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.

52 comments:

  1. 1
    SeattleMoose says:

    How could the “worst” be over?

    1) Jobs still being lost
    2) Government trying to “spend way out of recession” which ALWAYS comes back to bite…HARD
    3) Housing still overpriced relative to rents/salaries/etc.
    4) Same Big Bank/FED/Wallstreet crooks still in control of money/policy
    5) Obama just another puppet president controlled by his corporate masters
    6) Elected officials in DC still bought off by their corporate masters

    But if you ignore all of that, then maybe the “worst is over”…. (la la la)

  2. 2
    SeattleMoose says:

    Oh and lest we forget…..

    7) State/Cities/Counties are broke
    8) The healthcare plan is actually just a way to levy another Federal Tax…on EVERYONE

  3. 3
    David Losh says:

    The news that you are dying is the worst. After that there are five stages.

    I think that it will take another year or two for it to sink in that what we held as true was wrong.

    My biggest example for over ten years has been using housing starts as an indication of a robust economy. Developing housing units became a joke, and child’s play, in the 1990s. By 2000 if you bought into the development trap you were lost financially. Still it is going on today. After all they aren’t making any more dirt, you can only go up from here. I mean literally, you can build more units on a smaller foot print.

    So I think we can throw out housing unit starts along with consumer spending. Consumer credit will be an idiot’s tool. The consumer is tapped. What will be next? Stock market, currency trading? Financial markets in general?

    The worst is over because we have to start fresh.

  4. 4
    wsuengineer says:

    Is the worst over? Yes. I define it by number of jobs lost per month. We’re still losing jobs, but at a much slower rate (ignore the federal census jobs). The stock market is…well…better than it was. Our economy was jacked up on performance enhancing leverage. Like a body builder on too much juice, our economy went into shock and shut down. Trillions of dollars had to leave our economy for equilibrium to be established. Instead of a 250 lb. meat head, our economy emerged as a 180 lb. average joe. What we have today is the normal. People who found themselves without a job at the end of musical chairs are going to have to find a way to fit in or re-invent themselves.

    I think it’s going to be a long agonizing recovery.

  5. 5

    Don’t forget …

    9) Second wave of foreclosures (strategic defaults)

  6. 6
    TheHulk says:

    Which recession are you talking about Tim? The first or the second (of the double dip I mean). Personally, the first was pretty bad with a number of large companies going belly up (consequently thousands of lost jobs).

    This second coming recession (or rather flatline – tepid economic growth if any) is going to be rather unusual. Since we will mostly flatline, employers wont hire new people. Also they laid off most of the people they would have laid off in the last recession, thus I dont think there will be deep cuts.

    Thus, those that are employed will continue to stay employed (barring natural or BP sponsored disasters of course). Here is the rub. If you are unemployed and only have skills that were relevant more than 10 years ago it is very likely that you will continue being unemployed. This is even more so if you have already been unemployed for more than a year now. We are going to get a disconnect between the employed population which almost continues with business as usual (almost – since asset prices will continue depreciating including housing and stocks), while the unemployed will experience a depression like scenario. At best the long term unemployed will get temp positions but I don’t see permanent hiring on a large scale for the next couple of years.

    So, for the employed, I think they have already seen the worst of the recession. For the unemployed, especially the long term unemployed, I think the worst is yet to come. (I sincerely hope I am wrong about both but this is my gut feeling).

  7. 7
    Scotsman says:

    The depression party is just getting started.

    The issue is debt and the cost of servicing it. In a nutshell, debt service can’t grow faster than productivity since it is productivity that provides the income to pay the interest. Since 1994 we have had all types of debt grow at rates that far outstripped the growth in productivity and income, facilitated by ever falling interest rates and “novel” financial instruments. But this growth is not sustainable and in fact must retrace over the long term to more traditional levels and ratios of debt/income.

    We can ignore the issues of unfunded government entitlements for now even though they by themselves are sufficient to collapse the economy through the taxes required to fund them.

