[powayseller]

What’s going on over at Claritas and Neurocrine?

Although the Neurocrine and Nokia layoffs don’t seem directly related to the housing slowdown, perhaps they are a leading indicator of a slowing economy?

Or is this just a continuation of the decline of jobs in San Diego (think about the RB TV plant, Buck Knives, and the steady erosion of manufacturing jobs).

[powayseller]

BobbyD, you seem up to the task. Could you check with Dataquick or Ben Jones (housingbubbleblog and foreclosure blog)? You could also ask foreclosure.com. This would be an interesting figure. Just as we were awaiting the magical 22,000 inventory figure, the foreclosure number would give us a relative yardstick as well. I remember reading that a certain level of foreclosures is normal for any economy, and we are actually below that level due to the quickly rising home prices. Normal rates of foreclosures occur due to divorce, drug use, job loss, mental problems.

[powayseller]

In the long term, long term bond yields should rise. Here’s why: our long term bonds are bought by foreign central banks who are recycling US dollars from all our overconsumption. Once US consumption slows –> fewer dollars going overseas –> fewer Treasury bills and bonds are bought –> price of Treasuries and bonds goes down as demand declines –> yields rise.

This could play out differently if the US convinces other countries or the Plunge Protection Team (imagine printing dollars) to start buying treasuries. Or Saudi Arabia, rich with petrodollars, could end up buying the Treasuries that China and Japan and the other countries don’t buy anymore. We can’t track Saudi’s dollar buying through the Flow of Funds report, because Saudi does not report their purchases. Perhaps some currency revaluation has some effect that I don’t understand.

I would like to hear what others, especially Rich and Chris, think about this scenario of rising bond prices due to lowered imports.

And how does this all affect REITs?

Schahrzad Berkland

[powayseller]

In San Diego: credit counseling, financial advisor, foreclosure and repo and collection companies; it’s hard to think of a profitable business going into a recession. Basically, people are cutting back on their spending.

[powayseller]

It’s a conspiracy… the NAR got into the piggington blog
(just kidding….hahahah).

[powayseller]

I’m undecided. theplayers had a plan that interest me: a mixture of Treasury bills, CDs, swiss francs, and euros. Please correct me if I’m wrong, theplayers.

I am 95% cash, with 5% in stocks (Berkshire Hathaway, oil and natural gas, and trading bond futures through Chris Johnston). This 5% is meant to increase on the “dismal” 5.5% return from cash. The cash portion is currently in CDs and money markets, but I want to move to Treasury bills (short term only) and some alternative currencies. Roubini seems to think the floating currencies will appreciate vs. the dollar. I am stuck in indecision right now.

I am fairly conservative, so I will not short the homebuilders or lenders.

The economist who so brilliantly predict the future of the economy, don’t go all the way by suggesting where to invest our money. So what good is predicting a recession if you can’t tell people where to invest during a recession?

I am also interested in what Rich is recommending, or perhaps he is not able to post this here. I respect his opinion very much, but have not directly asked him for advice yet. I plan to do so, after he starts his financial business.

[powayseller]

FormerSanDiegan – I need to correct what I wrote. Typically you can buy a home for 3-3.5 x family income. Typically, 64% of people nationwide owned homes, so you’re right, we cannot use the median wage earner’s income at a 3 multiple. The charts in the Bubble Primer show this: the ratio is typically between 9 (peak) and 7 (trough).

mephisto – timing the real estate market is easier than people think. Don’t use the median – it lags by one year. Use months inventory and most important, work with an honest realtor who will know from his daily work in the field when the tide shifts, sales pick up… But not to worry if you are a few months late; real estate moves very slow. Eventually prices will stop dropping, and rise, but I expect that rise to be gradual before picking up momentum. There should be an entire year in which to make a decision.

As for me, I am not looking at MLS, Open House, or visiting builders. I am content to rent for 5 years. Why in the world would I want to look at homes now? To me, a house is like a big stone around my neck, a big turn-off, an albatross. Looking at homes now is like reading the Lucent Annual Report in 1999. One word: yuck! Sorry to offend anyone, but homeownership today, to me, is just plain yuck!

[powayseller]

Yesterday, I spoke with free-lance journalist who covered real estate for 10 years. I asked her why the media reports on the crazy thing that realtors say, such as “this is a great time to buy, land prices only go up”.

