Monday, February 25, 2008

Extinct Species Found In Bend Oregon

ADDENDUM: Bend Economy Man emerges from year-long hibernation & posts to his blog:
http://bendoregonbubble.blogspot.com/
YEAH!

Well, if you wondered what Armageddon looks like, go outside. This is it.

I posted an "Addendum" to last weeks post regarding mstuckers mid-Feb update on Month to date sales.

One home a day sold.

Not that that rate could possibly be sustained at such a low level, but that's 365 homes a year! We did 2,849 sales in 2005.

If there's anything I'm sure of, it's that number will pick WAY up. 6 months ago I was also sure that we could NEVER get to where we are today.

timothy said... The gears have ground to a halt. You can hear the silence. Next up: the flood of "spring" inventory.

As I've said before: This will get worse than you or I ever thought possible. Even Bends Gold Standard builders is starting to crack:

Anonymous said...

The layoffs are a comin'. Palisch homes just laid off 17 employees including 4 of their 6 superintendents. They were the last builder still slamming houses up. Supposedly unloaded the building that their offices are located in also. Maybe wal mart is hiring.

Even Duncan hopped on the Prediction Bandwagon, and NAILED IT!

So, I think we'll see the first battleground in the dining industry. Obviously, a lot of older restaurants are seeing the handwriting on the wall. The second battleground I'll predict -- with absolutely no inside knowledge, just a guess -- is in office space and condo's, especially on the west side. Third battleground are the outliers -- businesses and stores located in what may be zoned retail but not normally seen as retail.

BANG! The very NEXT DAY, the Bulletin runs this piece (and kudo's to them, I suppose, for running ANY sort of real estate piece... FINALLY):

Area’s industrial and office space vacancies rising

‘If you’re in an expansion mode,’ says one local broker, ‘it’s a great time to be looking’

By David Fisher / The Bulletin

Published: February 24. 2008 4:00AM PST

When Chemica Technologies, a Bend-based biotech research firm, pulled up stakes and moved to Portland last year, the managers at Grace Bio-Labs didn’t hesitate.

Grace, a maker of patented labware for the molecular study of cells, was about to burst out of its space on Empire Avenue, Business Development Director Michelle Carney said. So it bought the building that Chemica left on west Bend’s Cyber Drive, complete with built-out lab space and offices.

Now Grace Bio-Labs, which has been in Central Oregon since 1986, has 2½ times more space for its 17 employees, with room to build out further.

“It’s very well suited to what we do,” Carney said. “So it was just a matter of being in the right place at the right time and having the right connections that we found this building when we did.”

Businesses throughout Bend and Redmond are finding industrial and office space easier to come by this year.

After three straight years of relatively tight vacancies and gradually rising lease rates, vacancies opened up in the fourth quarter of last year, Bruce Kemp, principal broker at Compass Commercial Real Estate, said Thursday. The change was fueled partly by a contraction in housing-related business sectors and partly by the effects of new buildings coming onto the market.

According to Compass’ quarterly survey of 177 buildings, office vacancies rose to 11.2 percent in Bend by the end of the year, nearly double the 6.5 percent of fourth quarter 2006.

Industrial buildings also loosened up in both Bend and Redmond, according to Compass’ survey. Bend’s fourth quarter vacancy rate reached 10.5 percent in industrial space.

Redmond’s reached 17.3 percent, bloated mostly by the addition of new buildings.

The total amount of space leased in both markets increased through the year, but not at the same rate of growth the markets saw in 2006. In Bend, 48,800 square feet of new office space was leased out through 2007 — less than half the 124,000 square feet that was absorbed in 2006.

Industrial absorption in Bend amounted to a little less than 85,700 square feet, according to Compass’ numbers, about 33 percent off the 2006 pace.

In Redmond, less than half as much new space was absorbed in 2007 as in 2006.

The bottom line for potential tenants is simple, Kemp said. Lease rates have remained stuck, but tenants are getting much better incentive deals from prospective landlords, ranging from richer tenant improvement allowances to several months of free rent, as landlords scramble to get their buildings filled.

“If you’re in an expansion mode,” Kemp said, “it’s a great time to be looking for space.”

Who’s looking?

After a moribund fall, activity in the commercial leasing market is picking up as companies, like Grace Bio-Labs, that are not related to the housing industry begin to realize that they might be able to find a decent deal on new space, said Steve Larsen, principal broker at Steve Larsen Properties.

Much of the interest seems to be coming from the nonhousing-related financial and service sectors — insurance brokers, lawyers, accountants — who have needed for some time to grow their practices to keep up with the expanding population, but have felt shut out by a tight leasing market, Larsen said.

Now, with monthly Bend office lease rates stuck in the $1.65 to $2 per square foot range, depending on class and location, and with landlord incentives rising, some are making their moves.

“I think there are a lot of people who have kind of been on the fence for a while through 2007 who are making those kinds of decisions, either because they are out of space or they can’t wait any longer,” Larsen said.

Still, there is an air of caution in the wind, Kemp said, and it’s tipping the weight of the market toward leasing rather than buying space, and toward holding off rather than starting a new building project.

From a tenant’s perspective, the factors that go into making those decisions can get complex, Kemp noted, but it boils down to a basic question: Is there more money to be made by investing in a building or by paying rent and investing the upfront cash back into the business?

Right now, market factors are tipping the table toward leasing, Kemp said. First, there’s the question of whether to invest in a building or in something else. With lease rates flat, it’s tougher for the income stream on a commercial building to compete with the 6.5 percent or more in simple interest that a similar investment could draw in the general economy.

Then there is the question of rising or decreasing real estate values, Kemp said: Right now, there’s downward pressure on the price of commercial buildings, and particularly fierce pressure on the price of commercial land.

Consequently, Kemp said, he would expect the major office buildings that are already under construction in Bend, including The ODS Cos. building at Wilson and Bond streets and the 38,000-square-foot Bonnett Point office building at the corner of Simpson Street and Colorado Avenue, to finish up and gradually fill up this year. But any new construction that starts is likely to be a build-to-suit project for a locked-in tenant — and he doesn’t expect to see many of those.

“It’s a little bit cautionary,” Kemp said. “I think people who may want to buy at some point in time are probably going to lease rather than buy right now.”

Office condos

That’s not to say that sellers aren’t trying.

Ron Ross, a commercial property broker for RE/MAX Equity Group in Bend, said he counted eight to 10 sales of commercial buildings in Bend in 2007. Last month, there were 66 commercial units listed for sale, Ross said. About half were buildings and the rest were office condos.

Office condominiums — buildings in which the tenants can buy a small piece of a larger building, rather than having to shell out the millions that it takes to build a full-sized, Class A structure — are a relatively new concept to Bend. Two of the largest, the 32,000-square-foot Vision Plaza building and the neighboring 11,420-square-foot Columbia View Suites, sit next door to each other on west Bend’s Columbia Street. Both have had units for sale for about six months and neither is close to full.

Ross is dubious of the concept’s staying power, particularly in a market that is already overbuilt.

“They just flat have not been successful,” Ross told a group of reporters and real estate agents at a Central Oregon Association of Realtors lunch Wednesday. “I’m sorry if I’m offending anybody here, but they have not been selling office condos.”

Larsen, the listing agent for Vision Plaza, said he has one of the building’s units under contract and another in negotiations. There are two letters of intent to lease some of its space — an option that wasn’t part of the owners’ plan when the building was built.

“Obviously, the last six months were not what I, as the listing agent, or the owners anticipated,” Larsen conceded, but he blamed the building’s slow sales more on market timing than on the concept.

It took more than 18 months to take the Vision Plaza building, where 1,200-square-foot units are listed for around $367,000, from the concept stage to completion, Larsen said. The market changed during that cycle — a risk that all developers of commercial buildings, most of which are large, expensive and time-consuming to build, face.

If it were easy, everybody would be doing it, and for a while, a lot of people did. But it’s a risky business,” Larsen said.

That’s true, Ross agreed. The current market has driven out most of its speculators and tax-deferred property exchangers, leaving a different sort of playing field. But it’s taking awhile, he said, for some of its players to adjust.

“Property has to stand on its own, fundamentally, right now, and if it does, we have good buyer interest,” Ross said. “That means it has to have real tenants, with good leases that are supporting the price point. If that happens, property can sell in today’s market. But unfortunately, we have a lot of sellers who don’t understand that, and even a lot of brokers who don’t understand that, so we’re building up an excess of inventory.

“Long-term, I’ve seen this picture before,” said Ross, who’s been in Central Oregon real estate since the economic troubles of the early 1980s. “I’m actually very positive … you just have to take a bigger picture, longer-term view.”

David Fisher can be reached at 541-617-7862 or at dfisher@bendbulletin.com.

First off, lemme say that Duncan has been calling this for awhile. Personally I am fairly out of touch with commercial, except for a glimmer of personal knowledge that downtown is becoming wildly overbuilt, with unsustainable lease rates. I ultimately think that the credit/housing bust will affect EVERYTHING, but this was one of those things that's off my radar.

Second, note that business expansion as measured by office space absorption has dropped in half in 2007 vs 2006. And 2007 was not really supposed to be weak. In fact, EVERYONE seemed to state repeadedly that commercial was 100% IMMUNE from the whole crdit/housing bust, at least in Bend.

My Lord, they were building commercial space like crazy in 2007!

I actually drank the Commercial Immunity Kool-Aid, and thought Bend commercial would be OK. I did NOT understand the economics of how that could happen, because I personally thought the lease rates were insane, and I thought the "office condo" had all the appeal of the "home condo": Nice if you love living wall-to-wall with your neighbors and sharing in the financial pain of the weakest link.

That horrible abomination out near Colorado will probably end up on the RIP board. Office Condo's? Geez, that'll end up being another collective "What the fuck were we thinking?" head slapper.

Apparently Dunc was right, and the only thing collapsing (Yes, they are collapsing. I don't need a freakin' dictionary to figure that out.) faster than the Bend housing market, is now the imploding commercial market.

We are headed towards a mega-glut in commercial space in Bend. Nice high, double digit vacancy rates, and all that good stuff. All those pining for The Good Old Days, circa 1983, in Bend will soon have their wishes granted.

The most interesting quote in the Bulletin piece, to me, was this:

Is there more money to be made by investing in a building or by paying rent and investing the upfront cash back into the business?

Yeah! My "Rent And Invest The Difference" motto is starting to get some traction.

