Saturday, May 31, 2008

Bend Oregon: Mass Exodus to CA and AZ

Here's a comment I responded to Friday morning:

IHateToBurstYourBubble said...

“We’re still a growing area — we’re adding people and residents,” Williams said...

That's not what I heard.

May 30, 2008 6:07 AM

Coincidentally, there is a piece in todays paper, "As gas prices cut into profits, region’s movers get creative", that peripherally mentions something that I heard this week from a very reliable source:

Other customers say they can’t find jobs or afford housing, and so they are moving elsewhere.

“We can’t keep trucks in, especially on the weekend,” she said.

I heard that local truck renters have dramatically raised outbound prices, because Bend is experiencing a mass exodus like nothing these businesses have ever seen before.

Their inbound, one-way truck count has gone to near zero, while outbound numbers are so overwhelming, they have had to raise prices several fold to recoup costs of getting trucks back to Bend.

Again, a damn reliable source.

What's the upshot of things like this?

First and foremost is the edict to Think For Yourself. This place has "officially" 2-3X the construction base employment levels of Oregon overall. That is almost certainly low. "11.6% involved in construction"? Yeah, right. Try 25-40%.

Anyone with half a brain knows that RE & RE-related industries practically overwhelm the Cent OR economy. Health care is the only thing that comes close. They talk about manufacturing being a big driver, but tell me how the mass layoffs at Brightwood are NOT RE related.

I'd say maybe Les Schwab is RE-resistant... but they do own Juniper Ridge...

Second, DO NOT believe statements like the following:

"People are still moving to Central Oregon to enjoy our unique lifestyle, climate...."

This is one of those HORRIBLY contrived statements, with some parts truth, and some parts bald-faced lies. Remember this:

The buyers have come “from all over the country,” Breeze said. One is from England. About half are planning to use their units as primary homes. The other half are second-home buyers.

Uh huh. Look at all the implied bullshit in this statement. "International demand". "Such a flood of buyers that we have to hastily make up off-the-cuff estimates of what sort of buyers they are, whether super-affluent second home buyers, or just the local idle rich". "Breeze can barely contain the flood of buyers coming from every corner of the US"....

In case you've been in a cave, The Plaza was taken off Breeze & husband Wurzel's hands by their lender.

Here's more:

Closer to home in Bend, some developers are dialing back, at least for the short term. DesertScape LLC President Craig Glazier said his group has shelved plans for a new mixed-use building on the lot next to the Deschutes Brewery on Bond Street, although it has already demolished the building that stood there before, partly because the group is preoccupied with its work on the new Red Rock shopping center around Redmond’s new Wal-Mart Supercenter, and partly in response to market conditions.

We’re not worried that things aren’t gonna move,” Glazier said. “It’s just that you can only do so much.

Hmmmm. Of course there is more hilarity:

Local real estate agent Becky Breeze and her husband are building a 42-unit condominium project in the Old Mill District. Breeze already has sold most of her units. She said buyers know what they want and they don't balk at prices.

"They want to live in a custom home," Breeze said. "And they don't want to sacrifice quality. They want to be close to walking trails and the mountains. They're really mobile and they have a lot of money," she said.

Ah yes. Breeze's hallucinations still haunt the Old Mill to this day. So many rich, international, jet-setting billionaires coming here from Dubai & Tokyo that they've queued up in their Bentley's at her office with their trunks stuffed with cash.

Of course, The Bulletin was more than happy to report these fantasies. And they do to this day.

More praise heaped on Bend
"Bend is a growing city filled with our kinds of readers," Weeden said. "A lot are active in the outdoors. They are working hard, playing hard, drinking good beer and listening to good music. There also is good nightlife, which is key."

Then we find maybe not is all on the up & up:

DVA, which worked with Bend writer Tim Neville and Outside's editorial staff on content for the article, contracts with the Bend Visitor & Convention Bureau to promote tourism for the city.

Then we get the obligatory Good News quote from a local retailer:

"The magazines have been rating Bend highly for years, so we don't pay as much attention as we used to," said Don Leet, co-owner. "But there are more tourists who come into town that rent bikes and mention the articles. We definitely noticed."

Uh huh.

Just so you are not confused, realize that Bend has grown into a grifters paradise with the complicity of our local bought & paid for whorehouse of a paper, local RE developers, and the City Council, all working in concert to entice, reel in, land, and finally fleece of every last nickel marks (ie patsies) from every corner.

And fleece them we have. We happened to engage in this game at a time coinciding with the greatest credit expansion ever recorded, in an industry that just happens to run this 2 horse shithole. Of course, the players have chalked up their success to personal brilliance.

And have no doubt, this coincidence has had an almost belief-defying effect on Bend.

Who would have known that 25 years ago, this sleepy little busted logging town would go from one of the most under-appreciated housing markets in the US, to the single most overvalued, standing out in a sea of Florida & California bubble markets as an oddity too strange for explanation.

It's OREGON. It's CENTRAL OREGON. Go down the litany of over-valued markets & tell me how that makes sense. Please.

Prineville? No. Madras? No. Lots of people want you to Buy The Dream, but look around. They bought the dream & tried to transplant it in Prineville via Ironhorse. Result? Someone woke the fuck up one day, and realized they were in fucking PRINEVILLE, and Prineville is PRINEVILLE, and you can't sell dreams in Prineville. Same in Madras. Only more so.

Believe me, it's simply a matter of time before people realize that Bend is more like Prineville than Dubai or Tokyo or London, or any of the LONG LONG list of places that people have come from to SWARM our PR-fueled little outback meth-runner town.

This is Bend. Not Santa Barbara. Not Aspen.

And I heard from an inside source that a LOT OF PEOPLE who moved here under the pretense that Bend was an outdoor paradise (it is) with a myriad of wonderful outdoor activities (yes) and a bountiful work/play scene of almost all millionaires sipping Margaritas, drinking beer, living in mansions and in general enjoying life 24/7 (um, no), are now leaving in droves.

See, they mixed truth & lies in just the right amounts, so it's really hard to figure out that while Bend IS an outdoor wonderland, it has just about the WORST EMPLOYMENT ECONOMICS IN THE UNITED STATES. This has ALWAYS been true, except for the brief & fleeting period of 2003-2006, when Bubble-nomics took hold, and the mixed truth/lie PR fueled insanity became as close to 100% truth as it ever has, or ever will.

We are now on the unhappy side of things, and I have heard in no uncertain terms that Bend Is Getting Smaller Everyday. People are leaving In Great Numbers That May Even Rival The Rate At Which They Were Arriving Over The Past Several Years.

And the Mathematics of Growth, while rudimentary, are nonetheless easy to follow:

Each person has some level of residential RE demand. For me & the fam, it's about 400/sf each person. Now Bend is near 75K people right now. But blow that up to triple over a decade or so & even in our glutted RE market, we'd need a hell of a lot of building. That's basically what's happened here for 10 years. Coupled with a bubble, we rode this wave to good result.

But, reverse this trend, and you've got a death spiral. Here's Clive's latest inventory graph for Bend:

This actually doesn't look too bad. We're headed up towards record territory, but it looks like we've been there before. Not too bad.

Oh right. There's that little bugaboo that demand has FALLEN 50% during the course of this graphs time-line. So in terms of "inventory turn", which is the only relevant measures, we've got a real problem here.

There's the FURTHER bugaboo that Bend, in all it's perverse glory, will actually respond to the DECLINE IN HOUSING DEMAND BY BUILDING MORE HOUSES. Remember my little Mirada speech?

This point is so pivotal to Bends future, it bears repeating via analogy.

Remember golds bubble? Back in the early 80's that run to $800/oz? I barely remember it, but I do remember my father getting caught up in it, and buying old gold coins right at the top. There were infomercials 25/8 on buying gold. All sorts of little gold-related insanity got started.

Including gold mining. There was a HUGE amount of capital invested in NOT-EASILY-ABANDONED equipment, men, and infrastructure resources. Gold mining was never bigger than it was AFTER the gold bust.

And as gold prices fell, THEY MINED MORE of it. They had to sell more at lower margins just to make the same money to pay off their capital investments. And gold, like houses, has a nasty habit of accumulating above ground. Supply is never consumed, it just abounds in ever-growing quantities.

Now think of Bend as a place full of suckers who hold their whole lives savings in gold they bought at $850/oz. And further imagine that prices have fallen to $300/oz and that OF COURSE, no one is buying it because they've shot their wad at $800/oz so they have nothing left.

Lots of things are going cock-eyed in a situation like this. Traditional economics says that MORE gold should be demanded at lower prices than higher prices, and LESS supply should come onstream at lower prices.

But this is Bend.

The cost of bringing a house out of the ground for a SUPPLIER (builder) is now so much lower than just about any RESELLER (current homeowner) that the GOLD MINER is the only one who can even remotely come close to break even. And even they are losing money.

"Wait! People won't conduct business and knowingly LOSE MONEY you idiot!"


“Your average truck gets five miles to the gallon,” Dyas said. “So when you travel from here to say, Prineville, that’s 45 miles, times two. ... So I haven’t even covered my fuel to do a local move from here to Prineville. I’m actually paying the customer to let me do the move — isn’t that terrible?”

Like gold miners (and the far more applicable industry, AIRLINES), businesses can, do and WILL conduct business at losses for LONG PERIODS, if they believe there will at some point be a respite from the misery. Gold miners, airlines, and home builders are especially susceptible to this condition.

And so it goes. Bends response to the enormous glut of homes will actually be TO BUILD THEM AT A RATE NOT SEEN BEFORE. And they will sell them, or at least try to, at prices that will leave current $800/oz holders aghast.

Remember Picto-Plummet? Ah yes, the August sun beat down on crazy optimistic shit like this:
Picto-Plummet: We find out Whitey like starburst

Ah yes, Eagles Landing, where all your dreams come true. I wonder how they doin'?

Welp, all you have to do is head over to The Garner Group website, and you see that they have SOLD a home! It's this 3,225sf model home beast:
Original Vision of Eagle's Landing: $525K 3,300sf STD McMansions

A quick looksie on DIAL shows they hauled down $389,900, slightly lower than the $525K they were hoping for. Possibly due to the strange "His-N-Her dual walk-in" garage configuration.

Of further interest is the fact that the builder, Stonebridge Homes, bought the property for $80K, and then flipped it THE SAME DAY for $389,900! Good Job! I'm sure there was no double-dealing bullshit hanky-panky there.

That's of tertiary interest though. The Real News is that this GOLD MINER... err, builder, is now selling their product at a price they hadn't quite bet on given their starburst laden placard:
Lot 72, NE Dogwood Drive, $229,900 3 Bedrooms, 2 Baths, 1,432 Sq. Ft. Convenient Great Room Plan With Master Suite Separation

Uh oh. What were visions of half-million dollar mega mansions for as far as the eye can see has become artist renditions of labor shit shacks, doubling as high density, illegal alien meth dens for less than half that.

Yup, this is the VISION of a town FULL OF PEOPLE who either bought at $800/oz, or worse, refi'd at $800/oz. Your gold will remain ABOVE GROUND AND USELESS in the gold market, while suppliers continue to accelerate their production at LOWER & LOWER PRICES.

Do you see why I SHRIEKED REPEATEDLY to SELL, SELL, SELL last year at $500/oz? Mmm. Yes, it's cuz NOW we're at $300/oz and plummeting. It will not get better either. It'll just keep getting worse to the ASTONISHMENT of all. Even me.

The Point? We're still running the BUY BEND GOLD INFO-MERCIAL that reeled in all the people that have lost their $800/oz gold, and everything else for that matter in this little grift-fest. To wit, the NOD count for Deschutes County:
Number of people 100% grifted out of everything by Bend Media & local government, using taxpayer money.

And what's worse, our City Fathers have started to believe their own grifting bullshit. From Dunc's blog:

I've been trying to wrap my brain around this paragraph in the Bulletin's front page article today:

"Pepsi first started looking at Juniper Ridge land about two years ago but was told it's warehouse didn't fit the city's vision...."

This reminds me, as many things do, of a quote from the Simpsons:

We can't afford to shop in any store that has a philosophy. We just need a TV.
Marge Simpson

OK, Bend City Councilors: We can't afford your asinine dreams. You've bought into your own munificence, when really you were just the people who happened to be in the right place at a miraculous time. Without the gloss of a teflon bubble, you will be exposed as the mediocre grifting frauds you are. Except Telfer who is presciently getting the fuck out of here.

Juniper Ridge, like most things, is just an industrial park in a 2 horse shithole in the middle of nowhere.

But the WAKE UP WHITE PEEPUL phase has begun. The Kool-Aid is wearing off, and Whitey is starting to see the coyote-smugly he woke up with is truly worthy of a arm-chewoff.

Folks, Bend does have a great outdoors scene. BUT, except for this BRIEF period when insanity gripped this country at large, and practically overwhelmed the common sense of everyone in Central Oregon, Bend remains a TERRIBLE ECONOMIC PROPOSITION. I do not believe I, nor do 90% of the current population have a sense of "steady state" economics in Central Oregon. We've just never seen it.

I think Duncan has. I think Marge has. Even Buster. That's 30+ years. Not 5. Or even 10.

Do NOT buy the bullshit. PEOPLE ARE LEAVING BEND EN MASSE. I know they are. Common sense, and looking around and thinking on YOUR OWN are all you need to KNOW that it's happening.

NOD's are on par with or EXCEEDING home SALES. Do you think these people will stick around? Do you think the market is GLUTTED with homes because PEOPLE ARE STILL COMING TO BEND TO ENJOY THE FREEWHEELING LIFESTYLE?

The Bulletin, KTVZ & everyone they quote, Realtors and COVA says it's happening.

So is it?

4.5 years of acreage properties. 24+ months of residential inventory. Plummeting medians. Huge owned (second homes) and rental vacancies. Low cost supply glutting the market. Commercial vacancies up over FOUR FOLD in a year. Does this sound like ALL IS WELL?

Bend media repeats the same tired mixed truth/lies bullshit so often, so that YOU will become a parroting zombie that BELIEVES this crap, and so hence YOU WILL DECIMATE YOURSELF ECONOMICALLY by making BAD DECISIONS. They want to reel you in, land you, and gut you. That's all this town knows how to do.

But we used to EAT YOU. But now people are leaving, so we've begun to eat each other. Our little powers that be are the gold miners that are running us down the cutthroat gauntlet. Your $495K shitshack is worth $239K and falling. It'll soon be at $149K.

Look at that Garner Group meth hovel: Then go to Jett Blackburn, and look at similar homes in Burns. You'll see that meth dives there similar to Garners fancy schmancy 1,200sf meth den on Bend's Eastsiiiiiieeeede go for UNDER $50K.

OK, Bend ain't Burns. But it's CLOSE.

Read that movers article. We're headed back to POVERTY WITH A VIEW at warp speed. Everyone losing money. Craptacular economics. Crushed dreams. The Bend Equity Sinkhole.

It's just what happens here. We grift. And our local media is very clever at it:

“We’re still a growing area — we’re adding people and residents,” Williams said. “But now a higher portion of those people in the area are unemployed.”

One part is true, one is 100% dead false. But you need to open your eyes, look around, and think about it critically, or you will become one of the VAST majority that accepts statements like this at face value.

Happens EVERYDAY in Bend media. And it will continue to happen. And, it's about the best propaganda for separating people from their money that there is.

And just a little recap:

Bend residential real estate is NOT going down because of this blog.

It's not going down because I want it to, or need it to, or will somehow personally capitalize on it somehow.

Conversely, it will not go up because you want it to.

It won't go up because Costa, Hollern, Norma DuBois, or anyone else wants it to.

It will also NOT go up because in 2003, 2004, and 2005 you really WANTED it to go up and IT DID, and now you are like Pavlov's dog or a superstitious gambler with a nervous tick, who cannot get over the conditioned stimulus-response that if you JUST HOPE HARD ENOUGH, we'll return to the Good Old Days of Ever Rising Real Estate values.

No. It will go DOWN, and DOWN HARD, because that is the nature of speculative bubbles bursting. Despite Bernanke. Despite Bush. Despite You. Despite Me. It's just going to happen. And unfortunately for many, Bend is Ground Zero for The Implosion.

But Worry Not dear Readers, Bend is already returning to the Nations Top 10 Lists. But unfortunately, on the backside of a housing bubble, these are probably lists our City Fathers, the media, and our beloved home builders & developers would rather we could avoid:

It was the second time this year that the Bend metro area has ranked nationally in the top three for the highest unemployment rate increase. In February, the area ranked first in the nation, tied with Cape Coral-Fort Myers, and ahead of Punta Gorda, with a 2.6-point year-over-year increase.

We're Number 1! We're Number 1! We're Number 1!


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Anonymous said...

Speaking of exodus, I just noticed this posting on craigslist

Desert Sun criminals on the lamb? Anyone know their whereabouts (BEND)

It is rumored Tyler Fitzsimmons took off with 3 million of a local banks money. He is rumored to be in Mexico for good. Is there a reward for his bounty? Please post any activity regarding this rumor please.

He and Shannon Egelund should be in prison and out of the business for good. No story has been done on these two criminals in The Bulletin? Why?

Please post any comments to Craigslist please.

IHateToBurstYourBubble said...

Other customers say they can’t find jobs or afford housing, and so they are moving elsewhere.

“We can’t keep trucks in, especially on the weekend,” she said.

It's June 1, and so The Big Switch has begun, where noobs who have committed to 1 year leases for 12 months of recreating, biking, etc, finally figure out they're broke, and go back from whence they came.

I saw one hell of a lot of U-Haul trucks over the past 2-3 days loading up. Keep your eye open for the neighborhood move-in's.

Usually by now, the rental signs are taken down because they went up 30 days ago when tenants give notice, and places are either leased up for the year, or the owners are screwed.

I heard from an extremely reliable source that works with many area movers, that June 1 marks The End. Soooo many people leaving, and no one to replace them.

That quote was THE biggest point of interest in that article, but it wasn't even the point of the piece.

Anonymous said...

We just adopted a sweet lab who's owners lost their jobs and have to move out of the area. Heartbreaking but full on reality for Bend right now.

We are headed right back to poverty with a view...not that we ever left.

IHateToBurstYourBubble said...

RE: Local Real Estate Appraisers being prosecuted? (Central Oregon)
Reply to:
Date: 2008-05-20, 11:32AM PDT

I was wondering as to where you get your information? I will check this out with the ACLB (Appraisal Certification and Licensure Board) in Salem, Oregon.

If anyone has a Question about any type of Real Estate Appraisal done in the state of Oregon please contact the ACLB.

Physical Location and Mailing address:
Appraiser Certification & Licensure Board
3000 Market Street NE, Suite 541
Salem, OR 97301

Telephone numbers:
Telephone: (503) 485-2555
FAX: (503) 485-2559
TDD: (503) 378-4100

IHateToBurstYourBubble said...

Reply to:
Date: 2008-04-30, 11:57PM PDT

According to the State of Oregon, Bend has been targeted as a market which was and is being overinflated by crooked appraisers. It is advised to get a second appraisal who is independent from the one used by your lender regardless of who your financing goes thru. Lenders have been pressured by real estate agents to 're adjust" values to support their idea of real estate values. A real estate agent who puts pressure on a lender to "come in at their value" is not working in your best interests.

If two appraisals vary in price by more than 5%, then you would be smart to send them both into the State of Oregon , Dept of Consumer Affairs, Attorney Generals office and they will forward it to the appropriate governmental agencies who will impose fines and stiff penalties to those inflating the values. The rules are strict for appraisers and they all have to follow the same standards. One appraiser is not better than the next one and if they are, then something is not being done correctly. All appraisals at this time should be market as "declining values" in the appraisal which is a standardized form. Over the last 2 years this market has dropped by up to 40% and offers a great opportunity for those wanting to purchase a home who were squeezed out of the market.

Be weary of developers who "steer" you to their lenders as their lenders appraisers interests often compromise ethics as they want to please the developers. An earnest money agreement which states "if you choose to use a lender outside of our preferred lender list and your own independent lenders appraiser does not make the sales value, then you forfiet your earnest money" This is an illegal contract and in court will never be in favor of the developer. People who signed earnest money agreements a year ago are now seeing the appraisals come in at as much as $150 000 less. When a developer is trying to stay afloat which is normal and sells off their homes in a development for cheap, then an honest appraiser has to use the homes closest to the subject property ( the home you are purchasing) and this in effect lowers the values) Lenders are currently auditing and asking for appraisal reviews on all real estate transactions to protect themselves as well as their customers to protect consumers from getting upside down in their homes and the banks losing more .

Not all real estate agents, nor lenders nor appraisers , nor developers are dishonest and most are good people trying to make a living, however get as many opinions as possible from different sources before making a commitment. It will clearly be a good buyers market for a while and prices are rumored to drop for another six months before it flattens out.

It is a great market for buyers as buyers can offer as much as 30% off the sales price.

IHateToBurstYourBubble said...

Be weary of developers

Low hanging fruit today Tim, Your Imminence!

IHateToBurstYourBubble said...

Survived The Great Depression, WWI, WWII, 1970's stagflation, Crash of 1987, 9/11, NASDAQ Crash... but NOT the Third Inning of The RE Collapse.

JPMorgan completes takeover of Bear Stearns
Saturday May 31, 12:33 pm ET

NEW YORK (Reuters) - JPMorgan Chase & Co (NYSE:JPM - News) said on Saturday it completed its $1.4 billion Bear Stearns Cos (NYSE:BSC - News) takeover, capping the demise of a Wall Street firm that survived the Depression and numerous slumps in its 85 years but could not navigate the mortgage crisis.

Weakened by its massive exposure to mortgage markets and the embarrassing blow-up of two of its hedge funds, Bear was driven to the brink of bankruptcy in March by traders who drained about $17 billion of the firm's cash in a matter of days.

Federal officials, worried a Bear bankruptcy would drag the rest of the markets down with it, strong-armed the bank to accept JPMorgan's $2-a-share offer, backed by a Federal Reserve bailout of $30 billion in Bear assets.

IHateToBurstYourBubble said...

Whoops... NOT WWI. They got started in 1923 or so....

IHateToBurstYourBubble said...

Dropping a brick

May 29th 2008
From The Economist print edition
House prices are falling even faster than during the Great Depression

“A DESTABILISING contraction in nationwide house prices does not seem the most probable outcome...nominal house prices in the aggregate have rarely fallen and certainly not by very much.” Alan Greenspan's soothing, if rather verbose, words on America's housing market in 2005 rank high on history's list of infamous predictions. But to be fair, most American economists shared his view that it was highly unlikely that average nationwide home prices would drop. That was the sort of thing that happened only during a deep depression, like the 1930s.

Unfortunately, new figures this week reveal that house prices have already fallen by more over the past 12 months than in any year during the Great Depression. The S&P/Case-Shiller national index fell by 14.1% in the year to the first quarter. Admittedly, other property indices show smaller drops, but most economists now favour this measure. The index goes back only 20 years, but Robert Shiller, an economist at Yale University and co-inventor of the index, has compiled a version that stretches back more than a century. This shows that the latest fall in nominal prices is already much bigger than the 10.5% drop in 1932, at the worst point of the Depression.

