Posted by: Timothy Ellis (The Tim)

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

45 responses to “Economy: Back from the brink, or poised for a greater collapse?”

  1. Ray Pepper

    Love it Tim! Thanks!

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  2. David Losh

    I’m very glad you linked the http://rangerider.blogspot.com/2009/11/are-we-living-in-zero-hour-now.html with the Saturday Night Live clip. They both made me laugh out loud.

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  3. Matsayswhat

    That blog post regarding the dollar carry trade is interesting, and I think I agree with him regarding Gold not being a good indicator of pending inflation. I read that a lot of the recent run up of Gold prices is coming from increased demand out of Chinese and Indian markets…

    It’ll be interesting to see how this continues through the Christmas season coupled with what will surely be a slow shopping season for retailers.

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  4. sead97

    Well, I just took a big short position against the S&P. Here’s to hoping we see 700 again soon…

    Fundamentals just aren’t there. Inflation numbers are going to be increasingly hard to hide. Fed will have to give up the “0% rates and no inflation” bs. They may jack rates, or admit they don’t care about inflation.

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  5. Chuck Ponzi

    Mat,

    Personally, I believe this has nothing to do with the demand from China and India, which has remained relatively stable relative to supply.

    Take a look at this instead and I think you’ll have your answer.

    http://themessthatgreenspanmade.blogspot.com/2009/11/whats-going-on-with-gld-inventory.html

    Here’s a good link to start with on the same blog:

    http://themessthatgreenspanmade.blogspot.com/2009/11/gartman-on-mind-boggling-gold-bubble.html

    Fringe investors are dumping stocks in favor of Gold. This will not end well. It’s 2003 all over again.

    Chuck

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  6. Jillayne

    Let’s keep a close eye on the bond markets.
    Thanks for the link to the article, Tim. I saw the SNL skit yesterday and the best lines are: “Kiss me,” and “Do I look like Mrs. Obama?”

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  7. Ray Pepper

    DONT FIGHT THE FED!

    Where is that Eleua character?

    http://www.msnbc.msn.com/id/34105403/ns/business-real_estate/

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  8. Ray Pepper

    Personally, I’m not buying a stove, fridge, car, sofa, window, or undergarments until I see what the next Fed Bonus Bucks program is.

    I can hardly wait!

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  9. AMS

    RE: Ray Pepper @ 8 – How about that television? The 27th will probably be here before any Fed action.

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  10. Scotsman

    RE: Ray Pepper @ 8

    If you think this through you’ll probably come to the conclusion that the next “FedBucs Bonus Program” will be a transfer from you to the federal government. The past stimulus attempts have been judged abject failures, not only economically, but politically. But the government and the Fed have come to fear deficit spending and the debt, as Obama’s recent failures in China and Japan have shown. Look for more talk about higher taxes on the rich and investment classes. That means you. Uncle Sam screwed up and needs those stimulus/bonus bucks back.

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  11. Ray Pepper

    RE: AMS @ 9

    267.00 for a 32 inch at Target. I don’t need one but its compelling!

    Here one for everyone! Howard Davidowitz. There is no better analyst!

    We are in a death spiral!

    http://wallstreetpit.com/9902-howard-davidowitz-us-is-out-of-control-and-in-a-death-spiral

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  12. AMS

    RE: Ray Pepper @ 11 – I just might have to buy one of those myself. I was hoping for a larger one, but for $267, maybe I’ll put a 32″ in another room.

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  13. Ray Pepper

    RE: Scotsman @ 10

    Scotsman here is the latest one I heard. Cash for Caulkers!

    Weatherize your home and add more jobs to the construction industry.

    Sheer brilliance!

    http://business.theatlantic.com/2009/11/cash_for_caulkers.php

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  14. Ray Pepper

    RE: AMS @ 12RE: AMS @ 12

    the 599.00 50inch plasma at WalMart (Sanyo) is also the BEST PRICE I have EVER seen on a 50′.

    I just bought my 50″ LG at Costco 2 months ago for my bedroom. I don’t wanna take it back, I like it too much.

    The 32 inch LCD’s I use as my DeskTops Screens. I have 2 side by side and I will never go back to a 20in. I suggest you use this TGT deal for your home PC!

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  15. softwarengineer

    LOL….Home Sales Up

    And what homes are selling for what price? Article in part:

    “….The recovery is being driven by lower prices combined with federal programs to lower mortgage rates and bring more buyers into the market. The median sales price was $173,100, down 7 percent from a year earlier and off roughly 2 percent from September….”

    the rest of the URL:

    http://finance.yahoo.com/news/October-home-sales-rise-101-apf-3980633502.html?x=0&sec=topStories&pos=1&asset=&ccode=

    Golly Gee, home prices are chronically collapsing, better sell your house fast this year before its worthless in the future? LOL

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  16. softwarengineer

    To Quote Dr. Roubini:

    “…The Worst is yet to Come: Unemployed Americans Should Hunker Down for More Job Losses…”

    No green shoots for 2010 and this guy’s a “Democrat for Obama” too…LOL

    The rest of the URL:

    http://www.rgemonitor.com/roubini-monitor/257978/the_worst_is_yet_to_come_unemployed_americans_should_hunker_down_for_more_job_losses

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  17. AMS

    RE: Ray Pepper @ 14 – I already use a 28″ LCD (1920×1200) HDMI for my monitor. The dual monitor idea is nice, but one seems to get the job done.