Of course it would be considered far more quickly in a purely financial setting like commercial. Rent & Invest The Diff is harder to implement with your wife & kids involved.

Ross' final quote about being "positive longer-term" is a continuation on the Elizabeth Taylor SMEAR IT OUT thesis. Everything will be fine if you take the 1,000 year view.

OK, I agree with that.

Good job Dunc, on nailing this one!

So... what else happened this week?

Oh right. CACB revised their quarterly earnings to pocket change.

Huh, seemed like they had ironed out all the Q4 messiness last month:

Cascade Bancorp (Oregon) (Nasdaq: CACB) Released Results for the Fourth Quarter and Full Year 2007, Confirming Earnings Per Share at $0.19 and $1.23, Respectively
BEND, Ore., Jan. 23 /PRNewswire-FirstCall/ -- Cascade Bancorp ("Cascade")
CACB reported 2007 full year Diluted Earnings Per Share (EPS-diluted) at $1.23 per share down 8.4% as compared to 2006 with Net Income at $35.0 million versus $35.7 million for 2006. As pre-announced on January 3, 2008, the Company confirmed it recorded a $7.5 million (pre-tax) provision for credit losses for the fourth quarter of 2007 to increase the Company's level of credit reserves primarily related to its residential land development loan portfolio. This resulted in a full year 2007 provision of $11.3 million versus $6.0 million in 2006. Fourth quarter 2007 earnings per share were $0.19 per share on $5.3 million of net income, compared to $0.36 per share and $10.2 million for the year ago quarter and as compared to $0.35 for the linked-quarter. The Company also confirmed its pre-announced fourth quarter net-charge-offs of approximately $3.9 million, a majority of which were against loans affected by the real estate downturn.

Sorry! Hold the bus! 'Member that thing we said last month? Scratch that, that was a big load of shit! Man, were we way off. We actually got our ass waxed. Here ya go, this here is the Real Deal:


Market Report -- In Play (CACB)

February 21, 2008 4:31 PM ET

Cascade Bancorp increases Q4 provision for credit losses Co announces that it revised its estimated Q4 earnings from its previously reported results on Jan 23. Co says its Q4 results are reduced to $0.01 per share. This updated earnings estimate is the result of an $8.1 mln (pre-tax) increase in its provision for credit losses to $15.6 mln from the $7.5 mln previously announced. Co says "As we navigate through this challenging downturn in the real estate market, we will continue to monitor our loan portfolio and take appropriate measures to reserve against the risks posed."

Some among us seemed DUBIOUS about this financial wink-wink...


Bend Economy Man said...

Just a thought:

If Bank of the Cascades had 4Q 2007 earnings of $0.01 per share, probably a safe bet that in 1Q 2008 it's running at a loss.

CACB really "lucked out" (wink-wink) that even after revising its accounting mistakes, it managed to eke out a meager profit, thus delaying the inevitable "Bank of the Cascades Unprofitable" headline for a few months.

How, by the way, has P. Moss kept her job the whole time?

My target CACB stock price for April 2008: $9.

The financial sophisticates at Cascade Bancorp decided that they would sidestep the financial implosion overwhelming them:

Step 1) Drink Kool-Aid non-stop
2) Report earnings 50% below prior year
3) Wait for the hub-bub to die down, then drop the other ONE FOURTH of the earnings bomb.

Hey WAIT! "ONE FOURTH"? That sort implies this line of bullshit spewing forth from Patty "Never A Quarterly Loss On My Watch" Moss is NOT OVER.

Right. See, the losses at CACB dwarf their Kool-Aid fueled idiocy. The losses are FAR larger than what they are reporting. They have applied liberal amounts of ELIZABETH TAYLOR-FICATION to their reporting so that the horror is minimized.

Moss & Crew get the ::eye roll:: of the week for this little facade.

Anonymous posted this:

More people moving in, but at a slower pace
California continues to be No. 1 feeder market by far
By David Fisher / The Bulletin
Published: February 17. 2008 4:00AM PST

Back in 2006, Altrec.com CEO Mike Morford and his managers figured they had to get their company out of Seattle. The offices of the online seller of outdoor gear were 15 traffic-choked miles from its warehouse, and it was running out of space.

It was tough to compete for top-level techies in a region dominated by Amazon.com and Microsoft, Morford recalled Wednesday. People’s commutes were tough.
Nobody, in other words, was having much fun.

So the company cast a net around seven or eight Western towns and regions, including Central Oregon, weighing 20 or more different variables, from transportation to space availability to state incentives, to find a new place.


It settled on Redmond. Since it moved in September 2006, the company has brought 17 families to Central Oregon from outside the area, Morford said. Its total staff has tripled, partly because it has been relatively easy to attract talented people to the area to keep its Web design, marketing and search engine functions going, and partly because it has found a reasonable supply of them here.

“It actually has worked out better than we thought it would,” Morford said. “We knew it was going to be fun, in the sense of moving to Central Oregon, but I’ve been amazed at the number of people from places like San Francisco and Seattle who know about Bend. They have a place in Sunriver, or they’ve vacationed here or something, and they are trying to figure out how to live here.”


The total number of new families moving into and out of the area has slowed with the national housing slump, if data on interstate shipments from three of the country’s largest movers is any indication, but the basic trend remains strong.

People who can afford to move, and who can afford to hire movers, continue to prefer moving into Central Oregon to moving out of it by about a 2-to-1 margin.


Overall in 2007, United Van Lines LLC, Mayflower Transit LLC and Atlas Van Lines Inc. reported 369 shipments into Central Oregon’s three counties, and 179 shipments to other states.
California accounted for the bulk of the inbound shipments with 37.9 percent, followed by shipments from Washington state at 9.8 percent.

Overall, four times more Californians moved in than moved out, with 140 coming in to 33 moving out. Washington’s 36 inbound shipments exactly doubled the number moving out of the region to that state, but some numbers were more balanced.

Sixteen shipments headed for Arizona, while only 19 came in from there
, according to statistics from the three movers.

Colorado sent 18 shipments into Central Oregon, but got 15 back.
Massachusetts was the only net draw from the Central Oregon region, attracting eight shipments out, but sending only two back.

Slowdown in moves
The inbound migration pattern may have remained strong through 2007, nearly exactly reflecting the 2-to-1 inbound ratio of 2006. But the total amount of movement dropped substantially. The 369 inbound trips of 2007 were down nearly 15 percent from 2006. Outbound moves dipped, too, dropping 10.5 percent from 2006 to 179.

The data, collected from the three movers last week by The Bulletin, gives an incomplete picture of the region’s total migration pattern because it includes only interstate moves. Moves within Oregon are regulated by a different arm of government that doesn’t require the same type of data collection.


Still, the drop in overall numbers reflects a national slowdown in shipments, Atlas Van Lines spokeswoman Barbara Cox said, which is grounded in a single factor: A sluggish housing market is making it tougher for people to sell their homes where they are, which makes it tougher for them to relocate.


The slowdown is as apparent in Central Oregon, a region whose housing economy has traditionally been dependent on newcomers for its strength, as it is in the rest of the country.
Sales of single-family homes on lots dropped 26.7 percent to 1,520 last year in Bend, according to the Central Oregon Association of Realtors, while the number of homes listed for sale topped 1,200 at the end of the year.

Redmond’s sales fell even further, dropping nearly 43 percent to 516, with more than 500 homes still listed for sale at the end of the year.
As they have in much of the country, slowing sales are translating into lower prices.

In west Bend’s NorthWest Crossing, a 400-acre subdivision developed by Brooks Resources Corp. and Tennant Development, sales of housing units slid into the 45 to 50 range in 2006 and 2007, from the 105 sold in 2005, according to David Quiros, principal broker at NorthWest Crossing Realty.
About 75 percent of the NorthWest Crossing inventory that sold last year went to buyers from outside the area, at prices that were significantly off.

Lots in the subdivision today are listed as low as $138,000, he said, down from the spring 2006 peaks of nearly $200,000.


The fiercest downturn in moving activity seemed to settle in last fall, a couple of months after a credit crunch bit the nation’s mortgage lending markets, said Harold Perry, owner of local Atlas agent City Moving and Storage Co., and it hasn’t picked up yet.
“We had some things going last year, but jeez, there’s nothing going on this year,” Perry said, calling this year the worst winter he’s seen in the local moving business since the early 1980s. “You could almost go to sleep and not miss anything, so it’s bad. Whether it comes back or not is anybody’s guess.”

Given the number of unsold houses in Central Oregon and its biggest feeder markets, the leaders of Brooks Resources, the region’s biggest development company, figure that land and home prices may have to work their way back roughly to 2003 levels before the market regains some semblance of supply-and-demand balance, Brooks Resources President Kirk Schueler said.

That would bring median home prices in Bend back to the mid-$200,000 range.
The median sales price through 2007 for Bend homes on lots stood at about $349,000, according to the Central Oregon Multiple Listing Service.

“Our prediction — I guess maybe it’s a hope — is that it squares around when we get back around the 2003 area,” Schueler said, “and it varies. Different pockets of town will do better than others.”
Who wants to be here Meanwhile, Nancy Lynch, who’s owned local United Van Lines agent Bend Storage & Transfer Inc. since 1981, said she expects the same kinds of migration patterns to continue, even if they happen in reduced numbers.

Some will move here from warmer climates, then move back again after a few winters of snow and cold. Some will move here with half-formed dreams of economic success, then fail and move away.


On balance, though, the area for more than a decade has been a magnet for retiring baby boomers and others who are anxious to get away from the rat races, Lynch said, and the ones who have either brought jobs or money with them — or both — have had the best luck sticking.
If they can get here.

California reported its lowest number of outbound moves in more than a decade
, according to Atlas’ year-end report, possibly because people found it difficult to extricate themselves from houses in that state’s hard-hit markets. But despite the national slowdown in movement, Atlas’ national statistics still indicated a strong inclination for people in the country to move West, according to the company’s year-end report, with net movement particularly strong into the Northwest.


Falling prices in the local housing stock might actually help the region pull out of its funk faster than the rest of the nation, since its underlying desirability apparently remains undiminished, said Roger Lee, executive director of Economic Development for Central Oregon.
“People still want to own homes and, in our case, boomers still want to be in the Pacific Northwest,” Lee said, “so things are playing well for us. If we were in the same position in Detroit, I don’t know what my forecast would be.”

