Monday Open Thread (2009-12-28)

Here is your open thread for Monday December 28th, 2009. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.

Be sure to also check out the forums, and get your word in the user-driven discussions there!

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About 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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

27 comments:

  1. 1
    David Losh says:

    It’s a New Year!

    At this time of year, at this time in the decade, I do my business plans. You know, the ones that ask that you where you want to be in five years and ten years.

    In 2000 my plan was to be retired by this time, again. In the five year plan things were looking really good, then two years later POOF!

    So here we are at the beginning of a new decade, a new set of plans.

    I’m very excited about the economy, and where we are globally. As the dust settles it looks like a lot has been accomplished to “raise all boats with a rise in capitalism and democracy.”

    So I’ve heard all the bad news here, but surely there is something positive in your lives that makes you get up in the mornings.

  2. 2
    softwarengineer says:

    RE: David Losh @ 1

    Good News

    My health is great, without good health everything else is a joke.

    Yes, retirement planning is a joke right now, but so what, before the 60s there was no retirements either….we’ve returned back to 50 years in our past.

    The main thing is have a stable job, and if you do, every time you walk in the door of your office thank God for your good fortune. The lucky ones in today’s economy have good incomes and better yet, hardly no debt too.

  3. 3
    Tyler says:

    RE: softwarengineer @ 2

    Another thing is that I think that people have stopped over-extending themselves (as much), and justifying it by thinking that their incomes would rise to match their spending at the next performance review.

    I am a lot happier now the people’s expectations around me are back to linear growth instead of the exponential growth that happened over the past few years.

    I think the market for $600+ baby strollers will contract back to Hollywood http://philandteds.com/eshop/index.php

  4. 4
    AMS says:

    Discount rates, capitalization, vending machines and home ownership.

    As some of you know, I have been known to hang out in the vending machine area. I have often wondered who frequents the vending machines; well, I know who, but what traits does this group have? How might one market to these individuals?

    It’s always the same story. SSDD-Something happens. Many times it’s operator error. Some times it’s a mechanical problem.

    Today’s event happened to be an older machine, one without the vend detection equipment. The machine did operate, but the product snagged. The customer? A guy who makes about $75,000 per year, a home owner. He put his $2 in, but the product was snagged.

    Since the machine was functional, one possible solution is just to put another $2 in and get two. Another solution is to just write up the loss and get the $2 refunded in a few days. The ultimate solution, I suppose, is to complain enough about $2 until AMS puts $2 in the machine–Merry Christmas. Yes, he ended up with both; I have no interest in the garbage he was attempting to buy.

    Of course I wanted to get my $2 worth, so I started offering the normal solutions. It seems he wanted the product now! (High discount rate) It also seems he didn’t have an extra $2 (low capitalization). I suppose he did have an extra $2 somewhere, but not in his pocket right there.

    Once again I was reminded about how people “own” $350,000 homes, yet don’t have an extra $2 in the event there is a problem. This guy will probably have lots of money after he receives his IRS check–I’m guessing that mortgage interest deduction is going to help him, but it didn’t help him today.

    It never ceases to surprise me how people with greater than $50,000 in income complain about such a seemingly small issue.

    Maybe I should have offered to loan him $2 at 100% interest? He’d probably have to file bankruptcy!

  5. 5
    patient says:

    Seems like the “recovery” propaganda is driving down demand for T-bills. Looks like we are going to end the year at near the yearly high for the 10 year yield. Could spell trouble for Seattle if our loan resets start heating up duirng climbing interest rates. On the other hand the stock market is so fragile that the next big “correction” is lurking with a likely dip in yields from a flight to safety. Though a stock market fall like that will impact buyer psychology negatively…so troubles one way or another.

  6. 6
    AMS says:

    To: The Tim
    Re: Special Request

    How about a special 2010 prediction thread? I am not sure how much participation would take place, but we could review the 2010 predictions in December 2010 and make new ones for 2011!

    Every year I listen to Art Bell’s prediction show:

    http://www.coasttocoastam.com/show/2009/12/30
    and Part II
    http://www.coasttocoastam.com/show/2009/12/31

    The experts, “psychics and futurists,” will be on January 1 with Ian Punnett.

    http://www.coasttocoastam.com/show/2010/01/01

    This year’s predictions, made last year, were lackluster. I think the producers sough after the mentally ill to make many of the predictions. None the less, Bell will be taking calls for 2011 predictions and reviewing, by the number, the results of the 2010 predictions. As always, some are right on, but others are way off. If someone had a way to separate the predictions early, it’d be impressive. Unfortunately, it seems everyone thinks they are infallible in predictive ability.

    For the west coast, I see continued downward pressures on housing prices. I am not so sure about areas where median price has already been adjusted near median income. After falling over $200k, how further down will Vegas go from today’s median price of about $140k? As the median home price to median income ratio approaches one, it’s tough to predict major housing price reductions without further income reductions. Then there is the whole issue of massive governmental intervention, as someone famous one suggested, that generally push prices higher.

