Since the number is negative (first time since records have been kept going back to the ’50s), that means the FED has put its own money into the banks to keep the banks afloat

This money is used to keep the lights on and the paychecks clearing. What is happening is the money that banks borrow to fund their lending operations is gone.

$40T in real estate will vaporize without borrowing.

It is a HUGE deal. At some point (very soon) the FED has to move to save itself. The amount of assets the FED has in the slosh and at the depository banks is climbing at a rate that will bankrupt the FED by late summer.

The H.3 is interesting. $100B in borrowing is not fun to read about, but that is not new news. Against base of $40T in real estate, it is not the end of the world. If it keeps the overall system running smoothly until banks can recover, then it is worth it.

Perhaps I don’t get your point.

How did the NAZ do in the previous bubble? 14c on the dollar rings a bell, and that was WITHOUT a consumer recession.

How did the Nikkei do since its property bubble went kablooie? We are looking at somewhere in the 20c on the dollar range. That was with a vibrant export economy and a huge Japanese savings rate. They had cash to burn.

How did Japanese real estate do? 20 year bear market seems eerily familiar.

How about our own market back in the 30s? That was when we had a much lower debt/GDP ratio and produced most of our own stuff.

Tell me, what keeps our markets above 6K? What prevents our real estate from losing 2/3 of its peak value?

Without a major financial panic, banking failure, or stock market swoon, parts of California are already selling for 60 and 70c on the dollar.

Go look up the latest Federal Reserve H.3 and get back to me with an educated opinion.

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Dw 6000?
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20c was always for the most egregious examples. My guess is the average will be somewhere in the 30c range.

Sorry to disappoint. Don’t think I’ve suddenly become a real estate bull.

Sheeeeeeeet, Eleua. THIRTY cents?!? I thought it was 20 cents. I was going to post something just for you quoting land in the central valley of Cali going for 20 cents on the dollar, but now that you are waffling, I’m not going to bother.

Color me disappointed.

One thing I’d like is input on whether boomers cashing out their portfolios at the same time will significantly affect the market. Do you think our growing population or overseas investment be enough to offset / make up for this investment?

No.

A growing population may not be in our future. If the economic output in the developing world is stunted by a severe recession in the G-8 (sans China), then it is quite possible that world population will start to decrease.

If the US has a recession/depression people will not want to invest in the US.

Remember what you are asking. You are asking that someone else become the bagholder for the US economy, when their own economy already is the bagholder for US import demand. They would have to eat two helpings of whatever is on the menu.

This is the same conundrum that the Boomers face with their homes. They are PEAK demand. How, exactly, were a smaller and poorer group of GenXers supposed to buy out the Boomers in a fashion that would allow all of them to retire? The Boomers’ exit strategy never penciled-out.

We live in a credit economy. There isn’t a fixed amount of dollars that needs to go somewhere. When that economy starts to reverse, the money is simply destroyed. China and Japan are going to be wondering where the next bowl of rice is coming from. The last thing they are going to want is a few shares of GOOG, RIMM, AAPL, CAT, JWN, etc.

What you are seeing at your real estate agent’s office, and on Wall Street is the realization that an entire generation can’t simply “own” its way to wealth. At some point, there has to be sustainable production.

One thing I’d like is input on whether boomers cashing out their portfolios at the same time will significantly affect the market. Do you think our growing population or overseas investment be enough to offset / make up for this investment?

My target is the 6000s with sub-5K being possible.

How long? Anyone’s guess.

Keep in mind that the Boomers’ stock portfolios are all in the same 600 stocks. Once their McMansion goes for 30c on the dollar, I can’t imagine that they will stick around to see if their stock portfolios will hold up any better.

Panic now. Beat the rush.

put your money where your mouth is, and go into bonds and cash, buy some put options?

IRA in cash, 401k in the safest investment possible (some MM fund) and I bought XLF puts near the close on Thursday. That good enough for you?

Like B, I too cashed out my 401k – just last month. I’m in treasuries with a bit in ultra-short ETF’s.

Did you guys see bernanke’s speech today? He’s hinting that he’s going to raise rates… Historically, the market doesn’t go up when that happens – but bonds do…

If the dollar wasn’t dropping I would agree with you. However, they can seek much better returns than current US equities will provide when compared against dollar strength. There are plenty of places outside of the US to invest these days. Just wait for some of the SWF’s who bought into the big financials to get burned, that money will dry up very quickly when they realize Wall St. sees them as dumb money.

I did do that. I cashed out of the market in my 401k and went into the safest vehicles possible right around peak of the market. Saved myself the 15% or so its dropped since then, how is your 401k faring since the peak? I am also holding a small amount of short ETFs, but mainly just as play money. Do you really think we are not entering a bear market? Seen the write downs on financials lately? The next time one of them goes boom, the Fed bailout (if it occurs) will not matter and equities will be slaughtered.

Seattle real estate!

Wow, for the near 50% that actually voted that it will, put your money where your mouth is, and go into bonds and cash, or buy some put options?

Not ready to do that? Then you should have voted No.

No way it’s going to fall that low.

Why does this sound like an echo of the housing market bulls last summer?

Sometimes things are not as straightforward as they seem.

Not ready to do that? Then you should have voted No.

No way it’s going to fall that low.

Unfortunately, yes – as a nation, we’ve got a negative personal savings rate, a war bleeding us dry, two-tiered educational and healthcare systems, and a vanishing manufacturing base.

But we needed to bring democracy our own brand of dictatorship to Iraq!

Inflation will factor greatly into where the DJIA is headed. It could be 20,000 five years from now, but be less than today’s value after adjusting for inflation. I doubt it will drop below 10,000 in the next year.

ooh. maybe that was bit harsh. sorry, hadn’t had my coffee yet!

No problem. Thanks for setting me straight. I was certainly getting a little carried away. Nevertheless, looking at Deejayoh’s numbers it certainly looks as if 20% is not out of line, and even 30% is possible. I also still firmly believe that the recession we are headed to will be more severe than the ones of recent memory, since there is MUCH more mal-investment to clear out. According to that theory I think we should expect a bigger hit to stocks than the most recent recessions have seen.

At that very moment the shorting of WB should have been initiated. There was no reason for World to sell at the time. WB longs were upset at the merger taking on a large # of option arms and the stock sold off 3.00 to 61.00. Now WB trades at 19.00.

Someone get these OLD WORLD CEO”s in for a 60 minute interview. Their track record for decades was impeccable. In the end they called it quits at the very highs. **BRILLIANCE** It will be the BEST in Business Journalism.

Ray Pepper
Broker
http://www.500Realty.net