And things are even worse than they look. In the deflationary 1930s, America's general price level was falling, so in real terms home prices declined much less than they did nominally. Today inflation is running at a brisk pace, so property prices have fallen by a staggering 18% in real terms over the past year. In nominal terms, the average home is now worth 16% less than at the peak in 2006, and the large overhang of unsold houses suggests that prices have further to fall. If so, this housing bust could well see a bigger cumulative fall in prices than the 26% real drop over the five years to 1933. Most people would call that a pretty destabilising contraction.

IHateToBurstYourBubble said...

Inflation - Wary Fed Looks Ahead to Rate Increases

SAN FRANCISCO (Reuters) - Two Federal Reserve policy makers warned on Wednesday that interest rate increases might be needed before too long to curb inflation, even as the United States struggles with a weak economy.

The remarks solidified expectations that the Federal Open Market Committee has ended an aggressive rate-cutting campaign and could start to reverse its policy course late this year.

Dallas Fed President Richard Fisher and Minneapolis Fed President Gary Stern, both voting members of the FOMC in 2008, said they are keeping a close eye on inflation expectations being dialed into financial markets.

"If inflationary developments and, more important, inflation expectations, continue to worsen, I would expect a change of course in monetary policy to occur sooner rather than later, Fisher said in San Francisco.

Rate increases could be made "even in the face of an anemic economic scenario," Fisher told the Commonwealth Club of California, adding that he did not expect a recession.

Fisher said it would be "unacceptable" for the Fed to be viewed as resigned to higher levels of inflation.

That is a particular risk as the lagged impact of the Fed's interest rate cuts starts to kick in, boosting economic growth at a time inflation is already "too high" and commodity prices are being pushed up by strong global demand.

Earlier, Stern vowed that the Fed would act in an "appropriate and timely" way.

"The key to maintaining low inflation and inflation expectations is likely to be the timeliness and magnitude of decisions we make to reverse course" on interest rates, Stern told a local business group in Altoona, Wisconsin.


The Fed monitors inflation expectations as a test of what assumptions are priced into markets and, by implication, consumer behavior.

Central bank officials have expressed concern the United States may face early signs of stagflation, the damaging combination of weak growth and wage-price spiral that hit the world's biggest economy in the late 1970s and early 1980s.

Stern suggested the Fed had been able to hold the line.

"Inflation expectations have remained reasonably well anchored so far, which is encouraging," he said.

Headline inflation, which includes food and energy prices, "is clearly too rapid for comfort," he said, adding that core measures "have been better behaved."

The Fed lowered its federal funds rate to 2.0 percent in April, the latest in a string of cuts started in mid-September, when the rate was at 5.25 percent, to shield the U.S. economy from the fallout of a housing and credit crisis.

Fisher has been one of the Fed's most vocal policy hawks this year, and on Wednesday termed inflation "a sinister beast" and the "enemy of capitalism."

He has tallied three straight dissents against the FOMC's decisions to lower interest rates.

"Growth cannot be sustained if markets are undermined by inflation," Fisher said. "Stable prices go hand in hand with achieving sustainable economic growth."

But Stern said the Fed was still walking a policy tightrope given the combination of weak growth and rising inflation pressures, that demands delicate action.

"We are seeing challenges on both sides of that (dual mandate) and I think we are simply going to have to navigate the minefield," he said.

In particular, Stern said it was unclear if federal tax rebate checks now being mailed to millions of Americans would have an impact beyond one or two quarters.

Some forecasters fear that the United States faces a "double-dip" slowdown, with growth likely to pick up in the next few quarters on the back of the stimulus package, before fading again in late 2008 or early 2009.

Fisher said figures like Wednesday's stronger-than-expected April durable goods orders, while hard to view in isolation, were a sign that the most disastrous outcomes predicted for the economy have not played out.

"We'll have anemic growth for a while, but to me, inflation is the bigger risk," he said.


Separately, the FOMC will lose a voter with the departure of Frederic Mishkin, effective August 31.

The Fed's usual line-up of seven governors, including the chairman and vice chairman, will dwindle to four because of two vacancies that have been unfilled for months.

"This will mean the departure of an influential dove," said David Sloan, analyst at 4CAST Ltd in New York.

Mishkin, seen as an ally to Fed Chairman Ben Bernanke in his support of formal inflation targets, will return to his teaching post at Columbia University's Graduate School of Business.

IHateToBurstYourBubble said...

Ah yes.

If you wondered when we would EXIT the Virtuous Cycle Stage, and enter the Vicious Cycle Stage, this is it.

Higher rates to fight the inflation CREATED by the easing to fend off the implosion in consumer spending triggered by homeowners becoming poorer for the first time in modern history. Higher rates equals LESS PURCHASING POWER for every dollar in mortgage dollars borrowed, equals LOWER HOME PRICES.


Worst of all Worlds.

IHateToBurstYourBubble said...

Realtors, Prepare to Lose Your 6 Percent

The monopolistic hold big real estate agents have had on information — on access to use multiple listings services — has been blown open at last thanks to the Justice Department’s antitrust settlement with the National Association of Realtors.

Kiss your 6 percent commission good-bye, Ms. Agent! Competition is on the way.

The only reason — only reason — that Realtors could hold onto their high commission for such little value and work is that they kept information away from the marketplace, making it inefficient. To quote Umair Haque (sorry, no link; I’m pulling this from my manuscript):

Competitive advantage is fundamentally about making markets work less efficiently. One catastrophically effective way to do that is to hide and obscure information – to gain bargaining power relative to the guy on the other side of the table. . . .

A world of cheap, abundant, always-on interaction, where value is shifting to the edges, demands a fresh understanding of what’s truly strategic and what’s not.

Here’s a quick example. Where orthodox strategy advises hiding information and making things less liquid, what does edge strategy advise? Exactly the opposite: release information bottlenecks and make things more liquid.

What Craig Newmark realized is that listings — for sale, for rent, for hire — are the property of the market. By making that efficient and extracting the minimum value from it, craigslist grew huge. When Craig spoke with our students at CUNY recently, telling them about some of his other activities, the students asked him why he wouldn’t maximize the value of craigslist, then sell it for billions, then use that fortune for his philanthropic investment. Craig said that he believes he is doing more good leaving the internet dividend he created in the economy. Buyer and seller, directly connected by Craig or by Google, keep more money from transactions. The middlemen — agents and newspapers — suffer but more people benefit.

This new economy can now come to real estate sales as information become freer. Oh, it’s not fully freed yet. But I do believe that the combination of this settlement and what it does to empower discount players and the depressed real estate market will combine to finally shove dynamite up Realtors’ rears.

Couldn’t happen to a nicer bunch. A 2008 survey by the British Journalism Review found that estate agents in the UK are the least-trusted profession, worse even than tabloid reporters; only 10 percent of Britons trust them.

Freakonomics demonstrated how real estate agents’ interests are not aligned with their clients. “A real-estate agent may see you not so much as an ally but as a mark,” wrote Steven D. Levitt and Stephen J. Dubner. They cited a study that found that real-estate agents keep their own homes on the market an average of 10 days longer than homes they represent and sell them at prices 3 percent higher. Levitt and Dubner explained that it’s more efficient for agents if they can get you to sell quickly, even though, from your perspective, that is clearly a less efficient marketplace because it doesn’t get you maximum and true value. “Here,” they wrote, “is the agent’s main weapon: the conversion of information into fear.” That is to say, the control of information leads to inefficient marketplaces. But in the long run, Zillow is becoming far smarter than the smartest agent because it knows more thanks to the aggregation of our data about sales. On the internet, more information equals more value.

The Times said:

Real estate agents earned $93 billion in commissions in 2006, with a median commission of about $11,600, Justice Department officials said. Internet brokers, offering pared-down services, provided average rebates of 1 percent on commissions that normally ran 5 or 6 percent, translating into thousands of dollars per sale. . . .

The National Association of Realtors, with more than 1.2 million members, said that the settlement was “a win-win” for both the real estate industry and consumers. It noted that the association admitted no wrongdoing and paid no fines or damages as part of the deal.

Laurie Janik, the [National Association of Realtors] general counsel, said in a telephone interview that the settlement would have no real impact on home buyers or sellers.

“I don’t think they’ll see anything different,” she said. “This lawsuit never had anything to do with commission rates, or discount brokerages.”

Bullshit. Competition is coming. Information will get freer. Rates will decline. Homes will be worth more. A more efficient marketplace is good for buyer and seller but not middleman. We’re finally headed in the right direction. The Times concludes:

Norman Hawker, a business professor at Western Michigan University who organized a symposium on the Justice Department litigation as a senior fellow for the American Antitrust Institute, predicted that the settlement would ultimately mean a drop in sales commissions of 25 percent to 50 percent as a result of increased competition.

“It’s pretty clear that there was an enormous amount of discrimination against brokers who were trying to use innovative business models,” including discounted fees and virtual offices on the Internet, he said. “There are lots of entrepreneurs who have been looking for a green light in the form of this order to begin offering discounted rates. It has the potential to be a big step forward for consumers.”

When I write posts decrying the wasteful sloth of real estate agent commissions, I invariably get a cadre of agents - more often, actually, their defensive husbands - saying I just don’t understand the value they bring. I say that if they have to explain their value, then it is empty. They do not deserve 6 percent commissions and soon they won’t get them. Heh.

Anonymous said...

We were selling a house in Tanglewood a couple of years ago...a few months after the bubble popped. We had an offer for $60K more than our asking price. The condition was that we give the $60K back to the buyer. We laughed and said that it would not appraise for that much and the agent said, "Don't worry about it, our appraiser will make sure it does". We told him that we weren't interested in fraud and to have a nice day.

It was pretty funny, dude got all bent out of shape and started yelling at us. I told him to get the fuck off our property before I get my gun.

Fraud was happening big time all over the country.

IHateToBurstYourBubble said...

A blast from The Past! Just over 2 years ago....

Behind the boom
For some mobile home park residents, promised help may come too late

By David Fisher / The Buletin
Published: April 23. 2006 4:00AM PST
The dark side of Bend’s real estate boom filed patiently into City Hall on Monday night, looking for help. Any kind of help.

There was Dan Hayward, a computer technician, and his wife, Rebekah, carrying the youngest of their five children, 8-month-old Brooke.

They have two weeks to stay in their double-wide mobile home before they’re evicted from the land to make way for new housing.

There was Patty Allen, a home health care worker. She and her disabled boyfriend and her 14-year-old grandson have a little longer — a bit less than a year — before their home faces the same fate.

Among the 100 or so others who packed City Hall was Nate Lund, the soft-spoken retired college librarian who is trying to organize the city’s remaining mobile home tenants before they, too, find themselves with the choice of uprooting their homes or leaving them for the wrecking ball, forcing them to search for other options in the city’s increasingly pricey neighborhoods.

For the poorest residents of Bend’s 30 manufactured home parks, Lund likens the current loss of mobile home spaces to “an economic Katrina.”

Unlike most homeowners, mobile home owners generally don’t own the land under their homes. Instead, they lease space from a park owner.

Until, that is, the value of the land rises to the point where it’s more valuable as a site for expensive housing.

In Oregon, if a mobile home park is sold, the tenants have a right to $3,500 in compensation from the park owner if they are given 180-day notices to move their homes. But if the landlord gives them a year’s notice, they are owed nothing.

The problem, Lund noted, is that many, if not most mobile home owners can’t afford the $12,000 to $17,000 it would cost to move their homes to another park, even if there were vacancies — which there aren’t.

Many face the stark prospect of abandoning their homes altogether, even if they still owe money on them, while they search for some alternative that’s as affordable as the $300 to $350 a month lot rents they pay in the parks.

That’s not an easy task. The Central Oregon Regional Housing Authority uses a lottery system every month to distribute its limited supply of Section 8 housing vouchers, which give low-income people money for their rent. Each month, about 450 people apply for roughly 15 or 20 vouchers.

Unattractive options

Other options aren’t much better. CORHA’s Ariel South and North apartment buildings in east Bend have about 20 vacancies between them, Cook said. But they are only open to people who make less than $34,680 for a family of four, and the rent is $550 a month for a two-bedroom apartment — more than many pay for their mobile home rents.

“The people in New Orleans lost their homes to rising water and we could lose our homes to rising land values,” Lund said last week. “The devastation is the same, the way we see it.”

The devastation, as Lund terms it, has grown increasingly worse in recent months.

Of the 1,885 mobile home park spaces listed in Bend in June 2005 by Oregon Housing and Community Services, the agency that oversees the state’s mobile home park housing rules, at least 243 spaces in three large parks — 13 percent of the total — are under eviction notices to make way for new developments.

• At Juniper Hills Mobile Home Park at Brosterhous and Murphy roads — once the site of 108 spaces — the handful of remaining residents, including the Haywards, have until May 1 to get out. In its place, work will start this summer on a new subdivision with 161 new $300,000 to $700,000 homes.

• At Cascade Mobile Homes on Reed Market Road, the residents of 53 spaces got one-year notices to vacate in November. Ryan Peters, a principal in Oikos Development LLC, said he and his partners aren’t ready to discuss their building plans yet.

• At the Parrell-Sisters Mobile Home parks on Parrell Road, the residents of 82 spaces got their one-year notices to leave in March. Ron Meyers, managing partner of the company that’s developing The Shire, an English cottage neighborhood on neighboring Benham Road, said the company eventually hopes to build around 70 new homes on the 13.5-acre trailer site. Homes on the existing Shire site are expected to go on sale this summer for $400,000 to $800,000 apiece.

At the average occupancy of 2.3 people per mobile home estimated nationwide in 2002 by Foremost Insurance Group, a manufactured home insurer, the Bend evictions are displacing around 559 people.

It’s a situation that’s driven by money, but the developers who are closing the parks say they’re not happy about it either.

Meyers said his company, Butterfly Holdings LLC, bid on the Parrell-Sisters site after another buyer beat him to some empty land to the north of the 6.3-acre Shire. The price of the parks, according to county records, was $5 million.

The Shire’s project manager, Steve Colburn, said he spent a month researching space availabilities for the tenants and alternative rental housing.

There have been a few transition successes — one of the park’s 80-year-old residents might be able to get into a low-income assisted living center, and her government support may rise because she can ditch the mobile home that counted as a $7,000 asset.

On their own

If other tenants ask for advice on alternative housing, Meyers and Colburn said they will give it. Otherwise, the residents are on their own to find new situations.

“There is a human side that hates to see any suffering occur,” Meyers said, “and I’m sad about the whole condition there that needs to be served in some way. But if we hadn’t bought it as The Shire, somebody else would have bought it. And I think we’re doing a good job of stewardship of it.”

Darrin Kelleher, the developer who will subdivide new lots at Juniper Hills, said he would support some kind of government-mandated monetary transfer between park owners and their evicted tenants because the cost could be factored into the price of any land deal. But the economics that are driving developers to buy parks likely won’t subside as long as developable Bend land is as scarce as it is, he said, and the parks that have been bought for closure likely won’t be the last.

“You’ve got to feel for these people,” Kelleher said. “We bought the piece because it came up for sale. It’s not one of our proud moments.”

Monday’s show of public muscle by Lund’s new group, T.U.F.F. — Tenants United For Fairness — apparently got some attention at City Hall.

The City Council told its staff to bring ideas for fixing the problem to a May 15 “committee of the whole” meeting so it can sort them into something on which it can act.

“The city is taking steps to create more affordable housing,” City Councilor John Hummel told the crowd Monday night. “We are discussing fees and incentives. But it would be a shame if, while we are trying to come up with a way to create more affordable housing, we actually lose affordable housing in the process. So as bad as it is now, if we start losing affordable housing, it’s going to get worse.

“In whatever way we do,” he said, “we are going to help you.”

Two days later, the city’s affordable housing director, Jim Long, said he had no idea yet what the staff will bring back.

Ideas abound

A few ideas were kicked around at Monday’s meeting:

• The city of Wilsonville, Ore., passed an ordinance last year that requires park owners to pay the full cost of relocating their tenants’ mobile homes to a site within 100 miles. If the homes can’t be moved, or there is no alternative space, the landlords have to pay fair market value for it.

A park owner immediately attacked the ordinance in court. A decision on the first phase of the suit is expected in the next couple of weeks, Wilsonville City Attorney Paul Lee said. Its progress is being closely watched by high-value cities throughout the state.

• The city could rezone existing mobile home parks to be used exclusively as mobile home parks, city Community Development Department Director Mel Oberst said. That would open it to Measure 37 land-use claims from existing park owners, but would prevent new buyers from redeveloping the parks for stick-built housing.

• The city could buy land or use existing city-owned land to build a park of its own, Hummel said. Or it could partner with a nonprofit organization or another developer to fund parks that would stay off the resale market.

Statewide, a group of park owners and tenants’ representatives are meeting to try to hammer out new legislation that would possibly give tenants more protection, said Lane County Law and Advocacy Center attorney John VanLandingham, a leading authority on mobile home park issues who works with the group. But the group is far from consensus and nothing is expected to go to the Legislature until 2007, at the earliest.

National problem

Park closures are a growing national problem and states have tried a variety of fixes, VanLandingham noted. Nevada, Florida and Massachusetts require landlords to pay actual relocation costs to displaced tenants. Arizona and Connecticut require between $5,000 and $10,000 in compensation.

New Hampshire set up a statewide loan fund to help tenants buy their own parks. The fund has resulted in 72 tenant park purchases throughout the state, VanLandingham said, but that’s a solution that is unlikely to pencil out in hyperexpensive markets like Bend because tenant rental rates are unlikely to cover the real cost of the land.

“That’s not going to help the people in Bend right now,” VanLandingham said. “It may never help them as long as Bend is a red-hot market.”

For some families in Bend, any help that might be coming is already too late.

Brian Lucy, one of the last residents left in the Juniper Hills park, said the stress of eviction from the trailer he and his family have lived in since 1998 has effectively broken up the family. His girlfriend will probably move in with a child and granddaughter, he said. He may end up in a tent until something better comes along.

“There has got to be some recognition by the law that these really are homes for people, and homes in every sense of the word home. Not just a house,” Lucy said Wednesday in his living room, where empty boxes waited to be packed with old pictures, birthday cards and knickknacks. “There are a lot of hardworking, good people who have had their lives completely interrupted at the least and more torn apart.

“The anger spreads out into the family, you know,” he said. “Everybody’s pissed off about it, and there’s nothing anyone can do about it. It’s not fair.”

Allen and her boyfriend, Ray Elquist, have more time to look for options. But none of the options look good.

‘We’ll just have to lose’

Elquist, 61, gets $603 a month in disability checks for his heart problems and diabetes. Allen brings home about $1,200 a month after taxes. That might be enough to cover rent, if they can find anyplace that will take their teenage grandson and three dogs, Allen said. But the trailer they paid $6,000 for in 2002 is too old to be moved and they have no idea what they can do with it besides leave it behind.

“Whatever we’ve got here, we’ll just have to lose,” Elquist said.

“I know we have to move, but I don’t think it’s really sunk in,” Allen said. “We just got the notice three weeks ago. It’s very stressful. Next year will be here sooner than I want it to be.”

A year after her family got its own eviction notice, Rebekah Hayward said she still doesn’t know what the family will do.

Hayward quit her job as a customer service worker at iSky last year to stay home with her new baby. Her husband, Dan, just graduated from Central Oregon Community College with a pair of associate degrees in computer science. After 13 years of working construction jobs in Central Oregon, then going to school for his degree, he’s working as a computer technician at the college, but said he doesn’t make enough to afford a new house.

The Haywards managed to sell their 1988 trailer for $7,500, Dan Hayward said, but the money wasn’t enough to solve their future. So the seven-member family may have to pack into his parents’ 17-foot RV while she returns to work, Dan rejoins the National Guard Reserves, and they continue their so-far-fruitless search for an apartment to rent.

After seven years in Bend, “it almost feels like an exile, you know?” she said Wednesday. “Like I feel like we’re poor. We’re not rich enough to live here in this society that’s being created in this town. And it’s just ... hard.”

David Fisher can be reached at 541-617-7862 or at

IHateToBurstYourBubble said...

Go look at most of these ex-mobile home parks & you'll find bored Realtors manning unsaleable crap shacks built by busted developers.

Thank God we had this Bubble.

IHateToBurstYourBubble said...

We told him that we weren't interested in fraud and to have a nice day.

Many were quite interested in fraud. My Realtors certainly were. It was just a workaday assumption too. Like filling out the paperwork WITHOUT fraudulent info was the exception.

I heard this from every corner as well.

Free go karts, added amenity bullshit and buyer rebates are alive & well in Bend RE, and while not technically ILLEGAL, it is a blatant attempt to push up the apparent values of homes.

This little f'd up trend is also quickly reversing.

IHateToBurstYourBubble said...

Hyperinflation hits Dow Chemical:

Dow: Country in "true energy crisis"; ups prices

By JAMES PRICHARD – 3 days ago

Better start stocking up on diapers and detergent.

Consumers hit hard in recent months by sharply higher prices for gasoline and food should prepare to start paying more for various household items following Dow Chemical Co.'s decision to raise its prices by up to 20 percent to offset the soaring cost of energy.

The company, which announced the price increases Wednesday, took the unusual step of directing blame at the nation's energy policy makers.

"For years, Washington has failed to address the issue of rising energy costs and, as a result, the country now faces a true energy crisis, one that is causing serious harm to America's manufacturing sector and all consumers of energy," Andrew Liveris, Dow Chemical's chairman and chief executive, said in a written statement.

Dow Chemical's spiraling costs are "forcing difficult discussions with customers," he said.

The Midland, Mich.-based company supplies a broad swath of industries, from agriculture to health care, and any sizable price jumps would likely affect almost all of them.

The price increases will take effect Sunday and will be based on a product's exposure to rising costs. Dow Chemical said it spent $8 billion on energy and hydrocarbon-based feedstock, or raw materials, back in 2002 and that could climb fourfold to $32 billion this year.

Dow Chemical makes everything from the propylene glycols used in antifreeze, coolants, solvents, cosmetics and pharmaceuticals, to acrylic acid-based products used in detergents, wastewater-treatment and disposable diapers.

It makes key ingredients used in paints, textiles, glass, packaging and cars.

The company, whose products are sold in 160 countries, last month reported a 3 percent drop in quarterly earnings amid a 42 percent jump in energy and raw materials costs.

Its profit margins shrank from 9.8 percent in 2005 to 7.6 percent in 2006, and to 5.4 percent last year. During the 12-month period that ended March 31, the margin narrowed to 5.1 percent, according to Capital IQ.

Crude oil prices surpassed $135 a barrel last week, more than double the price from a year ago. Rising energy and transportation costs have been blamed for higher food prices, which rose 5 percent last year, the highest gain in 17 years.

Kevin McCarthy, a Banc of America Securities analyst, said in a note to investors there is "a growing unwillingness among chemical producers to function as an energy shock absorber."