  7. 7
    The_Dude_Abides says:

    I enjoyed seeing an upbeat post by software.

    This is what I’ll be watching in 2010, sorry no predictions:
    1) the 10 & 30yr. t-bond
    2) the unwinding of the fed mbs purchases
    3) the race between the nii & charge-offs of the banks
    4) condoze auctions….c’mon
    5) new financial regs

  8. 8
    AMS says:

    I’m a real fan of John Perkins, even if I am not sure about the totality of his claims. None the less, the claims that the US seeks to economically control much of the world doesn’t seem too far out.

    He’ll be on Coast to Coast AM with Ian Punnett tonight. The show starts at 22:00 PT.

    “Filling in for George, Ian Punnett speaks with economist John Perkins, who’ll discuss predatory capitalism and the real causes of the current global financial meltdown.”

    http://www.coasttocoastam.com/show/2009/12/28

    “Former economic hit man John Perkins has experienced today’s economic collapse before. The banking industry and sub-prime mortgage fiascos, the rising tide of unemployment, and the shuttering of businesses are all too familiar in the Third World countries where he worked. He was both an observer and a perpetrator of events that have now sent the US – in fact the entire planet – spiraling toward disaster.

    The real cause of our global financial meltdown is what Perkins calls predatory capitalism – the mutant form of an economic system that encourages widespread exploitation of the few to benefit a small number of already very wealthy people. A new geo-politics has emerged; today the CEOs of big corporations, rather than governments, control human and natural resources around the globe, as well as politicians and the media. Their arrogance, gluttony, and mismanagement have brought us to the perilous edge. The solutions will not be “return to normal ones”.”

    http://www.johnperkins.org/

  9. 9
    The_Dude_Abides says:

    Thought you guys might like this one from Businessweek:

    Portland (Ore.) lender Umpqua Holdings sank $3.4 million, according to local paper Bend Bulletin, into the Shire, a development where the artificial thatched-roof homes are modeled on the hobbit community in the Lord of the Rings trilogy. The developer defaulted in July. Umpqua CEO Raymond Davis said that while the bank did not experience a “significant loss” on the Shire, its real estate portfolio was “showing signs of weakness.”

    Calling on Ray – Perhaps a ‘gem’ in the Shire?

  10. 10
    Sniglet says:

    The real cause of our global financial meltdown is what Perkins calls predatory capitalism – the mutant form of an economic system that encourages widespread exploitation of the few to benefit a small number of already very wealthy people

    No. The cause of the melt-down is a multi-generational apex in bullishness, with all sectors of society feeling good about the future, and invulnerable to risk. Government meddling over the decades (to prevent serious economic trauma) led everyone to a feeling of invulnerability, and engendered an obscene appetite for risk, as we all strove to get rich.

    The Chinese factory workers who scrimped and saved to speculate on Shanghai stocks or condos (on easily borrowed money from state owned banks) were as much responsible for the depression as greedy Wall Street investment bankers selling mortgage backed securities.

    Heck, I have friends who bought homes with option arm loans, that were far above their budgets (i.e. they could never have made the payments on a normal loan), because they believed that prices only went up…

    As far as predictions for 2010 go, I am going to make the case that we will see the next shoe fall in the growing depression, and that stocks and real-estate prices will hit new lows. I’ll even go out on a limb to say that I believe this depression will last at least another 5 years, and possibly 10, with Seattle area real-estate prices dropping an more than 80% from peak (on average) by the time we hit bottom.

    Along the way I fully expect to see some recoveries which see a significant recovery in both stocks and real-estate which could last for up to two years before prices crash to new lows.

    We will know we’ve really hit a bottom when we go for at least 2 years with almost no movement in asset prices in either direction (i.e. up or down).

  11. 11
    AMS says:

    RE: Sniglet @ 10 – Did you listen to Perkins? I am not sure how far apart the two of you are in basic philosophy.

  12. 12
    softwarengineer says:

    RE: Sniglet @ 10

    My Dad Had a Comment About the Market You’d Like

    He always told me large shifts up and down in the stocks mean nothing; its the small shifts that occur and add up to a cumulative YOY change that really mean something.

  13. 13
    Sniglet says:

    Did you listen to Perkins?

    Yes, I’ve heard Perkins before. I don’t agree at all with his view that there is some “plan”, or people, behind events. I don’t think anyone purposefully orchestrated this depression. I agree that nearly all the financial “help” offered to struggling nations by other nations, or international institutions, is harmful. However, I do believe that most of the people working in these institutions (e.g.IMF, world bank, etc) genuinely believe they are doing the right thing. But you know what they say about the road to hell…

    No, my conviction is that there are broad socio-economic patterns that play themselves out time after time. The longer we get from the last economic catastrophe, the more complacent and risk seeking societies become. Eventually, all the risk becomes too excessive and the economy implodes, cleaning out mal-investments and re-teaching everyone the value of prudence.