February 17, 2008 10:58 AM

First of all, this piece goes on and on about the TREMENDOUS inbound inbalance between Oregon & just about everywhere else. Population figures from the Census bureau:

California: 36.5MM
Washington: 6.4MM
Arizona: 6.2MM
Oregon: 3.7MM

OK, we are TINY compared to these other places! There's NO ONE here to somehow push that ratio positive. There will probably NEVER be an outbound positive ratio to ANY of these states... EVER!

This also reminds me of the recent reports that Oregon is among the lowest states in foreclosure. Wyoming is The Lowest. Lowest number of foreclosures in the country are in Wyoming.

Wow! Real estate must be KICKING ASS in Wyoming, right?

Huh, here's a nugg printed by BendBB, "New data reveal depth of housing slump":

The states suffering the biggest drop in sales in the third quarter were Nevada, down 44 percent and Wyoming, down 42 percent. Other states with big declines were New Mexico, down 39 percent, Oregon, down 38 percent and Arizona, down 37.6 percent.

Uh huh. It seems that when you measure things on AN ABSOLUTE BASIS, stuff like OUTBOUND MIGRATION & FORECLOSURE NUMBERS can make small markets look GREAT. That's SOLELY because the population figures are TINY.

Oregon is a TINY population state, just like Wyoming. DUH. That's why we don't have a lot of foreclosures.

Granted, there's more to it than population... Michigan is suffering from a depression, and THAT is going to keep them in the doldrums for years.

But even if WE are having the Best of Times, and Cali is suffering The Worst of Times, they WILL HAVE MORE FORECLOSURES than we ever will. Basic math.

Don't succumb to basic mathematical crap that is being printed around here. Is it true? Yes. Is it also misleading? Of course. Somehow you never find the footnote telling you that:

1) We are a very low population state & will ALWAYS have a small number foreclosures.
2) We are 18 months behind the curve of the RE Mega Bubble Implosion.

The header over on BendBB puts it well:

Economic statistics are like a bikini. What they reveal is important... what they conceal is vital.

BEM said it best with respect to these recent Disaster Scenario Bulletin stories:
Bend Economy Man said...

I think that The Bulletin showed some backbone by publishing some rough facts and deadly quotes right after the COBA campaign began. Kudos to The Bulletin.

Yes, they followed the old Bulletin formula of Misleading Headline That Says Exactly the Opposite of the Facts in the Story / "Happy News" First and Last Paragraphs / Hard-Hitting News in the Middle. But by now I think we've deduced that this is in the Bulletin's editorial standards manual.

Another nail in the Bend Miracle coffin?

80 losing jobs at Bright Wood
Layoffs amount to 16 percent of work force; company attributes cuts to housing market

By Lauren Dake / The Bulletin
Published: February 21. 2008 4:00AM PST

MADRAS — For the second time in just more than a year, Madras-based Bright Wood Corp. has laid off more than 10 percent of its work force.

Around 180 out of 1,130 employees, working mainly in manufacturing and administrative positions, will be let go, said Bright Wood President Dallas Stovall. The layoffs started Monday and should be completed by the end of the week. The cuts amount to about 16 percent of the staff.

This should come as no surprise. And like CACB earnings "surprises", this one ain't over either. The hits will keep coming.

Area tourism feeling a pinch
By Jeff McDonald / The Bulletin
Published: February 21. 2008 4:00AM PST

Skiers and snowboarders flocked to Central Oregon over Presidents Day weekend, but the business boost was short-term relief in a so-so winter for many businesses that rely on visitors, industry representatives said Wednesday, expressing nervousness about the future.

Benefiting from clear roads, ample snow and sunny days, Hoodoo Mountain Resort broke attendance records over the holiday weekend, and Mt. Bachelor ski area saw more visitors and spending. But local lodging properties and restaurants are feeling the pinch of a cooling national economy.

A slow December and January at many area lodging properties could bode ill for the region’s $498 million-a-year tourism economy, according to Alana Audette, president and CEO of Central Oregon Visitors Association, which promotes the region’s tourism industry.

“Overall, we’re still getting that sense that people are just belt-tightening a bit,” she said. “People are getting more wary about making those vacation plans. Advance reservations for spring are off, and the summer also is showing signs of slowing. It’s making us real nervous.”

Business has dropped between 15 percent and 20 percent the past 2½ months at Merenda Restaurant and Wine Bar in downtown Bend, said Jody Denton, chef and owner. He said the slowdown has affected many restaurants and retail businesses around town. Denton also is chef and owner of Deep, which opened downtown in June.

“I don’t think anybody’s immune,” Denton said. “I thought Bend would dodge the bullet until December and January, but it’s definitely trickled down.”

Bend’s cold housing industry has played a large role in slower business at Merenda and Deep, Denton said.

Folks, you wondered what absolute calamity looked like? It's here, now.

Our commercial real estate sector has finally jumped whole hog into the bursting RE horror. Ridiculous concepts like "office condos" which is a simple-minded attempt to sell RE to the only group capable of buying anymore, BUSINESS, has failed MISERABLY. Lease rates are simply unsustainable.

Local banks, that only months ago declared themselves fit as a fiddle financially & almost completely IMMUNE from the collapse... LIED. They were firmly planted in some Kool-Aid fueled hallucination where they were exempt from reality. Even I bought into this fantasy. As GHWB so eloquently put it:


When US Presidents become confused, they invoke THE WHO!

CACB plumbed new lows, and is within eyeshot of the single digits. Who would have thunk it? Even CACB Shorter covered in the $20's.

People aren't moving here anymore. Has Bend lost its luster? Well, certainly some. I got here in 2001, and am not enamored of the "attitude" that has transformed the place in just that short time. Honking, rude, self-absorbed psychotic consumerist nightmares. Hopefully the Bust will put out that fire.

More specifically, NO ONE CAN SELL THEIR HOUSE, and we are finding that THAT is the grist of the Bend economic mill. We RELY on the ability to GRIFT PEOPLE OF THEIR MONEY. Look at that quote from the "moving" piece:

they are trying to figure out how to live here.

This is just amazing. I know of Very Few places where you have to "figure out" how to live somewhere. YOU FUCKING WORK. OK, you work.

Not Central Oregon. We are grifters, we have to FIGURE OUT how to survive. And my God, has the grifter trade here been a bonanza for the last 5 years. Ask Holz-Tek: Two of the most gifted Flim-Flam men to ever grace our shores. These two drew up a Perpetual Motion Machine on a napkin, called it a "Master Plan", and sold to the City of Bend for $2,560,000! AWESOME!

Unfortunately, this gig is up. The money has gone away, and there's no one left to pay for the nightmare created during this romp. Brucey got the Big Fuck You, when he dared address this problem with Bends Big Muckety Mucks:

bruce said... On the CC meeting: LS building looks as good as we will get, Sonia is worried about money (some real "choices" will have to be made if we don't sell any JR land next year) and the dickhead John Russell simply brushed me off with a "no" when I asked him how we were planning on paying for the roads/sewers/etc. for the 50 acres we were planning on selling if all the money from that acreage was going to pay for the current shit that we are building.

I STRONGLY ENCOURAGE you to head over to Bruce's Blog, and read his headline piece, "JR Financing Just Doesn't Make Sense". Excellent review on the Circular Financial Clusterfuck that is Juniper Ridge.

Nice Bruce.

Finally I want to retract my statements of last week, that could be interpreted that this may NOT be the Best Buyers Market in 20 Years in Bend.

I thought about it, and maybe they are right. This MAY WELL be The Best Buyers Market Of ALL TIME. Check this listing over on BendBB:

2008-02-22 2613809 Bend Mtn River Estates 1475000 725000 -750000 -50.85 219 11

This little Sugar Shack has been listed since the Earth was a ball of hot magma, and worse it's been marked down ELEVEN TIMES, for a total of OVER FIFTY PERCENT.

Think about it: This little shithole has been for sale FOREVER, and has taken 11 Reality Revisions for a 50+% hit in price. This bodes well for a strategy that has been non-existent for 5 years in Central Oregon:

The Coma Inducing, "I've Gone Fuckin Blind" 50+% OFF Lowball.

This species, long ago thought extinct, actually has a basis in reality nowadays. People who previously would have not even thought about responding... well, most probably still will not respond, but SOME WILL.

The sale of RE around here is being removed from peoples DISCRETIONARY table and being put on the COMPULSORY table. They HAVE TO SELL.

Can you imagine throwing this homeowner a 50% OFF lowball on Day 1? My God, they'd call the cops on you. "We've got a crazy person in the building!".

Have a scroll through BendBB's price change boards. Those badboys are well-populated with HUGE reductions from initial DREAMY list prices. There are people who HAVE TO SELL.

Now their prices are still insane in most instances. That should tell you something, when they are still 100% too high after a 35% price reduction. BUT, you can walk to the table in todays atmosphere of Dread, and calmly throw down a LOWBALL that renders every man in the room sterile, and every pregnant woman goes into premature delivery.

And you won't be removed forcibly. They might actually talk about it. Most won't. 90+% won't. But the ones that DO, can be worth your while. Some of these people/banks that hold onto 3 or 4 $320K EMPTY rental shitholes, MAY look kindly on a $190K kick square in their hairy-ass beanbag, if it means avoiding foreclosure on the lot of them.

This could be The Best Buyers Market EVER. But you gotta have the means & the fuckin nads to walk in unabashed, and give EVERYONE in the room FINANCIAL EBOLA & THE FUCKIN AIDS with a lowball that DOES NOT saddle YOU with their Horrific Financial Problems.

If you play their game, you will get killed. You'll hold an unsalable piece of shit in a MASSIVELY DECLINING market. You'll never break even, and you'll lose money every month, and you'll take a 33% haircut AT BEST when it comes time to sell, and that's a Big IF... IF you can sell.

But, if you firmly plant a scrote busting, steal-toed LOWBALL right in their crotch, you can actually make out OK, and that is IF AND ONLY IF you do NOT plan on selling in the next decade, and you can make that cracker shack pencil as a rental. And there are Realtors who are STARVING TO DEATH for you to play this game.

So do me proud folks: Go out looking for a cracker shack, and walk proudly to the table and throw down a LOWBALL that ruptures every eyeball vein in the place.


The Sign of A Successful Bend Oregon Real Estate Transaction


ATTENTION: Once comments hit 200, Blogger starts paginating results. There are small links at the top & bottom pointing to "newer" and "older" comments. Click "newest" to see the most recent comments.