    I think it’s time to take a trip to Walmart…

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  18. softwarengineer

    RE: AMS @ 17

    Hi AMS

    For the hades of it, I went through my COMCAST channels and found the following, convincing me to keep my CRT TVs:

    The first 200 channels are almost ALL NOT HDTV [that's your CNN, SyFy, TNT, etc, etc].

    The premium channels are about 70% NOT HDTV.

    CONCLUSION: Your 28″ LCD HD is really a 17″ TV on COMCAST when you cut the sides off to make the broadcasts fit.

    Or, you can watch stretched out fat people and Husky football on FOX stretched out on the HD, making the football players look 5’1″ tall and 450 lbs each….fat HD dwarves….LOL

    What a joke HD is on COMCAST!

    I just bought a digital projector [$95 new BTW] and portable slide projection screen….I can project 72″ computer images on it too and best yet….its NOT HD fat dwarves….LOL

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  19. AMS

    RE: softwarengineer @ 18 – I have Verizon Fios, which has different HD TV options than Comcast. I really am not worried about HD, I just want a bigger, nicer picture than my current CRT! CRT!

    The 28″ LCD is my computer monitor, and I don’t have that hooked up to a television. It does not have a tuner, but I could use it with a tuner box that has HDMI connectivity.

    I more of an Internet junkie, as you might have noticed. lol

    But that CRT really needs to go.

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  20. WaitingInIssaquah

    RE: softwarengineer @ 18 – The HD channels are mostly in the 600’s. There’s about 100, and all HBO are HD now too. You are looking at the wrong channels! Before the upgrade that happened this year, comcast in Seattle area was pretty crappy but not any more. Not to mention the addition of NFL REDZONE, the poor man’s sunday ticket.

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  21. Mariner22

    RE: sead97 @ 4

    I have been as bearish as anybody since 2007 but I would be very careful with shorting this market – First, we do have to fear the Peter Schiff hyperinflation threat, but even short of the end of the world scenario the Fed has created so much money that it has to leak in the equity market especially when US Treasuries are paying negative returns!

    I got burned (and continue to hold) SRS and if there is a better bear case anywhere I sure would like to hear it – between Government bailouts, banks extend and pretend, and accounting whitewashes, commercial real estate related stocks have prospered despite their underlying assets becoming worth half as much as during the boom. Fortunately, precious metal plays have worked great and I just sit on the equity sidelines and watch with interest….

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  22. softwarengineer

    RE: AMS @ 19

    I Hear Plasmas May Be Discontinued Soon Anyway

    They eat way too much electricity.

    I agree with you that a LCD has a better picture than a CRT from a +/-20-30 degree angle; then it dims horribly from side chairs in the living room….and plasmas can make the dark objects blend together all black with no detail….throwing CRTs away is environmentally a very poor decision too…they end up in a 3rd world country’s rivers in Asia, after they take the precious metals out of them per National Geographic.

    Yet Seattle makes it illegal to mix plastic/glass/metal with regular trash….LOL

    A projector like I bought is much clearer than a CRT, but dimmer too….I’ll watch my 72″ anolog sized movies at night…LOL

    I don’t know about Verizon or Direct TV HD options…..I do know cable services multiple TVs on different channels better and who wants a sattlelite nailed to the side of their house….ugly and another glueboard sealing area to maintenance too.

    Watch the “kicker” prices on these options though….they quickly double/triple in price a year later….

    I’m “grandfathered” from TCI to COMCAST on total TV….so get all the Premium Channels for almost free…if I switched to an HD package [it costs extra BTW] I’d lose total tv…..another reason to keep my CRTs.

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  23. AMS

    RE: softwarengineer @ 22 – I will properly dispose of the CRT, at least as proper as I can. Once I hand it to an authorized recycler, it might get sent to Asia, but what can one do?

    I normally take my electronics to 3R Technology in Sodo. They have a nice store, where one can buy cables, hard drives (cleaned), printers, systems, etc.

    http://www.3rtechnology.com/

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  24. Meadows

    Wait,
    How’d we get to tv’s from Zero Hour? I do think we are there, but Purgatory can last a long time.