    Pull up the chart in the link. Take a look at the growth in debt before and after 1995. Visualize where we would be if the linear growth prior to 1995 had continued to the present, then look at all the excess debt above that linear growth line. All of that, and more, has to be taken out of the economy as we go forward. The several $trillion in lost housing equity is just a start.

    http://market-ticker.org/uploads/Z1-2009-12/total-debt-2009-12.png

  8. 8
    wsuengineer says:

    And by “I think it’s going to be a long agonizing recovery,” I mean it’s going to be agonizing for people to accept our economic reality. People today still feel entitled to partake in the bubble party of yesteryear. They don’t want to believe that the party is over and you actually have to save money and earn what you get, and even with the market at “near bottom” they still can’t afford to live in Seattle Proper. That’s life. People need to actually learn some financial skills. The great reset has begun.

  9. 9
    ray pepper says:

    “I think it’s going to be a long agonizing recovery”

    agreed!

    We have entered the middle of the 2nd inning……………….And this game is going well into extra innings………..

  10. 10

    By ray pepper @ 9:

    “I think itâ��s going to be a long agonizing recovery”

    agreed!

    We have entered the middle of the 2nd inning……………….And this game is going well into extra innings………..

    I think it’s more like the fifth inning. We scored a lot of runs early by having the same guy batting over and over again. He’s out of the game now, and Timothy Geithner is coming up to bat. The batting coach is trying to show Timothy how to hold a bat, but Timothy is just not grasping it. Mo, Larry, and Curly are Timothy’s teammates.
    The other team is exhausted, and nobody at this point ,on either team, wants to or is able to score runs. Long. Agonizing.
    Are things going to get worse? I think so, maybe a little.I don’t see things like rioting in Wallingford, or Bellevue Square being abandoned. But things are pretty bad right now, and it looks like things are going to stay pretty bad ( at best) for an extended period.
    Things might not get worse, but I think we’re going to be wallowing near the bottom for a pretty long time.

  11. 11
    Blurtman says:

    A very misleading poll. If you lose 1 million dollars in one year, but gain $10,000 for the next 10 years, the worst is certainly over, but you are still in a terrible hole.

  12. 12
    David Losh says:

    RE: Scotsman @ 7

    I think this link is more clear

    http://graphics8.nytimes.com/packages/flash/business/DEBT_TRAP/media/interactives/timeline.swf

    You can see home equity loans took hold in the 1980s. That bolstered consumer credit. The whole mess, probably by refinances, drove up the price of housing rather than any true economic basis. Then the loans, based on people’s ability to pay, were used as securities that added more “false”equity into the financial markets.

    It all feed on itself, but yes, debt has to be paid at some point.

  13. 13
    pfft says:

    By SeattleMoose @ 1:

    How could the “worst” be over?

    1) Jobs still being lost

    the economy has added jobs in something like 7 out of the last 8 months. what data are you looking at?

  14. 14
    pfft says:

    By Scotsman @ 7:

    The depression party is just getting started.

    yeah you know despite the fact that the recession ended about a year ago.

  15. 15
    Scotsman says:

    RE: pfft @ 14

    I understand how meaningless the “official” demarcations are when looking at the bigger picture. You have once linked two concepts together, but have never comprehended anything close to a “big picture.”

    Neither of us will change the course of history here, but one of us will be correct in our prediction. Put your money down, folks!

  16. 16
  17. 17

    I’d add:

    10) Politicians voting on economic matters based on poll results of people who don’t have even a minimal understanding of economic matters, rather than doing what they think is right based on information they obtain from experts.

    For this I’d use an Iraq war analogy. If I recall correctly, the Iraq war had fairly significant public support going in (based largely on 9/11), but that faded away and calls started for a pull out. This stimulus had significant public support too (based largely on Obama), but that too has faded, with people now worried more about the deficit than jobs.

    I’d argue the time not to support something is before it happens, not halfway through, unless you didn’t support it from the beginning. You don’t start a war, destroy the entire infrastructure and government of a country, and then pull out. That just leaves a bigger mess than what you started with. And you don’t start a stimulus plan and then quit part way through. That too just leaves a bigger mess than if you hadn’t started.

