San Diego Housing Bubble News and Analysis

Bring the pain!!!!

"The world is at severe risk of a global systemic financial meltdown and a severe global depression

Nouriel Roubini | Oct 9, 2008"

The US and advanced economies’ financial system is now headed towards a near-term systemic financial meltdown as day after day stock markets are in free fall, money markets have shut down while their spreads are skyrocketing, and credit spreads are surging through the roof. There is now the beginning of a generalized run on the banking system of these economies; a collapse of the shadow banking system, i.e. those non-banks (broker dealers, non-bank mortgage lenders, SIV and conduits, hedge funds, money market funds, private equity firms) that, like banks, borrow short and liquid, are highly leveraged and lend and invest long and illiquid and are thus at risk of a run on their short-term liabilities; and now a roll-off of the short term liabilities of the corporate sectors that may lead to widespread bankruptcies of solvent but illiquid financial and non-financial firms."

http://www.rgemonitor.com/roubini-monito...

This is getting a little too serious for me.

Roubini is so conservative. He know's it's coming and there aint a thing we can do about it.

DJIA INDEX 8,338.00 -260.00

http://www.bloomberg.com/markets/stocks/...

^N225 Nikkei 225 8,183.37 10:00PM ET 974.12 (10.64%)

http://finance.yahoo.com/intlindices?e=asia

I'm thinking 8000 tomorrow.

I work in the financial services industry, and much of my savings are invested in stocks, but this is thrilling.

For years, I've watched as people lived way beyond their means, based on borrowing and/or increasing asset prices. I saved at least 50% of my pay, and did not consider that to be extreme, but few others saved more than 20%, if that. I felt that I was an outcast, a nut. Now I am getting tremendous satisfaction from not being a complete idiot. Of course, I am personally much less well off, but I feel better poorer and grounded than well-off and a nut.

Anyone else out there in the same boat?

As i said before, you think it *might* have been cheaper if the Fed just bought all the rating agencies and cheated on the ratings

If there's a loss of confidence, what's the difference between "wrong" or "wronger".

:)

another 5% and Nikkei will be at all-time low.

When everyone's poor, everyone's happy, except the lesser poor guy gets beaten up if he acts like a jackass.

Those making a killing shorting the market or really aren't strained in this market...Don't talk about to much where j6p strangers might hear....You might find yourself down a ditch. Several people are taking this way to seriously.

I was in a store the other day with a coworker (fresh college grad). He asked me what i thought about the economy about the bailout. I said it was ridiculous, and that it's not gonna help, and RE was going to continue to come crashing down, but that in the long run that's a good thing because housing will be more affordable for both first time buyers like him and as investments for middle aged people like me. Someone waiting in line apparently got pissed said in a hostile way to the extent "you think this is funny you (expletive) ?"

Enough said. Watch your mouth people, you have a lot of people in a really pissed off mood who are more seriously in deep sh!t.

Good point FLU. This is how I know the bottom is falling out. People get really cranked when you start talking about the new reality. Means they're crashing with the market. And this is where huge opportunity will come for you patientrenter.
Just keep quiet and smile that understanding smile. Maybe even throw in a few negative comments about our govts inability to manage. Everyone likes to bash them. It's therapuetic.

Never a good idea to gloat. But that's life. Sometimes the bear eats you. Sometimes you eat the bear. I think this is going to devistate many people in ways we've never seen before. But it is life.

Futures on S&P500, DOW, NASDAQ are ALL trading for another several percent drop in the indexes tomorrow.

Where's the BOUNCE?

I got my hand out. I want some Halloween candy!

Are stock markets gonna end this month with a "Trick" or with a "Treat"?

More like a boulder thrown in the window :)

I think it's a quadrupple whammy for a lot of people.

1) People overpaid for homes, and a lot of them never were able to afford it.

2) They taped into credit and "investments" keep the home.

3) Credit is tapped out and now investments are down the tube.

4) Throw in unemployment or underemployment into the mix.

Some folks can deal with 1 out 4, 2 out 4. I suspect a lot of people are dealing with 3 out of 4 or 4 out of 4.

Your portfolio can take 50%, which would be a bummer, but if you're really not that dependent on it right now, it's you're probably not up sh!t creek yet. At at this level, it's a waiting game frankly.

I feel bad for some of the older folks and retirees and seniors who didn't plan and go to cash in their age. Because that was what all financial advisers have been saying all along when you are near retiring. They won't have much time to make up for it.

As far as unemployment. It's anyone's game at this point. I'd say everyone is vunerable at this point. But oh well...Not a big deal.