    The thing that has always impressed me is our national ability to put off the inevitable, which to me is the admission that we as a nation are flat broke and have to shrink our military spending to the size of a rodent before we drown it in the tub. Then roll back the Reagan tax cuts, tax Wall Street transactions, let housing finish collapsing and a lotta other stuff.

    I’m a master procrastinator myself so I see how easy it is to put off an admission of insolvency. A drunk has to hit bottom sometime, it just might be later than sooner, if someone keeps “enabling” the drunk. Same w/ drugs and debts. Cash for Caulkers, indeed.

    Inflation is not in the near future. A deflationary spiral? Much more likely. Gold in a bubble? I say, “Yes.” But bubbles are tricky, as we all here know. They can last MUCH longer than we think, or pop quite suddenly. No wonder folks are paying down debt and “hoarding” cash. (I think that’s called “saving.”)

    Debt is like booze. A little is OK. A moderate amount can be managed. Too much is deadly dangerous, ruinous.

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  25. Ira Sacharoff

    Great post, Meadows.
    Back from the brink, or poised for greater collapse?
    The answer is both. We have staved off immediate collapse but having done so, we are making real, sustainable, meaningful recovery nearly impossible. You can cover the wound with a band aid, you can make the headache disappear by taking an aspirin, but it’s as if we’ve done that at the same time we’ve decided to stop exercising and started to inject pure lard into our veins.

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  26. Meadows

    By Ira Sacharoff @ 25:

    Back from the brink, or poised for greater collapse?
    The answer is both. We have staved off immediate collapse but having done so, we are making real, sustainable, meaningful recovery nearly impossible. You can cover the wound with a band aid, you can make the headache disappear by taking an aspirin, but it’s as if we’ve done that at the same time we’ve decided to stop exercising and started to inject pure lard into our veins.

    So we pick up our drunk friend, hand him some pain pills, maybe a bottle to ease the pain, and say, “Joe, don’t do that again.”

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  27. Buford

    By Ray Pepper @ 14:

    RE: AMS @ 12RE: AMS @ 12

    the 599.00 50inch plasma at WalMart (Sanyo) is also the BEST PRICE I have EVER seen on a 50′.

    I just bought my 50″ LG at Costco 2 months ago for my bedroom. I don’t wanna take it back, I like it too much.

    The 32 inch LCD’s I use as my DeskTops Screens. I have 2 side by side and I will never go back to a 20in. I suggest you use this TGT deal for your home PC!

    My experience has been LG is cr*p!

    New house with all LG kitchen appliances and nothing but grief.
    No customer support what so ever.
    Finally, in order to make me go away, they bought my dishwasher back because they had no idea how to fix it.
    You should hope their tv’s are better.
    Be very careful with LG.

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  28. Ira Sacharoff

    .

    “So we pick up our drunk friend, hand him some pain pills, maybe a bottle to ease the pain, and say, “Joe, don’t do that again.””

    He needs to stop smoking cigarettes, he’s hacking wildly and doesn’t look well, so we take away his carton of Marlboros and hand him a crack pipe.

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  29. Scotsman

    Kiss me and tell me you love me……

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  30. Racket

    By softwarengineer @ 18:

    RE: AMS @ 17

    Hi AMS

    For the hades of it, I went through my COMCAST channels and found the following, convincing me to keep my CRT TVs:

    The first 200 channels are almost ALL NOT HDTV [that’s your CNN, SyFy, TNT, etc, etc].

    The premium channels are about 70% NOT HDTV.

    CONCLUSION: Your 28″ LCD HD is really a 17″ TV on COMCAST when you cut the sides off to make the broadcasts fit.

    Or, you can watch stretched out fat people and Husky football on FOX stretched out on the HD, making the football players look 5’1″ tall and 450 lbs each….fat HD dwarves….LOL

    What a joke HD is on COMCAST!

    I just bought a digital projector [$95 new BTW] and portable slide projection screen….I can project 72″ computer images on it too and best yet….its NOT HD fat dwarves….LOL

    I bet you can find a brand new laser disk player to go w/ that.

    If you can tolerate watching a 480i broadcast in 4:3 format, you lose all cred when it comes to talking about televisions IMO. I watch very little in 4:3 anymore, and football is unwatchable in 480i after watching a 720p, or 1080i broadcast.

    It’s like talking to my grandpa about cell phones.

    BTW everything all the 100 channels are hd as well as many in the 600’s and a few scattered premium channels.

    Not having a source for HD television, is like using dialup for your internet.

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  31. Flying Ape

    “As the dollar declines, their losses mount. So what question should you be asking? Who is purchasing China and other nation’s bonds?”