"To be sure, cost inflation is not new; it has been an ongoing battle for Dow and others in recent years," he wrote. "However, we are seeing a new sense of urgency at Dow, and its competitors, to pass along escalating and volatile costs in an environment of decelerating demand."

Price increases from major suppliers significantly affect the cost of manufacturing, said Angie Chaplin, a spokeswoman for Solo Cup Co. The Highland Park, Ill.-based company is a customer of Dow Chemical.

"We absorb as much of these increases as we can through greater efficiency in our own operations, but we have no choice other than to pass on some of the increased cost to our customers," she said.

Companies and entire industries are looking for ways to share increases in the cost of doing business, said Mark Stephenson, a spokesman for chemical giant BASF Corp. in Florham Park, N.J.

"For us, BASF, we don't consider prices across the board, like you saw with Dow," Stephenson said. "Rather, we look at the necessity for increases on a product-by-product basis."

He said BASF had raised its prices for "a handful of products" during the past three months, but he did not know how many products had gone up in the year.

Another competitor, Rohm and Haas Co., announced April 29 that, beginning this month, it will apply an indexed raw materials and energy surcharge to products made by its Specialty Materials businesses. The index will be adjusted up or down monthly, based on the collective changes in key raw material, crude oil and natural gas costs, according to the Philadelphia-based company's Web site.

On Friday, suburban Dallas-based Kimberly-Clark Corp. announced that the consumer products maker will raise prices 6 percent to 8 percent beginning in late July for Huggies diapers, Pull-Ups training pants, and Cottenelle and Scott bathroom tissue. Company spokesman Joey Mooring declined to comment on Dow Chemical's price increases.

Paul Fox, a spokesman for Procter & Gamble Co., said Wednesday the company announced some pricing changes earlier this year and had no immediate response to the action being taken by Dow Chemical. Cincinnati-based P&G reiterated in April that more price increases were coming this summer.

The American Chemistry Council spent $770,000 in the first quarter of this year lobbying lawmakers on climate change, energy-policy reform and other issues. The council wants new supplies of natural gas — which is used extensively by its members to heat and power their facilities and as a raw material for thousands of products — brought to market by opening access to supplies that are currently off-limits.

The trade group represents more than 130 companies, including Dow Chemical, and spent about $2.4 million lobbying last year.

Dow Chemical itself spent $540,000 lobbying in the first quarter and more than $3.4 million last year on various pieces of legislation, including energy efficiency and climate change bills.

"I don't know how right or wrong Dow is about its pricing, but I'm sure fed up with the feel-goodism that has passed for congressional energy policy all this year and last," said Rep. Joe Barton, R-Texas, ranking member of the House Energy and Commerce Committee.

"That's why Republicans introduced a dozen bills that touch every portion of the energy sector, and whatever it takes to get them to the House floor, we're for, because we want energy prices down."

Both Democrats and Republicans have agreed on long-term plans to increase the use of renewable fuels and reduce consumption as the means for limiting U.S. dependence on foreign oil. But many Republicans also want to increase domestic petroleum and natural gas production through expanded offshore drilling, as well as in Alaska and elsewhere to aid that process in the near-term.

David Marks, a spokesman for Senate Energy and Natural Resources Committee Chairman Jeff Bingaman, said the New Mexico Democrat is aware of Dow's concerns and worked to address them in last year's energy bill by co-sponsoring an amendment to create a pilot program for companies to build green facilities that could use coal as their primary feedstock.

"Unfortunately, that amendment was not successful," Marks said. "Sen. Bingaman and other Senate Democrats look forward to continuing to work with Dow, in this Congress and the next one."

IHateToBurstYourBubble said...

I can just imagine that Bernanke was making his case to BushCo lackey's about raising rates, which violates every economic bone in their body, with a PowerPoint presentation using Zimbabwe's Robert Mugabe, and the effects of 100,000% inflation.

You know BushCo thinks 0% interest rates solves all, but what it really does is create horrendous misallocations of capital (eg remember post of Young Woman BURNING her money, instead of fire wood?), and a populous in a frantic race to get rid of their worthless currency.

IHateToBurstYourBubble said...

And note all these little surcharges:

Airlines imposing "temporarily" a fuel surcharge. Chemical companies imposing surcharges.

All these little "temporary" fees are added in anticipation of a future REDUCTION in costs.... notice how prevalent they are. And how much they are popping back up with such frequency that is getting harder & harder to swallow the idea that they are "temporary".

And some are coming in strange new guises, like the CHARGE for any carry-on baggage by American. Believe me, that's a FEE.

IHateToBurstYourBubble said...

Bankruptcy Reform Act Finally Blows Sky High

The Debt Slave Act, better known as the Bankruptcy Reform Act of 2005 has at long last blown sky high. We will get to "how" in just a moment but first let's review some of the provisions of the bill. Lenders asked for and received everything on their wish list as follows:

Wish List

* A strict financial means test that may prohibit many debtors from filing a liquidation bankruptcy under Chapter 7;
* A requirement that all debtors must receive a briefing from an approved credit counseling agency at least six months before they can file their bankruptcy case; Note: Check with your local bankruptcy court to determine if they will waive the time restrictions in the beginning months.
* A requirement that debtors take an approved class on debt management techniques before they receive their bankruptcy discharge;
* A provision making it easier for a court to dismiss a bankruptcy case outright or to convert a Chapter 7 case to a Chapter 13 case; and
* A provision permitting a court to impose sanctions on attorneys, or even on debtors, for filing a Chapter 7 case that is dismissed or converted to a Chapter 13 case.

After the fairy godmother (Bush) signed the bill written by industry lobbyists and passed by Congress as "reform", banks and lending institutions went on a credit binge of previously unimaginable proportion. The most ridiculous abuse of common sense was the so called "Liar Loans" more commonly referred to as "Stated Income Loans".

In addition, much of the subprime mess and the HELOC (home equity) can be attributed to lending institutions behaving as if Sixteen Tons was the new state of being.

You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store

Liar loans are now blowing up. I talked about this recently in Bring On The Alt-A Downgrades.

Liar Loans Discharged In Bankruptcy

Debt Slavery is now in reversal. Inquiring minds should consider this extremely significant ruling: BK Judge Rules Stated Income HELOC Debt Dischargeable.

Tanta writes:

This is a big deal, and will no doubt strike real fear in the hearts of stated-income lenders everywhere. Our own Uncle Festus sent me this decision, in which Judge Leslie Tchaikovsky ruled that a National City HELOC that had been "foreclosed out" would be discharged in the debtors' Chapter 7 bankruptcy. Nat City had argued that the debt should be non-dischargeable because the debtors made material false representations (namely, lying about their income) on which Nat City relied when it made the loan. The court agreed that the debtors had in fact lied to the bank, but it held that the bank did not "reasonably rely" on the misrepresentations.

I do not always agree with Tanta, but I would say that I do over 85% of the time. And I certainly agree with her post this time. She is correct on two counts:

1) This was an extremely significant ruling
2) This was the correct ruling

What is interesting to me was some of the comments, some of which defended the lenders. I have zero sympathy for the lenders and the following comments are in line with my thinking.

Tanta Writes:

Nat City gets zero sympathy for me on this one. Talk about a case of "fool me twice."

Jas Jain writes:

Tanta: “I argued some time ago that the whole point of stated income lending was to make the borrower the fall guy: the lender can make a dumb loan--knowing perfectly well that it is doing so--while shifting responsibility onto the borrower, who is the one "stating" the income and--in theory, at least--therefore liable for the misrepresentation.”

Bingo: And the reason this was carried to such an extreme was the debt slave act of 2005 in conjunction with absurd interest rate policy at the Fed, the Fed's direct sponsorship of ARMs and derivatives, and the "Ownership Society" of the Bush administration. All of which are also blowing sky high right now.

Uncle Festus writes:

A few random thoughts on things which have been raised in these comments:

1. I don't think that the lender will appeal this, because at this point it's not "binding" precedent on any other court (though it will be cited as "persuasive" precedent in future similar disputes). I think the lender will not appeal it because there is a real risk that the higher court (either the 9th Circuit itself or the Bankruptcy Appellate Panel) could affirm it and it would then become binding on the entire 9th Circuit, which encompasses the whole West Coast plus Arizona and Nevada. The money at risk in this individual case (if there is any at all) is minuscule compared to the risk of this becoming the law in the largest Circuit in the country.

Binding or not, the die is cast. Furthermore, under a Democratic Congress and Obama as president the entire bankruptcy reform act is likely to be rewritten.

As ye sow so shall ye reap.

Banks and lending institutions are now bearing the fruits of their attempts to make debt slaves out of consumers. I salute the ruling of Judge Leslie Tchaikovsky.

IHateToBurstYourBubble said...

Further job losses could dash recovery hopes
By Rex Nutting, MarketWatch
Last update: 12:49 p.m. EDT June 1, 2008

WASHINGTON (MarketWatch) -- Any notion that the economy has turned a corner toward recovery is likely to be dashed in the coming week by weak economic numbers on job growth, household wealth, auto sales, construction spending, and the factory sector, economists said.

The first week of the month is always the busiest, with two of the most important monthly indicators scheduled: the nonfarm payrolls report on Friday and the Institute for Supply Management index for manufacturing on Monday. Both indicators are expected to show a sluggish economy.

"Indicators as a whole are going to be tilted on the downside," wrote Brian Bethune and Nigel Gault, economists for Global Insight.

Federal Reserve Chairman Ben Bernanke will speak twice, including a remote appearance at a major international monetary policy in Barcelona.


Nonfarm payrolls will get the most attention. Economists surveyed by MarketWatch see payrolls falling by 50,000 in May, worse than the 20,000 lost in April and about average for the monthly losses this year.

It would be the fifth straight decline in payrolls.

The unemployment rate is expected to rise to 5.1% or perhaps 5.2% from 5% in April.

Job growth has been weak, but not as weak as it typically is during the first months of recession. Initial jobless claims have averaged about 370,000 per week, instead of the 400,000 or more that's typical.

"This reflects the fact that much of the non-financial corporate sector did not over-hire during this business cycle -- nonfarm payroll growth was only about two-thirds as fast as during the 1990s expansion - and therefore has less need to slash payrolls now that sales growth has slowed," wrote economists for Lehman Bros.

Lehman economists said expected job losses were likely concentrated in construction, manufacturing and retail. "Construction employment has still not fully adjusted to the 57% decline in housing starts."

Construction spending declined 0.5% in April after a 1.1% decrease in March, economists say. Commercial construction is beginning to slow, lagging behind the collapse in home building and the slowdown in the economy. The construction data will be released on Monday at the same time the ISM index is released.


The ISM is expected to be nearly unchanged at 48.7% in May vs. 48.6% in April, the economists say. At that level, the ISM shows a contraction in manufacturing activity, but not the collapse normally seen in recessions.

The auto sector is weighing on manufacturing. Motor vehicle sales, especially of the trucks Detroit has found so profitable in the past, are expected to fall yet again in May when they're reported by the automakers on Tuesday.

But exports are growing. "The weak dollar coupled with solid global activity has helped manufacturing hold up better than expected," wrote economists for Wachovia.

New orders are weaker than inventories for the first time since 2001, noted economists for Credit Suisse.

Falling home prices have sapped the net worth of Americans. On Thursday, the Fed will report on the wealth and borrowing of the economy in its quarterly flow of funds report. Net worth dropped at a 3.6% annual rate in the fourth quarter, and likely accelerated in the first quarter.

The report will also detail how households and businesses are coping with the severe credit crunch stemming from the collapse of structured financing.

Rex Nutting is Washington bureau chief of MarketWatch.

Anonymous said...

Hi guys!

I've just finished with my next invention. It's a wind and solar powered button vacuum thing.

Now if I can just find some cheap land for these dang varmints.

Bye bitches!

LavaBear said...

Interesting interview with Taleb.

IHateToBurstYourBubble said...

June 1, 2008

Nassim Nicholas Taleb: the prophet of boom and doom
When this man said the world’s economy was heading for disaster, he was scorned. Now traders, economists, even Nasa, are clamouring to hear him speak

A noisy cafe in Newport Beach, California. Nassim Nicholas Taleb is eating three successive salads, carefully picking out anything with a high carbohydrate content.

He is telling me how to live. “The only way you can say ‘F*** you’ to fate is by saying it’s not going to affect how I live. So if somebody puts you to death, make sure you shave.”

After lunch he takes me to Circuit City to buy two Olympus voice recorders, one for me and one for him. The one for him is to record his lectures – he charges about $60,000 for speaking engagements, so the $100 recorder is probably worth it. The one for me is because the day before he had drowned my Olympus with earl grey tea and, as he keeps saying, “I owe you.” It didn’t matter because I always use two recorders and, anyway, I had bought a replacement the next morning.

But it’s important and it’s not, strictly speaking, a cost to him. Every year he puts a few thousand dollars aside for contingencies – parking tickets, tea spills – and at the end of the year he gives what’s left to charity. The money is gone from day one, so unexpected losses cause no pain. Now I have three Olympus recorders.

He spilt the tea – bear with me; this is important – while grabbing at his BlackBerry. He was agitated, reading every incoming e-mail, because the Indian consulate in New York had held on to his passport and he needed it to fly to Bermuda. People were being mobilised in New York and, for some reason, France, to get the passport.

The important thing is this: the lost passport and the spilt tea were black swans, bad birds that are always lurking, just out of sight, to catch you unawares and wreck your plans. Sometimes, however, they are good birds. The recorders cost $20 less than the marked price owing to a labelling screw-up at Circuit City. Stuff happens. The world is random, intrinsically unknowable. “You will never,” he says, “be able to control randomness.”

To explain: black swans were discovered in Australia. Before that, any reasonable person could assume the all-swans-are-white theory was unassailable. But the sight of just one black swan detonated that theory. Every theory we have about the human world and about the future is vulnerable to the black swan, the unexpected event. We sail in fragile vessels across a raging sea of uncertainty. “The world we live in is vastly different from the world we think we live in.”

Last May, Taleb published The Black Swan: The Impact of the Highly Improbable. It said, among many other things, that most economists, and almost all bankers, are subhuman and very, very dangerous. They live in a fantasy world in which the future can be controlled by sophisticated mathematical models and elaborate risk-management systems. Bankers and economists scorned and raged at Taleb. He didn’t understand, they said. A few months later, the full global implications of the sub-prime-driven credit crunch became clear. The world banking system still teeters on the edge of meltdown. Taleb had been vindicated. “It was my greatest vindication. But to me that wasn’t a black swan; it was a white swan. I knew it would happen and I said so. It was a black swan to Ben Bernanke [the chairman of the Federal Reserve]. I wouldn’t use him to drive my car. These guys are dangerous. They’re not qualified in their own field.”

In December he lectured bankers at Société Générale, France’s second biggest bank. He told them they were sitting on a mountain of risks – a menagerie of black swans. They didn’t believe him. Six weeks later the rogue trader and black swan Jérôme Kerviel landed them with $7.2 billion of losses.

As a result, Taleb is now the hottest thinker in the world. He has a $4m advance on his next book. He gives about 30 presentations a year to bankers, economists, traders, even to Nasa, the US Fire Administration and the Department of Homeland Security. But he doesn’t tell them what to do – he doesn’t know. He just tells them how the world is. “I’m not a guru. I’m just describing a problem and saying, ‘You deal with it.’”

Getting to know Taleb is a highly immersive experience. Everything matters. “Why are you not dressed Californian?” he asks at our first meeting. Everything in Newport Beach is very Californian. I’m wearing a jacket: it’s cold. He’s wearing shorts and a polo shirt. Clothes matter; they send signals. He warns against trusting anybody who wears a tie – “You have to ask, ‘Why is he wearing a tie?’”

He has rules. In California he hires bikes, not cars. He doesn’t usually carry his BlackBerry because he hates distraction and he really hates phone charges. But he does carry an Apple laptop everywhere and constantly uses it to illustrate complex points and seek out references. He says he answers every e-mail. He is sent thousands. He reads for 60 hours a week, but almost never a newspaper, and he never watches television.

“If something is going on, I hear about it. I like to talk to people, I socialise. Television is a waste of time. Human contact is what matters.”

But the biggest rule of all is his eccentric and punishing diet and exercise programme. He’s been on it for three months and he’s lost 20lb. He’s following the thinking of Arthur De Vany, an economist – of the acceptable type – turned fitness guru. The theory is that we eat and exercise according to our evolved natures. Early man did not eat carbs, so they’re out. He did not exercise regularly and he did not suffer long-term stress by having an annoying boss. Exercise must be irregular and ferocious – Taleb often does four hours in the gym or 360 press-ups and then nothing for 10 days. Jogging is useless; sprinting is good. He likes to knacker himself completely before a long flight. Stress should also be irregular and ferocious – early men did not have bad bosses, but they did occasionally run into lions.

He’s always hungry. At both lunches he orders three salads, which he makes me share. Our conversation swings from high philosophy and low economics back to dietary matters like mangoes – bad – and apples – good as long as they are of an old variety. New ones are bred for sugar content. His regime works. He looks great – springy and fit. He shows me an old identity card. He is fat and middle-aged in the photo. He looks 10 years younger than that. “Look at me! That photo was taken seven years ago. No carbs!”

This is risk management – facing up to those aspects of randomness about which something can be done. Some years ago he narrowly survived throat cancer. The change in his voice was at first misdiagnosed as damaged vocal cords from his time on the trading floor. It can recur. Also he has a high familial risk of diabetes. He is convinced the diet of civilisation – full of carbs and sugar – is the problem. The grand doctors who once announced that complex carbohydrates are good for you are, to him, criminals responsible for thousands of deaths.

So, you are wondering, who is this guy? He was born in 1960 in Lebanon, though he casts doubt on both these “facts”. The year is “close enough” – he doesn’t like to give out his birth date because of identity theft and he doesn’t believe in national character. He has, however, a regional identity; he calls himself a Levantine, a member of the indecipherably complex eastern Mediterranean civilisation. “My body and soul are Mediterranean.”

Both maternal and paternal antecedents are grand, privileged and politically prominent. They are also Christian – Greek Orthodox. Startlingly, this great sceptic, this non-guru who believes in nothing, is still a practising Christian. He regards with some contempt the militant atheism movement led by Richard Dawkins.

“Scientists don’t know what they are talking about when they talk about religion. Religion has nothing to do with belief, and I don’t believe it has any negative impact on people’s lives outside of intolerance. Why do I go to church? It’s like asking, why did you marry that woman? You make up reasons, but it’s probably just smell. I love the smell of candles. It’s an aesthetic thing.”

Take away religion, he says, and people start believing in nationalism, which has killed far more people. Religion is also a good way of handling uncertainty. It lowers blood pressure. He’s convinced that religious people take fewer financial risks.

He was educated at a French school. Three traditions formed him: Greek Orthodox, French Catholic and Arab. They also taught him to disbelieve conventional wisdom. Each tradition had a different history of the crusades, utterly different. This led him to disbelieve historians almost as much as he does bankers.

But, crucially, he also learnt from a very early age that grown-ups have a dodgy grasp of probability. It was in the midst of the Lebanese civil war and, hiding from the guns and bombs, he heard adults repeatedly say the war would soon be over. It lasted 15 years. He became obsessed with probability and, after a degree in management from the Wharton business school at Pennsylvania University, he focused on probability for his PhD at the University of Paris.

For the non-mathematician, probability is an indecipherably complex field. But Taleb makes it easy by proving all the mathematics wrong. Let me introduce you to Brooklyn-born Fat Tony and academically inclined Dr John, two of Taleb’s creations. You toss a coin 40 times and it comes up heads every time. What is the chance of it coming up heads the 41st time? Dr John gives the answer drummed into the heads of every statistic student: 50/50. Fat Tony shakes his head and says the chances are no more than 1%. “You are either full of crap,” he says, “or a pure sucker to buy that 50% business. The coin gotta be loaded.”

The chances of a coin coming up heads 41 times are so small as to be effectively impossible in this universe. It is far, far more likely that somebody is cheating. Fat Tony wins. Dr John is the sucker. And the one thing that drives Taleb more than anything else is the determination not to be a sucker. Dr John is the economist or banker who thinks he can manage risk through mathematics. Fat Tony relies only on what happens in the real world.

In 1985, Taleb discovered how he could play Fat Tony in the markets. France, Germany, Japan, Britain and America signed an agreement to push down the value of the dollar. Taleb was working as an options trader at a French bank. He held options that had cost him almost nothing and that bet on the dollar’s decline. Suddenly they were worth a fortune. He became obsessed with buying “out of the money” options. He had realised that when markets rise they tend to rise by small amounts, but when they fall – usually hit by a black swan – they fall a long way.

The big payoff came on October 19, 1987 – Black Monday. It was the biggest market drop in modern history. “That had vastly more influence on my thought than any other event in history.”

It was a huge black swan – nobody had expected it, not even Taleb. But the point was, he was ready. He was sitting on a pile of out-of-the-money eurodollar options. So, while others were considering suicide, Taleb was sitting on profits of $35m to $40m. He had what he calls his “f***-off money”, money that would allow him to walk away from any job and support him in his long-term desire to be a writer and philosopher.

He stayed on Wall Street until he got bored and moved to Chicago to become a trader in the pit, the open-outcry market run by the world’s most sceptical people, all Fat Tonys. This he understood.

His first book, Dynamic Hedging: Managing Vanilla and Exotic Options, came out in 1997. He was moving away from being a pure trader, or “quant” – a quantitative analyst who applies sophisticated maths to investments – to being the philosopher he wanted to be. He was using the vast data pool provided by the markets and combining it with a sophisticated grasp of epistemology, the study of how and what we know, to form a synthesis unique in the modern world.

In the midst of this came his purest vindication prior to sub-prime. Long-Term Capital Management was a hedge fund set up in 1994 by, among others, Myron Scholes and Robert C Merton, joint winners of the 1997 Nobel prize in economics. It had the grandest of all possible credentials and used the most sophisticated academic theories of portfolio management. It went bust in 1998 and, because it had positions worth $1.25 trillion outstanding, it almost took the financial system down with it. Modern portfolio theory had not accounted for the black swan, the Russian financial crisis of that year. Taleb regards the Nobel prize in economics as a disgrace, a laughable endorsement of the worst kind of Dr John economics. Fat Tony should get the Nobel, but he’s too smart. “People say to me, ‘If economists are so incompetent, why do people listen to them?’ I say, ‘They don’t listen, they’re just teaching birds how to fly.’ ”

Taleb created his own hedge fund, Empirica, designed to help other hedge funds hedge their risks by using a refined form of his options wins – running small losses in quiet times and winning big in turbulent markets. It did okay but, after a good first year, performed poorly when the market went though a quiet spell. He’s still involved in the markets, but mainly as a hobby – “like chess”.