Something big is brewing. Maybe next week off ala 9/11? Global conflict? Not sure. Get some cash outta the bank tomorrow. Never hurts. I gotta bad feeling about this. Too much, too fast. Govt does not like panic. Makes it hard to govern.

Iceland is already lifesupport. It really surprised me what a mess that economy is in, from what I can read.

[.

Agreed and distraction is needed. After all we did just spend 700 billion of your money to stop this.

what else should we do to prepare?

Anyone else out there in the same boat?

I've been preparing for this for the last few years.

Got a job in higher-ed, rent near work and have been aggressively paying down debt. I live way, way beneath my means.

Still not happy about this, of course. I'm seriously worried about crime as I live in the city.

To prepare? I have a couple of months cash, food/water and gold, first aid,etc... All stashed. Always have the tank full on the 4X as well as 3 extra cans. Just visualize what you'd need for a few weeks in the outback.
Never hurts to be prepared and it's peace of mind. This is just good advice for any emergency, anyway.
Keep it to yourself. It's your business and no one elses.

Posted from valleywag on VC's mood..... Interesting read...

Bad times have hit sunnily optimistic northern California. Does it matter if the mayhem on Wall Street had any real connection with the tech-powered Silicon Valley economy? Some of the region's most influential power brokers believe it will — and by pushing others around, they can make perception reality. A helpful insider has provided notes from a recent meeting of Sequoia Capital, a backer of Apple, Cisco, and Google which has risen to become the Valley's preeminent venture-capital firm. Michael Moritz had summoned CEOs of Sequoia's portfolio companies to tell them to prepare for a long, hard downturn. The bottom line: All startups must become cash-flow positive — in other words, earn more than they spend. Or in other, other words, act like the real businesses they always should have emulated. Here are what our tipster claims are notes from the meeting, apparently forwarded by one of the attendees:

Today, Sequoia Capital hosted a mandatory CEO All-Hands Meeting on Sand Hill Road (where else?). There were about 100 CEO's in attendance and let me tell you, the mood was somber. I'm not one to perpetuate doom and gloom or bad news, but let me underscore this for you: We are in a serious economic downturn and this is just the beginning. Immediate, decisive and swift action is required, along with frugal, day-to-day management of expenses and our business is required.

***Here are my notes from the meeting. Keep this note in your in-box and read it every day. I'm serious folks, this is for our survival.***

Speakers:

· Mike Moritz, General Partner, Sequoia Capital (he moderated the speakers).

· Eric Upin, Partner, Sequoia Capital (Eric ran the $26-Billion Stanford Endowment Fund and knows a few things about Economics and investing.)

· Michael Beckwith, Sequoia Capital (Michael was recruited to start Sequoia's very first hedge fund, coming from Maverick Capital and Robertson Stephens. I know him from my BEA days.)

· Doug Leone, , General Partner, Sequoia Capital

Slide projected on the huge conference room screen as people assembled inside the conference center to take their seats: a gravestone with the inscription: RIP, Good Times.

Mike Moritz:

· The only time Sequoia's assembled all CEO's like this was during the dot.com crash.

· We are in drastic times. Drastic times mean drastic measures must be taken to survive. Forget about getting ahead, we're talking survive. Get this point into your heads.

· For those of you that are not cash-flow positive, get there now. Raising capital is nearly impossible if you're too far off of cash flow positive.

· There will be consequences for those who hesitate. Act now.

Eric Upin:

· It's always darkest before it's pitch black.

· Survival of this storm means drastic measures must be taken now, so you will have the opportunity to capitalize on this down turn in the future.

· We are in the beginning of a long cycle, what we call a "Secular Bear Market." This could be a 15 year problem. [many slides on historical charts of previous recessions, averaging 17 year cycles.]

· The credit market [versus the Equity markets] are the issue and will take time to recover.

· Inflection point: Make changes, slash expenses, cut deep and keep marching. You can't be a general if you turn back.

· This is a global issue and not a 'normal' time.

· There is significant risk to growth and your personal wealth.

· Advice:

o Manage what you can control. You can't control the economy, but you can control everything else.

§ Cut spending. Cut fat. Preserve Capital.

§ Don't trust your models and spreadsheets. All assumptions prior to today are wrong.

§ Focus on quality.

§ Reduce risk.

Michael Beckwith:

· Note: Michael had a lot of slides that were charts, data points and comparisons.

· A "V" shaped recovery is unlikely [√]

· Cuts in spending will accelerate in Q4/Q1. Look at eBay-this is just the beginning.

Doug Leone:

· This is a different animal and will take years to recover.

· Getting another round if you're not profitable will be rough.

· Do everything possible to get to cash flow positive. Now.