Monday, February 18, 2008

"Best Buyers Market In 20 Years, Can I Fuck You?"

Addendum:
YoY Feb stats posted by mstucker on BendBB, Feb 19 11:14AM:
Looks worse than Jan.
Feb 07 sales for stick built homes on an acre 2/1 thru 2/19 were 76 and med $'s was 370k

Feb 08 same period solds are only 19 at a med $ of 332,500.
Wow one per day....maybe we will hit the big 30 !!!


The outrage of the week (and month, year, and decade) goes to the MOTHERFUCKIN SLEEZEBALLS at COBA.

These cocksucking LIARS came up with their weak-ass lame little PR load of shit, and are circulating it far and wide as a way to saddle you with their worthless ass inventory.

OK, I'm FINE with stupid ass, lie-packed PR & Marketing bullshit. If I weren't, I would have done GAGGED TO DEATH on the non-stop bullshit spewing forth from Norma DuBois, Becky, and others of the Realtor ilk.

No, what is absolutely nauseating, and seemingly illegal, is THE OVERT EFFORT to:

1) COLLUDE

2) MISLEAD

3) MANIPULATE, AND

4) FINANCIALLY BLACKMAIL


Bend citizens via the local media.


COLLUDE:

So what? Big deal, collusion is part & parcel of every decent PR effort. It's certainly a lame-ass, but long-honored tradition of local RE interests, to give the illusion of some sort of grass-roots groundswell of demand. It's a weakass attempt to somehow create the illusion that amidst overwhelming depression in their market, that there is a large unspoken contingent that believes ALL IS WELL.

OK, fine. Collusion on it's own maybe insufficient to skewer these fuckers. But, they also want to....

MISLEAD:

How's this for a COBA quote?

Following the initial press release each participating business will be responsible for releasing "good news" stories. These press releases will cover a variety of subjects predominately focusing on "good news" stories and op-ed opinions of all participating businesses. Each of the organizations should actively solicit "good news" and "actual fact" stories.

Look HARD at this.

Notice "GOOD NEWS" is always in quotes.

You know, I always use the old "FINGER QUOTES" when I want to make it quite clear to someone THAT I AM LYING about that particular line.

In the final sentence they go so far as to distinguish "good news" (aka LIES), from "actual fact", AS IF THE TWO ARE 100% DISTINCT & SEPARATE CONCEPTS.

EVEN COBA IMPLICITLY ADMITS THEY ARE TRYING TO LIE & SPREAD FALSEHOODS TO GET YOU TO BUY A HOUSE.

Further, here is anther COBA quote:

After seeing multiple national stories printed and broadcast in local media, the six groups partnered to dissuade the notion that the national trends applied to the local market.

Wow. Now it makes sense. This explains the non-stop media barrage of LIE-FUELED IDIOCY about how Bend is 100% insulated from the BUST OF THE HOUSING BUBBLE.

Right, right, right, right, right, right, right...

OK, so Bend:

1) PARTICIPATED on the UPSIDE MORE THAN ANY OTHER METRO AREA IN THE US
2) ALL OTHER HYPER-BUBBLE MARKETS, LIKE VEGAS, MIAMI, LA, SACRAMENTO, PHOENIX and the rest are busting HARDER than anywhere.
3) But Bend, at the ABSOLUTE TOP OF THAT LIST, is 100% IMMUNE.

If you believe a syllable of that, you should go back & get your GED. Learn to read. Or add. Get a job at Goodwill, and not a good one, but a dumbshit job where you don't use your brain AT ALL. Cuz you are a mental incompetent.


MANIPULATE:

Here's more insanity:

Write up a press release of a "Good News" story, send it out and follow up with a phone call. Repeat Often!! This is key!! We have to produce enough "Good News" stories to move the national "wire" stories from the front page or the lead in story.

YES. This is their actual goal. To flood local news outlets with such a quantity of "GOOD NEWS" stories, so that ACTUAL NEWS FROM THE WIRE SERVICES is NOT PRINTED.

THEY DO NOT WANT YOU TO HEAR ANY BAD NEWS ABOUT THE RE MARKET, AND THEY ARE WILLING TO MANIPULATE LOCAL MEDIA TO DO IT.

They want to STUFF THE LOCAL MEDIA CHANNEL so badly that the NATIONAL BAD NEWS is never run. 100% manipulation.

OK. So maybe they are attempting to LIE, CHEAT & STEAL from you. Big Whoop. So far this is just a concerted effort to RIP YOU OFF. So what?

FINANCIAL BLACKMAIL:

Here's the nail in the coffin. The reason this thing feels like ILLEGAL COLLUSION TO MANIPULATE THE MARKET:

Additionally each of the participating organizations are requested to utilize their advertising strength & partnerships to "economically encourage" local media to print and broadcast the stories.

Well, there you have it. A very thinly veiled THREAT that if the local media doesn't print these LIES, there will be hell to pay. This is where this thing crosses into ILLEGAL MARKET MANIPULATION. PRICE FIXING. COLLUSION. RACKETEERING.

KNOW THIS: When you deal with COBA, you are dealing with near-pathological LIARS hell bent on doing whatever is necessary to sell you their wares. Even if it involves LYING, COLLUSION, MEDIA MANIPULATION, or anything else.

FUCK THESE FUCKERS. I guarantee you one thing, IF AND WHEN I buy a house around here, I WILL EXPLICITLY NOT BUY FROM A COBA MEMBER. Or even a COBA supporter.

This is the sort of mindless insanity that the vast Central Oregon RE machine thinks will WORK ON YOUR STUPID ASS, AND GET YOU TO BUY A HOUSE FROM THEM.

Listen up COBA dumbfucks: You CANNOT MARKET or PR your way out of a bubble bursting. And when you did all in your power to make the bubble expand beyond the bursting point to THE MOST OVERVALUED MARKET IN THE US, know that it is not going to end well. It WILL BURST, DESTROYING YOU, YOUR MEMBERS, and most of our local economy.

And just because you & your GREEDY-ASS MEMBERS are hurting, doesn't mean you can LIE, CHEAT, and STEAL your way into a "great housing market". No. Not gonna happen.

Central Oregon RE is 100% DOOMED, which of course means Central Oregon's Economy is 100% DOOMED. And YOU CREATED THIS STATE OF AFFAIRS. YOU. Not me. Not BEM. Nobody else. You greedy-ass fuckers are 100% to blame.

Now here's what's going to happen:

1) Your LAME-ASS PR will not work. Anyone who actually buys a home based on your lying ass bullshit, should actually save a copy of your Market Collusion Plan, and sue your ass in 5 years when their STD-laden shit shack:

A) Falls apart due to shoddy workmanship, and
B) Falls 50% or more in value

2) The Bend RE Market will continue to implode. Ain't no power on Earth that'll stop this. Why? OK, listen close, you stupid COBA buttfuckers:

THERE AIN'T NO MONEY LEFT

I know, it's hard to follow. Especially since your 3rd grade educated ass was rolling in money just a year or two ago. OK, here's another whacky corollary of what happens in a bubble:

DUMBFUCKS LIKE YOU MAKE LOTS OF MONEY

I know you want it to happen again, but it won't. If COBA dumbfucks could ALWAYS make millions, then the average mental-retard would be a billionaire, and that ain't gonna happen.

3) Home prices will implode 50+%

This is good news for COBA retards. Cuz this is when your dumbfuck members will actually make money again. Not before. And NEVER AGAIN as much as you made in 2004-2006. EVER.

Cuz at THAT POINT Bend will have had a GIANT ECONOMIC SHIT TAKEN ON IT. Bend itself will go broke. Prices will implode here FOR A REASON. I won't bore you with the fact that diverting SDC charges from the City into the coffers of COBA members made this possible, and that the fix will involve the TAXING of every single person in Central Oregon into the poor house.

WE ARE PAYING FOR COBA, The City of Bend, and Local Medias PAST COLLUSION. Pot holes, unbuilt parks, fired cops, unplowed roads (except the road to Bachelor of course... don't want capacity utilization to fall below 125%... there might be some SKIING done!). Plus there's going to be the CRIME! YEAHHH! Oh, right. And the HOMELESSNESS & METH! Whoopee!

Good call COBA. You lying, greedy, manipulative, colluding fuckwads have DOOMED THIS TOWN.

Are you asking how you can empty your Bubble-stuffed coffers to fund the remediation of some of these problems? Are you trying to EDUCATE & INFORM and talk the market toward a stable and economically reasonable equilibrium? Are you willing to talk as much about the BAD as well as the GOOD that may have been created by YOUR ACTIONS?

No.

No, you fuckers wanna keep the party going via MEDIA CHANNEL STUFFING, "GOOD NEWS" PR (AKA LYING), and every other imaginary artifice that you can muster, and you don't give a fuck about bankrupting the citizenry, ruining the reputation of the media (too late), or even our local Chamber of Commerce to do it.

So, no. I won't be buying a house being sold by one of your SLEEZY ASS MEMBERS in the near future. I'll wait until you fuckers are curled up in a fetal position, DYING. And even then, I'll think long and hard, and if I can I'LL KICK YOU WHEN YOU'RE DOWN, YOU LYING CUNTS!

FUCK YOU COBA!

I hope you fuckers go BUST.

And the Best Part of this LAME ASS COBA BULLSHIT? They actually want members, AND OTHER LEGITIMATE CENTRAL OREGON ORGANIZATIONS TO ANSWER THEIR PHONE LIKE THIS:

Write up a phone answering script for your office... "Best Buyers Market in 20 Years, The Bend Chamber of Commerce"

Seriously. They want businesses to say THAT. To date, ZERO organizations have even come close. Wait... there is one.

Cascade Business Buttfuckers

Of course. Should have known these pathetic fucks bit hook, line and sinker on the COBA fueled idiocy. On page 25, there is a "Good News" piece by one Tim Knopp, who just happens to be EXECUTIVE VICE PRESIDENT OF COBA. Title of this LEGITIMATE NEWS STORY?

"Best Buyers' Market in Central Oregon in Past 20 Years"

Dang. That sounds like real NEWS!

There's some real solid reasons for reconsidering THE LIES being foisted on us by The National Media, according to Mr Knopp:

Despite the doom and gloom painted by the national media and politicians, the real estate market has corrected itself and their promotion of a mortgage crisis appears to be the creation of a cause for which they would like to offer a government solution.