Finally, with two books – Fooled by Randomness: The Hidden Role of Chance in the Markets and in Life, and The Black Swan – and a stream of academic papers, he turned himself into one of the giants of modern thought. They’re still trying to tear him down, of course; last year The American Statistician journal devoted a whole issue to attacking The Black Swan. But I wouldn’t bother. A bad but rather ignorant review in The New York Times resulted in such a savage rebuttal from Taleb on his website,, that reviewers across the US pulled out in fear of his wrath. He knows his stuff and he keeps being right.

And what he knows does not sound good. The sub-prime crisis is not over and could get worse. Even if the US economy survives this one, it will remain a mountain of risk and delusion. “America is the greatest financial risk you can think of.”

Its primary problem is that both banks and government are staffed by academic economists running their deluded models. Britain and Europe have better prospects because our economists tend to be more pragmatic, adapting to conditions rather than following models. But still we are dependent on American folly.

The central point is that we have created a world we don’t understand. There’s a place he calls Mediocristan. This was where early humans lived. Most events happened within a narrow range of probabilities – within the bell-curve distribution still taught to statistics students. But we don’t live there any more. We live in Extremistan, where black swans proliferate, winners tend to take all and the rest get nothing – there’s Bill Gates, Steve Jobs and a lot of software writers living in a garage, there’s Domingo and a thousand opera singers working in Starbucks. Our systems are complex but over-efficient. They have no redundancy, so a black swan strikes everybody at once. The banking system is the worst of all.

“Complex systems don’t allow for slack and everybody protects that system. The banking system doesn’t have that slack. In a normal ecology, banks go bankrupt every day. But in a complex system there is a tendency to cluster around powerful units. Every bank becomes the same bank so they can all go bust together.”

He points out, chillingly, that banks make money from two sources. They take interest on our current accounts and charge us for services. This is easy, safe money. But they also take risks, big risks, with the whole panoply of loans, mortgages, derivatives and any other weird scam they can dream up. “Banks have never made a penny out of this, not a penny. They do well for a while and then lose it all in a big crash.”

On top of that, Taleb has shown that increased economic concentration has raised our vulnerability to natural disasters. The Kobe earthquake of 1995 cost a lot more than the Tokyo earthquake of 1923. And there are countless other ways in which we have built a world ruled by black swans – some good but mostly bad. So what do we do as individuals and the world? In the case of the world, Taleb doesn’t know. He doesn’t make predictions, he insults people paid to do so by telling them to get another job. All forecasts about the oil price, for example, are always wrong, though people keep doing it. But he knows how the world will end.

“Governments and policy makers don’t understand the world in which we live, so if somebody is going to destroy the world, it is the Bank of England saving Northern Rock. The biggest danger to human society comes from civil servants in an environment like this. In their attempt to control the ecology, they don’t understand that the link between action and consequences can be more vicious. Civil servants say they need to make forecasts, but it’s totally irresponsible to make people rely on you without telling them you’re incompetent.”

Bear Stearns – the US Northern Rock – was another vindication for Taleb. He’s always said that whatever deal you do, you always end up dealing with J P Morgan. It was JPM that picked up Bear at a bargain-basement price. Banks should be more like New York restaurants. They come and go but the restaurant business as a whole survives and thrives and the food gets better. Banks fail but bankers still get millions in bonuses for applying their useless models. Restaurants tinker, they work by trial and error and watch real results in the real world. Taleb believes in tinkering – it was to be the title of his next book. Trial and error will save us from ourselves because they capture benign black swans. Look at the three big inventions of our time: lasers, computers and the internet. They were all produced by tinkering and none of them ended up doing what their inventors intended them to do. All were black swans. The big hope for the world is that, as we tinker, we have a capacity for choosing the best outcomes.

“We have the ability to identify our mistakes eventually better than average; that’s what saves us.” We choose the iPod over the Walkman. Medicine improved exponentially when the tinkering barber surgeons took over from the high theorists. They just went with what worked, irrespective of why it worked. Our sense of the good tinker is not infallible, but it might be just enough to turn away from the apocalypse that now threatens Extremistan.

He also wants to see diplomats dying of cirrhosis of the liver. It means they’re talking and drinking and not going to war. Parties are among the great good things in Taleb’s world.

And you and me? Well, the good investment strategy is to put 90% of your money in the safest possible government securities and the remaining 10% in a large number of high-risk ventures. This insulates you from bad black swans and exposes you to the possibility of good ones. Your smallest investment could go “convex” – explode – and make you rich. High-tech companies are the best. The downside risk is low if you get in at the start and the upside very high. Banks are the worst – all the risk is downside. Don’t be tempted to play the stock market – “If people knew the risks they’d never invest.”

There’s much more to Taleb’s view of the world than that. He is reluctant to talk about matters of human nature, ethics or any of the traditional concerns of philosophy because he says he hasn’t read enough. But, when pressed, he comes alive.

“You have to worry about things you can do something about. I worry about people not being there and I want to make them aware.” We should be mistrustful of knowledge. It is bad for us. Give a bookie 10 pieces of information about a race and he’ll pick his horses. Give him 50 and his picks will be no better, but he will, fatally, be more confident.

We should be ecologically conservative – global warming may or may not be happening but why pollute the planet? – and probablistically conservative. The latter, however, has its limits. Nobody, not even Taleb, can live the sceptical life all the time – “It’s an art, it’s hard work.” So he doesn’t worry about crossing the road and doesn’t lock his front door – “I can’t start getting paranoid about that stuff.” His wife locks it, however.

He believes in aristocratic – though not, he insists, elitist – values: elegance of manner and mind, grace under pressure, which is why you must shave before being executed. He believes in the Mediterranean way of talking and listening. One piece of advice he gives everybody is: go to lots of parties and listen, you might learn something by exposing yourself to black swans.

I ask him what he thinks are the primary human virtues, and eventually he comes up with magnanimity – punish your enemies but don’t bear grudges; compassion – fairness always trumps efficiency; courage – very few people have this; and tenacity – tinker until it works for you.

“Let’s be human the way we are human. Homo sum – I am a man. Don’t accept any Olympian view of man and you will do better in society.”

Above all, accept randomness. Accept that the world is opaque, majestically unknown and unknowable. From its depths emerge the black swans that can destroy us or make us free. Right now they’re killing us, so remember to shave. But we can tinker our way out of it. It’s what we do best. Listen to Taleb, an ancient figure, one of the great Mediterranean minds, when he says: “You find peace by coming to terms with what you don’t know.” Oh, and watch those carbs

Taleb's top life tips

1 Scepticism is effortful and costly. It is better to be sceptical about matters of large consequences, and be imperfect, foolish and human in the small and the aesthetic.

2 Go to parties. You can’t even start to know what you may find on the envelope of serendipity. If you suffer from agoraphobia, send colleagues.

3 It’s not a good idea to take a forecast from someone wearing a tie. If possible, tease people who take themselves and their knowledge too seriously.

4 Wear your best for your execution and stand dignified. Your last recourse against randomness is how you act — if you can’t control outcomes, you can control the elegance of your behaviour. You will always have the last word.

5 Don’t disturb complicated systems that have been around for a very long time. We don’t understand their logic. Don’t pollute the planet. Leave it the way we found it, regardless of scientific ‘evidence’.

6 Learn to fail with pride — and do so fast and cleanly. Maximise trial and error — by mastering the error part.

7 Avoid losers. If you hear someone use the words ‘impossible’, ‘never’, ‘too difficult’ too often, drop him or her from your social network. Never take ‘no’ for an answer (conversely, take most ‘yeses’ as ‘most probably’).

8 Don’t read newspapers for the news (just for the gossip and, of course, profiles of authors). The best filter to know if the news matters is if you hear it in cafes, restaurants... or (again) parties.

9 Hard work will get you a professorship or a BMW. You need both work and luck for a Booker, a Nobel or a private jet.

10 Answer e-mails from junior people before more senior ones. Junior people have further to go and tend to remember who slighted them.

IHateToBurstYourBubble said...

What was I talking about with all that Hyper-Inflation Bullshit talk a year ago? Never happen!

Passing on the pain
With rising food prices, the area's small businesses have little choice but to follow suit

By Andrew Moore / The Bulletin
Published: June 01. 2008 4:00AM PST

In the 30 years he’s made maple bars at Sweetheart Donuts on Bend’s Third Street, Ray Montoya says he’s never seen food prices jump like they have in the past few months.

Flour and shortening cost double what they did six months ago, Montoya said. Coffee is up, too.

But rather than raise prices, Montoya absorbed the increases because he feared he would alienate customers. That will likely change this week, when Montoya plans to charge 10 cents to 15 cents more for his maple bars and the 45 other varieties of doughnuts he makes. Raising the cost of a doughnut from 55 cents to 70 cents is an increase of more than 25 percent.

“For the last six months, I’ve been losing income,” Montoya said. “I hate kicking up prices, but I decided I want to do it.”

Whether raising prices or reducing labor or food portions, local bakers, doughnut makers and restaurants are having to retool their businesses due to rising prices for everything from eggs to wheat.

According to a recent report by the Port Washington, N.Y.-based market research firm NDP Group, food prices are increasing at the fastest pace in 17 years.

Another report released Thursday by the United Nations’ Food and Agriculture Organization said soaring world food prices may dip in coming months, but steadily rising demand means higher food costs are probably here to stay over the coming decade, according to a Chicago Tribune report.

Local business owners cited a number of possible causes for rising prices, including skyrocketing fuel and transportation costs for shipping food, lower grain harvests due to farmers planting corn in order to cash in on ethanol demand, a drought and subsequently poor grain harvest in Australia, and increasing demand for richer diets in ascendant countries such as India and China.

At Cheerleader’s Grill on Bend’s Third Street, proprietors Al and Linda Larson raised their prices after Memorial Day for the second time this year. No longer will they charge 50 cents for a cup of coffee, which had long been a point of pride for the Larsons. The new price is $1.50.

Seniors, though, still get free coffee, said Linda Larson.

Al Larson said a box of tomatoes for which he paid $7 a few years ago cost him $32 on Wednesday. A case of 15 dozen eggs that used to cost between $4 and $6 now fluctuates between $17 and $30.

“Everything is on the rise,” said Al Larson. “I’m a mom-and-pop store, no computers, so I raised everything 50 cents on the breakfast and sandwich menu, and left the senior and burger menu alone to leave me room to play with if I have to raise prices again.”

Linda Larson said the grill’s customers understand the price increases and business hasn’t suffered. The Larsons also have had to reduce hours for their four nonfamily employees to control costs.

Mike Edwards, owner of the West Side Bakery & Cafe, said he is trimming portions and scaling back hiring to deal with higher food costs.

“Food prices are out of sight,” Edwards said as he scrutinized his bill from a food services vendor at his restaurant Thursday.

Edwards said he raised his menu prices in December and is considering doing so again. In the meantime, he is shopping around to ensure he gets the best deals and switched to liquid eggs to save on labor required to crack eggs.

“You have to take control,” he said.

At The Village Baker, on Bend’s west side, owner Bill Kurzman said he’s baking fewer loaves of bread to reduce waste and match production with demand. He’s also going to raise his prices in the coming weeks by 4 percent to 5 percent.

“It’s something we’ve resisted for a year now, but it’s got to the point we can’t do it anymore,” Kurzman said.

Kurzman said it’s important to maintain his products’ consistency and quality, so he said he’s not scrimping on loaf size or ingredients — just producing less.

Kurzman, like baker Cloyd Robinson, the owner of Great Harvest Bakery in downtown Bend, believes government mandates to produce ethanol are driving up prices for corn.

Robinson said that in the 20 years he’s worked as a baker, he’s never seen grain prices increase so dramatically. Even honey, which Robinson uses a lot of, costs more.

Robinson also believes corporate farms and big agribusinesses are responsible for too much of the nation’s food production, which gives them price leverage.

“So many of (my) basic supplies are provided by conglomerates,” Robinson said. “It’s scary. I’m concerned.”

With whole and white wheat flour prices up, Robinson is experimenting with other grains, including an exotic wheat variety called kamut. He’s also thinking about making Southern-style corn bread, he said.

Robinson said he would like to give his employees raises, to help them defray their commuting costs, but his income has dipped with the price hikes for his raw materials. Robinson expects he will have to raise his prices in the next few weeks.

Andrew Moore can be reached at 617-7820 or

Anonymous said...

Taleb...A great read !!! Thanks.
Really makes you scratch your head and also go buy Black Swan.

timothy said...

"The Black Swan" is mostly hype. Buy his much-superior (in my mind) earlier book "Fooled by Randomness." Much more interesting and he's much easier to take in that one.

WSJ said...

Collapse in Demand
For Large SUVs Leaves
Owners in a Bind

Tumbling Values on Trade-ins, Used Vehicles Means Many Loans Are 'Underwater'

The Wall Street Journal

June 2, 2008

Most people who buy a new car or truck don't think they are making a risky bet on the commodity futures market. But they are. Just ask someone who's trying to unload a large sport-utility vehicle purchased in the last two or three years.

The market for large, second-hand SUVs is going through its own version of the mortgage market's meltdown -- and for some of the same reasons. GM's Hummer H2s and Chevy Tahoes and Toyota's Sequoias were adjuncts to a lifestyle built on cheap energy. Because gas was cheap, living farther from work in order to buy a larger home in a former corn field (or desert) was a reasonable economic decision. Shuttling 100 miles a day from school to work to mall to Costco was a trivial expense -- $10 or so when gas was $1.50 a gallon. You could spend more supplying all your passengers with 20-ounce bottles of Coca-Cola.

Gasoline at $4 a gallon has burst the super-sized American lifestyle. The proof: The fizz has gone out of sales of those 20-ounce sodas3, in part because after the shock of filling up at the pump, people aren't in a mood to buy anything else at the quickie mart.

More seriously, lots of big homes far from town suddenly aren't worth what's owed on them, and the SUVs that ferried people around the sprawl are also "underwater" on their loans.

About 36% of the people who tried to trade in a large SUV in May owed more on the truck than it was worth, according to data from the Power Information Network. That's up from just under 33% a year ago. (It's worse for large pickups. Recent PIN data suggests 40% of large pickups traded during May fetched less than the loan balance.)

A three-year-old large SUV today is worth about $2,000 to $3,000 less at trade-in than a three-year-old large SUV would have been in 2007, before gas prices began to soar, according to Marc Cannon of AutoNation Inc., the largest U.S. auto retailer. A three-year-old Chevy Tahoe that might have fetched $19,700 in September 2007, he says. Today, a three-year-old Tahoe might be worth $16,400 at trade-in.

In other words, folks who bought a big SUV in 2005 are discovering that they were making a bet that oil prices would remain stable. They were wagering $30,000 to $40,000, not the billions certain U.S. auto makers stand to lose from making a similar wager. But the pain of losing that bet is still real. There hasn't been such a significant collapse in demand for a class of vehicles since the oil embargoes and inflation of the 1970s slaughtered muscle cars.

For the past several weeks, I have passed an increasingly common sign of the times: a Hummer H2 parked at the front of the owner's driveway with a "For Sale" sign in the window. I don't know the seller's motives, but it's doubtful they'll get what they want for the truck, given that Hummer dealers have a glut of unsold new vehicles that will probably leave their lots at fire-sale prices.

Within the past few days, a number of experts in the used-car market have recommended that owners of large SUVs should probably just hang on to their rigs rather than sell into the current collapse.

"If you've got one two- to three-years-old and you're working on a five-year loan, you will be upside down," says Jack Nerad of Kelley Blue Book/KBB.Com. "That's exacerbated by the fact the dealer doesn't want that vehicle right now. It's going to be an ugly scene."

Mr. Nerad's reasoning is that right now could be a trough for large SUV demand. Winter usually brings an uptick in demand for four-wheel-drive vehicles, which would make late model used SUVs more desirable for people who want them.

It's true, as Mr. Nerad points out, that the incremental expense of driving a large SUV for another year -- as opposed to buying a Ford Focus -- is almost certainly less than the financial hit a consumer will take trading in a big SUV right now.

A Toyota Sequoia costs about $1,700 more to drive for a year than a Ford Focus, based on the government's mileage calculations and average gasoline prices of $3.79 per gallon. Even adjusting the calculation to $4 a gallon, you'd likely lose less in a year by keeping the big rig.

This is a perennial debate in financial markets: When do you close out a losing hand? No one would or should pay attention to what a journalist has to say about that. (If we knew….)

The bind of what large SUV owners should do with their rides illustrates the bigger problem confronting the U.S. car business. Vehicle strategies -- the mix of small and large, cars and trucks -- take years to develop. Consumers, likewise, buy vehicles they intend to keep for several years -- as evidenced by the fact that so many people choose to take five- or six-year car loans. The economic environment that makes a vehicle choice look rational can change far more quickly.

What remains to be seen is how consumers will choose to cope with the fallout.

Some big SUV owners may decide that their big truck is worth keeping, provided it is used for tasks only a big truck can do -- such as hauling a trailer. A big SUV that is driven only about 8,000 miles a year costs no more to fuel than a Ford Focus driven 15,000 miles a year. Daily commuting in a big SUV never really made a lot of sense. But now, high gas prices make it economical to get the right tool for that job.

The collapse of the SUV market presents a huge challenge for auto makers. The financial problem is well documented. But this goes beyond red ink. Auto makers will have to reorient their marketing. To sell SUVs, car makers convinced consumers that they needed one vehicle capable of performing every conceivable task from climbing a cliff to negotiating left turns across traffic to get to Nordstroms.

Now, auto makers will have to tell consumers they need a number of vehicles designed for specialized tasks – the SUV for the family vacation, the Mini or the Honda Fit for the slog to work, the luxury sedan for the night out with business associates.

It will be a tough sell. But they may find that many customers are already ahead of them.

Send comments about Eyes on the Road to

IHateToBurstYourBubble said...

his much-superior (in my mind) earlier book "Fooled by Randomness."

I sometimes wonder if Taleb doesn't realize that his own popularity is something of a statistical fluke.

Every Crash is "called" by someone.

Some get rich, like Phillip Falcone

Some get famous like Taleb.

Some keep a blog in anonymity. Hmmff.

Anonymous said...

Thanks Timmy, for the heads up on the book "Fooled by Randomness" I'll try that first. I also enjoyed the WSJ article on vehicles. I have been thinking of trading in my Highlander for a CRV (not new) to get 6 more miles per gal. But I only drive 20+- miles per day and like my car. After the read here, I will keep it. I may spend more on gas but what I may lose on the trade-in is worse than the fuel. If I want to save the planet I will wait a few more years. Thanks for all the great news pulls today. I really enjoyed them.
Bend Res. Sold, May. 97 @ 302k..
A bit off 2007 @ 117 Sold @ 399k Med.
2006, May 244 sold @$345,450 Med. Ouch!
Will someone please spank me?
Is this a nightmare or am I finally there.

Anonymous said...

hilarious "for sale" sign:

bruce said...

Re: hilarious for sale sign.

Now that is a fucking gem!

Lost job. Can't pay MTG.
Wife left, took dog. House a gem.
Except for asbestos.

Hey, at least he spelled everything right.

IHateToBurstYourBubble said...

Will someone please spank me?

[[Slingblade grumble...]]

timothy said...

>>If I want to save the planet I will wait a few more years.

That's not a bad choice. Batteries are getting better. I think it's reasonable to skip the current hybrids and wait for the plug-in versions.

timothy said...

Sacajawea NOD. That's in NW Crossing. There've been a few there and a few in The Parks.

Hard rain.

LavaBear said...

From the Los Angeles Times
The market turns cold in a desert boomtown
The Magsams traded up in La Quinta after leaving the Midwest behind. Now they're underwater, confronting dwindling options.
By Peter Y. Hong
Los Angeles Times Staff Writer

June 2, 2008

LA QUINTA — First in a four-part series

-- Like a lot of houses here, the Spanish-style five-bedroom Gary and Debra Magsam bought three years ago has a sparkling pool, a designer kitchen and a nearby golf course.

Now it has one other feature common to the area: a foreclosure notice. Barring a last-minute reprieve, the Magsams' house will be auctioned June 27. They've begun to pack.

"We've accepted the fact that it's going to have to take place," Gary, 48, said of their impending departure. "For a long time we felt, 'Why did this have to happen to us?' " he said. "Now we know a lot of other people are going through the same thing. It seems to make it a little easier to accept."

The Magsams are among an estimated 243,000 American households, including more than 47,000 in California, that face the prospect of foreclosure this year.Congress is expected to pass legislation by the fall that would help an estimated 500,000 households avoid foreclosure. But for the Magsams and thousands of others, the relief would probably be too little to help them, even if it weren't already too late.

The Magsams aren't looking for a handout, however, and they don't blame predatory mortgage brokers or Wall Street financial wizards for their plight. Instead, they say they simply got caught up in the excitement of the real estate boom and the bad judgment that went with it -- on the part of lenders and borrowers alike.

"The banks loaned money to all kinds of people they shouldn't have, including us," Gary said. "This situation we're in is one of our own making. We were not taken advantage of."

As analysts explain the rising tide of foreclosures sweeping the country, many point to first-time home buyers who used sub-prime loans to finance properties they couldn't quite afford. But many of those facing foreclosure are people like the Magsams -- experienced homeowners who simply didn't expect that values would fall so hard, so fast.

Rising home prices created "a false sense of security," said UCLA economist Edward E. Leamer. "Borrowers are realizing some of the decisions they made over the last few years were not that wise."

Gary acknowledges that before the boom went bust, he and his wife were among its many beneficiaries.

In 1999, the Magsams and their two sons came from Wisconsin to visit relatives in the Palm Springs area. They liked it so much they decided to stay, happy to be done with the Wisconsin winters. That year, the couple bought a house in the Coachella Valley town of Bermuda Dunes.

They paid $140,000 for that house and sold it the next year for $170,000. Southern California real estate looked like a solid investment. In Wisconsin, that kind of price appreciation would have taken five years or more.

The Magsams scored again with their next home, which they bought in La Quinta for $215,000 in 2000. Four years later they sold it for $452,000, more than twice what they paid.

Proceeds from that sale enabled them to buy their current house in late 2004 for $685,000. They took out a mortgage for $537,000. A year later, with the house worth an estimated $865,000, they took out a second mortgage for $100,000.

With new construction booming and real estate values soaring, people spent freely on home improvements, and the Magsams' business selling blinds, awnings and outdoor misting systems took off. La Quinta was one of the Inland Empire's boom towns, its population swelling about 75% from the beginning of the decade to a current 43,600.

The couple's business had five full-time employees, and its gross sales grew to more than $40,000 a month, Debra said. They had obtained an adjustable-rate loan to buy the house, but they thought they would have plenty of income to cover the bigger payments once the interest rate reset upward. And if not, they figured they could always sell the house for a neat profit.

Then in 2006, the real estate market began to cool off. Construction slowed in the new developments around them, and then halted. So did orders for their blinds and awnings.

By 2007, they had let their employees go and moved out of their office, running their business from their house. Over the last year, revenue has shrunk to about $5,000 a month, Debra said.

Barely breaking even, the Magsams said they tried to re-negotiate their loan. But their lender told them they couldn't do much because Gary was self-employed.

They stopped paying the mortgage in December, just before their interest rate was reset, raising their monthly payment to $4,000, up from $2,400.