    Now that doesn’t mean you need to blindly go on no matter what. On Iraq Rumsfeld was a disaster. In comparison the stimulus has been fairly well run, with most the complaints being simply the expected results (e.g. debt run up), or false arguments (it didn’t create jobs as opposed to it didn’t create enough jobs).

    Finally, I’d agree with another item on the list–health care. An incredible drag on jobs.

  18. 18

    By Blurtman @ 11:

    A very misleading poll. If you lose 1 million dollars in one year, but gain $10,000 for the next 10 years, the worst is certainly over, but you are still in a terrible hole.

    But it would be pretty pointless to have a poll that asks is the economy stronger now than in 2007.

  19. 19
    Blurtman says:

    If a company books revenue on product that has not shipped, it’s top line can look really good. But it is all bogus.

    If a country calculates GDP to include the selling of fraudulent securities, selling homes that will soon be defaulted upon, and consumption of folks employed in industries selling bogus products, the GDP number although it looks positive, is bogus.

    Pumping up GDP through outright fraud, and by pulling demand forward from the future may make everyone feel good at the time. but it masks the fact that the USA has been in a recession for quite a while, even during years of positive and growing GDP.

  20. 20

    By Blurtman @ 19:

    If a country calculates GDP to include the selling of fraudulent securities, selling homes that will soon be defaulted upon, and consumption of folks employed in industries selling bogus products, the GDP number although it looks positive, is bogus. .

    Are you talking about 2007-2008, or 2010? ;-)

    Seriously, you have to measure GDP by the actual numbers, and not by some bogus system where you put Dave Losh’s value on every parcel of real estate sold.

    At any time you’ll have numbers that can be challenged. For example, I would say the gasoline and other related sales in 2007-2008 were bogus because they could have stabilized gas profits by simply creating a 40 cent a gallon gas tax (which would would have cut consumption without contributing to GDP).

  21. 21
    patient says:

    RE: Kary L. Krismer @ 17

    “10) Politicians voting on economic matters based on poll results of people who don’t have even a minimal understanding of economic matters, rather than doing what they think is right based on information they obtain from experts.”

    If this was true it would be great since it would mean democracy is working. Remember that our elected are there to represent the people who elected them. That means to vote as the majority wishes as long as it’s according to the law. Unfortunately most of them forgets this as soon as the polls are closed. To do what you think is right against the peoples will since you assume that the people are to stupid to know what they want is the opposite of democracy.

  22. 22

    Doesn’t take much to trip the consumer confidence switch in the right direction. As with any recession, apart from the obvious hard cash aspects, the recovery is usually just a change in the our collective state of mind, including big business that has plenty of cash sitting around and pitifully sitting on the fence waiting to see happens, Get off your fat arses and hire some people!

  23. 23
    softwarengineer says:

    RE: patient @ 21

    You’ve Just Defined Fascism Patient

    It’s not Conservative and certainly not Liberal thinking [old fashion liberal thinking, before the world’s poor became more important to the politicians than We the People].

  24. 24
    softwarengineer says:

    We’re in Great Depression II

    Article in part:

    “…Those who don’t remember history are doomed to repeat it…there was a head and shoulders pattern that developed before the Depression in 1929, then with the recovery in 1930 we had another head and shoulders pattern that preceded a fall in the market, and in the current Dow situation we see an exact repeat of that environment,” Guppy said. …”

    http://www.cnbc.com/id/38092759

  25. 25
    pfft says:

    By Scotsman @ 15:

    RE: pfft @ 14

    I understand how meaningless the “official” demarcations are when looking at the bigger picture. You have once linked two concepts together, but have never comprehended anything close to a “big picture.”

    Neither of us will change the course of history here, but one of us will be correct in our prediction. Put your money down, folks!

    tell my why they are meaningless. it was one of the longest recessions in awhile and now it’s over. GDP growth even ex-stimulus is postive and has been for awhile. I understand the big picture far more than you think. you’re just bearish and so the recovery most be perfect until you believe. they aren’t.

    when you are bearish you can easily make excuses and still be bearish years after recovery of the economy or stock market. sometimes you just have to admit you’re wrong.