    This is very much along the lines of what Kondratieff postulated.

    http://en.wikipedia.org/wiki/Kondratiev_wave

  14. 14
    S. Marty Pantz says:

    RE: Snignet @ 10 – So it’s almost a “wash,” or I may even come out way ahead, if over the next handful of years I lose on paper (and thus pay no income taxes) 30% of my stock portfolio value (let’s say $200k), but am able to get that $400k home I want for $100k. I’ll also pay less in commission, real estate taxes, and can pay in cash (no mortgage). My figures are very general, but you get the idea. Of course, it would be better if I lost next to nothing in stocks by having most of my portfolio in cash equivalents.

  15. 15
    Sniglet says:

    So it’s almost a “wash,” or I may even come out way ahead, if over the next handful of years I lose on paper (and thus pay no income taxes) 30% of my stock portfolio value (let’s say $200k), but am able to get that $400k home I want for $100k.

    If you own a house as well as stocks, then you will lose all round. Of course, those with cash will come out on top if my scenario plays out.

  16. 16
    AMS says:

    RE: Sniglet @ 13 – I’ve mentioned Elliott Wave Theory here in the past, and I find both Kondratieff and Elliott Wave Theory to be interesting.

  17. 17
    AMS says:

    RE: S. Marty Pantz @ 14 – Those who will be receiving annuity payments win big, and those paying annuity payments lose. Of course when those paying file for bankruptcy, those who expected to receive the annuity payments might not be so happy.

  18. 18
    Sniglet says:

    Those who will be receiving annuity payments win big, and those paying annuity payments lose. Of course when those paying file for bankruptcy, those who expected to receive the annuity payments might not be so happy.

    So true… I fully the well over half of ALL corporate and municipal bonds (junk, AAA or otherwise) to default by the time we hit bottom. Many companies or cities that are considered AAA today will go bust. A great many people who are counting on the stability of bond payments will be sorely disappointed when they find IOUs are worthless.

  19. 19
    AMS says:

    RE: Sniglet @ 18 – I have a friend who worked in a small automotive parts manufacturer that went bankrupt. He large pension turned small when he was informed to go apply at the PBGC.

    Right now the PBGC is solvent. Today. Who knows about the future.

    The bigger issue, however, is that the PBGC has a maximum that is guaranteed. His pension was cut down to the PBGC maximum, which was quite a shock for a guy who worked 30+ years.

    GM retirees might end up in a similar position.

  20. 20
    One Eyed Man says:

    RE: AMS @ 19

    Lots of airline pilots too.

  21. 21
    softwarengineer says:

    RE: AMS @ 19

    Pay and Retirement Cuts the Way Out?

    I’ve never heard health reform bill supporters suggest health care salaries and let’s go even further, even government workers, RE: pay and retirement, be cut like our UAW auto workers to survive.

    Its sort of funny, when its them and not us, its being world competitive and OK.

  22. 22
    softwarengineer says:

    RE: softwarengineer @ 21

    Boeing Assembly Worker Pay Cuts

    We all know a lions share of any 787 jobs left in America moved to lower salaried South Carolina, next stop base pay China?

    Besides, doesn’t it seem that all we do in America now-a-days [including Boing] is box foreign products and sell, or assemble the foreign sub-assemblies, then box and sell. The only craftsman tool we need now in America is a screw driver.

  23. 23
    The Tim says:

    Speaking of Boeing, this is from an article that was featured on the front page of the Seattle Times website earlier today, but has since been inexplicably pulled. Boeing faces challenging economy, bitter rival in 2010

    Last January, in light of the general economic downturn, Boeing CEO Jim McNerney announced a cost-saving target of 10000 job cuts companywide. “We expect to achieve and surpass that (10000) target in 2010,” McNerney said in October.

    All right, Boeing is achieving and surpassing their targets, sweet! Wait, what? We’re talking about layoffs? Doh.

  24. 24
    softwarengineer says:

    RE: The Tim @ 23

    Thank God for Military, When it Comes to Boeing

    In the 80s, 20% of Boeing’s Puget Sound workforce worked military, the rest worked commercial…..today, 50% work military at Boeing Puget Sound and the way things are going its going to be 80% military in no time.

    Be careful what you wish for, when you want big defense cuts….LOL

  25. 25
    Sniglet says:

    Just a reminder that the Optimistic Bear internet radio show will be airing live tonight (Tuesday the 29th) at 9:00pm Pacific Time. We will be discussing the past week in economics and finance. Feel free to call in and share your thoughts. Tonight we will also be talking about predictions for 2010

    http://surkanstance.blogspot.com/2009/11/introducing-optimistic-bear-weekly.html

  26. 26
    AMS says:

    RE: Sniglet @ 25 – Is this a phone in only program?

  27. 27
    Sniglet says:

    Is this a phone in only program?

    There is a chat room available for you to post questions if you like. Just go to the link I pointed you to for details. You can listen live from your PC, call in by phone, or send messages via the chat room. I would LOVE to hear from SeattleBubble folks for the year-end show!

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