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We all, on this board, have to be very wary of confirmation bias.

Stan

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Found it…not much fun in my area until late December when they are due again.

https://www.sdctreastax.com/ebpp3/

Stan

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I hope this doesn’t resurrect a sore subject, but I want to take another look in my area and see how things look now. Does anybody have an updated link where you can see who is delinquent on property taxes.

Stan

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I have a friend who is a high up in the Navy. They just bought a house in Huntsville several years before he will actually wind up there because there is some forthcoming military activity that he thinks will really drive the local economy.

Might be worth figuring out if that’s true…if it is, it may be a great place to move for a guy like you.

Stan

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I haven’t disagreed with you for awhile:

Then go be a friggin termite exterminator…that’s not a fun job, and I’m sure it’s more than a little dangerous due to the chemicals…between hazard pay and the fun of crawling through nasty basements (job description below), those guys are worth whatever they make (which incidently is around $13 an hour).

You know enough economics to know that there’s no free lunch, especially in a job like that.

“Working conditions depend on the job. A worker may spend one day working in the kitchen of a restaurant and the next day crawling through a dirty basement looking for rats’ nests. Usually workers do their job alone, without supervision. They work both indoors and outdoors. Pest control workers often have to carry and lift equipment and materials weighing as much as fifty pounds. They must be very careful when using poisons, because some pesticides are harmful to humans if inhaled or touched. Therefore, they may need to wear gloves, goggles, and respirators. They should have manual dexterity as well as some mechanical skill.”

Stan

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I’ve been hesitant to go into Gold, but I have about 40% of my portfolio in TIPS (Treasury inflation protected securities), which seem like the next best thing. Most of the rest is in international stocks….Thoughts on TIPS vs. Gold?

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I’ll take a stab at your question on stock options since I am in a similar situation. I have some fairly deep in the money options that don’t expire until 2012. It’s a solid fortune 500 company, as likely as any to effectively weather a downturn, but also one heavily dependent on consumer spending and business investment.

Here are the considerations most at the fore of my mind (others can chime in with others):

1. Excercising the options triggers an immediate tax at ordinary rates.

2. The difference between the excercise price and zero is effectively free exposure to the market for you. In my case, I have exposure to about 150K in market capitalization. If the stock goes up 10%, I make 15K. If I sell, however, after taxes, I’m left with somewhere around 50K, which then gets taxed, leaving me with 40K or less. If I put the 40K in an account earning 5%/year or so, I make 2K/year. The stock only has to average 2% over the four years until expiry to make it a better deal to hold it. I’ve done a whole sensitivity analysis on this, and if the stock averages a 2-3% gain over 4-5 years, in my situation, I’m better off holding. If somehow that gain goes to 10%/year, I’ve made an extra 60K or so.

3. You can, theoretically protect that downside by buying puts on the stock (there could be tax implications here-not sure-and given your experience, I wouldn’t dabble here without professional help)

4. Unless the options are deep in the money, you should probably hold them. Your downside is limited to the amount they are currently in the money, but your upside is theoretically limitless.

There are a number of other considerations, but those are the biggies in my mind.

What am I doing? I’m 60% sure that the market will take a dive, but I’m not 100%. If the stock performs well below average, I am still better off holding. I’ve also considered how I’d feel if I lost my entire 50K, and for now, the potential upside is worth a roll of the dice (I have conservatized my portfolio in other areas so that my overall exposure is reasonable).

If your options expire in the next 2 years or so and are deep in the money, I’d be quick to excercise (barring any positive insider knowledge of how the company will do). If they last longer than that, and if you could live with yourself if they became worthless, you might consider rolling the dice.

That’s my 2 cents,

Stan

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It didn’t say where they were.

Stan

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Found this snippet on an article in thestreet.com

“Hovnanian said Monday that it recorded more than 2,100 gross sales over the weekend — 1,700 of which were contracts and 400 were sales deposits. In comparison, the company recorded just 3,906 gross orders for its entire third quarter, which ended July 31.”

I’m sure the 3rd quarter sucked, and I know they borrowed from the past two weeks and at least the next two…still, 2,100 strikes me as pretty impressive in that context.

What I want to know, though…next time they have an even deeper sale, what the heck do they call it?

A few suggestions:

Deal of the millenium
Super Deal of the Century
Deal of the Century part deux
Going out of business sale
Liquidation
For whom the bell “Toll”s sale

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Agree with your assessment…fed funds futures are showing an almost 100% probability of a 50bps cut.

Personally, I think the probability of a 25bps cut rather than 50 is more substantial than the market implies, but who am I to try to outforecast Mr. Market.

Stan

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Agree doesn’t change your overall conclusion at all. Thanks for satiating my curiosity.

Stan

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This is weird…I went back and duplicated the regression Rich describes above on the RB dataset I mentioned previously. My sample size is much smaller, but maybe RB is different.

I got an r-squared of 75% and a coefficient that would imply for every increase of 100 square feet, the $/square foot goes down by $11, or for every 1,000 increase in square footage, $/square foot goes down by $110 (obviously, this would change in the limit).

My dataset is much smaller and only consists of homes <600K in the RB/4S area, but I'm still surprised to get such a high coefficient when the impact for SD in total is negligible.

Rich if you have a minute and it's easy, I'd be interested to see if you reach the same conclusion if you limit the dataset to detached houses under $600K.

Stan

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I think PS actually makes an excellent point. That said, Rich would certainly acknoweldge this, and doesn’t point to median/Sq ft as the be all and end all-just that’s it’s more accurate than the median.

A few months ago I ran a regression on all the houses for sale in Rancho bernardo. It confirmed what I alredy suspected, but was interesting to see it quantified: Bedrooms are more important than square footage, and the average $/sq. ft. is much higher than the marginal $/sq. ft.

Said differently, and everyone knows this just from experience, the value of a square foot getting a house from 1,200 to 1,500 square feet is much, much higher than the the value of getting it from 2,200 to 2,500.

So, PS brings up an excellent point-as the distribution skews toward the high end, this will tend to bring down the $/sq. foot. What we really need is to rely on Case Shiller data (which is more in line with the $/Sq. foot), or to look at the median price within square foot size bands.

Finally, I haven’t heard this mentioned lately-lots of houses now have granite countertop and pergo floors rather than the ratty carpet and 80s tile of a few years ago. On top of that, there is alot of cash back going on. I think it’s fair to assume that the “housing stock” quality now is higher than it was 5 years ago. Another reason why the statistics are misleading. This alone could be worth 5ppts of depreciation between 2001 numbers and now.

I would love to hear Rich’s response, but PS doesn’t have to be a narcissistic ass to start some dialogue.

Stan

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Your basic assumption is that be dropping $11M, you’ll be adding enough information content to the market to bring the builder storck down by $300M (assuming $1B of market capitalization).

Many think the market is irrational, but I see no way you add that kind of information content by selling a few houses. People are starting to see what’s going on already.

Creative, but dumb idea.

Stan

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I’ve been thinking along these lines a bit as well. Does anyone know how La Jolla, Del Mar, PB, etc. fared during the boom? If they appreciated at the same rate as San Diego overall, I see no reason why they couldn’t fall just as far or hard. They were just as nice 5 years ago as they are now.

If OTOH, if they didn’t grow as fast, the beta idea from raybyrnes is an interesting way to think about it. Crazy exotic mortgages notwithstanding-if they went up as fast, they can fall as hard.

Stan

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