  26. 26
    pfft says:

    By softwarengineer @ 24:

    We’re in Great Depression II

    Article in part:

    “…Those who donâ��t remember history are doomed to repeat itâ�¦there was a head and shoulders pattern that developed before the Depression in 1929, then with the recovery in 1930 we had another head and shoulders pattern that preceded a fall in the market, and in the current Dow situation we see an exact repeat of that environment,â�� Guppy said. …”

    http://www.cnbc.com/id/38092759

    go back and look at the data. this is not 1930.

  27. 27
    Mark Kirby says:

    RE: Conor MacEvilly @ 22

    “…the recovery is usually just a change in the our collective state of mind”

    True, usually. But this recession is not the usual variety. It is borne from peak debt, where public and private capacity to borrow and spend has reached it’s limit. The only other time we hit a debt wall like that was in 1929, and it took until the 1940’s to get out. Japan in the late 1980’s is another example and they still haven’t gotten out.

    As for your advice — just start hiring — IMO that puts the cart before the horse. Companies hire only after they’ve seen demand for their products increase.

  28. 28

    By patient @ 21:

    RE: Kary L. Krismer @ 17

    “10) Politicians voting on economic matters based on poll results of people who donâ��t have even a minimal understanding of economic matters, rather than doing what they think is right based on information they obtain from experts.”

    If this was true it would be great since it would mean democracy is working. Remember that our elected are there to represent the people who elected them. That means to vote as the majority wishes as long as it’s according to the law. Unfortunately most of them forgets this as soon as the polls are closed. To do what you think is right against the peoples will since you assume that the people are to stupid to know what they want is the opposite of democracy.

    That is not how our system of government is supposed to work. We elect people to make decisions, not people to make decisions based on polls.

    http://en.wikipedia.org/wiki/Direct_democracy#United_States

  29. 29

    By pfft @ 26:

    By softwarengineer @ 24:

    We’re in Great Depression II

    Article in part:

    “…Those who don�t remember history are doomed to repeat it�there was a head and shoulders pattern that developed before the Depression in 1929, then with the recovery in 1930 we had another head and shoulders pattern that preceded a fall in the market, and in the current Dow situation we see an exact repeat of that environment,� Guppy said. …”

    http://www.cnbc.com/id/38092759

    go back and look at the data. this is not 1930.

    And even if it were, if you want to lose money look for stocks that had a head and shoulders pattern and then are developing it again, and bet that it will carry through in the same way.

  30. 30

    RE: Mark Kirby @ 27
    Hi Mark

    Good points! I’m just an overly optimistic individual and always looking for the silver lining. I prefer not to wallow in the recession and just get on with it. Obviously not easy to do if you’ve been unemployed for over a year, losing your home and your unemployment benefits have just been cut off.

    Thanks
    Conor

  31. 31
    patient says:

    RE: Kary L. Krismer @ 28 – I think you need to read up on democracy Kary.

  32. 32
    WestSideBilly says:

    By patient @ 31:

    RE: Kary L. Krismer @ 28 – I think you need to read up on democracy Kary.

    The United States has never been, and never will be, a democracy. We’re a representative republic, and the responsibilities of our elected politicians are to vote in the manner which best serves all of his or her constituents, not just those who voted for him/her. The concept of running sample polls before every vote is cast is a relatively new one, and one which hurts our country a great deal.

  33. 33
    WestSideBilly says:

    By Kary L. Krismer @ 17:

    This stimulus had significant public support too (based largely on Obama), but that too has faded, with people now worried more about the deficit than jobs.

    That’s not really true. When push comes to shove, people will always worry more about jobs than about deficits. The people most worried about deficits are the ones screaming loudly on television. The people worried about jobs are the many millions without one, the many more millions working a job that pays them a fraction of what they made before, and the still millions more who wonder every day if their paycheck is going to clear.

    How many people do you know that really worry about the federal deficit?

    (Data source:
    http://bsom.blogspot.com/2010/06/washington-post-alternate-reality.html )

  34. 34
    David Losh says:

    RE: Kary L. Krismer @ 20RE: Kary L. Krismer @ 17

    Number one value is determined by economy. What is a housing unit worth in relation to the job market, the price of goods, and it’s viability for a return on the investment?