To try to reduce the damage to their credit, they put the house on the market for $549,000. There were no takers. They cut the price five times, most recently to $490,000, each time with the same result.

The Magsams can avoid foreclosure only by finding a buyer willing to pay something close to that price, but the lender will have to agree to a sale for less than the amount owed on the property. Such transactions, called "short sales," still result in the borrowers giving up their house, but with less damage to their credit score.

Short sales are becoming the norm in La Quinta, said Craig Conley, the agent selling the Magsams' house. Conley said 40 of his 70 current listings were short sales, and the distress is widespread.

"I've got doctors, farmworkers, police officers, business owners, everybody," he said.

The foreclosure prevention bills making their way through Congress are designed to keep people in their homes by providing up to $300 billion in federally insured mortgages. But to qualify for these loans, the lenders would have to agree to voluntarily write down the principal on the loan to 85% of the appraised value, and the borrowers would have to be able to document their income, along with other requirements.

For the Magsams, those terms would probably be too difficult to meet, according to Jack Guttentag, a retired University of Pennsylvania professor who is an expert on mortgages.

For one thing, with the decline of their business, they may not have enough documented income to qualify for a new loan. On top of that, the couple, like many homeowners, reduced their equity by taking out a second mortgage -- $100,000 in this case -- on which they have already defaulted.

The second is also with another lender, and the added complication of the default makes it more likely that the primary lender would pursue foreclosure rather than face the complications of two loans, Guttentag said.

The Magsams say friends offered to lend them money to cover their mortgage. But with house prices dropping all around them, and their business unlikely to pick up soon, prospects for staying in the house or selling it are dim.

Borrowing from friends "might stretch it out three or four months, but we didn't feel it would help in the long run," Gary said. "I do not want to have any bad feelings if we are unable to pay them back."

To cover their living expenses, Gary recently took a job at a new Home Depot store, one of two the chain recently opened in the area. His co-workers include former construction superintendents for the now-shuttered housing developments nearby, Gary said.

The Magsams, meanwhile, still have their business. These days, Debra, 46, runs what's left of it from home, while Gary takes care of any clients in the mornings or afternoons, depending on which shift he has at Home Depot.

For now, they will rent a place to live. Friends have offered to lease them their vacation houses in the area during the summer off-season.

They'll have to leave when the tourists return in the winter. Then, they plan to rent an apartment or house nearby, which they guess will cost them a bit under $2,000 a month, less than what their mortgage payments had been.

Gary and Debra remain cheerful despite it all. They built a business and owned three houses, trading up twice as the market rose.

Now, they're back where they began. Their two sons are grown. They point out they've got time and health going for them. "We're still young," Debra said. "It's not like we can't start over."

Anonymous said...

I just saw an add in the frontier and a guy named doug farmer has a carpet dying buisness in la-pine is this the same doug farmer the realtor His buisness name is called color magic

Bend Economy Man said...

Anyone see the Bulletin article on how the job market for teens is tough this year?

I think a few people on this forum called this one: adults and teens competing over the same crappy jobs. Used to be that the only thing The Bulletin had to say about jobs was that no one needed them in Bend: it's all wealthy retirees and telecommuters climbing over one another to buy property, recreate and buy upscale lifestyle accoutrements.

Talk about your "paradigm shift": so I guess that labor shortage problem went away, right?

Oh and also, this "Bend's still attracting newcomers" thing that we keep seeing in stories otherwise dominated by doom and gloom - they will be printing that until the U.S. Census actually publishes figures proving that we lost population. Until then, we're a "growing community."

Even though there's no reason why Bend should/would/could be growing in population right now. Is this really the time to move to BFE for a change in lifestyle?

IHateToBurstYourBubble said...

Even though there's no reason why Bend should/would/could be growing in population right now. Is this really the time to move to BFE for a change in lifestyle?

I think there is a reason Bend "could" be losing population: The largest reduction in family-wage jobs & wealth ever seen in this town.

I think it IS the time to BFE (or anywhere else) that CAN provide people a living. Iowa is one such place.

People will, after a sufficient time contemplating their navel, move to where there are jobs & a stable economy.

IHateToBurstYourBubble said...

"The banks loaned money to all kinds of people they shouldn't have, including us," Gary said. "This situation we're in is one of our own making. We were not taken advantage of."

Holy shit... this guy is a liberals worst nightmare.

IHateToBurstYourBubble said...

Construction slowed in the new developments around them, and then halted. So did orders for their blinds and awnings.

I'm seeing advertising from businesses who seemingly never needed it before. Mountain Comfort, etc.

Some big design places will go down. Cascade Design over on Auto Row being one of the first...

IHateToBurstYourBubble said...

Until then, we're a "growing community."

This is Bend medias Ultimate Sacred Cow: Lots of other "problems" can be acknowledged, BUT NOT POPULATION SHRINKAGE.

They'll NEVER report that. That'd get spun every which way to give us plausible deniability. Hell, they'll expand city boundaries & swallow up Redmond, LaPine & Sisters just to keep Bend getting bigger.

But I guarantee you it IS happening right now. Mass outflows of people from Cent OR. June is DO OR DIE time on the rental front. I've already heard it is DIE.


LavaBear said...

That LA Times article is one of the few I've read that does a good job of laying out what the fuck is happening in the real world. Every other article falls into the "sub-prime", "migrant worker buying $1 million dollar", "it's all speculators" crap. I can't even count how many people I know in this town that are exactly like this family. Made a double on the first house, local business in RE or related industry was doing great. Went big on the next house expecting it to double (or refi'd and blew the cash)....It's actually hard to find people in town NOT like this.

timothy said...

Move TO BFE? I thought we WERE BFE.

IHateToBurstYourBubble said...

Move TO BFE? I thought we WERE BFE.

No. We're BFE - Tuscany Acres.

LaPine is BFE.

IHateToBurstYourBubble said...

Anyone see the Bulletin article on how the job market for teens is tough this year?

Remember how just 2 years ago Cent OR businesses could not induce teens to take Summer jobs, no matter the wage?

Anonymous said...

Gotta love Bend. I was one of those fools who the bank said I could afford a 3000 sqft house. Well I finally saw the writing on the wall. Realtor said sell the house for $449,000 WTF! Well a year later no takers slashed to $365,000 in May 2007. Well got lucky and sold the house in June. Renting now and watching home prices fall and fall down, down down.

Anonymous said...

I just saw an add in the frontier and a guy named doug farmer has a carpet dying buisness in la-pine is this the same doug farmer the realtor His buisness name is called color magic.

Same Doug Farmer has closed $180k in sales in the past 17 months. Need to work the carpet business and run stats.

Anonymous said...

Distressed homeowner: "The situation we're in is one of our own making. We were not taken advantage of.... "

IHTBYB: "Holy shit... this guy is a liberals worst nightmare."

Yes, this guy should be silenced! He is going to foil our plans!

Anonymous said...

My Bend house is 50% paid off. It still feels like a victory even in this market to be half done.

Anonymous said...

"My Bend house is 50% paid off."

Congrats.... if only more people could achieve that.

But, a question: Is that 50% off of what you originally paid, or 50% off of what the house is worth right now?

I've got a bunch paid off on my house too, but I can only guess at what I'd be able to get if I had to sell today (minus all the fees, commissions, etc.)

IHateToBurstYourBubble said...

Same Doug Farmer has closed $180k in sales in the past 17 months. Need to work the carpet business and run stats.


I feel bad for the guy... he seems all right.

IHateToBurstYourBubble said...

Where the Financial Crisis Is Headed Next

By Lawrence C. Strauss
May 30, 2008

Barron's Online THREE YEARS AGO, hedge-fund manager Sy Jacobs told Barron's that serious trouble was brewing in the housing market, predicting that "the bursting of the housing bubble [would] be a dominant theme for investing in financial stocks in the next decade." He was right. Jacobs, 47, is the founder of New York's JAM Asset Management, which runs two funds, both focused on financial stocks and closed to new investors. The larger entity, JAM Partners, follows a market-neutral, long-short strategy and has close to $300 million in assets. As of May 21, the fund's year-to-date total return, net of fees, was 9.6%, versus a 4.5% loss for the S&P 500. Its annualized return since inception in 1995 (through April 30) was 16.6%, compared with 9.9% for the S&P. The $45 million JAM Special Opportunities Fund invests in illiquid private-equity holdings. Jacobs' familiarity with financial stocks dates to the 1980s, when he worked as an analyst at firms like Salomon Brothers and Alex. Brown & Sons. To find out where Jacobs sees new problems emerging in the financials — surprisingly, they're not in the subprime arena — read on.

Barron's: You were early in detecting the serious problems in subprime mortgages. That turned out to be a great call.

Jacobs: About three years ago, we were worried about subprime specifically. And that view very much paid off for us as we were short a host of such companies. More than a year ago, in another interview with Barron's, we said subprime was already in a full meltdown mode, but the idea that subprime was somehow isolated was still popular. Our message was that the mortgage-credit tail was going to wag the capital-market and economic dog. That's coming to pass now.

Looking ahead, what do you see for the financials?

We believe the recent rally in financial stocks — and for the whole market — is a bit of a head fake that will prove to be a bear-market rally.

What's your premise?

After first ignoring subprime, people now are too focused on it and they're missing the broader storm coming — that's the head fake. While the bursting of the housing bubble produced all sorts of headline-making losses for some, it is just starting to drag down the rest of the economy. Separate from subprime, you are seeing diminished ability for consumers to spend their home equity. The securitization market, which banks and finance companies use to get funding, has slowed. So we see consumer and business spending slowing; the economy will falter.

In a recent letter to your investment partners, you noted that you were very concerned about the health of construction loans. Could you elaborate on that concern for us?

I spent a week recently in California, visiting some troubled, or soon-to-be-troubled, banks. With home sales down so much, construction lending is becoming a problem. You have a lot of developers and home builders stuck with homes that aren't moving. And they are sitting on lots that have loans against them. Subprime is such a small piece of the banking industry, but construction lending is a core product. If the housing market stays weak for much longer — and it seems to be getting weaker — construction-loan losses are going to be a big problem.

After the brutal real-estate recession that occurred in the early 1990s, there was a sense that banks had finally learned their lesson and would be much better fortified for the next downturn. I take it you don't think that's true.

I take a pretty cynical view of whether bankers have gotten smarter. We've had a real-estate bull market ever since the early 1990s. I think you are going to see the same thing again. The number of banks that get taken over by the FDIC and disappear may not be as high as it was in the late-1980s and early 1990s because there is strength in the energy patch now. But real-estate lending institutions are the bulk of the community-bank world, and I think you are going to see a lot of banks disappear.

What's your sense of the prevailing views of the financials right now?

People are trying so hard to believe that the Bear Stearns crisis in March was some sort of financial crescendo and represents the bell that gets rung at the bottom, as if that happens. But just because we got saved from what would have happened that Monday if Bear went down doesn't mean we are saved from all the forces that conspired to get Bear Stearns to the brink in the first place. Bear was not the sacrificial lamb to the market gods. It got knocked down by the same winds that are affecting everybody else. Credit destruction is a process — not an incident. And avoiding that particular meltdown doesn't mean that things are getting better — and yet that is how financial stocks in particular and the market in general have acted ever since.

You're a fundamental stockpicker, but are there any interesting trends you see in the financials?

One of our themes on the long side is that local plain-vanilla, over-capitalized community banks, especially thrifts, are in a position to gain back market share in the lending business. And they have real deposit franchises that they can fund themselves with. They have been losing market share to the Countrywide Financials (CFC1) of the world for a generation. Now, though, they are going to gain a lot of that market share back, because they suddenly have a funding advantage, relative to the larger financial firms that have been securitizing their loans. That market has been discredited. We're long lots of micro-cap ways to play this, but they're too illiquid to mention here.

Fair enough. Let's discuss some of your holdings, starting on the short side.

The first one is Wells Fargo (WFC2), trading at 12 times '08 estimates and 2.7 times tangible book; the group trades at less than two times book. The Wells Fargo name has a storied past and gets the Warren Buffett halo effect because he owns a lot of the shares. But if you look back at the last real-estate recession in the early 1990s, the Wells Fargo side, focused on California, had a lot of credit problems in the real-estate area, and the stock underperformed during that period. The Norwest side, which has more exposure to the Midwest, still has a lot of consumer-credit exposure. Of particular concern is the bank's portfolio of home-equity loans.

What's the big worry there?

Home-equity line of credit (HELOC) is 16% of their portfolio. More than a third of their HELOC exposure is in California, which is now developing very badly on the home-price and employment fronts. And delinquencies and losses are already rising pretty sharply. But they also have a big unfunded exposure to the undrawn lines of credit. Also, despite their reputation for being conservative, their loan-loss reserve at the end of March was lower than their annualized charge-off rate for the first quarter. Given the prospects for rising losses that we see, that's not conservative. We think they will disappoint this year and next and, as a result, their premium multiple will go down.

Wells Fargo, however, is known as a well-run bank. One example of that is the company's reputation for being very effective at cross-selling its products.

We're most concerned with their exposure to home-equity loans at the top of a real-estate bubble. Remember that home-equity lines of credit sit on top of first mortgages. So if home prices depreciate, which is what is happening now, and a home goes into foreclosure, the home-equity line often gets wiped out. The first mortgage holder can get most of their money back, but the home-equity line absorbs all of the loss.

Let's move on to another short position.

BB&T (BBT3), which operates in the Southeast. The stock trades at 11 times '08 earnings and 2.5 times tangible book. It's bounced about 30% off its lows in January. They've gotten a pass because, to some extent, their core Carolina and Virginia real-estate markets were among the last to roll into home-price depreciation. So their non-performing assets are still low. But we listened to the Toll Brothers (TOL4) conference [call] recently. [Chairman and Chief Executive] Robert Toll graded the markets they operate in and he gave Charlotte an F-minus for current home-building conditions and Raleigh a C-minus. We're also concerned that they have 4% of their portfolio in Alt-A mortgages, which are between prime and subprime, and 20% in construction loans.

As with many of the financials, there was this big relief rally on first-quarter earnings. The thinking was these results weren't so bad, but we think that more credit losses are ahead of us.

How about a different short holding?

Hudson City Bancorp (HCBK5), which is based in New Jersey. The shares have gained about 60% from their July '07 lows and now trade at 21 times '08 estimates and two times tangible book. They have a wholesale funding and asset-generation strategy, which allows them to keep expenses low.

Could you elaborate on that?

Basically, they borrow funds from the Federal Home Loan Bank of New York and use repurchase agreements. So they, in effect, purchase money, more so than relying on deposits. In addition, they buy most of their assets, usually through brokers. A big chunk of their assets are first mortgages and mortgage-backed securities. So for the most part, they are not a retail originator of loans, and they are benefiting from the steepness of the yield curve.

And, even with all that, they will earn less than a 10% return on equity this year, so I just don't get the valuation. Furthermore, when you have a wholesale business model, that means you don't really have a valuable franchise that another bank would pay much for. So a recent stock price represented approximately a 100% premium for their core deposits, which is how bank acquisitions typically get priced. And I don't think their deposits are worth nearly that much to a buyer. Everything looks great for them now, if you a call 10% ROE great. But they are not immune to credit risk in a recession and a weak housing market. I also think their loan-loss reserve at 0.15% is very low, relative to others'. When the Fed rate-cutting cycle is over, I don't want to own a spread play with credit risk that's trading at two times book.

Let's move to the long side of the ledger. What financial firms do you like?

One is Hatteras Financial (HTS6), based in Winston-Salem, N.C. They are a mortgage REIT. We bought it in a private placement last year and it recently went public at $24 a share. They own all agency adjustable-rate securities, so there is no credit risk here. The market capitalization is about $630 million.

What's the biggest risk for this firm?

I'd say it's yield-curve risk, but, trading at just over one times book value, it's well- factored into the price. We estimate that they will earn $4.50 to $4.75 a share from mid-year '08 to mid-year '09, once the IPO proceeds are invested. As a REIT, they will pay out all — or nearly all — of their earnings in dividends. So at 25 recently, the stock was sporting an expected yield of around 19%. We think the stock gets to 30 at least. Between the appreciation and the yield, it's a great total return.

Could you explain their yield-curve risk in a little more detail?

Like all mortgage REITs, they use leverage. They borrow at short-term maturities so they have been benefiting — and continue to benefit — from falling federal- funds rates. It's very similar to what Hudson City is doing. They are benefiting from falling short-term interest rates because they use the wholesale market to buy funds. And yet, somehow, the market is paying two times book for that, whereas you can buy Hatteras for 1.1 times book — and Hatteras earns a 20% ROE, versus Hudson's 10%.

Last pick, please.

This is a more controversial long holding: MGIC Investment (MTG7), in which we used to have a short position.

What made you switch to the long side?

The stock's down from north of 70 in early 2007 to around 12, bringing its capitalization down to about $1.5 billion. One reason we like the company is that it was able to raise more capital recently, something its competitors haven't been able to do. In March, they did a common offering that raised about $500 million — so they've been able to raise liquidity and capital. At the same time, they are raising prices on premiums and tightening underwriting on the business now being written. The new business is being written based on lower home appraisals after the housing bubble burst — and yet they are still showing good growth despite the fact that the whole industry has slowed down.

Our thesis is that once MGIC gets through writing down its old book of business, the new book will be very profitable and valuable. Even applying our bearish mortgage-credit outlook, we don't see more than another $4 or $5 per share of losses in the next two years. So current book value of $24 should bottom in the high teens in '09 and start rising from there. They'll be quite profitable after that, given their better margins and more conservative underwriting of the current book of business. The stock should trade upward of two times book. So we see the stock, currently at around 12, as a double-to-triple over the next few years.

Thanks very much, Sy.

IHateToBurstYourBubble said...

Wow. Something happened at Lehman at about 12:30EST....

Bear Stearns II?

Anonymous said...


I feel bad for the guy... he seems all right.

He is all right. But as many brokers, he is having a hard time finding a buyer that is willing to particpate in this market.

And on another note:
I am sending letters to my neighbors this week. There are only about 20. I think it is time we all start to think in a communal way of aiding each other.
So, here goes
"I believe that the American economy is headed into an area we have never seen before in our lifetimes.
I believe that very hard times are about to consume many in America.
I believe that people can rise to the tasks that are imperative to survive the high prices of groceries and gasoline in the next several years.
If small groups of people come together in a communal way, I believe we will all be better off.
I believe that if we are willing to help each other, and work together, that we will have a greater chance of surviving the potential hard times to come.
If, we become a community that works together, we can each offer different skills for the betterment of all of us.
If you are not in fear yet, of what is coming, you are foolish. We can, as a community, be strong, if we know our needs.
I propose that we come together in skills and trades and meet so that we can make a plan for the near future. We are all diverse in skills and may soon be able to benefit each other, for the good of all of us.
If you have any interest in attending a block party (1950’s, ice cream street social) please let us know. We can begin planning for the near future. We all have needs and it is possible that if we work together we can solve each other’s problems/needs. Big gardens may the first thing to consider.

Anonymous said...
This comment has been removed by a blog administrator.
Anonymous said...

Will all of you all stay seperate? Or come together in some way?
Want to come to my block party?

Anonymous said...

"Wow. Something happened at Lehman at about 12:30EST...."

Wall St. Journal excerpt:

Losses Push Lehman
To Weigh Raising New Capital
June 3, 2008

Lehman Brothers Holdings Inc., set to report its first quarterly loss since going public, is considering raising billions of dollars in fresh capital to help shore up its balance sheet, according to people familiar with the matter.

The exact amount of the capital hike isn't known, but analysts and Wall Street executives estimate it is likely to be $3 billion to $4 billion. They said Lehman would probably announce the capital raising in conjunction with its quarterly results, due the week of June 16. The amount of new capital under consideration suggests Lehman's quarterly loss could be larger than the $300 million or so that some analysts have been expecting.

On Monday, shares in the 158-year-old firm fell $2.98, or 8%, to $33.83 on the New York Stock Exchange after negative comments from two Wall Street analysts. The shares are down almost 50% this year compared with year-to-date drops of about 20% for rivals Goldman Sachs Group Inc. and Morgan Stanley. The new capital would likely be raised by issuing common shares, diluting current shareholders, people familiar with the matter said.

Lehman is Wall Street's smallest independent firm now that the sale of Bear Stearns Cos. to J.P. Morgan Chase & Co. is complete. Lehman says it is well-positioned to weather the current credit-market turmoil, and its management has been aggressive at facing down its critics.

In the past year, Lehman has raised $6 billion in capital, including $4 billion last quarter. The firm's financial position was further strengthened in March when Lehman, like all U.S. investment banks, was allowed to borrow directly from the Federal Reserve against a variety of collateral, which gives it ready access to considerable funding. The availability of Fed funding significantly reduces any worries that Lehman and other firms might suffer a cash crunch.

Nonetheless, some investors remain concerned that relative to its size, Lehman is holding more securities tied to both residential and commercial real estate than any other big Wall Street broker, according to Bernstein Research.

Mortgage Exposure

"Lehman still has a lot of exposure to the mortgage market, and they are going to need capital to get through it," said UBS analyst Glenn Schorr.

On Monday, Standard & Poor's cut long-term debt ratings on Lehman, Merrill Lynch & Co. and Morgan Stanley. The credit-rating agency focused in particular on Lehman, saying it expects a "relatively meaningful deterioration" in the firm's earnings for its second quarter, which ended May 31.

Also Monday, Merrill Lynch analyst Guy Moszkowski lowered his rating on Lehman stock to underperform from neutral. Oppenheimer & Co. analyst Meredith Whitney swung her earnings forecast to a loss from a profit.

. . .

Stung by Hedges

During the second quarter, Lehman was stung by hedges used to offset losses in real estate and other securities, according to people familiar with the matter. The firm bet that indexes tracking markets such as real-estate securities and leveraged loans would fall. If that happened, it would book profits that would make up some of its losses from holding these securities and loans.

However, in an unexpected twist, some of the indexes rose, even as the assets they were supposed to hedge against continued to lose value or stayed relatively flat. Lehman's losses from both write-downs on assets and ineffective hedges will likely top $2 billion, people familiar with the matter said. Lehman will also realize additional losses related to its decision to reduce its work force, according to a person familiar with the matter.

timothy said...

I don't think people want to face facts yet, Marge. Give them some time.

Anonymous said...

Redmond and Bend may give builders a break

By Peter Sachs / The Bulletin
Published: June 03. 2008 4:00AM PST

In a move that could save builders thousands of dollars and have a small effect on new home prices, Bend and Redmond may defer the collection of growth-related fees on new buildings.

The cities collect the fees, which are called system development charges, on all new homes and businesses to pay for the increased demand on infrastructure created by the projects.

On a typical single-family home in Bend, that totals nearly $13,500, which is money many builders must finance with a high-interest construction loan, said Andy High, the government affairs director of the Central Oregon Builders Association.

Right now, builders must pay those fees, which can include those for streets, sewers, water lines and parks, when they pick up their building permits — before construction begins.