OK Knopp, I'm with ya. So the real estate problem was really an illusion drummed up by the media & government so that they could manufacture a solution to the problem.

Right!

See, I never thought of that! Gat DAMN those fuckers! Fuckin media & the government up to their old tricks of TRYING TO CRIPPLE THE NATIONAL ECONOMY, while COBA and it's members try heroically to save us all from destruction. But wait, there's more:

Unfortunately, national politicians are creating poor consumer confidence by attempting to institute yet another government fix that won't work.

Mother fuck. Is there anything the government won't do in it's hellbent-for-leather attempts to destroy us! Well, according to Knopp, HELL NO!

And FuckN-A if COBA and it's members aren't the only ones trying to save us. This fuckin government & media fueled bubble was manufactured SOLELY for the goal of wrecking our economy, and America's steadfast, principled, and measured braintrust, AMERICAS HOME BUILDERS, watched in horror as the heinous RE bubble lined their pockets with BILLIONS despite their best efforts to avert this tragedy.

Folks, I was wrong.

COBA is trying to do the right thing by us. And luckily we can count on Cascade Business Buttbangers to get the word out this economically oppressed group. They've done nothing but fight selflessly the greed-fueled government, NATIONAL POLITICIANS, and crooked media who have done nothing but MANIFEST FEAR about a NON-EXISTENT mortgage implosion, and an illusory housing market bust.

Well FUCK THAT. I'm going to DO MY PART, and buy 3 or 4 OR MORE STD tract shitholes, and frankly I don't give a fuck if I lose my shirt. There is NO PROBLEM. Everyone, and I mean EVERYONE should own 5 or 6 homes. If not us, THEN WHO?

OK, so stop reading this FUCKIN BLOG, and call your broker, bank, COBA, and anyone else who'll listen AND YOU START BUYING A FUCKIN HOUSE OR TWO, YOU UNPATRIOTIC MOTHERFUCKERS! The fuckin government & national media are trying to WRECK OUR FUCKIN LIVES by CREATING a mortgage crisis. FUCK THAT! There ain't no mortgage crisis!

That massive housing inventory reported each month by MLS? That is GOVERNMENT PROPOGANDA! Your inability to sell your house? THAT'S THE FUCKIN NAZI'S! Those "stories" about a collapsing housing market? That's the fuckin media trying to FUCK YOU IN THE ASS!

And if ANY BUSINESS in CENTRAL OREGON doesn't answer their phone "BEST BUYERS MARKET IN 20 YEARS", YOU TELL THEM TO, "FUCK OFF, YOU COMMIE FUCKERS!"

Monday, February 11, 2008

Bend Oregon: The Other Shoe Has Dropped

The Denial Continues:

Here's a good Reuters piece that summarizes the attitude of most economists towards the housing debacle, and certainly Bend media about our local situation:

Year of "denial" in U.S. subprime crisis

Fri Feb 8, 2008 7:01pm EST

By Jennifer Coogan

NEW YORK (Reuters) - One year after the first alarm bells of the subprime mortgage crisis rang on Wall Street, many of its victims are trading at half their value or less, while others have long been buried.

On February 8, 2007, HSBC (HSBA.L: Quote, Profile, Research) said it would take a charge of about $10.6 billion on subprime loans. The evening before, the No. 2 U.S. subprime lender, New Century Financial Corp (NEWCQ.PK: Quote, Profile, Research), had unexpectedly warned it faced a quarterly loss and said it would restate previous earnings.

New Century shares lost more than a third of their value on February 8, but to look at the overall market, there was no telling how big a toll the crisis would take on the U.S. stock market. The S&P 500 shed less than 2 points that day.

By spring, the stocks of subprime lenders were falling into a death spiral and dropped from the major exchanges in steady succession.

On April 2, New Century filed for bankruptcy protection. American Home Mortgage Investment Corp AHM.N followed in August. Accredited Home Lenders Holding Co (LEND.O: Quote, Profile, Research) was bought out by a private equity firm in October.

Countrywide Financial Corp (CFC.N: Quote, Profile, Research), the nation's No. 1 lender, hit a high of $44.92 on February 7, 2007. The shares are now trading at $6.58 as it awaits a takeover by Bank of America Corp (BAC.N: Quote, Profile, Research).

But despite the bloodbath in the mortgage finance sector, investors last autumn were still confident enough that the subprime debacle was contained that they pushed both the Dow and S&P 500 to lifetime highs on October 11.

From its intraday high on October 11 to Friday's close, the S&P 500 index has fallen 15.5 percent.

"That's been the history of the last year. Denial, denial denial," said Gary Shilling, president of A. Gary Shilling & Co., an investment research firm in Springfield, New Jersey. "That's what held stock up in October.

That confidence was shaken shortly after, when Merrill Lynch warned it would have to write down billions of dollars more in subprime-related debt than it had previously said. Citigroup, Bear Stearns and others added to the writedown chorus.

In a year, Merrill Lynch (MER.N: Quote, Profile, Research) has fallen nearly 45 percent. Citigroup (C.N: Quote, Profile, Research) stock has fallen more than 52 percent and Bear Stearns has shed nearly 51 percent. In addition to millions in market capitalization, all three firms have lost their chief executives.

By New Year, consensus formed that the subprime crisis would indeed spread beyond the mortgage and financial market and into the broader economy, and potentially beyond U.S. borders.

"More recently people realized the theory of decoupling was a fairytale, that the U.S. really is the world's economic leader," Shilling said. "There's still a lot of denial. The consensus is begrudgingly admitting we're into or close to recession, but the consensus is now that it will be over in the first half of the year."

Wall Street may have been late to recognize the impact of the subprime crisis, but the public caught on fast. Less than a year after HSBC and New Century fired their warning flares, the television show "Law and Order" featured a plot about a con-artist who scammed subprime mortgage holders facing foreclosure to sign over their homes.

Why is it that virtually EVERYONE "wants" this housing debacle to be mild so badly that they are perfectly FINE with making failed prediction after failed prediction that there will probably be NO RECESSION, ONLY A BARELY PERCEPTIBLE SLOWDOWN?

And incredibly this continues today. Every "prediction" is followed by COMPLETE FAILURE in it's predictive ability, but by God, they have NO PROBLEM issuing YET ANOTHER PREDICTION WHERE THERE IS NO FORMAL CONTRACTION (ie Recession).

This blog and most of it's commenters have said the Exact Opposite, And Been Dead Right.

Again: It'll be worse than you ever thought possible. It'll be worse than I thought possible. And I think it's going to be pretty gat damn bad.

To wit, mstucker posted on BendBB (don't cry Paulie... she can see other guys. We never agreed it was exclusive...) some horrendously deteriorating stats:

As of today the Jan 08 Stats are:
Residential homes on less than an acre, Bend
Sold=73
Median price=$310,000

Avg PP SF = $185.87

Avg SF = 2,057

DOM = 191


This is a 8.3% decline from Last Month! Last Month! I'm not sure how much stock I put in any stats regarding Bend RE at this point, cuz as I've said before, we've just reached The Sleeping Point: Our monthly sample sizes are too small to be reliable or indicative of any real trend. Even if I would have won the much vaunted Burrito Bet with BendBB, it would have been something of a hollow victory, cuz it could have just been a blip in the stats. 2 months below $300K? That would have been convincing.

The longest-running, internally consistent stats now seem to be coming from Doug Farmer.

David Foster seems to have thrown in the towel. Could it be that he has mentally walked away from RE as a career? Is tired of posting similar "hopeful" opinions, and pretty much being proved wrong? These posts don't really return him much given the time input? I don't know, but I sort of get the feeling that when you watch your industry disintegrate before your eyes, it's hard to stay enthused enough to write that all is well... or will be soon.

I've updated Doug's data in a google spreadsheet. There are some very forbidding numbers there.

First, it's The First Time that unit sales have fallen below 100 in Doug's data set, which goes back to Nov 2005. Only 94 units of all residential subtypes sold in Bend in January.

What does that mean?

That means the end of real estate as a career for MOST of Central Oregon. We should see mass exodus by many, MANY RE brokers in 2008. The weak will die en masse, the strong will be near-starvation, and many of them will die. Real Estate as a career & an industry (our PRIMARY industry) is Imploding.

94 units sold at an average of $388K (that's down 12.4% from Jan 2007's avg of $443K) means $36MM in sales, or about $2.2MM in commissions (assuming 6%, which is dubious at this point).

Remember, those commission dollars are split 4 ways, the respective listing & selling brokers & their respective motherships. And assuming 2,000 (that's LOW) brokers, that's $1,100 per, and divide by 4. Well, you can see this isn't sufficient for even 1/10th of our current broker count. Numbers down here is simply The End for HUNDREDS of the best paying jobs of the past 5 years.

According to Doug, the raw median for Jan was $307,500. This seems sort of odd given mstuckers addmittedly preliminary (but probably very close to the final figures) of $310K. Remember Doug's data covers "all residential subtypes" including townhomes, condos, and residential on acreage, amongst others. And it's the decent number of acreage properties that pushes Doug's median above the straight residential w/o acreage medians.

But not this month. This tells me (maybe wrongly) that acreage homes are falling apart compared to low-end stuff like mobiles.

And if higher end stuff is deteriorating, it seems maybe "trophy" home sales are starting to get hit, which also seems to be the case. Case in point, BendBB's listing data:


You can see that LISTING medians in Bend have flatlined at $400K +/- $1,000 for months. But sold prices are falling pretty regularly. So the high-end is going begging. No one is buying that stuff. Oh, they're still listing the hell out of it... but it ain't moving.

Why does this really matter? Well, I think I've heard the familiar refrain the "Bend Will Completely Escape The Fall In Prices Because Bend Is 103% Populated With Multi-Millionaires". Hmmmm... maybe that's true, but these vast fields of millionaires are starting to buy LOW END HOMES, and that's IF they buy anything at all... which they ain't.

Better than raw medians, is median PPSF:

Bend continues it's monotonic decrease, falling to $205/sf, down from a high of $227/sf in March of last year. Better to see the changes is PPSF's indexed to zero:

So you can easily see that homes as a store of value are falling HARD, especially adjusted for size, which seems to be the right measure.

So when does this conflagration end?

Welp, not soon, and not even close to current prices. Doug's AAA stat, most important number in Central Oregon economic stats is, of course, MONTHS OF INVENTORY. And at 20.01 months, this bodes VERY BADLY for the coming RE selling season. Last January this number was 12 months... and there was quite a bit of gravedancing.

