Posted by: 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.

36 responses to “Weekly Open Thread (2013-12-09)”

  1. Kary L. Krismer

    Is this really the most compelling foreclosure out there to protest?

    http://www.king5.com/news/local/Protest-At-Foreclosure-Auction-234835811.html

    If the owner has someone old enough living with them, then the bank shouldn’t foreclose? I guess that would help support extended families. Move your parents into your house and then the bank won’t foreclose.

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  2. Kary L. Krismer

    RE: The Tim @ 2 – I don’t believe that’s a refinance. It’s too bad that it’s not, because then they might be out from under the 80/20 loan mess they got themselves into. I haven’t checked which DOT is being foreclosed, but my guess is it is the first and they will still owe the second.

    Which hits on another topic. Congress is very unlikely to extend the Mortgage Debt Relief Act, which deals with debt forgiveness on short sales and foreclosures, but also expiring is the deduction for PMI. Not being able to deduct PMI, which really is a form of interest, is part of what got us into the mess with 80/20 loans.

    I can see how someone would be against allowing any deduction for home interest, but if you allow any, you should allow PMI too, IMHO.

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  3. Kary L. Krismer

    RE: The Tim @ 4 – I would guess a lot of it is probably unpaid interest, but the other likely components are: (1) The amount of that 2008 loan; and (2) Any inaccuracy in the article.

    I’m not showing that house as being listed, so I will make the comment that the statement of value in the article is most likely high. If that is off, the amount of the debt might be off too. If you look at the NTS for the DOT being foreclosed, that should give you a good idea of the amount owing on that loan, but not the other two loans.

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  4. softwarengineer

    Its “Pick and Choose” Which State Gets Seattle Area’s 777

    “…That now makes ten states known to be in the competition or strongly suspected to be in play. Those states include Washington, California, Utah, Texas, Alabama, South Carolina, North Carolina, Georgia, Kansas and Missouri. Wisconsin says it’s sending a proposal to Boeing even though the state says it was not asked. Sources told KING 5 News that Boeing was reaching out to 15 states, but five of those states remain a mystery.

    Boeing threw 777X production out to bid after the Machinists Union rejected 2 to 1 an offer by the company that many considered too full of concessions….”

    http://www.king5.com/news/aerospace/Time-running-out-for-states-bidding-on-Boeing-777X-234833221.html

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  5. Kary L. Krismer

    RE: softwarengineer @ 7 – King5 has really been fear mongering on that topic, reporting on next to nothing. That though is typical of TV news.

    Personally I think KS or MO would be the best choices if you don’t consider tax incentives, although I’m not sure of the nature of the need for access to a sea port. CA and NC probably the worst.

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  6. Erik

    RE: Kary L. Krismer @ 8
    I think Texas may get it. I think they already have some infrastructure in place. I don’t know that Boeing will want to build an entirely new facility just because of the time it would take to put up.

    I still think Washington state makes the most sense financially. But making financial sense has never been a big component in Boeing’s decisions in the past. I think they want to get rid of the unions so bad that they are willing to accept billions of dollars in losses just to get out from under the unions. This is a power struggle and my bet is on the executives. The executives are very smart people. Much smarter than the union. This is a game of chess and it’s only a matter of time until the union is gone.

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  7. Kary L. Krismer

    RE: Erik @ 9 – I could probably agree with all of that except the part claiming that the executives are very smart people. Both the 787 development and moving of headquarters to Chicago proves that is not true.

    I have no opinion though on whether they are smarter than the union leadership, because I don’t have a take on the latter.

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  8. redmondjp

    RE: Kary L. Krismer @ 10RE: Erik @ 9 – My guess is that Boeing executives are using a very large and complex Excel spreadsheet, with one tab for each potential location. Each and every quantifiable cost-relative variable is included in the calculations. Intangible costs such as an inexperienced workforce are not included (much to the dismay of the local experienced Boeing workforce).

    The spreadsheet tab that has the smallest number at the bottom will determine the location.