Redmond and Bend are both considering plans that would give builders at least six months to pay, after a heavy lobbying effort on COBA’s part.

“The homebuilders started with us and then went to Bend and said, ‘Oh, Redmond’s going to do this,’” said Jim Hendryx, the Redmond community development director.

If approved by the Redmond City Council, builders in Redmond wouldn’t have to pay their SDCs until construction is complete. For homes, that would mean an extra six months, High said. On offices and other larger buildings, the deferment could be 12 to 18 months.

Bend’s City Council would also have to approve such a change, Finance Director Sonia Andrews said. It would be part of a small economic stimulus package for builders, which would also include faster plan reviews.

Bend’s deferral program, if approved, could also have a one- or two-year sunset clause, after which builders would again have to pay SDCs when they pick up permits.

“It’s just to help them through a down period,” Andrews said.

Two Southern California cities, Orange and Anaheim, passed similar provisions in April as a way to spur new construction during the current real estate downturn.

On large projects especially, where SDCs can top $500,000, the savings could be large for builders, High said. Construction loans can have rates as high as 10 percent, he said.

“The everyday consumer might not see it, but it would have a significant impact on the builders,” High said.

It’s conceivable those savings could be passed on to buyers, High said, in the form of incrementally lower prices on new homes.

Bend Community Development Director Mel Oberst, said the city has been hesitant to give builders more time to pay SDCs because it finances large construction projects with bonds and uses SDCs to pay them back.

“If we don’t have the flow of SDCs in, then the city could face a gap in funding,” Oberst said. “That’s why we’re reluctant to go any farther than six months.”

Cities also are concerned about becoming collection agencies if builders fail to pay SDCs, Hendryx said. Redmond would get around that issue by withholding final inspections or occupancy certificates until SDCs are paid, he said. Bend would place liens on construction properties, Andrews said.

Hendryx said it would be “doable” for his city to offer the extension. He said Redmond pays for many SDC-related construction projects as it goes, rather than taking out large loans at the start.

“It’s not like deferring it 10 years,” he said. “It’s deferring it a matter of months.”

Peter Sachs can be reached at 617-7837 or

IHateToBurstYourBubble said...

The cities collect the fees, which are called system development charges, on all new homes and businesses to pay for the increased demand on infrastructure created by the projects.

Looksie here if you want to see where City priorities are:

Stimulate supply, by lowering costs & increasing builder profits, or at least make profits possible.

Screw the idea that we are awash in supply right now, and THAT is the problem.

Good call. Salt in the wound, dumbasses.

IHateToBurstYourBubble said...

It’s conceivable those savings could be passed on to buyers, High said, in the form of incrementally lower prices on new homes.

Uh huh. And I could be hit by a meteor shower of pure diamonds.

Anonymous said...

“It’s just to help them through a down period,” Andrews said.

That's ridiculous. We don't need to spur on any building right now. We are overbuilt and putting more inventory on the market is going to drive prices down more. How is that going to help the builder?

It's not. They will be able to afford to start the project easier, and will be able to sell it for less at the end allowing them to lose more money.

LavaBear said...

I love this shit: “With a little motivation, the new home market could turn around, which would have a very positive impact on banks, bond prices and many other areas of the economy.”

Toll urges action to lift US housing market

By Daniel Pimlott in New York

Published: June 3 2008 13:56 | Last updated: June 3 2008 13:56

Toll Brothers, the largest US builder of luxury homes and apartments, on Tuesday called for greater government action to help boost demand for homes as it reported its third consecutive quarterly loss.

The plea for help came as the builder of high-end homes said that buyers were still scarce in most of its markets in the second quarter.

“We believe Congress should jump-start demand for new homes with an initiative that will bring buyers off the sidelines and into the market, and thereby stop the downward spiral of home prices,” said Robert Toll, the company’s founder, chairman and chief executive.

“With a little motivation, the new home market could turn around, which would have a very positive impact on banks, bond prices and many other areas of the economy.”

The Senate banking committee overwhelmingly agreed a plan last month that would allow up to $300bn of federal guarantees for refinanced home loans. Action to help stabilise falling home prices has been widely called for, as it would not only ease the pain felt by homeowners, but could also help slow losses related to mortgage securities – thereby relieving lenders after hundreds of billions of dollars in write-downs have hit the financial sector.

“Demand continues to be weak... as our clients worry about selling their existing homes or entering the market before prices stabilise,” Mr Toll said.

He said the company favoured a short-term tax incentive for home buyers to create a sense of urgency.

Toll Brothers posted a loss of $93.7m, or 59 cents a share, compared with net income of $36.7m, or 22 cents, a year earlier. Analyst polled by Bloomberg had expected a loss of 90 cents a share. Income was boosted by $40m from a condemnation judgment.

The company said on May 13 that homebuilding revenue had dropped 30 per cent in to $818m.

The loss came after Toll was forced to write down the value of land by $175m after tax.

The top US builders have written considerably more than $20bn since the housing downturn began, leaving many strapped for cash or with soaring debt.

However, Toll said it had reduced its debt-to-capital ratio to 23 per cent compared with 32 per cent a year ago. The company now has $1.23bn in cash and a $1.27bn credit facility, leaving it among the best placed builders to take advantage of the distress of other builders when markets turn around.

“We hope to position ourselves for opportunities that should arise from this continuing severe down-cycle,” Mr Toll said.

However, the turnround does not appear imminent, and the company expects to be selling from 290 communities by the end of this year, 10 fewer than it does currently.

“We believe Toll is well positioned to weather this downturn and emerge stronger,” said David Goldberg, an analyst at UBS.

Shares in Toll were down 0.8 per cent at $20.80 in pre-market trading.

Copyright The Financial Times Limited 2008

Anonymous said...

is Jim Hendryx experienced?

bruce said...

Re: We're also concerned that they have 4% of their portfolio in Alt-A mortgages, which are between prime and subprime, and 20% in construction loans.

CACB has 33% in RE-Construction loans. And another 32% in RE-Commercial. Now that's exposure.

bruce said...

Lender Gets $1.4 Billion Cash Infusion
Published: June 4, 2008
Residential Capital, the mortgage lender, said Tuesday that its parent company, GMAC, and the private equity firm Cerberus Capital Management would inject more than $1.4 billion in cash, a move that highlights the company’s struggle to stay solvent.

The money will come from asset sales and help ResCap plug a possible $2 billion cash shortage, more than triple the amount it said it needed a month ago, according to a Securities and Exchange Commission filing.

ResCap had estimated May 5 that it needed to raise $600 million by June 30 to pay its debts. It said it now believed it might need the additional sum because “adverse” conditions left it unable to sell about $1.3 billion of assets.

Mirko Mikelic, a portfolio manager at Fifth Third Asset Management in Grand Rapids, Mich., said that there was the potential for bankruptcy at ResCap, “especially if G.M. and Cerberus get more hesitant about providing capital.”

Cerberus led a group in 2006 that paid the General Motors Corporation $7.4 billion in cash for 51 percent of GMAC. GM owns the other 49 percent.

ResCap and Cerberus were not immediately available for further comment.

Like many mortgage rivals, ResCap has struggled with mounting delinquencies and falling volumes and has essentially stopped making loans to people with poor credit.

“If ResCap can’t restructure debt, it won’t be a happy result,” said Brian Gevry, co-chief investment officer at Boyd Watterson Asset Management, which manages $3.2 billion in assets in Cleveland. ”The question is can they get it done fast enough? The answer for us is to step to the side and let that level of risk be taken by a hedge fund.”

The lender has lost $5.3 billion in the previous six quarters and said in the filing that its liquidity problems could grow.

“There can be no assurance that ResCap’s liquidity needs will not be greater or less than currently anticipated,” the company said. ”If liquidity needs are greater, ResCap may be unable to independently satisfy its near-term liquidity requirements.”

Meaning they go bankrupt.

bruce said...

Negotiating for a House? Start With ‘Dear Seller’

A few years ago, when multiple bidders would show up at a real estate open house, the truly desperate resorted to writing love letters to the sellers.

Their plaintive scribblings painted a picture of first-time buyers chasing the American dream or growing families hungry for more space. The letters dripped with compliments for the property and ended with a plea for mercy (and a signed contract).

Today’s real estate market, however, calls for a different kind of letter, less a fuzzy valentine and more like a cold splash of water. It’s what you write to accompany a bid that is so far below the listing price that it cries out for explanation.

Inspired by the success of a friend who used this tactic, I drafted a sample letter that buyers who fear overpaying might send to homeowners. Then, I crafted a reply that confident sellers could fire back.

No seller would be happy to get a letter like this. The most powerful missives stoke doubt and create fear. Sellers who get them may be tempted to write off the bidders as lowballers. But it makes little sense not to at least reply, given the number of competing properties in most places and the difficulty lately in getting mortgages.

The sample letters below, which I wrote after conversations with representatives of the National Association of Realtors and the National Association of Exclusive Buyer Agents, don’t mention local economic conditions, comparable sales or other such data. You’ll want to fill in those details yourself. But the templates below should work as a starting point.

One caveat is that you’ll generally be relying on real estate agents to deliver your letter. Ask them point blank whether they intend to do so.

Dear Seller:

I’m writing to let you know that I would like to make a bid on your property. I love the area and am committed to buying a house nearby. And your home fits my needs.

But given that my offer is well below your asking price, I also feel I owe you an explanation.

First, consider the big picture. Nationwide, home prices in the first quarter of 2008 fell 14.1 percent compared with the same period a year earlier, according to the Standard & Poor’s/Case-Shiller U.S. National Home Price Index.

That’s the biggest decline in the 20-year history of the data. And just in case you’re wondering, during the housing downturn of the early 1990s, the decline was never worse than 2.8 percent.

Not only that, earlier this month, the National Association of Realtors pointed to the huge number of existing homes on the market. As of the end of April, the total number was 4.55 million. At the rate people are buying right now, that represents an 11.2-month supply.

So buyers have options right now. A lot of them. I’m no different. Your home is great, but it isn’t unique. Few homes are. I know this may be hard to hear, since you’ve spent years creating memories here. But you may be waiting a long time if you hope to find a buyer with the same emotional connection that you have.

My mindset is hardly unique. We’ve all been reading the headlines. The accompanying articles appear prominently in major newspapers and sit on the Web pages where people check their e-mail every day. Everyone sees them, and the psychological impact is real.

Has your real estate agent laid any of this out for you? Maybe so, and you didn’t want to believe it. But it’s also possible that your agent, afraid of offending you and losing the listing, simply doesn’t want to initiate that sort of discussion. It may be worth sitting down for a candid reassessment.

It will be tempting to view my low bid as an insult. Please don’t make that mistake. Your home is genuinely appealing, and I wouldn’t have written this note unless I was serious about buying it. Getting a firm offer in this market is an accomplishment. So congratulations!

Oh, and one more thing. You presumably need someplace to move. My guess is that you’ll find these same points compelling when it’s your turn to buy. You just might succeed in buying for a better price, too.

I look forward to hearing from you soon.

Yours Truly,

The Realist

Dear Bidder:

Thanks so much for your note. I’m truly glad that you like our home as much as we do. You’re right that my family and I have many great memories of this place, and we hope someday you will, too.

And I just want you to know that I’m not insulted in any way by your offer. The fact is, none of us are very good at buying and selling homes. We don’t do it often, and as much as we know we’re not supposed to let emotions get in the way, it’s hard not to. After all, few people buy or sell anything else as expensive as a home in their lifetimes.

That said, your offer disappointed me. You seem to believe that I’m not aware of how bad things are out there or that I’m in denial. But I do read the headlines, and I priced the house accordingly. I knew I might have to wait awhile to sell it.

I should point out that your data draws on what has already happened in the housing market. Instead, I’d ask you to consider what’s about to happen.

One big reason for the falling prices is that it’s harder to get mortgages. Lenders went from giving money to anyone with a pulse to demanding higher credit scores and larger down payments. All sorts of buyers simply couldn’t make the numbers work anymore.

That may now change. Starting June 1, Fannie Mae and Freddie Mac, which buy mortgages from lenders and help make it possible for them to lend more money, are loosening restrictions on the sorts of loans they’ll buy in many markets. That is supposed to make it easier for people to buy a home with a down payment of 5 percent, or even less. Many more qualified buyers should mean more bids, and I’m willing to wait to see if it turns out that way.

I know you talked about having choices, but presumably we wouldn’t be engaging in this correspondence unless you liked my home best. Given that, I’d ask you to think about something: How often do you find a place that you can actually imagine living in? Sure, there are a lot of other properties out there. But an increasing number are in foreclosure and probably have problems lurking within the walls. So don’t let fear of a falling market keep you out of a home that you truly want.

It’s probably obvious by now that I’m not going to counter with a particular number. This doesn’t mean that I do not want to negotiate. I’d just like you to consider what I’ve said and see if you find it convincing. In the meantime, other shoppers who are interested in my home now have a price to beat. So thanks for helping me out with that.

Just one more thing. Please take another look at whatever mortgage calculator you’re using and see how your monthly payment will change if you brought your price up a bit. It almost certainly is not going to be enough to break you. But it may be enough to get us to a deal.

I look forward to your reply.


The Undaunted

IHateToBurstYourBubble said...

Holy Fuckin Snot!

Pick up a "Homes & Land" magazine this month, Tuscany Pines bullshit on the front.

Then turn to page 25. Hayden Homes advertisement. I'll reproduce it here, with emphasis being THEIRS:

[[Ugly, beat up dirty volkswagen picture]]

Can you see yourself behind the wheel of a USED van with 173,000 miles of wear, rust and road dirt? NO?

Then why buy someone's hand-me-down house (with who-knows-what's been on the carpet) for the most money they can possibly squeeze out of you?

* * *

Log onto and learn eight very compelling reasons why you should buy a new Hayden Home instead of someone else's second-hand house for the same price.

IHateToBurstYourBubble said...

OK, if I'm a current Hayden Homes owner... I'm just a little pissed right now.

IHateToBurstYourBubble said...

help ResCap plug a possible $2 billion cash shortage...

Does anyone have a Capstone Buttplug available?

Speaking of buttplugs, is Buster on strike... or dead?

IHateToBurstYourBubble said...

Hayden-Homes Motto:

We'll throw everyone under the bus, including our own customers, to sell even a single house.

IHateToBurstYourBubble said...

This was posted over on BendBB:

Housing affordability back to pre-bubble levels

Study shows formerly overvalued markets in California, Nevada and Arizona are seeing prices come down substantially.

NEW YORK ( -- Declining home prices across the nation are bringing valuations - the difference between what a home should cost and its actual price - back to pre-bubble levels, according to a survey released Monday.

The survey, conducted for financial research firm Global Insight and banking company National City Corp. (NCC, Fortune 500) found that home prices declined in 262 of the 330 metropolitan areas surveyed during the first three months of the year.

The sharp dip in home prices means that only 8 markets can now be considered overvalued, down from 14 markets last quarter. In mid-2006, at the height of the bubble, a full 53 metro areas were considered over-valued.

"We've covered a lot of territory in terms of restoring balance in the housing market," said National City's chief economist, Richard DeKaser. "The froth has been completely blown away."

The survey seeks to give a more accurate picture of housing affordability by analyzing data on household income, population density and historical price trends, in addition to current home prices and interest rates.

The move toward a more balanced market is most dramatic in areas where home prices saw the biggest runup during the housing bubble that began in 2004.

In Stockton, Calif., the average price of a single-family home fell 35% to $230,800 in the first quarter of 2008 from $357,800 in the first quarter of 2006. Over the same two-year period, Stockton has gone from being 71% over-valued to 4.3% over-valued.

IHateToBurstYourBubble said...

So maybe we'll hit breakeven valuations in 2010?

Rock bottom in 2012-2015?

Have no illusions, we'll overshoot on the downside, HARD.

IHateToBurstYourBubble said...

I'll be damned... Doug Farmer:

APR 08

Listings Sold: 121
Listings Expired: 88
Avg Square Footage: 1907
Avg Days on the Mkt: 192
Avg Sale Price: $ 343,871.
Median Sales Price: $ 277,000.
Active Listings Apr 30: 2140

MAY 08

Listings Sold: 120
Listings Expired: 84
Avg Square Footage: 2077
Avg Days on the Mkt: 209
Avg Sale Price: $ 370,150.
Median Sales Price: $ 302,500.
Active Listings May 31: 2295

A year ago...

May 07

Listings Sold: 146
% of Inventory Sold: 7.35%
Listings Expired: 74
Avg Square Footage: 2078
Avg Days on the Mkt: 161
Avg Sale Price: $ 484,633.
Median Sales Price: $ 379,500.
Active Listings May 31: 2145

IHateToBurstYourBubble said...

I publish a google spreadsheet of Doug Farmers data here:

IHateToBurstYourBubble said...

Interesting points:

Even though AVG & Medians are up, AVG/sf his an all time low ($178.21/sf), while Medians/sf is up less than $1/sf off it's low set in Mar. ($144.69 vs $145.64 this month).

Months inventory is 19.13, down from the horrendous mark of 26.48 months set in Feb. We were at 14.69 months last May.

And we finally have raw YoY medians: $302,500 this year vs $379,500 in May 2007, down 20.3%. I made a bet with BendBB in May of last year that we'd hit sub $300K medians by years end.

I'm a lousy market timer.

Quimby said...
This comment has been removed by the author.
Quimby said...

Rare Major Black Swan formation - caution!

This is what the charts are telling us about the current environment for stocks:

Black Swan Formation

Anonymous said...

Sorry I am a few moments late withmy stats. Different than Dougs, as he includes ALL types of Residential. Mine are strictly home on lots, excluding condo, manu and homes on acreage.
So here they are.

May 2008 Residential only
100 @ $302k Med
1511 Active
15 month supply
101 Pending
214 DOM

April 08
91 Sold
$270k Med
190 DOM

March 08
93 Sold
$293 Med
162 DOM

Feb 08
56 Sold
$317k Med
213 DOM

Jan 08
74 Sold
$311K Med
193 DOM

YTD May 31 08
414 Sold
$299,950 Med
193 DOM

YTD May 31 07
713 Sold
$357,509 Med
171 DOM
Didn't run ppf. If you want it let me know.

IHateToBurstYourBubble said...

Just to reiterate, you should clearly see the motivations of City Council & local builders towards current Bend residents trying to sell their homes:

They have NO PROBLEM damaging your interests in a blind, flailing, and ultimately self-defeating attempt to bolster the fortunes of local builders.

Hayden has finally come right out and said it.

"Don't buy a piece of crap USED HOME! Buy it from us for the same price, or less."

City Councilors are far more insidious, and are simply dropping SDC charges.

Once they've caught, netted, and gutted you, they don't care if you grill or blow goo.

IHateToBurstYourBubble said...

If you want it let me know.

You should know the answer to that.... :-)

IHateToBurstYourBubble said...

Rare Major Black Swan formation - caution!

Good one!

Anonymous said...

So maybe we'll hit breakeven valuations in 2010?

Rock bottom in 2012-2015?

Have no illusions, we'll overshoot on the downside, HARD.

I believe we will over shoot the downside. But what makes you think we may hit any kind of breakeven in 2010? Breakeven with what target? Don't understand that statement.

Anonymous said...

Buster was a real flamer on the way out the door, saying he's a "multi- multi-millionaire" and that Duncan was a loser, or something like that.

And to think, only a week before Duncan was proclaiming his love for Buster, saying in a poem that he won't stay if Buster is not here.

My how times have changed.

Anonymous said...

I'm a lousy market timer.

So am I.

Do you want to make another bet on where medians will be at the end of 2008? I'd be willing to bet we won't see any Doug Farmer medians below $250K this year.

-- bendbb

WSJ said...

excerpt from the WSJ:

Lehman Is Seeking Overseas Capital

As Its Stock Declines, Wall Street Firm Expands Search for Cash, May Tap Korea

June 4, 2008

Lehman Brothers Holdings Inc., facing a sharp decline in its stock that will make it more difficult to raise fresh capital, may look to a foreign land for a strategic partner.

The Wall Street firm has managed to raise capital from a rich base of existing U.S. shareholders, but this week reached out to overseas investors, including at least one in South Korea.

The firm has a long history in South Korea, an effort led by the firm's well-connected vice chairman Kunho Cho. The options for Lehman include the Korea Development Bank and Woori Financial Group. One person familiar with the situation said it is unlikely Korean Investment Corp., an investor in Merrill Lynch & Co., would be an investor.

The news comes during a rough week for Lehman, whose stock topped the New York Stock Exchange's most-active list Tuesday and closed down 9.5%, or $3.22, at $30.61 on the New York Stock Exchange.

Tuesday's trading wiped $1.72 billion off of Lehman's market value and the closing price was Lehman's lowest since August 2003.

Anonymous said...

Speaking of buttplugs, is Buster on strike... or dead?

Let's hope so...not dead but on strike. It's all fine and dandy until you start telling people they are losers because they aren't rich like you....what a kook!

It's been a long time since I was a 3rd grader.

Anonymous said...

Buster lost it when he said it was a great time to buy...errr

It's a great time to buy if you are 25...errr

It's a great time to buy if you are 25 and have a 780 credit rating....errr

It's a great time to buy if you are 25, have a 780 credit rating and have 30% to put down....errr

But where he really went over the edge was, It's a great time to buy if you are 25, have a 780 credit rating, have 30% to put down AND you can get one of these new fangled loans that essentially has a -3% interest rate that you have to have a relationship with a banker for 30 years to get. Then that shit pencils FOR SURE.

IHateToBurstYourBubble said...

Do you want to make another bet on where medians will be at the end of 2008? I'd be willing to bet we won't see any Doug Farmer medians below $250K this year.


I'd take the bet that we'll see sub $250K medians on marge's medians in the next 12 months... :-)

Once bitten, and so forth...

IHateToBurstYourBubble said...

But what makes you think we may hit any kind of breakeven in 2010? Breakeven with what target? Don't understand that statement.

Yeah, sorry. It was in the context of the froth blown off the market & that many places were back to their "Fair Value" with respect to CNN/Money & National City estimated fair values.

Bend will be back to "Fair Value" by 2010. But I'm curious if Fair Value won't start falling nationwide, and we just churn lower.

IHateToBurstYourBubble said...

Buster was a real flamer on the way out the door, saying he's a "multi- multi-millionaire" and that Duncan was a loser...

He flamed long & hard before that, and called virtually everyone a Loser at some point. I'm sort of surprised that when he got some back-splash, he disappeared.

Could dish it out all day, but couldn't take it I guess.

Anonymous said...

"It's all fine and dandy until you start telling people they are losers because they aren't rich like you"

On the Internet, nobody knows you're a dog.

Now you'll have to excuse me -- I have to go outside and wax my Lamborghini.

IHateToBurstYourBubble said...

This was the piece I was thinking of:

The sharp dip in home prices means that only 8 markets can now be considered overvalued, down from 14 markets last quarter. In mid-2006, at the height of the bubble, a full 53 metro areas were considered over-valued.