· Nail your Sales and Marketing message.

· Pound your competitors shortcomings. They're hurting and they will be quiet. Take the offensive.

· In a downturn, aggressive PR and Communications strategy is key.

· M&A will decrease dramatically and only lean companies, with proven sales models will be acquired.

· Spectrum discussion:

o Capital Preservation ß—-—-—-—-—-—-—-—-—-—-—--à Grab Market

o Everyone should be far to the left (capital preservation)

· Requirements of our companies:

o You must have a proven product

o You must cut expenses. Now and deep.

o Your product should reduce expenses and drive revenue [NOTE: I want to revisit this with the Management team. Our solution does both, we need to quickly and crisply define the sound bite here.]

o Honestly assess your solution vs. your competitors.

o Cash is king [have you gotten this message yet?]

o You must get to profitability as soon as possible to weather this storm and be self-sustaining.

· Operations review:

o Engineering: Since you already have a product, strongly consider reducing the number of engineers that you have.

o Product: What features are absolutely essential? Choose carefully and focus.

o Marketing: Measure everything and cut what is not working. You don't need large Product Marketing, Product Management teams.

o Sales & Business Development: What is your return on this investment? The Valley has gotten fat with Sales people: Big bases, big variables. Cut base salaries on sales people, highly leverage them with upside (increase variable) and make people pay for themselves via increased sales productivity. Don't add sales people until you've achieved your goals with sales productivity. Be disciplined.

o Pipeline: Scrub the shit out of it and be honest with yourself.

o Finance: Defer payments, what is essential? Kill cash burn.

· Death Spiral (Nobody moves fast enough in times like these, so get going and research later.)

o The death spiral sucks you in, you're in it before you know it and then you die.

o Survival of the quickest.

o Cutting deeper is the formula for survival.

o You should have at least one year's worth of cash on hand.

o Tactics:

§ Assess your situation. Drop your assumptions, start with a blank page and start zero-based budgeting.

§ Adapt quickly

§ Make your cuts

§ Review all salaries

§ Change sales comp

§ Bolster your balance sheet-if you can add $5M to your coffers, take it and save it.

§ Spend like it's your last dollar.

· Get Real or Go Home.

FLU,

We need these Sequoia Capital guys running all our Govt offices.

we're so screwed. I hope everyone here has enough supply to live on at least a year. Unemployment is looking like it could double in 2009, maybe worse.

Notice how no one's talking about buying a house right now!!

Unfortunately, smart people like these folks will only invest time in money into things they know would be profitable :)

It's actually has been the theme of my company these days. All CEOs are basically saying the same thing.

Something along the line (paraphrased)... This is gonna be rough, our customers are being impacted, and we will be impacted. Trim the fat...Find the most capable people, cut the bullshit. No more creative assignment projects that don't contribute to the product line. Find our competitors that are successful and copy the sh!t out of them and beat them to their own game.... by out innovating, out marketing, out selling our competitors. We have a capital advantage, take out the small competitors that are a direct threat to us 2-3 years down the road...now....Our/your survival depends on it.

In a nutshell, back to basics.... No more facebook crap.

Thank you for posting the notes from that Sequoia Capital mandatory CEO All-Hands Meeting.

Good stuff!

http://blownmortgage.com/wp-content/uplo...

funny but reality

Little old me has been saying the same thing for a while now.

San Diego tech companies that are cash-flow negative or not generating revenues will be in trouble. They won't be able to pay those professionals who bought overpriced houses in the region.

Except what percentage of companies are startups versus established boring companies?
The startup mentality is disprpportionally large in the bay area.

I don't have the answer for what it's like in SD.

BUT...It's a myth if you think startup companies ever paid professionals "well" to begin with, except the CEO and executive staff. And I'm sure those folks have assets more so the average j6p. The entire point of a startup was trading upfront cash for future equity. Common thing in silicon valley as well...Also health/healthcare is probably a different beast from pure hardware/software geeks. Short of life support systems, transit systems, etc, a lot of software/hardware is not considered "essential".

Worth watching: Bloomberg interview about values in OVERsold Asian markets.

John Alkire, chief investment officer at Morgan Stanley Asset and Investment Trust Management Co., talks with Bloomberg's Bernard Lo from Tokyo about the impact of the global financial crisis on Japanese stocks, and the outlook for the yen, mergers and acquisitions, and the global banking industry. (Source: Bloomberg)

http://www.bloomberg.com/avp/avp.htm?cli...

That Bernard Lo tries too hard to be "all American" financial talking head. I hate that kind of talking head who uses the vernacular. It's strange coming from an Asian guy.

It would be much better for the host ask succinct journalistic question.