    If Everett ends up with the smallest number, production will stay here.

    It’s that simple.

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  9. ricklind

    By The Tim @ 6:

    By Kary L. Krismer @ 5:
    …the statement of value in the article is most likely high. If that is off, the amount of the debt might be off too.

    Good call. The NTS filed this past August shows a principal balance of $394k. It’s not clear how much they may owe other lenders not listed in that NTS.

    This whole thread has been really good quality; thanks gents.
    Rick

    Fel Temp Reparatio

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  10. Erik

    RE: Kary L. Krismer @ 10
    Boeing executives use to be smart. Things have changed.

    If Alan Mulally, the ex vp of Boeing becomes CEO of Microsoft, I will buy a condo near Microsoft in Redmond and buy all the Microsoft stock I can get my hands on. I forsee that as a huge opportunity if Alan Mulally becomes CEO. It will be like when he pulled ford out their difficulties, only this will be a bigger magnitude and Bellevue and Redmond real estate will go much higher in price. That’s how I plan to make a lot of money on my next remodel.

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  11. Kary L. Krismer

    I was in West Seattle yesterday in my truck, just after Fauntleroy and 35th (I don’t remember exactly where), and the road was slippery. I wonder if that was still the impact of their using too much de-icer on the bridge?

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  12. Kary L. Krismer

    By Erik @ 13:

    RE: Kary L. Krismer @ 10 – If Alan Mulally, the ex vp of Boeing becomes CEO of Microsoft, I will buy a condo near Microsoft in Redmond and buy all the Microsoft stock I can get my hands on. I forsee that as a huge opportunity if Alan Mulally becomes CEO. It will be like when he pulled ford out their difficulties, only this will be a bigger magnitude and Bellevue and Redmond real estate will go much higher in price. That’s how I plan to make a lot of money on my next remodel.

    Yes, he did wonders for flippers in Detroit. ;-)

    Seriously, I wouldn’t try to predict future real estate trends based on any one factor, including things with a more direct impact, like interest rates.

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  13. softwarengineer

    RE: Kary L. Krismer @ 8

    Yes Kary

    Wichita closed down in spares facility when Boeing outsourced parts manufacturing….assuming the Wichita Boeing plant [it used to build rockets BTW] is still available/empty; Kansas is all set…..they just have to rid themselves of the Machinist Union….LOL

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  14. softwarengineer

    RE: Kary L. Krismer @ 15

    What Microsoft After Mullaly Takes Over

    If he does for MSFT what he did for Boeing’s 787 it will be 90% outsourced.

    He didn’t have as much control over Ford [why he's leaving]; albeit even Ford [I'd add GM, Toyota, Mazda, Hyundai, Kia, etc, etc...to this gimmick too] just made their smaller choice larger and everything looks like Fusion, even the Taurus [IMO they're the same sedan].

    http://images.search.yahoo.com/search/images?_adv_prop=image&fr=yfp-t-900&va=Ford+2013+sedan+models

    Toyota had no producibility assembling Camrays and Corollas in America with the higher paid foreign engineers in Japan, so they make the Lexus identical to the Corolla, and the Camray identical the Corolla too….they only make the Lexus in Japan near their engineers.

    Its a cheap manufacturing “no choice” formula only Chrysler has shunned so far to date IMO; but when your higher paid engineering is in another country….what else could they do? I’d add Mercedes and BMW to this cheap-shod method too…..no wonder we need foreign cars in America, there’s only one sedan to chose from each company. Even the Cadillac looks like a Malibu…..LOL

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  15. Erik

    RE: softwarengineer @ 17
    I don’t think Mulally wanted that. That was a Harry Stonecipher mistake. Alan Mulally is not to blame for that. Alan Mulally would come into engineering and introduce himself. He was all about treating employees well and keeping business in house. Stonecipher from McDonald Douglas was the person that hurt Boeing. Stonecipher came in and reversed a lot of Alan Mulally’s 787 plans. The outsourcing of engineering was one of those plans he reversed. Mulally was the father of the 787 program, but he is not to blame since his decisions were reversed by McDonald Douglas’ CEO, Stonecipher.