"We've covered a lot of territory in terms of restoring balance in the housing market," said National City's chief economist, Richard DeKaser. "The froth has been completely blown away."

The survey seeks to give a more accurate picture of housing affordability by analyzing data on household income, population density and historical price trends, in addition to current home prices and interest rates.

The move toward a more balanced market is most dramatic in areas where home prices saw the biggest runup during the housing bubble that began in 2004.

In Stockton, Calif., the average price of a single-family home fell 35% to $230,800 in the first quarter of 2008 from $357,800 in the first quarter of 2006. Over the same two-year period, Stockton has gone from being 71% over-valued to 4.3% over-valued.

I think by 2010, we'll be in the middle of the pack on these over-under valuation studies. By 2015 we'll be in the bottom rungs. $150-175K medians, and such.

IHateToBurstYourBubble said...

But my timing is usually early.

For proof, I bought Pfizer this week. Usually good for a quick loss of 10-20%. But I'm just in get-it-and-forget-it mode, cuz it's about as far from housing as I could think of, and everytime there's a liberal that's a shoe-in for the White House they beat the drug stocks to hell.

I'm playing the other side... plus the div yield is over 6%!

IHateToBurstYourBubble said...

Someone over at BendBB says Deschutes county is still one of the 8 markets nationwide (out of 330) that is still considered "overvalued" at +49.5%.

Not sure what dollar figure they are using, but that's a 33% haircut to get back to breakeven.

timothy said...

If the worst thing Buster ever called you was "loser," he holds you in high regard.


Check out the yield on CACB.

IHateToBurstYourBubble said...

I found that National City data, it's here

We are 49.5% overvalued using a $290,500 median, according to them.

That's a $194,314 Fair Value median for Deschutes county.

Yup. We're screwed.

IHateToBurstYourBubble said...

Wow... 4.6% yield on CACB. MossCo seemed to intimate that we shouldn't get real attached to it though.

Total equity is $279MM, while the current market cap $244MM, so it's around 87% of book value too. Lots of hot air in there given their buyout of that Idaho bank. Tangible book is probably quite a bit lower.

Banks can fudge the numbers pretty hard, and MossCo seems like she's packed quite a bit of fudge into her numbers.

Anonymous said...


As part of strategic shift, Bend Research cuts jobs
By Andrew Moore / The Bulletin

Published: June 04. 2008 4:00AM PST Bend Research Inc. laid off approximately 10 percent of its work force Tuesday in an effort to better position the pharmaceutical company to attract new business, according to CEO Rod Ray.

The company employs 125 people, and the layoffs were across the board, Ray said.

“We’re kind of changing our business model from having a single large client (Pfizer) to going out and building a base of new customers and getting into some new technical areas,” he said. “And when you make a change in your business model like that, we realized we need to downsize to be more lean and flexible while we make the change.”

Ray said the company had to lay off workers many years ago. This time, it tried to manage its way out of layoffs but was unable to, he added.

“We’re all very emotional, bummed out, about this,” Ray said.

Bend Research, founded in 1975 and spread between two offices in Bend and one in Tumalo, designs and develops drug delivery technology. Almost all of the company’s development involves tricks with tablets, Ray said, such as making insoluble drugs soluble and engineering drugs to release at timed intervals.

Anonymous said...

WE are #2 We are #2.

Not sure what dollar figure they are using, but that's a 33% haircut to get back to breakeven.

They used the $290k Med of the County sale of Residential homes.
I just ran stats on that for Q1 and it was $289,950 Med.

Anonymous said...

The Bulletin
Landing Les Schwab at Juniper Ridge cost taxpayers a bundle

By Scott R. Siewert / Bulletin guest columnist
Published: June 04. 2008 4:00AM PST

On Dec. 12, 2006, the city of Bend executed a sale agreement with Les Schwab Tire Centers for the purchase of 12 acres of property in Juniper Ridge. There is also an option for eight additional acres in the contract. This followed a highly secretive process controlled by confidentiality agreements that prevented the public from learning details of the sale prior to execution. In a contentious meeting with only five days advance notice, the City Council split 4-3 in favor of Schwab with no ability to negotiate terms or conditions of the contract, as Schwab had delivered an ultimatum.

The public deserves answers to the following set of questions to serve as the basis for judgment regarding fairness of the deal. Did taxpayers get “slammed,” or was the deal reasonable under the circumstances? Close examination of the sale agreement and interviews with officials close to the process may provide a basis for conclusions.


1. Did taxpayers receive fair value for their property?

2. Did Les Schwab effectively avoid system development charges in this transaction?

3. Did Les Schwab receive additional incentives to pricing concessions?

4. Was Les Schwab exempted from provisions of the city’s highly touted master plan?

5. Why did the initial sale agreement include a confidentiality clause that was later waived?

6. Should the city of Bend be in the development business in the first place?


Purchase price: Les Schwab paid $6 per square foot for the original phase 1 plot of 12 acres. A check with local commercial realtors indicated a going rate of $12 to $13 for prime commercial property at that time. On a cost-per-acre basis, Schwab paid $250,000 for our property while Wal-Mart paid $600,000 per acre, plus a 1031 exchange (taxed deferred commercial property trade) for similar land several blocks removed. Worse yet, Wal-Mart was denied permission to build because of traffic congestion!

The city maintains that a low price was justified by large lot size, a desire to keep Schwab in Central Oregon, and to establish a flagship client at Juniper Ridge.

Based upon the foregoing, a reasonable person might conclude that $9 per square foot would have been advantageous for both parties.

Cost to taxpayers: $1.5 million.

System development charges:

Section 4.7.2 of the sale agreement stipulates that if the seller elects the alternative phase 1 purchase price, then, notwithstanding 4.7.2 above, buyer shall pay up to $525,000 of SDCs applicable to phase 1 and seller shall pay SDCs, if any, applicable to phase 1 above $525,000.

Section 1.2 of the agreement stipulates that the alternative plan 1 purchase would be reduced from $7 to $6 if 4.7.2 was elected.

Actual estimates for SDCs at the site exceed $1 million.

The net effect of this maneuvering may have been to satisfy SDC legal requirements without actual cost to Schwab. Considering 43,560 square feet per acre times 12 acres, the amount involved is significant.

Cost to taxpayers: $500,000 to $1 million.

Economic incentives:

Section 4.4 of the sale agreement states that Bend will cooperate with Les Schwab in efforts to obtain economic incentives available through government agencies and other third parties, etc.

These will include green credits, employment and investment incentives.

As Bend is not an enterprise zone, it does appear that Schwab will pay taxes on the property, but at reduced rate because “market value” will be minimized.

Cost to taxpayers: substantial, but undetermined.

Master plan issues:

As the initial structure in Juniper Ridge, Les Schwab has been effectively indemnified from provisions of the city’s highly touted master plan. That document has been severely undermined even before delivery, as future buyers will certainly seek the same consideration that Schwab negotiated.

Instead, a brief set of CCRs was developed to protect Schwab’s interests. These same CCRs should be sufficient to cover 50 buildable acres adjacent to Schwab after 97/Cooley issues are addressed. Why waste taxpayer dollars on a master plan?

Juniper Ridge Partners received $2.56 million for no tangible benefit to Juniper Ridge except for a master plan that now has minimal if any value, as Schwab has established a new set of rules.

Cost to taxpayers: future inability to fairly enforce master plan provisions.

Confidentiality clause:

Section 9.7.1 of the agreement stipulating strict confidentiality was later waived, probably under ORS Section 192 mandates.

Cost to taxpayers: opportunity to review terms of sale prior to closing.

Bend as a developer:

In view of the foregoing, it is apparent that Bend does not possess the business acumen necessary to deal with powerful entities like Les Schwab. The mess with Juniper Ridge Partners and their subsequent dismissal further confirms inability to manage projects of this magnitude.

The city cannot possibly perform effectively as a “watchdog” over a development it owns. Conflicts of interest abound everywhere! Juniper Ridge has been strategically bankrupt from inception. It’s now up to taxpayers to avoid financial bankruptcy as well.

Cost to taxpayers: incalculable.


Following an interim fix at 97/Cooley, Bend should sell 50 buildable acres to a private developer at a reasonable price and utilize the proceeds to retire the massive debt that has already been incurred.

They should dissolve the urban renewal district and exit the developer business immediately thereafter.

It can’t happen soon enough!

Scott R.
lives in Bend.

Anonymous said...

OSU branch loses out in the state’s $1B wish list

State university officials leave Bend campus off the list of proposed construction projects

By James Sinks / The Bulletin
Published: June 04. 2008 4:00AM PST

SALEM — University system officials have compiled a preliminary $1 billion wish list of construction projects they hope to present to the 2009 Legislature — and if approved, would invest in new facilities at the state’s seven public universities and Oregon Health & Sciences University in Portland.

Yet there is one notable absence: Not a dime’s worth of work is proposed at the Oregon State University-Cascades Campus in Bend.

That comes after no work was proposed or approved for the entity during the 2007 Legislature — and in spite of indications at the time by higher education officials that some kind of Central Oregon project would be forwarded to lawmakers in 2009.

“Naturally, you look at the capital expenditure issue, and we weren’t getting anything for the branch last year, which is not OK — but understandable — because everybody doesn’t get something every time,” said state Sen. Ben Westlund, D-Tumalo, who helped shepherd the legislation in 2001 that created the branch campus.

“But I came away from multiple conversations with the very clear understanding that all happens in good time, and your time is next session.”

The Bend branch campus is based at the Central Oregon Community College campus in west Bend, but Central Oregon leaders have envisioned a standalone campus — perhaps as an anchor of a university research park in the city-owned Juniper Ridge area.

University system officials and state board members will evaluate and then decide in July which of the new $1 billion in construction requests to forward to Gov. Ted Kulongoski, said Bob Simonton, the assistant vice chancellor of capital programs.

The new preliminary list will be unveiled Thursday to the State Board of Higher Education, which is meeting at Eastern Oregon University in La Grande.

Ultimately, it will be up to legislators to decide whether the state should borrow money to fund any of the projects, he said.

There is no Bend project on the wish list because university officials saw projects at the main campus as a higher priority, Simonton said.

“It is up to OSU to determine what are their priorities overall, and if it is not in their top five, it’s probably not in my top five,” he said.

Mark McCambridge, the vice president of finance and administration at OSU, said the university’s officials wrestled over which projects to forward — but ultimately decided that new buildings in Bend would struggle for political backing, because there has been no money raised locally to help with the cost.

“We did look hard at the need for the next building for the Bend campus,” he said. “Without some match, the chances of a building getting approved with all direct state funding was pretty slim, so we determined for this coming biennium not to request a building.”

If the branch campus enrollment is robust, the school can rent classrooms from the community college or bring in portable buildings as a stopgap measure, he said.

The state will match projects up to 50 percent of the cost, he said.

Oregon lawmakers did approve financing for a Central Oregon college building in 2007. A new health sciences center is being built at COCC — and is accessible to students at the OSU branch campus.

Diana Sloane, the chief executive and vice provost of the Cascades Campus, said Tuesday that a new building will be needed in the next three to four years.

She hopes matching dollars can be raised in that time through a new Cascades Campus foundation that’s been running for about six months. She does not expect to get money from the main campus for new buildings in Bend, she said.

“We do get support from OSU in our foundation, such as $125,000 in scholarship money that we did not raise, so we do get support from them,” she said. “I am optimistic we can raise money for capital construction, not in this biennium but the next, and I expect our enrollment trajectory will make a compelling case for us.”

The new building will be sought for the COCC campus site, she said, because there is uncertainty about what is happening at Juniper Ridge.

“The city has a long way to go but that would make a nice site for us,” Sloane said. Neil Bryant, a Bend attorney and former legislator who helped lay the political groundwork for the branch campus, said Tuesday that the local drive for developing a robust campus has lost some momentum. A lack of Bend projects on the new list is disappointing but not unexpected, he said.

He now works as a lobbyist for the university system.

The Central Oregon community may need to ratchet up political pressure in order for the branch to become a bigger priority, he said.

“I think the campus and the community need to better formulate an idea that this is what we think we need, and where it needs to go and a road map how to do it,” he said. “That kind of advocacy takes place from the other institutions.”

James Sinks can be reached at 503-566-2839 or at

State universities’ potential projects, 2009-11

Eastern Oregon University — $11.5 million
• Interagency partnership building — $6 million
Oregon State University — $258.7 million
• Student involvement center — $55 million
• International residence hall — $40 million
Oregon Institute of Technology — $6.6 million
• Geothermal Demonstration Project — $6.6 million
Portland State University — $90 million
• School of Business Administration — $90 million
Southern Oregon University — $11 million
• Theater arts expansion and remodel — $11 million
University of Oregon — $92.9 million
• Building renovations and expansions — $52.2 million
Western Oregon University — $30.6 million
• Health/wellness center — $30.6 million
Systemwide — $525 million
• Safety, code and deferred maintenance — $280 million
• Portland South Waterfront Science Facility at Oregon Health & Science University — $200 million
TOTAL — $1.026 billion
Source: Oregon University System

bruce said...

Re: The Bulletin
Landing Les Schwab at Juniper Ridge cost taxpayers a bundle

And it's not going to end anytime soon. At tonights CC meeting, they plan to vote on a $6M line of credit to continue development:

10. Consider a roll call vote on Consent Agenda B:

A. Consider a roll call vote on a Resolution of the City Council of the City of Bend, Oregon, Authorizing the Negotiation, Execution and Delivery of a Contingent Loan Agreement and Related Documents; Designating Authorized Representatives and Delegating Authority; and Related Matters with the Bend Urban Renewal Agency to provide a guarantee for the $6 million line of credit with Bank of America for the Juniper Ridge project.

On February 20, 2008, staff provided the City Council with a financial update of Juniper Ridge which included a proposal to obtain a $6 million line of credit to fund Juniper Ridge construction and operating costs through FY08-09. In March a request for proposal was issued to various banks to obtain the lowest interest cost for the line of credit. Proposals were received from 3 banks and Bank of America was selected. The interest on the line of credit will be tied to the bank's prime rate or LIBOR. A resolution has been presented to the Bend Urban Renewal Agency (BURA) board for approval to authorize the line of credit with Bank of America and also to authorize the contingent loan agreement with the City. The bank requires the use of this contingent loan agreement to provide the City's guarantee on the line of credit. Under the contingent loan agreement, the City will repay the $6 million line of credit to the extent not paid by BURA, with general revenues of the City. The contingent loan agreement also provides for BURA to repay the City from future land sales, tax increment revenues and/or other revenues.

This on top of the $1.6M short term financing and $5M bond authorized last October.

This is from the Issue Summary from that meeting:

This additional short-term debt of $1,662,000 will also be secured by the City’s full faith and credit and is expected to be repaid with property sales.

Hell, everyone knows at this point the City can't make a profit on property sales. It's proved it time and time again, from Les Scwab to the last meeting, when they sold the Galveston property that the City had sunk $172,000 for $100,000 or a little over $20 sq ft. To a developer that paid $80 a sq ft for the adjacent property he was going to combine it with.


I'll post the current $6M Issue Summary next.

Anonymous said...

Bend Research Inc. laid off approximately 10 percent of its work force Tuesday in an effort to better position the pharmaceutical company to attract new business, according to CEO Rod Ray.

That is the most LAME-ASS attempt I have ever seen to try to spin a layoff to look like something positive. And of course The Bullshittin obediently parrots it.

Anonymous said...

Damn, if I'm interpreting that National City map right, Bend is now THE MOST OVERVALUED HOUSING MARKET IN THE COUNTRY! Hot damn! We're NUMBER ONE again!

LavaBear said...

I think "lender pulls the plug" is going to lead 2008's most used headline.

Oregon's Legend Homes can't pay its bills
After sales slump, the Tualatin-based company's main lender pulls the plug

Wednesday, June 04, 2008
The Oregonian

Legend Homes Corp., one of Oregon's oldest and biggest homebuilders, has survived three recessions with a reputation for paying subcontractors on schedule on the 10th day of each month.

But Tualatin-based Legend last month stopped paying about 60 subcontractors after its biggest lender, KeyBank, cut off funding. Legend's outstanding bills total less than $1 million, President Jim Chapman said.

Legend has retained a turnaround specialist and now finds itself having to downplay worries about a potential bankruptcy.

"We're not in danger of bankruptcy," said David Oringdulph, Legend Homes' chief executive officer. "What we are doing is reorganizing for a smaller market for the next year."

Along with other builders across the country, the 42-year-old company has been squeezed by declining sales, falling land and home values and lenders becoming more aggressive to recover their investments.

In general, builders say slower than expected home sales have forced them to ask banks for more time to pay back construction loans. Local banks, they say, have been willing to renegotiate.

But builders say Cleveland-based KeyBank has been reluctant to restructure loans to allow them more time. Earlier this year, KeyBank filed a default notice on a Bend subdivision built by Renaissance Homes of Lake Oswego.

With economists predicting even deeper price declines, Chapman said he's had a tough time finding another lender willing to take over KeyBank's loan. Renaissance, though, has since raised enough from investors to pay off the debt, President Randy Sebastian said.

"KeyBank has not been willing to renegotiate," Chapman said. "They're playing hardball."

Roberta Fuhr, KeyBank's national manager for home builder lending, declined to talk about Legend or Renaissance. In general, she said, KeyBank continues to make construction loans but added: "Every lender when they have loans not meeting benchmarks try to get back in line." The "big squeeze"

Chapman said he worked hard not to overbuild during the 2004 to 2007 housing boom.

The company did expand to Colorado Springs, Colo., and Riverside, Calif., now one of the country's worst markets. The company now has 20 active projects in three states. Since 2000, Legend Homes is the fifth largest home builder in the Salem and Portland areas, according to the Construction Monitor, an industry trade group.

Its sweet spot are middle-class and upper-end housing with an average price of $387,000, Chapman said.

With KeyBank, Legend took out three credit lines to pay for new home construction in three Washington County subdivisions, two in Hillsboro and one in Tigard.

The Hillsboro projects are done and the 349-lot Tigard subdivision is under construction, Chapman said.

In January, KeyBank capped all three credit lines and forced Legend to use all sales revenues from those projects to pay off the credit line balances, Chapman said.

Legend continued construction on six subdivisions, using sales revenues generated elsewhere to pay subcontractors. But by May, KeyBank's requirements ate so far into the company's cash flow that it halted construction companywide, Chapman said.

"We've had lines of credit with KeyBank for 17 years," Oringdulph said. "It's a big squeeze from our best lender."

On May 15, Chapman sent an e-mail to his excavators, framers and cleaning crews to alert them to the problem.

"We are still not in a position to send out checks for this pay cycle," he wrote. "Significant efforts are being made in hopes that can happen, and soon, but too many roadblocks remain. We cannot predict when resolution will occur."

Subcontractors and real-estate lawyers familiar with the deal declined to talk publicly about Legend's troubles. They said they were concerned about compromising their relationships with the homebuilder.

But Brian Clopton, who owns Brian Clopton Excavating, said: "Legend has always been a destination place for subcontractors. It's a very, very well-run company and they always pay their bills."

Asked if the company will have to file bankruptcy, Chapman said: "I would certainly hope not. I'm kind of waiting for our experts to show us the plan. Looking at our books from my point of view, we have a viable operation."

If it comes to it, Oringdulph said, the company has enough equity tied up in land and houses to pay its bills. In the meantime, Chapman said he continues talks with KeyBank.

KeyBank profits down

KeyBank is facing the same housing-related pressures. U.S. banks have been forced to write off billions in bad mortgages and boost reserves for future loan losses.

KeyBank's parent company reported in April that its first-quarter profits dropped 38 percent compared with the same period a year earlier. Citing concerns that included continuing housing troubles, the bank tripled reserves for future loan losses to $187 million, according to the Cleveland Plain Dealer.

KeyBank said it has halted home construction lending in California and any other market where it does not have branches.

Sebastian and Oringdulph said KeyBank has shuttered its home construction lending program in Oregon.

"Not a bit of truth to it," Fuhr responded. "We value our clients. We at this time are selective."

Ryan Frank: 503-221-8519;;

©2008 The Oregonian

bruce said...

Staff recommends approval of the attached resolution authorizing a Contingent Loan Agreement with the Bend Urban Renewal Agency to provide a guarantee for the $6 million line of credit with Bank of America for the Juniper Ridge project.

The attached resolution authorizes the City to enter into a contingent loan agreement with BURA where the City will provide a guarantee or full faith & credit pledge to the line of credit needed by BURA to fund Juniper Ridge costs through FY08-09. Under the contingent loan
agreement (attached), the City will repay the $6 million line of credit to the extent not paid by BURA, with general revenues of the City.
The contingent loan agreement also provides for BURA to repay the City from future land sales, tax increment revenues and/or other revenues.

On February 20, 2008, staff provided the City Council with a financial update of Juniper Ridge which included a proposal to obtain a $6 million line of credit to fund Juniper Ridge construction and operating costs through FY08-09. A recap of the costs and funding is as follows:

Form revised February 2008
Infrastructure and HWY97/Cooley mid-term study $ 9.0 million

Payment to Juniper Ridge Partners for master plan $2.5M

Additional master planning & entitling costs projected $100K
Subtotal (investment in infrastructure & masterplan) $11.6M

Personnel & overhead costs $2.5M

TOTAL COSTS $14.1 million

Les Schwab property sale proceeds $ $3.7 million
Long term debt repaid through tax increment $3.7M
Line of credit $6.0M
Property sales $0.7M

TOTAL FUNDING $14.1 million

In March a request for proposal was issued to various banks to obtain the lowest interest cost for the line of credit. Proposals were received from 3 banks and Bank of America was selected. The interest on the line of credit will be tied to the bank’s prime rate or LIBOR.
A resolution has been presented to the BURA board for approval to authorize the line of credit with Bank of America and also to authorize the contingent loan agreement with the City. The bank requires the use of this contingent loan agreement to provide the City’s guarantee on the line of credit.

BURA is expected to draw approximately $2 to $3 million from the line this year. First interest payment will be due in FY08-09.

Reviewed by: (finance staff) Date:

The guarantee encumbers the City’s General Fund. The revised FY08-09 budget provides for $180,000 from the General Fund to pay interest on the line of credit. If land sales do not occur, other general revenues of the City will need to be directed toward payment of interest and principal on the line of credit.

Reviewed by: Jim Forbes Date: 5/27/08
Comments: Meets the legal requirements as determined by bond counsel


Provides temporary funding for Juniper Ridge costs needed to sell properties.

Requires pledge of City’s general revenues.

Form revised February 2008
 Resolution authorizing contingent loan agreement with BURA.
 Contingent loan agreement

bruce said...

Bend City Council Decides Six Million More For Juniper Ridge Is Just Fine

Only one dissenter--Chris Telfer--and absolutely no discussion.



They will spend three hours discussing a bus system cost of $140,000, but will not even begin to discuss a $6,000,000 line of credit. One that brings our investment in Juniper Ridge to $20,000,000. Backed by the full faith and credit of the City of Bend.