WHEN SHOULD YOU BUY A HOME HERE?

I say again, "WHEN MONTHS OF INVENTORY STAYS BELOW 6 MONTHS FOR 3 MONTHS IN A ROW."

This is a deviation from my "12 months average below 6 months of inventory", and that's what I personally will look for. Either that or prices down around $200K adjusted for inflation. Yup... $200K! My 2007 number was $190K, or so so I'm adding the long-term average of 4% per annum, and rounding up a little. Hey, I'm an optimist.

But we won't see that for a long, LONG time. Why?

First, IT'S WORSE THAN ANYONE THINKS. I know, repetitive. But no one seems to be swallowing this. IT IS WORSE THAN YOU THINK. This isn't just a speed bump, neither locally or nationally. It is CATACLYSMIC. Our kids will look back on this as "Our Depression". We will ALL look back on this as The Turning Point, when we became Second Rate.

Huh? Yeah, see that's what happens when each & every person loses 1/4th... 1/3rd... or like here, 1/2 their wealth in a heavily indebted primary asset.

If you count roughly 75,000 housing units in Deschutes County, and each one losing $150K, that's $11.25 BILLION in losses. I know, doesn't seem possible, until you realize that back in the early 90's the ENTIRETY of Deschutes County real property was assessed closer to $1.5BB. It's now around $24 billion.

This is The Tsunami Wave down. This ain't that yearly cyclicality crap. Nor is it the decade long, Long Wave. This is The Big One. This one will blow out half the wealth of this place. It's OUT MIGRATION. IT'S MASS VACANCY, BOTH RESIDENTIAL & COMMERCIAL.

To repeat, IT IS WORSE THAN YOU EVER THOUGHT POSSIBLE. If you don't know what the fuck to do, it's cuz you're a deer caught in the headlights. Wake Up White People! Your ass needs to FLEE.

Sell that shithole surplus housing unit FOR WHATEVER YOU CAN GET. Hell, don't believe me, here's mstuckers take on it from a week or so ago:

I tell my buyers and sellers the truth. Don't buy now. And sell as fast as you can at the lowest price you can or stay forever.

Now I'm not sure I'm all in with the "sell at the lowest price you can" thing... I think *maybe* she means mark 'er down & get that White Elephant sold. The lowest PPSF in the neighborhood is The Only Stuff that'll sell.

Until January, you could conceivably say that the Bend RE market was "holding Up" OK. Prices had not really imploded. So you could say, "Hey, I might not have a great chance of selling, but at least I can still ask a decent price, cuz everyone else in the neighborhood is still asking more than what they paid".

No more. The Other Shoe Has Dropped. NOW, price is starting to plummet AND you have about a snowballs chance in hell of selling (remember 94 units... lowest per capita sold in Bend since The Earth was a molten ball of lava). Price is running away lower... and NO ONE is buying at these lower prices.

That sound?

That's THE OTHER SHOE HITTING THE FLOOR.

Buster Makes A Funny:

Usually Busters idea of humor is calling Bruce or I a smelly cunt. And I'll admit it was pretty funny the first 600X he said that. Now, I know that everybody has ulterior motives, little pet-projects that they want to succeed no matter what, and they'll talk about it whatever the forum topic is.

And brucey has apparently started mixing business & pleasure by threatening to legally whale on our helpless City Council unless they either staighten up... or buy Capstone turbines.

I know Bruce... I'm just bullshitting you. But Buster's response was pretty good:

Don't you fucking realize you can't send a public letter to a public official that says, Hey Bitch your breaking the law, and unless you buy 1,000 capstone micro energy butt-plugs I going to file a complaint...

That shit is funny! Sorry, just had to post that! Buster actually said something funny, without calling Brucey or I a smelly cunt!

timothy said...
>>This season, pass prices increased another 12 percent to $929.

Tim & others talked about the Bachelor debacle, in a thread started about -- *GASP* -- unfavorable piece on how the mountain is being managed via HARVESTING methods. Excerpt:

At Mt. Bachelor, mixed reviews
Bend Chamber chairman voices concerns; others say everything's OK


By Jeff McDonald / The Bulletin
Published: February 06. 2008 4:00AM PST

The chairman of the Bend Chamber of Commerce board of directors fears the region’s economy could suffer from customer dissatisfaction with Mt. Bachelor ski area.

...

Mt. Bachelor, which is owned by Park City, Utah-based Powdr Corp., had its second best season ever in 2005-06 with approximately 590,000 visitors. Visitor counts dropped about 10 percent in 2006-07, according to the Pacific Northwest Ski Areas Association.

This year’s totals are behind last year’s pace, mainly due to a slow start to the season due to late-arriving storms, a national economic slowdown and several weekends of heavy snowfall that have hindered travel, Janney said.

Bachelor is simply being managed for harvesting of profits prior to a sale. "APPARENT" profits are maximized in an imaginary wonderland of NO CAPEX EXPENDITURES. The lifts are breaking, prices are being hiked, wages are slashed, service levels are disastrous... but by God, profits are going thru the roof.

Bachelor is going to be sold.

But it will be destroyed first as Powdr maxes out profits. This is Yet Another Nail in The Central Oregon Economic Coffin. Bachelor is The Only Thing That Keeps This Place Afloat During The Winter. Take away 600,000 Bachelor visits, and you've got Armageddon.

And Bachelor is being managed to the Sleeping Point.

Luckily Bend taxpayers are joint-partners in the continued MARKETING of this calamity. You cannot MARKET your way out of a BAD REPUTATION. People's memory LASTS LONG when they are GOUGED price-wise & are ALSO SCREWED with bad service.

Predicted this last year. Busted lifts & OVERRUN... people were FURIOUS. You can't market away furious.

But luckily you & I are acting as joint-partners in scheme to prop up Bachelor in last gasp of profit maximizing before Powdr blows Bachelor out the hatch. We are spending hundreds of thousands to get people from SoCal (dupes) to stay an extra 24 hours.

Self-fulfilling disaster. Did this last year, when Bachelor was at 110% of capacity, and people showed AND GOT FURIOUS WHEN THERE WAS NO SKIING TO BE DONE. Smart. Let's MARKET our way to 120% of capacity, so as to infuriate everyone who comes here to stand in lift lines at Bachelor for hours.

Good Call Bend. Yet another reason we will go broke. Yet another reason It Will Be Worse Than You Thought Possible.

Developers adjust Bend hotel plans

Well, today we hear that Yet Another Mega-Project has been "Right Sized". Remember... nothing is ever DOWNSIZED in Bend... plans are "adjusted" toward a Better Idea Than We've Ever Yet Dreamed. Geez.

Anyway, The Village can't get funding for ludicrous square footage no one wants, so they have scaled back to merely inane square footage no one wants.

This brings up a side issue raised by BEM:

Paul,

Please put the The Village condotel on the R.I.P. list.

Also, please put the Pine Nursery sport fields. These were also killed by the RE bust.

I'm not sure what to do about this, cuz the RIP list was something I originally thought of as 100% Total Failures. Like The Plaza. Like The Shire (Note to self: Put the Shire on the RIP list). Here was my take on it:

I think the Mercado is about ready for your gravestone. Ain't seen anybody there, not even the guards the signs warn you about, for months now.

Yeah, I've noticed that thing sits untouched.

But I actually consider the fact that they are doing nothing some sort of acceptance of the reality of the Bend RE situation, and not really a failure.

They bought the land at the top, so that's about a half failure... but the crazy fuckers are not building either by financial fiat or by choice. Either way they are not digging themselves an even deeper grave.

The Plaza (and probably The Shire to a lesser extent) is a great example of someone committing 100% to a brain-dead RE concept & losing everything.

The Bend Pine park & Mercato qualify more as 1/2 failures in my eyes.

I want to prioritze these losers...

It seems there are 3 pieces to this. I guess there's the RIP tome: stuff that was built and failed spectacularly. And then there are the Brain Dead projects; like Mercato or the Redmond Water Park; alive but in a coma. And then there's the merely amputated: These are not "dead" projects, but they have been vastly scaled back. This is The Village.

But where does IronHorse fit in? Or Yarrow? These projects were necessarily "built to order" in large measure, so they could never really be classified as "dead"... but they sure as hell are failing... MASSIVELY. They fall more in the "amputee" section. They are missing Huge Chunks they were supposed to have by now.

I don't know. I want to preserve some sort of classification of these things. Bend going broke is far, FAR more a Big Deal than Mercato not getting built. Maybe I'll have some sort of classification: DOA, Brain Dead, and Amputees. Don't know. Ideas?

Speaking of insane, they quote a Bend developer, Brad Fraley, in the Village piece. He actually used to go by a pseudonym, Matt Foley. He gave talks to Realtors & stuff, pumping them up. I actually found a video of one of his recent motivational talks. It's pretty good:


Monday, February 4, 2008

Bend Overwhelmed By STD Epidemic

Mstucker Ain't A Dude

I guess I should have known that a nickname like "EM-stucker", should have been "Ms Tucker" or some such, but Paul-doh's mind ain't been the same since being washed over by the ecstasy of Deschutes' Abyss beer. My Lord, I don't really drink beer EVER, but that Abyss is stuff alcoholism is made of. Has anyone partaken of that glorious elixir? I'm considering getting a divorce so that I can marry a vat of that stuff. Take crack, cable TV, porno, and a Wii, and make it into beer, and that's Abyss. My God, it's unbelievable.

Anyway, what was I talking about?

Right, Ms Tucker. Seems Ms Tucker is a Realtor that:

1) Is a chick
2) Can withstand a Buster Onslaught
3) Is actually not all that sanguine on the prospects for Bend RE
4) Is pretty good about posting timely Bend RE stats
5) Is refreshingly innocent ("What is a MILF?" God, I love that!)

I might have to reconsider my New Years request that all "Fake Tittied Realtors Kill Themselves, And You're ALL Fake Tittied Realtors".

mstucker
is all right! So let's post some mstucker nugg's (well, at least we think it's her):

mstucker:
1.) Please quit using abbreviations, so people know what your talking about.
2.) Please tell your story from the start that would be a good start.
3.) The reason we need you to start your own blog, because we need to have a womens blog here for real-estate women to come clean.