    Stonecipher wanted a team of employees competing against one another. He said we only want the best members to play and if you aren’t the best, you wont play. Mulally wanted a family of employees to help each other get better. You should read up on the history. Extremely interesting.

    Alan Mulally is a winner.

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  16. softwarengineer

    RE: Erik @ 18

    Erik, Read These Two Artcles

    http://seattletimes.com/html/businesstechnology/2020275838_boeingoutsourcingxml.html
    http://www.businessinsider.com/dreamliner-problems-blamed-on-alan-mulally-2013-2

    Then allege again the 787 wasn’t Mullaly’s fault. If we listened to everything they wanted us to believe; we’d all be bankrupt.

    BTW, I do think Mullaly was smart….get the hades out of Boeing before I get fired.

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  17. redmondjp

    RE: softwarengineer @ 17 – The next big thing at Microsoft is likely to be a significant closet-cleaning. It will be eye-opening to many that they can do everything they are doing now and be even more profitable with 10-20K less employees.

    Look at how many employees Boeing had in the 1980s and look at the number now (then compare their stock price, then and now). When I was in college back in the 1980s, as part of my job search efforts I paid $120 of my own money to buy a business directory of WA with detailed information on just about every company here – IIRC Boeing had about 120K total employees in WA in 1987 (including defense and commercial).

    You could completely eliminate the Microsoft research division and it would only be good for the bottom line. One could argue that they haven’t contributed anything to the bottom line for years (most of their gee-whiz technology like the Kinect sensor is purchased from other companies). This may hurt a lot of people’s feelings, but most of the other (once-)great companies in America had significant research divisions (GE, AT&T, etc) and have significantly downsized them if not eliminated them altogether. It’s much less expensive to let other companies invent stuff and then just buy them, or license the technology.

    And for that matter, let’s look at Amazon as well. For the past several years they have been losing money (with a few quarterly exceptions), but somehow keep growing larger every year. How long can Mr. Bezos keep claiming that profitability is right around the bend? How many more employees do they need to hire in order to turn that corner?

    If you want your property to maintain its value (esp. in N. King and Snoho counties), you should be praying every night that these latest talks between Boeing and the machinists are fruitful.

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  18. Kary L. Krismer

    By redmondjp @ 20:

    This may hurt a lot of people’s feelings, but most of the other (once-)great companies in America had significant research divisions (GE, AT&T, etc) and have significantly downsized them if not eliminated them altogether. It’s much less expensive to let other companies invent stuff and then just buy them, or license the technology.

    I know you’re talking at the individual company level, so please don’t take this comment the wrong way. I’m sort of changing the topic.

    I’m not a big fan of a lot of superficial things in American society right now, but one of the things I like a lot is the development of technology. It’s incredible to me the advances that the technology companies are making collectively. You may be right that it’s no longer the big companies (e.g. Intel) making the most significant advances, but collectively a lot of things are happening.

    Colbert was mocking an opinion piece this week about how statistics indicating stagnant income from the 90s don’t take into account the advances in technology. I can understand where he’s coming from, because perhaps having a 50″ TV connected to a DVR and Internet streaming doesn’t really raise the standard of living in a meaningful way, but at the same time, that 50″ TV not so long ago would have cost over $5,000 if it was possible at all. So how do you account for that in income statistics?

    Connecting the two thoughts together, I think a lot of these advances while technologically meaningful are not that meaningful on a personal level. I’ve commented before on how much people now pay just for communications. It used to be you had a $20 phone line. Now you have a $70 smart phone plan and $50 broadband at home. That’s a lot of money that is being spend on something that is not tangible and does not exist the month after you paid for it. I’m not sure what that change will mean for the country over either the short run or long run.

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  19. Kary L. Krismer

    RE: The Tim @ 22 – That reminds me of the Talking Heads’ Movie “Stop Making Sense,” particularly the part where they have the seemingly random words flashing on the three screens behind, like “Air-conditioned” “Under the Bed” “Drugs.”