    Second, we did bomb the infrastructure of Iraq. We do have the obligation to rebuild it, and the premise of the attack was weapons of mass destruction. We attacked Iraq in an effort to bring stability to the region. It was all lies. The weapons of mass destruction was all lies. Bombing the infrastructure, the shock, and awe, was of no benefit to any one. It is the biggest military disaster in history. It has cost us billions of dollars for an event we need to apologize for.

  35. 35
    patient says:

    RE: WestSideBilly @ 32 – While you are correct that the US is not a pure democracy, our elected congress men and women are definately supposed to represent the people in the state they are elected by. Yes, this also incoudes the minority who did not vote for them. But to make that into a free pass to go against the majoirties and only listen to themselves or “experts” since the people are to stupid is a stretch.

  36. 36

    By patient @ 31:

    RE: Kary L. Krismer @ 28 – I think you need to read up on democracy Kary.

    Same back at you. Like I always say, you don’t know what you don’t know. But in your case I should say, you don’t know what you don’t know, and even when a link is provided, you still don’t know.

  37. 37

    RE: WestSideBilly @ 33 – Interesting. I’m not sure where I heard the opposite. I’m sort of like Sarah Palin–I don’t read the Washington Post.

  38. 38

    RE: patient @ 35 – I’m glad you’re coming around a bit. To listen to the majority would be stupid. If we listened to the majority, we probably would have cut the gas tax in 2008 and handed the oil companies a huge windfall.

    But don’t distress, there are some politicians (e.g. Cantwell) that all they do is pander to the stupid. It sort of balances out.

  39. 39
    Jonness says:

    By wsuengineer @ 4:

    The stock market is…well…better than it was.

    The stock market will always be better than it was at some point in the past, as it started at 0. Unfortunately, it’s not better than it was a decade ago. After that crash, rates were moved extremely low in order to stimulate a housing bubble. After the housing bubble crashed, despite record low interest rates, the unemployment rate is nearly 10% (as months turn into years). As we get further into debt, the stimulus tricks are having less and less of an effect. I agree we are in for a long sustained crawling out, but I believe we won’t completely crawl out. The long and sustained crawling out will really be a long sustained lowering of our standard of living until we hit a sustainable new normal that fits within the global economy.

    http://www.marketoracle.co.uk/images/1929-stock-market-crash-dow-chart-image005.png

  40. 40
    Jonness says:

    By wsuengineer @ 8:

    People today still feel entitled to partake in the bubble party of yesteryear. They don’t want to believe that the party is over and you actually have to save money and earn what you get, and even with the market at â��near bottomâ�� they still canâ��t afford to live in Seattle Proper. Thatâ��s life. People need to actually learn some financial skills. The great reset has begun.

    Exactly.

    It seems to me the government will be pleading and trying to trick people into binging on debt, and then it will take money from those who don’t bite and redistribute it to those who do. It’s a gigantic redistribution of wealth. The banks get bailed out, the debt bingers get bailed out, and the prudent get their standard of living lowered as their gratitude for having shouldered the financial burden.

    For now, saving as much cash as possible is not a bad financial strategy.

  41. 41
    Jonness says:

    By patient @ 21:

    RE: Kary L. Krismer @ 17
    If this was true it would be great since it would mean democracy is working.

    Unfortunately, it isn’t true. The political machine brainwashes the people what to believe, and that is what they vote for. It’s more about corporations funding political mouthpieces to sell ideas to the voting public than it is about politicians desperately trying to figure out what the voters want and then creating laws and policies that materialize their wishes.

    Hitler said it best when he said, “what good fortune for governments that people do not think.” This isn’t to say that most people are necessarily stupid. But they have been brainwashed from birth through their critical period and beyond to not question authority. Thus authority need use very little effort to fool the voting public.

  42. 42
    Jonness says:

    By patient @ 21:

    To do what you think is right against the peoples will since you assume that the people are to stupid to know what they want is the opposite of democracy.