    Well China is. Unlike the US, China is literally monetizing its debt with the government owning about 50-90% of Chinese bonds. Remember the big commercial banks are state-owned. They recently raised bank capital requirements so it should spur demand and they should have no problem financing US treasury purchases, if needed. I’m getting so sick of this “DISORDERLY DECLINE IN THE DOLLAR” argument. Yes its on a cyclical trend downward but its eventually going to recover when the carry trade unwinds. The lower the dollar falls, the more its feeding the asset bubbles abroad and the more dollar reserves each county will need to counteract any outflows. Anyway, why on earth would China be buying toxic MBS’s if they were ready to flee US assets.
    http://www.reuters.com/article/ousiv/idUSTRE57G0T020090817

    I do agree with his bond market call. Once the carry trade unwinds, maybe due to Asian/EM Financial crisis 2.0, money will flow back into the US. It probably won’t flow back into overpriced US equities or gold but into bonds. Current 3%+ long term treasuries might be priced right, or even at a bargain, as the market implies today. So if the Chinese are buying MBS’s and long term treasury yields could fall lower with the unwind of the carry-trade how will that affect mortgage rates? Could we actually see sub 6% mortgage rates for quite some time?

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  32. Richard Stabile Bergen County Real Estate

    China has been doing a lot of very strategic things such as storing up all the minerals for the lithium batteries. They are arranging for crude supplies around the world. They stimulate the economy by really stimulating, while we waste our tax money in banks coffers. Stock will go down because the market is too lazy and complacent. What are they going to do with the commercial real estate market here.?

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  33. Dan

    On certain subjects, after reading articles of this nature, I am reminded that “no one knows anything.”

    Economists are still debating the effectiveness of the New Deal, and it’s been 75 years.

    Will we see a deflationary spiral, rampant inflation, etc… Who knows? And worrying about it isn’t going to do much.

    Your average person, reading this article, doesn’t understand it but is filled with a sense of dread. Hey, who doesn’t love fantasizing about the breakdown of civilization as we know it?

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  34. HappyRenter

    RE: Flying Ape @ 30

    It’s interesting that now the US is hoping to be rescued by a country run by a communist government. The “evil” is going to rescue us:

    “CIC, established by China’s Communist government in late 2007, is eager to participate in the PPIP as it expects the U.S. property market will recover gradually late this year,”

    Wasn’t communism supposed to be a bad thing?

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  35. mukoh

    RE: Ray Pepper @ 14 – For quality home get a LED tv from samsung. It is the best.

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  36. mukoh

    RE: softwarengineer @ 18 – Software engineer which package are you with Comcast? I have HD: History, Syfy, Paladia, Travel, CNN, CNBC and over 100 others? You sure you had the right comcast?

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  37. Flying Ape

    RE: HappyRenter @ 33

    Your missing my point. The fear is that the US dollar will go into free fall once China stops drinking the spiked Kool-aid and sobers up (i.e sells the US dollar). I’m saying that they will continue to drink the Kool-aid since all the drinks are on the house. China can print as much money as they want since they are the bond market.

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  38. shawn

    RE: AMS @ 23 – when I got my 72″ I had to get rid of my 56″. Haulers/Electronic stores wanted at least $100 to come get it to dispose of it (it had only red/blue colors). I put it on craigslist for free and it was gone the next day.

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  39. AMS

    RE: Flying Ape @ 36 – They just keep that currency pegged to the dollar and print away.

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  40. AMS

    RE: shawn @ 37 – CRTs are much more difficult to dispose of. I actually found someone who wants my old one for free. Hard to believe, but I found someone who has a CRT that is not cable ready. Remember the days of external converter boxes?

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  41. shawn

    RE: AMS @ 39 – I remember climbing very high up a huge cedar tree in my back yard to put an antenna in it to get better reception.

    As to the topic. It is hard for me to tell. Today I am just lucky. I feel none of the pain others are feeling. I am employed, see no reason to fear job loss, got money to spend. I can find half that say it is going to get worse and the other half say it is going to get better? So put me down as unsure.

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  42. AMS

    RE: shawn @ 40 – Oh, yes, long before satellite dishes…

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  43. Racket

    By shawn @ 41:

    =

    As to the topic. It is hard for me to tell. Today I am just lucky. I feel none of the pain others are feeling. I am employed, see no reason to fear job loss, got money to spend. I can find half that say it is going to get worse and the other half say it is going to get better? So put me down as unsure.

    Put me in that column, Even if my company folds, I can probably go out on my own, making more money working less hours.

    I really don’t care about people not having money to buy new jetskis, but many people I feel bad, because their job gave them a purpose, now they ware just loafing around waiting for the phone to ring.

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  44. macaca

    hey Mariner22,

    re: SRS… i feel your pain, bro! what a scam that was.

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  45. Steve Roth

    >see if afterward you still think that a 60% gain in the stock market means the economy is out of the storm.

    Since all the runup in corporate profits has been from the financials (and we know where those “profits” came from)…

    Pretty profit pictures here:

    http://www.asymptosis.com/gdp-and-corporate-profits-smoke-and-mirrors.html

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