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  20. softwarengineer

    RE: redmondjp @ 20

    I’d Blame Business Management and (Sorry Kary) Attorneys

    Let’s be honest; America is ridding itself of its cheaper domestic engineers and outsourcing to higher paid engineers in Japan and Europe…..so R & D is up to the foreign new crop now and guess what….they aren’t up to the job. IMO, MSFT [Boeing too] kept on this “protectionist” [if protectionism means protecting higher paid engineers' salaries abroad] mode and also tried to bring in India’s tech on the cheap through insourcing too….the results are clear…..its not working in R & D.

    Why? I’m sure MSM would allege it should…..but they’re also a bunch of non-techs, how would they know it was a failure path for R&D.

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  21. softwarengineer

    RE: The Tim @ 22
    Yes Tim

    Its coincidental or possibly a reason?

    After the Roswell incident in 1947 we had a boost in American R&D development….it lasted a couple decades…..its over now, we’ve reversed engineered all we could? LOL

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  22. Erik

    RE: softwarengineer @ 19
    Those articles do not lead me to believe Mulally did a bad job. He did push more of a technology jump, which I think was just fine. The big issue in my opinion was the outsourcing. I blame Stonecipher for that.

    I read the book “Turbulence” years ago. Super interesting. It talks about how the Boeing culture changed and how we got where we are today. I highly recommend it. Anyone that wants to understand Boeing better needs to read this book cover to cover. Phil Condit merged Boeing with Mcdonald Douglas and we turned into McDonald Douglas. The agreement is that Boeing would let McDonald Douglas lead the company. That is how Boeing lost their “family” values. Boeing stock is sky high, so was the 787 really a failure or was it a huge investment?

    http://seattletimes.com/html/sundaybuzz/2013470649_sundaybuzz21.html

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  23. Ron

    Why are republican men so misogynous?

    Michigan ‘Rape Insurance’ Bill Passes Into Law http://www.huffingtonpost.com/2013/12/11/michigan-rape-insurance_n_4428432.html

    Seattle is known for being one of the most progressive cities in the county yet local republican men fight tooth and nail at every election as they attempt to bring their politics to this city. Perplexing. I’ll never understand why any women would screw a republican consider what they stand for. Don’t be fooled. Voting republican will bring this to our fine city.

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  24. Kary L. Krismer

    RE: Ron @ 27 – Just out of curiosity, what does an abortion cost? The reason I ask is that it seems more in the range of dental or vision insurance–a relatively low cost item that it would be stupid to insure in the first place. The difference might be possible complications that would result in a hospital stay, but you don’t generally want to insure against low cost items.

    So if I were to go on a partisan rant like Ron, I would complain that Democrats think everything needs to be covered by insurance. That’s incredibly stupid thinking, and part of the reason the new Obamacare policies are so expensive. The main type of things you want to insure are a low probability events that are very expensive (e.g. cancer, earthquakes). The last thing you want to insure is a high probability event that is virtually certain to occur (e.g. dental/vision and birth control pills). But in general, if you can cover the cost of something, you don’t want to cover it by insurance, so that’s why I’m asking what does an abortion cost?

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  25. Kary L. Krismer

    Does anyone know how healthcare insurance premiums factor into the consumer spending data? Is it counted or not counted?

    If it’s counted, I would expect to see a rise in consumer spending in January and February as Obamacare kicks in, since that is relatively involuntary. But if it’s not counted I would expect a drop as people stop spending money on other things.

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  26. ron

    RE: Kary L. Krismer @ 28

    thank you for illustrating my point.

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  27. Kary L. Krismer

    By ron @ 30:

    RE: Kary L. Krismer @ 28

    thank you for illustrating my point.

    Thank you for demonstrating my point about ignorant partisan Democrats. Ever take a class on the theory of insurance?