    So is democracy currently working well in the U.S. or not? Just curious about your opinion.

    P.S.

    “If this was true it would be great since it would mean democracy is working.”

    Kary didn’t say the statement in my post above, Patient did. :)

  43. 43
    patient says:

    RE: Jonness @ 42 – The answer is no. Imo it doesn’t work as it should. It doesn’t work since the elected do not serve “We the people” first instead they serve themselves and special interests first. It has become very clear during this crisis and the way the tax payer has been used to take on corporate debt to save the elite. Indirectly it will hopefully still work. Even if we are a republic and not a direct democracy in the purest sense we still have democratic elections. If the majority of the sitting that is up for re-election gets the cold hand democracy will still work it’s magic just with a very,very costly delay.

  44. 44

    By patient @ 43:

    RE: Jonness @ 42 – The answer is no. Imo it doesn’t work as it should. It doesn’t work since the elected do not serve “We the people” first instead they serve themselves and special interests first. It has become very clear during this crisis and the way the tax payer has been used to take on corporate debt to save the elite. Indirectly it will hopefully still work.

    How many people do you think would be unemployed now if there hadn’t been this taking on of corporate debt? Also, do you have any understanding of what happened to shareholders of GM and AIG? Or how about the CEOs of those companies? Just which elite were saved?

  45. 45
    Trigger says:

    RE: Kary L. Krismer @ 44 – My other question is whether this was totally unprofitable to tax payers. I think the govt sold some financial shares and made a killing there.

  46. 46
    patient says:

    RE: Kary L. Krismer @ 44 – Kary, you are thinking to narrowly. Think about GS, think about the other IBs that were absorbed, think FHA and the GSEs. Then think about the chain of MBSs and the leverage into hedge funds etc. If you don’t think there were elite saved with tax payer money think harder.

  47. 47
    MacroInvestor says:

    RE: Kary L. Krismer @ 44

    “Also, do you have any understanding of what happened to shareholders of GM and AIG? Or how about the CEOs of those companies? Just which elite were saved?”

    Shareholders are not the elite. BOND holders are. The bond holders were bailed out. In a “fair” bankruptcy there were not enough assets for them to get anything (perhaps 15%). Yet they got 100 cents on the dollar.

    Why were bond holders treated differently? Because the bankers own most of the bonds and they are the elite. If you doubt that, watch the “money is debt” video series:

    http://www.youtube.com/watch?v=vVkFb26u9g8

    Yes, CEO’s lost their jobs but with $10’s of millions in separation bonuses. More like a prize than a punishment.

  48. 48
    matsayswhat says:

    RE: wsuengineer @ 8
    RE: TheHulk @ 6

    These are two great answers. People need to learn to live frugally… Not buy boats and a different big screen TV every year, then a different house every 3-5.

    Now is when those lessons about living and money from your grandparents really pay off.

  49. 49

    By Trigger @ 45:

    RE: Kary L. Krismer @ 44 – My other question is whether this was totally unprofitable to tax payers. I think the govt sold some financial shares and made a killing there.

    The bank bailouts have been very unpopular, but not that costly. If Obama would just STFU then maybe even AIG might not be that costly. Freddie and Fannie on the other hand . . . .. (Although they’re probably the reason the bank bailouts probably have not been that costly.)

  50. 50

    By patient @ 46:

    RE: Kary L. Krismer @ 44 – Kary, you are thinking to narrowly. Think about GS, think about the other IBs that were absorbed, think FHA and the GSEs. Then think about the chain of MBSs and the leverage into hedge funds etc. If you don’t think there were elite saved with tax payer money think harder.

    GS would clearly be the exception, and something I thought about when I wrote that. But the thing is, that’s what happens when you save a financial system from collapse. Or stated conversely, it’s pretty hard to keep credit flowing to the economy without saving the people/entities that have money to loan.

  51. 51

    RE: MacroInvestor @ 47 – I don’t think the bondholders in all the entities came out as well. GM for example. But bondholders are a step up the ladder from shareholders.

  52. 52

    RE: matsayswhat @ 48 – Or like I pointed out a week or two ago, line up to buy a new iPhone.

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