4.)
We need a place where women can comment there experiences and not have 50 year old guys going on 12 talk about pussy and their anus.
5.) Please tell your story from the beginning, and assume nothing. Start from the beginning, and tell us about how you saw the Bend real estate business change especially from 2000 to 2006, but also from the time you arrived.


Ummmm. Don't hold your breath on #4 going away. "50 year old guys going on 12" describes ALL 50 year old men. And all 40 year olds. And 60 year olds. Well, it describes every guy between 12 and 99, and most beyond that.

mstucker: Answer to IHTBYB. I tell my buyers and sellers the truth. Don't buy now. And sell as fast as you can at the lowest price you can or stay forever. I know of many brokers looking or working part time at other jobs.

They never heeded the good advice about keeping 6 to 12 months money in the bank.
I will retire this fall. Have no debt, no mortgage and will stay in Bend.

I blurted out that this is going bad until 2012 and was shussed by RE office owners. As if not saying it will somehow keep it from happening. But most of them don't read Mish or Clusterfucknation or HP or HD or BB2 or ML implode. I want all the best info so I can plan for the future.


That nugg about "Sell however you can, come hell or high water or plan on staying forever" is Dead Right. There really ARE people around here who have fairly stable & safe incomes, who have plenty of resources tucked away, who live in a nice but severely depreciated house, who could go into financial hibernation For Years if the need arose. There just aren't that many.

There are also Deep Equity types who have stuck around through the entire previous 1,000% runup, who could take a major beating (Buster?), and still have equity clear down to the Sleeping Point. Maybe this describes mstucker herself, she seems perfectly fine with Getting Real About The Bend RE Debacle.

mstucker: Yes i like Bend enough to stay. I don't like most of the changes that have happened in the past 15 years, but I have 30 years worth of good friends here.

Hallelujah! I think this describes most Old Timers. Now this is partly explained by the tendency of Old Bastards (sorry mstucker) to get crotchety and bitch about gas not being 12 cents, and those "Awful Baggy Pants" and shit. But Bend has been on a rather long-term trajectory of change that DID seem tolerable until about 6-7 years ago, when Our Founding Fathers began marketing Bend to Any Skank-Ass Californicated Bastard Who Had $1,000 they would part with in our wonderous downtown.

I'm FINE with change. DAMMIT. What is almost intolerable beyond belief, is that this town has mortgaged EVERYTHING to get unneeded & unwanted homes to litter every square inch within this towns UGB. As Buster has said repeatedly, our ridiculously LOW SDC CHARGES have spawned an Epidemic Of Siberian Tract Developments (STD's).

Even having a severe case of STD's is FINE with me. But ours came at the cost of SACRIFICING ALL MEASURE OF PUBLIC SERVICES.

$13.5MM Bend Pine Park complete with 4 baseball fields? Nope, now it's a $2MM parking lot with ~40ac of grass, and illegal-alien-meth-dealer friendly gazebo's.

It's even starting to impinge on EDUCATION. Anyone notice that the horizontal-snow Arctic gale on Tuesday did NOT result in school closure, BUT the Thursday Woosie Snow DID? Right, that's cuz we ran out of plowing money WEDNESDAY. We made the Big Shit, on Forbes.com:

Associated Press
Ore.: Heavy Snowfalls Stretch Budget

It's worse in Bend, where the city set aside $280,000 to remove snow on residential streets. But recent budget cuts due to fee permit declines from the housing slump dropped that to $152,000.

Parts of the city got more than 20 inches of snow in January and Bend may be at least $100,000 over budget, said Hardy Hanson, manager of the city streets division.

Bend still plans to call its contract snow removal companies when at least half a foot of snow falls at a time, possibly requiring a dip into the contingency fund.

"We will continue to operate at our standard level even though we may or may not get that money," Hanson said.

THIS is the cost of our short-sighted mania for unhindered, slap-dash, all engines FULL ON growth. SDC's that should have been $50-60K, were instead $12K and drew hyiena's from every quarter to evicerate the Bend carcass, while developers cashed in on the difference on the backs of those of us who will remain.

Of course The City of Bend Will Go Bankrupt. Randy Sebastian, Hollern, Pollock and other hyiena's, having gorged themselves to the bursting point, will simply leave. We who remain Will Pay. Unplowed streets, meth-den parks, closed schools, tens of busted industries (including all RE), Grand Canyon-esque potholes, No Cops, Teachers quitting, rampant homelessness, double-digit monster unemployment, and to boot, the lamest Christmas lights of any town West of Detroit. We haven't even begun to see the backlash of this horrendous shortsightedness. THIS will be what vacates the "It's Different In Bend" PR/Marketing standby (yeah, it's different all right... It Sucks!) we have expended MILLIONS on to Bring In Noob's (DOUBLE DOWN ON RED). Underpricing SDC charges is much like underpricing insurance, the aftereffects (LOSSES) can be delayed quite far into the future, and "today's" revenue gains can be quite dramatic, IF you're willing to completely Fuck Yourself "tomorrow". Well, "tomorrow" is now.

Here's Warren's philosophy (sorry Buster) about underpricing insurance with respect to an acquisition he made decades ago, NICO:

When we purchased the company NICO - a specialist in commercial auto and general liability insurance - it did not appear to have any attributes that would overcome the industry's chronic troubles. It was not well-known, had no informational advantage (the company has never had an actuary), was not a low-cost operator, and sold through general agents, a method many people thought outdated.

Nevertheless, for almost all of the past 38 years, NICO has been a star performer. Indeed, had we not made this acquisition, Berkshire would be lucky to be worth half of what it is today.

What we've had going for us is a managerial mindset that most insurers find impossible to replicate.

Can you imagine any public company embracing a business model that would lead to the decline in revenue that we experienced from 1986 through 1999? That colossal slide, it should be emphasized, did not occur because business was unobtainable. Many billions of premium dollars were readily available to NICO had we only been willing to cut prices. But we instead consistently priced to make a profit, not to match our most optimistic competitor. We never left customers - but they left us.

Most American businesses harbor an "institutional imperative" that rejects extended decreases in volume. What CEO wants to report to his shareholders that not only did business contract last year but that it will continue to drop? In insurance, the urge to keep writing business is also intensified because the consequences of foolishly-priced policies may not become apparent for some time. If an insurer is optimistic in its reserving, reported earnings will be overstated, and years may pass before true loss costs are revealed (a form of self-deception that nearly destroyed GEICO in the early 1970s).

THAT is exactly what has happened here: Our REPORTED EARNINGS HAVE BEEN OVERSTATED, AND YEARS WILL PASS BEFORE THE TRUE COSTS ARE REVEALED. We're in the teeth of the true costs being revealed. It's called FISCAL PAIN, and it's always the cosequence of financial irresponsibility. Thank you Bend City Council.

What SHOULD we have done? Glad you asked. We should have done what any person, city, county, state or country does to smooth their economic cycles, by CHARGING HIGHER SDC's DURING THE GOOD TIMES (and socking it away), and lowering them during the slowdowns. YOU SAVE DURING THE GOOD TIMES, AND SPEND DURING THE BAD, it's plain common sense. What are we doing? 100% THE EXACT DEAD OPPOSITE. Unfortunately we've seen the ecstatic highs & we will now suffer the plummeting lows....

I like that phrase, "A form of self deception". Kool-Aid anyone?

Anyway, back to mstucker.

mstucker: Timothy,

Realtor and Realist do not necessarily go hand in hand.

Their hopes of the market picking up is just that, a hope. I just heard on KBND a short quote that Knoop said he sees the market picking up this spring. It's a safe bet to say that, considering it always picks up in the spring. Yes we will have more than 50 sales in March.

But that is not enough. Just prior to Knoop speaking the reporter said 2007 was off 26% over 2006 nationally.
I beliveve now that the national media is reporting more about the RE mess more folks will get to the panic phase quicker. I will bet 6 months from now we will see 26% less Realtors here. They will be out of any money they may have had stashed. 50 to 100 sales in Bend per month will not support the # of Realtors we have.

Most Realtors don't even know who Shiller is, nor have they seen the graph of OP arms resting in 2010-12. Yun is their man.
Foolish

If you ain't been here much, "Yun" is Realtor code for Let's Get This Party Started. NAR seems inclined to hire the first low-bid meth-huffing economist they can find. mstucker is just parroting what 104% of all humans know (margin of error +/- 2%) that Realtors as a group are still bobbing for apples in the Kool-Aid vat.

See, ignoring reality & reason has been such a lucrative mindset for so long that these people don't realize that they are like heroine addicts, jonesing for an activity that will ultimately destroy them. mstucker seems to have seen the light here, taken her methadone, and is now calling it quits. She'll come out ahead. The rest will perish on the slopes of Everest, "shussing" her.

Foreclosure Is The New Black - The Economics of "Fuck You"

Of course anyone who could fog a mirror KNEW this Bubble would not end well. But I've long maintained that the Exact Consequences would be extremely hard to predict. This one, I guess we should have seen coming.

Californicators have this way of making The Absolutely Abominable And Morally Reprehensible, chic & fashionable. From CBS:

There is a certain cold logic to just walking away. Kevin Moran, the real estate agent who gave Kroft the tour of foreclosed houses in the Weston Ranch subdivision, says it is happening every day.

They were never really invested. Most of the people who lost the houses didn’t lose any money because they never put any money down. Though their credit is damaged, and they could face legal action in some circumstances, they got to live in a new house for a couple of years, and some of them even managed to get some money with home equity loans or by refinancing.
"Nobody seems to be saying, 'Look, I made a contract with you. I borrowed money from you. I'm gonna do everything I can to pay off that obligation.'

People just seem to be saying, 'Look, take the house. Good-bye. I'm leaving,'" Kroft says. "There was a time, I think, when people felt really bad about not paying off a debt."
"Yeah, I think in those days, loans were made by your local banker or building and loan associations or savings and loan. They were guys you saw in the grocery store. They were on the little league team with you, the PTA, the school. And I think as mortgages became securitized and Wall Street became involved, they became very transactional and there was no relationship built with the borrower and the lender. And I think that makes it easier for someone to see it as an anonymous party at the other end of the transaction and just walk away from it," Moran says. "Just a business decision," Kroft says.