    Go back and re-read my post. It was dealing solely with the economics, not the morality. Not to mention the fact that I’m not a Republican. I’d call myself a Libertarian except for two things: (1) I don’t really associate that well with all of their issues either; and (2) I usually can’t remember what they’re called, so it’s hard for me to call myself that. ;-) In reality I’m an Independent that hates almost every politician on the face of the earth.

    But go ahead being an ignorant partisan and thinking that you’re doing people a favor by covering birth control pills, even though economically it makes zero sense (ignoring the fact that employer based health care benefits are not taxed). The drug companies like the extra profits.

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  28. Macro Investor

    By redmondjp @ 20:

    RE: softwarengineer @ 17 – The next big thing at Microsoft is likely to be a significant closet-cleaning. It will be eye-opening to many that they can do everything they are doing now and be even more profitable with 10-20K less employees….

    And for that matter, let’s look at Amazon as well. For the past several years they have been losing money (with a few quarterly exceptions), but somehow keep growing larger every year.

    I think this is a very astute comment. What I continually hear from Microsoft insiders is that they have MASSIVE duplication of effort and people doing nothing of value. A new CEO may very well clean house in a shocking way, which will ripple through the housing market.

    That is all very speculative. I also believe Ballmer and Gates might not really give up much power. I think they’ll quarterback from the sidelines and change may be very slow. These guys still own a big chunk of the stock and they are control freaks.

    Amazon is a very unique company. They spend almost all their profits on wild ideas, that may or may not pan out. What is an online retailer doing developing cloud IT services, hand held computers and media rental services? I think all of those things will eventually fail and they’ll have to fall back to online retail only.

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  29. Macro Investor

    By Kary L. Krismer @ 10:

    RE: Erik @ 9 – I could probably agree with all of that except the part claiming that the executives are very smart people. Both the 787 development and moving of headquarters to Chicago proves that is not true.

    I sort of agree with you. They didn’t bring the project in on time/budget, and some of the failures were publicly humiliating. I’m not even sure the plane is safe to ride in. Time will tell.

    But that is short term thinking. Boeing management realized they need to push the technology envelope, and rid itself of the unions. They had no choice, with China making a big push to enter the market. The choice was bet the company on new technology and manufacturing processes, or bet the company waiting for low-cost competitors to eat their lunch. Compare that with what the “big 3″ auto makers did — arrogantly sitting still while toyota and honda left them in the dust.

    New technologies take a very long time to fully bake. Look at how many decades it took for computers and software to progress to a point where most people can use them. Look at how long it took before rockets no longer blew up on the launch pad regularly.

    The 787 composite design probably sets China back another 10-20 years. If it works out, we may look back and see this as the spark for a lot of new inventions… decades away. Composite body cars that get much higher gas mileage, for one obvious example. If I were a young engineer, I’d find a way to become the composite design/manufacturing expert. You’ll be in high demand while your fat, lazy co-workers get laid off and blame others for their fate.

    Were the unions stupid or smart? I’m not sure. Maybe they saw the writing on the wall and decided to play hard ball every new contract, knowing that with globalization their death was imminent anyway. Get all you can while you can. Or maybe they were just greedy and short sighted, and cut their own throats. Strike and be disruptive so often only a divorce makes sense.

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  30. Erik

    RE: Macro Investor @ 33
    Thank you, I am smart.

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  31. Kary L. Krismer

    By Macro Investor @ 33:

    Boeing management realized they need to push the technology envelope, and rid itself of the unions. They had no choice, with China making a big push to enter the market.

    Agree in the technology, but the implementation and planning sucked.

    As to the unions, they just need to know how to deal with unions. Being union hasn’t hurt UPS, and being non-union didn’t help DHL/Airborne. And moving their work to right to work states didn’t help the latter either. Poor management leads to poor results, and for several years now Boeing has suffered from piss poor management. If they relocate any operations it should be headquarters, leaving all the employees in Chicago.

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  32. ricklind

    RE: Kary L. Krismer @ 29

    I am “reasonably” sure it’s not counted.

    Rel Temp Reparatio

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