She told me her job is not to make an opinion or analysis. A reporter’s job is to present both sides of the story. Her goal is for a reader to walk away with some new information, or just a thoughtful, “Wow, that was sure interesting”. She seeks to report both sides, regardless of whether she agrees or not.

[powayseller]

For me, it started out as a confirmation of my decision to sell. Now it is fascination with behavioral finance, education from professionals in business and real estate fields, and a place I can do what I love: study, write, and read about the economy.

[powayseller]

In the other link I posted on the Roubini thread, he explains why not even a rate cut can prevent a recession; it’s a sure thing now. He also explains why the rest of the world cannot decouple from the US slowdown; they will all be affected; commodity prices and emerging markets will all go down as US demand wanes.

One comment I’d like to add: the US consumer is in so much debt, that not even 0% interest rates can save us. Look at Japan – not even 0% rates for over a decade prevented their recession and housing bubble collapse. The US consumer is spending 108% of disposable income, up from 40% in the 1950s when they first started tracking this data. How much more of income can people spend. Any Fed printing will really raise inflation, and that will be just as bad for consumers as higher interest rates.

The other very real problem that the Fed doesn’t directly address: how do they get foreign central banks to keep funding our deficit? If rates are cut to 1% again, watch the flight out of the dollar in earnest.

I am curious if the Fed has any rabbits in the hat. What can they possibly do to mitigate the recession. The recession is coming, I’m certain,but what will they do to try to shorten it once it hits? Anything they could do would be just an intermediate fix, I am afraid. The real answer is we must invest in our education, development, research, and start saving and not consuming stuff made by other countries at a higher rate than our own production!

[powayseller]

Miramar makes sense to me – it’s centrally located. But how can it have a chance, with the military opposing it? How will the airport authority get the military to agree?

[powayseller]

I find the government expecations and treatment of National Guardsmen quite despicable. I’ve heard many stories of men who marched off to duty, only to return to a job that was lost, and their finances ruined. Guardsmen need better government mandated financial protection during to cover their tours of duty. At least the employer should be required to leave the job open; but then, I guess it would make guardsmen less attractive to hire…

[powayseller]

I read a media critique today; someone was asking why the media didn’t pose the tough questions about the maintenance issues, if any, on the remaining 500+ miles of the Alaskan pipeline? After all, if BPs corrosion was undetected with the sonar scanning, could the rest of the Alaska pipeline have those corrosion problems if they use sonar scanning?

[powayseller]

I vote for a pause too….

Seriously, I was wrong on this one. I predicted one more hike.

While it is true that the effect of past hikes is still in the pipeline and will take 6-9 months to carry through, I think the Fed made a mistake by being weak on inflation.

I think staflation is here: inflation will keep rising while the economy slows. What should they be doing in such a situation?

Bloomberg reports this morning: Federal Reserve Chairman Ben S. Bernanke put his inflation-fighting credibility on the line after barely six months in the job, leaving interest rates unchanged even as consumer-price increases quicken….Fed watchers said the strategy is risky because there’s no sign inflation is abating, and failure may erode the credibility built up under former chairmen Alan Greenspan and Paul Volcker…. “If I’m sitting at the Fed, I have a tough choice here,” said Ethan Harris, chief U.S. economist at Lehman Brothers Holdings Inc. in New York. “Which war am I going to fight: is it the growth slowdown or the inflation pickup? To me the inflation story looks a lot more serious at this stage.”

Harris, a former head of domestic economic research at the New York Fed, predicts two further quarter-point rate increases this year. ” UNQUOTE

[powayseller]

A second question must be answered before I can be absolutely sure that range pricing works. A set price listing is the price the seller wants to get, while a value range listing will be lower to higher than what the seller wants to get; the idea is to put in a lower range to attract buyers searching the MLS in the lower price range, and hope this buyer will come up with the extra money for the home.

For example, say I have a house that should sell for $805K. I price it at $805K. My neighor with the identical house uses value pricing of $775K – $825K. We both get offers for $805K. Same houses, same offers. Now your data shows I got my asking price, and he got above the lower end of his asking price, confirming your bias that range pricing works. But it didn’t make any difference in this example.

I would like to know from the realtors if range pricing works.

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