This is The Economic of Fuck You. A complete mental walk-away from the idea of contractual obligations. What used to be a stigma, is now becoming a social norm. I'm not sure how our inter-personal & business relationships will evolve if our propensity to default on our promises, without any hesitancy or remorse, becomes the norm. "Contract" will become meaningless. Even the US Government has jumped on the bandwagon, by slashing rates to nothing, even if it's means flipping China the finger (& the rest of the world for that matter) on their trillions in dollar denominated assets. As if our International image needed to be further tarnished, The World may see this episode as reason for pause when dealing with America. We won't need NAFTA or tariffs or other bullshit, when we are perceived as the World's Biggest Deadbeats.

America & Americans are finally at their Minsky Moment, and when faced with the choice of "Them vs Us", it should come as no surprise given the inane level of selfishness that has overwhelmed virtually every interpersonal exchange (FUCK YOU, I'm leaving my cart right in the driving lanes. FUCK YOU, someone else can pick up my dog's shit. FUCK YOU, I'll pass your ass on the right, even if it kills us both. FUCK YOU, I'll park in a handicapped spot and hang my little tag, even though I can walk fine.) in this stupid-ass country, that we are flipping the World the collective finger.

The Economy That Bubbles Built

I just have to reprint an article I posted in the comments:

PAUL B. FARRELL
A mind-blowing machine
In America, land of the bubbles, the next pop will be the biggest
ARROYO GRANDE, Calif. (MarketWatch) -- Three cheers! Wall Street's got a new rally song: "I'm dreaming dreams, I'm scheming schemes, I'm building castles high."

Actually it's the 1919 tune that launched the roaring run-up to the '29 crash and the Great Depression. Remember the lyrics: "I'm forever blowing bubbles. Pretty bubbles in the air. They fly so high, nearly reach the sky. Then like my dreams they fade and die."
And it still fits today! Listen to venture capitalist Eric Janszen's scary new paradigm in "The Next Bubble," a Harper's Magazine report: "That the Internet and the housing hyperinflations transpired within a period of 10 years, each creating trillions of fake wealth, is, I believe, only the beginning."

Translation: The next bubble is already expanding. Now listen very closely as Janszen makes the single most dangerous prediction of 2008: "There will and must be many more such booms, for without them the United States can no longer function. The bubble cycle has replaced the business cycle."

After the collapse of the 1990s dot-com bubble we laughed at all the hype they had spewed: "This time it's different." "New paradigm." "New economy that only went up."

Well, stop laughing: The new, new came true, says Janszen. Seriously, the economy and the stock market can no longer function without an ever increasing series of bubbles, one after another, rapidly expanding then bursting, with all the manic trading, risk, uncertainty, hypervolatility and distortions that come with it.

Janszen traces bubbles through history: From the 1720's South Sea Bubble to the housing-subprime bubble. Bubbles are accelerating, becoming more frequent, a frenzy feeding on itself: "Nowadays we barely pause between such bouts of insanity. The dot-com crash of the early 2000s should have been followed by decades of soul-searching; instead, even before the old bubble fully deflated, a new mania began to take place."

What's so scary is not that the subprime bubble was happening so fast on the heels of the dot-com bubble, not that the pundits, the public and the policy makers all appeared to be ignoring it. What's really scary is that our best and brightest leaders in Washington, Wall Street and Corporate America wanted to create a bubble! They even threw jet fuel on this raging fire with cheap money, favorable taxes and minimal oversight.

Of course the Treasury and the Fed will never admit it, but they saw the housing bubble as a healthy economic necessity in their warped ideology! In their myopic minds, the housing bubble was the messiah "saving" America from a big, bad bear/recession.

Publicly they denied the bubble's toxicity, dismissing it as "regional froth." Privately, they conspired to create a massive new bubble driving America deep into debt.

'New economy' morphs into out-of-control robot

This new ideology is extremely dangerous: It assumes the American economy can no longer be managed by politicians or Wall Street quants. The "new economy" has a life of its own, a "Terminator" from a dark future, an "I, Robot" from Asimov's sci-fi world.

Yes, our economy has become a self-sustaining "bubble-blowing machine" inventing new bubbles at warp-speed even before the last is buried, in endless reincarnations of Schumpeter's "creative destruction" cycles.

What's next? More asset-backed bubbles. The dot-com '90s created $7 trillion in market value. The housing boom created $12 trillion in "fake wealth." Janszen predicts the next great bubble will be a $20 trillion "alternative energy" bubble. In fact, Wall Street's already hustling biofuels, solar, wind, nuclear, geothermal and hydroelectric as the new alternative energies destined to replace oil, gas and coal in this next new economy.

Timing? The new "alternative energies" bubble will last about 8 years, from a 2005 launch till a peak around 2013, when it will "creatively destruct," when all possible "fake wealth" is squeezed out, when investors wise up to the scam, when that new bubble pops.

In his finale, Janszen admits that when the "alternative energy" bubble finally self-destructs around 2013, "we will be left to mop up after yet another devastated industry," while Wall Street "will already be engineering its next opportunity."

But be warned: Even before we near the end of the "alternative energy" bubble, the law of unintended consequences could trigger a meltdown, not of the bubble but of the "bubble-making machine" itself! The machine will implode, taking down Wall Street, Washington, Corporate America ... and with it, the "new economy," the "new paradigm" and the "bubble-making machine!"

'Black Swan' self-destructs 'shadow banking' derivatives

The trigger? A "black swan" off the radar and invisible to the quants managing the world's derivatives.

The brilliant supertrader and risk manager Nassim Nicholas Taleb says a "black swan" is an extremely rare, improbable event (like 9/11) that cannot be predicted, yet has catastrophic impact. Black swans are events outside the vision, experience and technology of the world's derivative traders' geniuses.

What will the black swan destroy? How about the derivatives market that spreads so far beyond subprime loan obligations.

Pimco's Bill Gross warns that $500 trillion of derivatives are hiding in a "shadow banking system" that "craftily dodges the reserve requirements of traditional institutions and promotes a chain letter, pyramid scheme of leverage ... with no requirements to hold reserves against a significant 'black swan' run that might break them."

Derivatives have become a renegade army of "I, Robots." "According to the Bank for International Settlements ... total derivatives amount to over $500 trillion, many of them finding their way onto the balance sheets of SIVs, CDOs and other conduits of their ilk comprising the Frankensteinian levered body of shadow banks."

Shadowy? Pyramid schemes? Frankenstein? Terminator? Black swan: Gross paints a much darker future than Janszen: "The last two decades alone have witnessed pyramid schemes involving savings and loans/junk bonds, the small investor/dot-coms, and now global bonds/subprimes ... in each and every case the originator of a surefire 'can't miss' concept collected huge premiums from a willing investment public, only to see the pyramid collapse either of its own merits or from the lack of additional gullible investors. There will be more to come, much like a regular university that welcomes a never-ending stream of new 'students' who pay annual 'tuition' to be 'educated.'"

Higher truth

Never-ending: Gross and Janszen agree on that. But they're both wrong. The biggest flaw in Janszen's argument: "Given the current state of our economy, the only thing worse than a new bubble is its absence."

Wrong, wrong, wrong! Remember, this new paradigm assumes that the only way the American economy can exist in the future is if Wall Street's greedy "bubble-blowing machine" keeps feeding on itself, creating an endless, accelerating succession of ever-bigger bubbles.
Folks, that's one of the dumbest economic theories ever, silly "new age" magical-thinking touted as a scientific basis for the new self-indulgent ideology of Wall Street, Washington and Corporate America.

There's a higher truth: The best (not worst) strategy would be to let the "bubble-blowing machine" implode, live with the absence of a new bubble for a while, then quietly step back and reassess our unsustainable "growth-at-all-costs" economic policies that are secretly designed to benefit the self-interests of Wall Street's insiders who profit by endlessly blowing bubble after bubble ... after bubble ... after ....

Now, I'm not sure how much stock can be put in a study with a data set of 2 (NASDAQ Bubble and Housing Bubble), but he's got interesting ideas here. What started this Bubble Mentality? IMO, America Online.

Why AOL? Well, first start with a chart:


You might notice that little runup from $.09 in 1992 to $90 in 2000. That little 1,000-fold increase in market value was fairly unprecedented in market value history.

"Why the fuck should I buy boring-ass crap like IBM, Exxon, Coke, or whatever, when I can string together 1 or 2 AOL's, and even if I don't time it perfect I will be WAY better off than boring old Buy & Hold. Fuck that, you only live once & I'm swinging for the fences."

Swinging for the Fences (Bubble Investing) is a dominate strategy, EVEN when catastrophic losses are factored in. Look at eBay buying Skype, and other misguided Bubble Buys. But you can see that The Next AOL (Google), is not nearly the AOL that AOL was. AOL was a 100,000% knock outta the park, Google is up a relatively anemic 1,000% or so since it's IPO. Yawn.

And when the Economics Of Fuck You are factored in, you can mitigate MUCH of the contractual losses by offloading them onto your bank.

You're going to see the offshoot of this paradigm shift in bank stocks. Watch it Arabs: Americans learn everything we know from Cali-Spankers, and those bitches are going to start Walking Away. You hold a contract with an American? You Ain't Got Shit.

Little Olde BendBubble2 Bats 500

Dang, 500+ comments! Now I don't put a lot of stock in pure quantity, but seems that we are having our own little Bubble. I should do a chart of the number of comments each week. I remember starting out & getting 3 in a good week.

Welp, as I've said before, the good stuff here's in the comments. Mercifully my contribution is limited to just adding a thin veneer of humor (maybe?) to a situation that is not just dead boring, but glacially slow to unfold. But it IS the most important news & economics story in Bend history... most media outlets either don't know it yet, or do know it & refuse to report on it, or just print complete & utter bullshit about The Sun Coming Out Tomorrow. It's ain't.

And speaking of kickass commenters... let's celebrate a relative noob...

All Hail BRUCE!

Man, most noobs that stumble upon Ye Olde BendBubble2 get their ass waxed by UNKNOWN commenters (who dat?), and promptly flee. But "bruce" done made the jump to lightspeed, and has put up with almost unending taunts of "bruce pussy", and other intellectually stimulating banter. Plus Bruce actually seems to STILL be doing the leg work that fat-asses like me refuse to do. Plus he gives as well as he gets from Buster, and then proceeds to throw Buster a smack down that would exhaust the rest of us.

So Bruce, I salute you! Rock on Buddy! (Don't worry Buster, we still love you too)



BRUUUUUUCE! Damn, I love that video! Bruce channeling Bob Dylan channeling Manfred Mann, who in turn channeled Bruce. Now, I have to go make plans to elope with my bottle of Abyss....