You know, sometimes I think I'm simply hallucinating at these meetings. And then I realize I'm not. That either nobody fucking cares or it's all some sort of premeditated plan or whatever.

One funny note: a city planning employee, whose name escapes me because I've never seen her before, was asked about what happen in the future on a zone change. She said something to the effect of "Oh, when we're all laid off?" to much laughter among the Council.

The fireman sitting next to me didn't think any of this shit was funny, either.

Anonymous said...

Why the hell would anybody NOT leave Bend for CA or AZ? Even if you don't have a job at least you'll be warm while you starve.

Anonymous said...

Interesting article about Legend Homes. But this is what I don't get. These guys build houses in my neighborhood in the W.V. In one month they raised the prices of all their houses by $75,000 -- October 2005. They justified this by making granite countertops, auto sprinklers, etc. as "standard". At that time, it didn't slow sales a bit. Their houses/community was so much nicer than anything else that people gladly paid upwards of $400,000 - $450,000 for a house that was only$320,000 in early 2005. But now Legend is stuck at the $400,000 - $500,000 price tag, and is completely resistant yield the profit margins they built in 2.5 years ago.

OK, I get that prices of some materials has gone up. But not labor. Not plywood. I don't believe that costs suddenly went up by $75,000 in one month.

If these guys can't move houses, WHY DON'T THEY CUT THE PRICE?

If they can't stomach selling houses for less now than they did 2 years ago, they don't deserve to be a business, and deserve to fail. How many of us working wretches can afford a $450,000 house?

Anonymous said...

But, a question: Is that 50% off of what you originally paid, or 50% off of what the house is worth right now?

It's 50% of what I originally paid in late 2004. It looks like current prices are back down to just a little above what I paid back then!

I can't get upset about it however. It could be far worse. And I actually have the money to pay off my house very quickly which is much more than most can say. I'm one of the lucky ones, even if the prices fall further.

Anonymous said...

How many of us working wretches can afford a $450,000 house?

None of us. They're going to sell those houses to all the rich retirees, second-home buyers and telecommuters who are flocking here by the tens of thousands daily for the glorious "lifestyle" (snigger).

Anonymous said...

This just might work out to our favor. We're moving our little family and little business to Bend this summer, from SoCal. If there is this big sucking sound of moving trucks leaving Bend, then maybe we can get the truck rental companies to drop their shorts in a bidding war to let us pay to drive a 26-footer back to Bend.

Anonymous said...

NEW YORK (AP) - The equity Americans have in their most important asset — their homes — has dropped to its lowest level since the end of World War II.

Homeowners’ portion of equity slipped to 46.2 percent in the first quarter from a revised 47.5 percent in the previous quarter. That was the fifth quarter in a row below the 50 percent mark, the Federal Reserve said Thursday.

The total dollar value of equity also fell for the fourth straight quarter to $9.12 trillion from $9.52 trillion in the fourth quarter, while Americans’ total mortgage debt rose to $10.6 trillion from $10.53 trillion. ...

Experts expect equity to decline further as falling home prices erode the value of Americans’ largest asset, dragging more homeowners “upside down” on their mortgages.

At the end of March, nearly 8.5 million homeowners had negative or no equity in their homes, representing more than 16 percent of all homeowners with a mortgage, according to Moody’s Chief Economist Mark Zandi. By June 2009, he estimates that will increase to 12.2 million, or almost one out of every four homeowners with a mortgage.

IHateToBurstYourBubble said...

We're moving our little family and little business to Bend this summer, from SoCal.

Dude, you'll find a town FULL of people welcoming you with open arms. No better people in the World than immigrants to Bend from Southern California.

Check old posts: There's real love there.

IHateToBurstYourBubble said...

The total dollar value of equity also fell for the fourth straight quarter to $9.12 trillion from $9.52 trillion in the fourth quarter, while Americans’ total mortgage debt rose to $10.6 trillion from $10.53 trillion. ...

So the value of our homes was $19.72 trillion at Q1 2008. Interesting to know.

IHateToBurstYourBubble said...

So according to The Fed, home values dropped 1.6% in Q1 2008 from Q4 2007, going to $19.72TT, down from $20.05TT.

IHateToBurstYourBubble said...

They will spend three hours discussing a bus system cost of $140,000, but will not even begin to discuss a $6,000,000 line of credit. One that brings our investment in Juniper Ridge to $20,000,000. Backed by the full faith and credit of the City of Bend.

Dude, the Bend Old Boys Network knows no bounds. Patently illegal shit does not phase a single City Councilor. Telfer, God bless her wretched heart, was the only one who voted against the loan.

Anonymous said...

"Buster was a real flamer on the way out the door, saying he's a "multi- multi-millionaire" and that Duncan was a loser, or something like that. "

Buster is dead, gone, vamoosh? RIP, dear Buster.

Buster was worth six BruceyPussys, five Duncans, or at least three ICantBelieveItsNotButters. Marge? Whatever.

If buster says somebody is a loser, well, then that somebody better start winning, and fast.

This blog is getting lamer by the minute, but without buster to lay it out straight and direct, this blog is just the pussy, marge, 'Butter, and an occasional duncan. Sycophants, one and all.

And who is this Quimby guy? Is quimby even a real name in non-3rd-world countries? Gimme a break. Next we will be having Ladislavs and Igors commenting here. And what happened to that mexican hating racist? Is he gone too? Or was that buster too?

Man, I leave town for a few days, and it all goes to pot!
This is all so sad. And lame. Sad and lame.... and pathetic.

Sad, lame and pathetic.... and worthless.

Yes, sad, lame, pathetic and worthless.

IHateToBurstYourBubble said...

Bend rated as second in U.S. for overvalued housing

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

The Bend area housing market is the second most overvalued in the nation, according to a quarterly study released Thursday.

The Bend metropolitan statistical area, which includes all of Deschutes County, was 49.5 percent overvalued with a median home price of $290,500, according to the survey that was co-authored in May by Lexington, Mass.-based Global Insight and Cleveland-based National City Corp.

Any valuation greater than 35 percent means the metropolitan area poses a risk of substantial price declines going forward, according to the report.

“We’re careful not to say this is a forecast, but I would not be shocked if prices dropped significantly in the near term in Bend as they have in California,” said Jim Diffley, the managing director for Global Insight, an economic research firm.

“The price drops in California have been more than 20 percent in some places,” Diffley said.

Fewer sales of high-priced homes and a spike in sales of foreclosed properties have caused price declines nationally, according to the Global Insight research. Also adding to the downward pressure are significantly tighter lending standards, which are reducing the amount of credit available for home purchases.

Income levels and population densities were used together with home prices and interest rates to determine what would be considered normal housing values in an area. A region’s attractiveness and its amenities also were considered, Diffley said.

In the first-quarter survey, price declines were pervasive nationally, with 262 of the nation’s 330 metropolitan areas posting lower year-over-year median sales prices.

Eight of the top 12 overvalued markets in the nation were in Oregon and Washington state.

The appearance of northwestern cities among the worst price performances indicates that the region was likely “the next shoe to drop” in the nation’s housing market downturn, according to the survey.

“I’m not surprised at all because of all the trends and how quickly these markets went up,” said Tim Duy, an adjunct assistant professor for the University of Oregon’s Department of Economics. “Housing prices were out of line with incomes.”

Dave Woodland, the vice president and regional manager of Signet Mortgage in Bend, urged caution in drawing too much from the national survey, which doesn’t capture the true income of the area, he said.

“They look at Bend and say it’s overpriced based on reported compensation levels,” Woodland said. “The reason Bend is so popular is that it’s a great retirement area, and there are a base of individuals who are independently wealthy, self-employed or retired.”

Diffley of Global Insight said there was a possibility that the wealth of individuals was understated, but that’s not likely to affect the region’s overvaluation, he said.

“The last few years, Realtors were saying the same thing about South Florida, but we don’t hear that anymore because prices are crashing,” Diffley said.

Bend could be better positioned if it is increasing its amenities, and becoming more attractive to retirees and other high-income professionals than it was in the past, Diffley said.

Those factors may not show up yet in the survey, he said.

Jeff McDonald can be reached at 383-0323 or at

IHateToBurstYourBubble said...

Buster was worth six BruceyPussys, five Duncans, or at least three ICantBelieveItsNotButters. Marge? Whatever.

C'mon Buster... is that gonna be your obituary?

What happened man? I thought you could take as well as you gave... then you up & ran off when I called you on the Best Buttplug Market in 290 Years.

C'mon Man! Nobody could get our panties in a bunch like YOU!

IHateToBurstYourBubble said...

This is all so sad. And lame. Sad and lame.... and pathetic.

Sad, lame and pathetic.... and worthless.

Yes, sad, lame, pathetic and worthless.


IHateToBurstYourBubble said...

“They look at Bend and say it’s overpriced based on reported compensation levels,” Woodland said. “The reason Bend is so popular is that it’s a great retirement area, and there are a base of individuals who are independently wealthy, self-employed or retired.”

Diffley of Global Insight said there was a possibility that the wealth of individuals was understated, but that’s not likely to affect the region’s overvaluation, he said.

“The last few years, Realtors were saying the same thing about South Florida, but we don’t hear that anymore because prices are crashing,” Diffley said.

Look at where The Bulletin is trying to steer this guy from National City or whereever, and he'll have none of it cuz he could give a fuck about some hick-ass bunch of hillbillies.

Some local jerkoff is going for the same old amenity-laden bullshit, and this Diffley bitch will have none of it. Naples, FL had the SECOND most overvalued homes in the country next to Bend, but it's median family income was something like $150K! The most per capita millionaires IN THE COUNTRY!

Bend is chucked full of pickup driving contractors who happened to land in the middle of a Gold Rush for 3 years. I guarantee that's over.

IHateToBurstYourBubble said...

Bend could be better positioned if it is increasing its amenities, and becoming more attractive to retirees and other high-income professionals than it was in the past, Diffley said.

Oh yes. Become more attractive to OLD PEOPLE. That'll do the trick.

"Increasing it's amenities"? WTF? More All You Can Eat buffets? More Wal-Marts? Yeah, we need more of that crap.

I like how they "grouped" geezers & "high-income professionals". These HIP's are basically California housewives who have learned to use Dreamweaver & Photoshop, and are willing to suck their clients dicks. MILFy web bitches. These dipshits last about 2 years before they go back to the Tried And True:

Stuff a couple of big Double D's upstairs & get titty banged.

IHateToBurstYourBubble said...

definition: WMB's -- Webby MILF Bitches are Cali skanks who are trying not to suck their husbands best friends cock their whole life, so they learn FrontPage & Photoshop Elements, but ultimately resort to Canninus Rumposaurous Dirt Button Injecticus & Titty Bangitis by reimplanting some humungoid Big Double D's. & making their front teeth retractable ala Deliverance

We are pinning our future on these people.

IHateToBurstYourBubble said...

“The reason Bend is so popular is that it’s a great retirement area, and there are a base of individuals who are independently wealthy, self-employed or retired.”

You wanna have a go on that Timmy?

We are popular BECAUSE:

There is a large base of INDEPENDENTLY WEALTHY PEOPLE, a large base of SELF-EMPLOYED PEOPLE, AND a large base of RETIRED PEOPLE.

This motherfucker is caught in some sort of Logical Groundhog Day: He cannot form a sentence without using the terms "INDEPENDENTLY WEALTHY", SELF EMPLOYED" or "RETIRED", even if it's completely idiotic.

"Bend has a large bald eagle migration because of the large base of INDEPENDENTLY WEALTHY, SELF EMPLOYED, and RETIRED people here!"

PR Zombie Stupid Motherfuckers.

Anonymous said...

Dude how do you do it? First you start this here blog and singlehandedly ruin Bend's housing market. Next you talk your book regarding Pfizer. Yesterday DOW up a bazzilion yet Pfizer was down. Today DOW down a bazzilion ish Pfizer down yet again. You got mad skilz. Can you start talking about the Laker's next? I've got cash on the Celtics.

IHateToBurstYourBubble said...

Diffley of Global Insight said there was a possibility that the wealth of individuals was understated, but that’s not likely to affect the region’s overvaluation, he said.

Look at this.

This Jeff McDonald has obviously asked this guy if HE HAS UNDERESTIMATED the wealth of the people living here.

Did he ask that about anywhere else? Did he ask if possibly they had OVERESTIMATED our local wealth?

No. He was concerned with one thing: RAISING DOUBT about the OVERVALUATION issue.

"Is it possible that National City singled out Bend, and dramatically undercounted the number of pickup driving contractor multi-fucking-millionaires that LITTER OUR STREETS and can easily afford the most overpriced homes IN THE WORLD?"

Yet Another Costa Bitch who is on a Quest To Prop Up The Local RE Market. So biased, the dumbfucks don't even know they're doing it.

IHateToBurstYourBubble said...

You got mad skilz.

Hey, I told you that when I buy a stock, it's good for 10% DOWN right there.

I bought a stock, Perini (PCR) in 2002 in the $4's, bought it going down. Several thou shares. Bailed out when I finally broke even, after taking much pain.

Hit $75 last year.

Ask BendBB: I got terrible short term timing problems.

That's why I said WALK AWAY MENTALLY from it. It may well go to $15. Hell, I don't know. I just know it's divorced from housing, and there is a liberal fervor out there for Obama that is hitting the drugs hard. But it seems no matter who wins, drugs LOVE a fresh new president. They climb a wall of worry for 4 years...

IHateToBurstYourBubble said...

But DON'T buy it cuz I am!

My Lord.

IHateToBurstYourBubble said...

PFE is down 62% from April 1999.

That is just brutal.

And I should say that drug stocks love a fresh new LIBERAL president. THAT is the wall of worry.

IHateToBurstYourBubble said...

PFE yield just tipped over 7%.

Am I turning into CACB Shorter? Please, tell me.

Anonymous said...

Bend could be better positioned if it is increasing its amenities, and becoming more attractive to retirees ...

I just don't see all these rich geezers moving here. Old people, for the most part, are not that much into mountain biking and rock climbing and snowboarding. (There are exceptions, but not enough of them to build the local economy on.) They like a warm climate where they can play golf all year, and some cultural attractions. Good public transportation is another plus. Bend offers none of these things.

Much if not most of the local real estate industry has not yet faced up to the fact that grotesquely inflated home prices here were driven by SPECULATORS, not by people beating our doors down because they wanted to enjoy our uniquely wonderful "lifestyle."

IHateToBurstYourBubble said...

And I still like Monaco Coach (MNC) as a counter-trend lottery ticket play on oil.

You think Ford is hurting with their pickup line? Hell, multiply that by 10 to get the kind of hurt Monaco is going thru.

They might actually go broke first though. Lottery ticket money only.

Although I knew people who worked the Bend line, and Monaco is severely dysfunctional. And their products are Rube Goldberg-ish in nature. Some stuff is MADE to fit.

IHateToBurstYourBubble said...

MNC is DOWN 85% since mid-2002.

I like that.

LavaBear said...

The issue I have with PFE is the boner drug is coming off patent and they don't have shit in their pipeline. They have cash to buy pipeline but they just keep sitting on their hands. I bought Merck last week with an similar thesis. ie. It ain't housing. New president. It's been beaten senseless. People are getting old (and they are all rich and moving to Bend).

Anonymous said...

The American unemployment rate surged to 5.5 percent last month, the government said on Friday, the biggest increase in more than two decades. The report was the latestsign that workers face a darker outlook even as they struggle to cope with the housing slump and high energy prices that have cut into their spending power.

Employers also shed 49,000 jobs in May, the Bureau of Labor Statistics said in a statement. Payrolls have shrunk every month this year, the worst losing streak since 2003. Manufacturers, construction companies and the retail sector were the hardest hit, as businesses struggled with lower demand and looked to cut costs.

The jump in the unemployment rate, which was 5 percent in April, led to a sharp increase in the number of Americans who looked for jobs in May. The size of the work force grew, but fewer jobs were available, nudging up the percentage of unemployed to its highest level since October 2004. -- NY Times

Of course the official unemployment rate is far lower than the true unemployment rate because the underemployed and "discouraged workers" are not counted. The true rate is probably double the official rate. Welcome to Great Depression II.

IHateToBurstYourBubble said...

First you start this here blog and singlehandedly ruin Bend's housing market.

Not sure about the "single-handedly" part, but...

If you were here, you'll remember I hopped on the BEM blog bandwagon on Day 1.

Wayyyyyyy early, as usual. Housing didn't crack here convincingly for a long while after that.

I've tried to accept it as part of my investing nature. I've given up on timing entries perfectly, and just buy, in small quantities, stuff that I have found attractive at price $X... I then wait & try to buy at 1/2 $X.

I thought MNC was OK at $9's. PFE I bought early, and broke my rule. I thought it was OK at $24. Maybe I'll pay for that....

IHateToBurstYourBubble said...

I bought Merck last week

Yeah, I came close. MRK might be next...

I love the drugs fundamentally. It's an almost ridiculously profitable business model. Shit, even Buffett picked up Glaxo Smith Kline recently, in a sector he admits he knows little. And he's not exactly setting the World on fire with his short-term timing.

I like the drugs down here...

Anonymous said...

MNC has a P/E of 65! That is a lottery ticket play. They just look like a BK restructure waiting to happen. WGO has a P/E of 10 ish...they might be the only one to survive $5 a gallon gas.

IHateToBurstYourBubble said...

The true rate is probably double the official rate.

This is especially true here, since WMB's are not counted, nor any independent contractors (ie Realtors) & independents in the trades.

We're probably easily at 10-12% here.

It'll be interesting to see if the long-wave down here can actually overpower the seasonal cycles that push unemployment down throughout the Summer & Fall.

IHateToBurstYourBubble said...

I rarely buy on P/E... well, never. Auto's especially hit their lowest P/E's at the top of the cycle...

I look at tangible book, quick ratio, and L/T debt.

I'm not looking for MNC to be operational geniuses anytime soon... I'm looking for a buyout.

Anonymous said...

I'm pretty sure the official numbers weren't counting the Juan/Pedro/Jesus crews that were doing a huge percentage of the labor. Those dudes have either gone home or are back to picking strawberry's for 1/100th the wage.

timothy said...

>>“The reason Bend is so popular is that it’s a great retirement area, and there are a base of individuals who are independently wealthy, self-employed or retired.”

We do have a base of wealthy people. But that's a slice of Bend. bend is NOT richie rich town USA, and it won't be.

Bend is a FAD. It's done nothing that it should have done to build a good economy based on the money of its rich inhabitants. You can see that in the strain of the city's finances nows. IT DID NOT BOTHER TO COLLECT the money it should have collected. The city's coffers are not overflowing, but the city acts if they were.

People despise median information, but it's precisely the huge spread between the average and the median that shows how bad off Bend is right now. The median Bend resident is in a world of hurt.

Lots of the upper ones are, too, from making foolish decisions in the good times.

There's a difference between income and wealth, and I fear that a lot of our upper-end houses were bought by people with high incomes. And a lot of those high incomes were a product of RE gains that are gone.

Anyone who doesn't see Bend's economy as a train wreck is deluding themselves.

Anonymous said...

The Bulletin

Deschutes ‘08 defaults surpass ‘07 totals

Published: June 06. 2008 4:00AM PST

Deschutes County reported 664 notices of default from Jan. 1 through Thursday, eclipsing 2007’s full-year total of 591.

On June 5 last year, the county had 159 pre-foreclosure notices, according to the Deschutes County Clerk’s Office.

Notices of early default are typically filed when borrowers fall three or more months behind on their payments. About half of the notices of early default result in foreclosure.

“Foreclosures are running the market,” said Valerie Hunter, a broker and owner of H&H Preferred Real Estate, based in Redmond. Hunter brokers sales for bank-owned properties and says she expects her workload to increase dramatically this summer.

Hunter currently has 83 active listings, pending sales and new listings on the way, but she expects that number to more than double by September.

Some customers have tried to avoid foreclosure by selling their home or property in a short sale. A short sale occurs when a buyer pays less than the amount owed the lender, a price the lender must authorize.

But short-sale offers face a lengthy approval process through the bank, and those that fail to sell could result in foreclosure, Hunter said.

“It’s ridiculous,” she said. “We haven’t even hit the height of short sales or foreclosures.”

— Jeff McDonald

Anonymous said...

It'll be interesting to see if the long-wave down here can actually overpower the seasonal cycles that push unemployment down throughout the Summer & Fall.

The seasonal unemployment drop in summer and fall historically has been caused by a job surge in construction and agriculture. Agriculture is now only a very small part of the local economy, and construction ... well, we know what's happened to construction. So the job outlook through the summer is going to remain quite grim. We put all our eggs in one basket -- real estate -- and the basket broke.

Anonymous said...

Bend is a FAD. It's done nothing that it should have done to build a good economy ...

Megadittoes. But in fairness, what COULD we have done to build a solid economy? The region's economy has always been resource-based, and its biggest resource -- timber -- is gone. Thinking that we were going to become some kind of high-tech industrial mecca is and always has been a fantasy; we're too far out in the boonies, and increasing fuel costs will only exacerbate that problem. So we're left with nothing to sell to the outside world but "lifestyle," i.e. smoke and mirrors. It worked for a very short while but it never was going to last.

Anonymous said...

I was one of those vaunted telecommuters living over there. Know what? I MOVED! Saw the writing on the wall, sold my home for a comfy profit, and went to the valley. Why? Cuz I knew it wouldnt last, and I would be stuck in my house for a long while if I hung on longer. Only lived there 18 months, and sold it for a 20 percent gain...right now, I couldn't sell it for much more than I bought it for.
As for Bend's "amenities"...sure, lots of outdoor stuff, when the weather permits. That 300 days of sunshine crap was clearly a line a bull from the first day I moved in. And frankly, most of the people I knew and met over there were total jerks. Nearly all from Cali, a few from Washington or Idaho. I just couldn't get over their attitude that Bend was God's Gift to the world. And even more to the point, that WEST Bend was God's much tut-tuts when I was looking at homes on the east "My GOD!!! Only poor snivelling dopes live on the EAST SIDE!!" Too hoighty-toighty for me, sorry.
So yeah, I do get a little grin on my face when I read about how your town is crashing, its called karma.

Anonymous said...

As for Bend's "amenities"...sure, lots of outdoor stuff, when the weather permits. That 300 days of sunshine crap was clearly a line a bull from the first day I moved in.

Yep. And even when the sun is shining you freeze your ass off about eight months out of the year. "Recreation paradise"? Well, maybe if bowling and watching DVDs are your favorite pastimes.

Anonymous said...

I have lived here in oregon all my life, in Bend 16 years, The weather can do whatever it wants Ive seen it snow in july and we have a weather alert for snow right now. So if you are moving here for 300 days of sun forget it. I like it here but also lived on the coast compared to 300 days of rain there this is nice. But for those people who move here from a sunny warm climate I am sure it could really suck for them.And then again there are people who are not content no matter where they live. And also I might add that there are a lot of nice people in this area I guess you just need to spread yourself out to find them.

Anonymous said...

>>And even when the sun is shining you freeze your ass off about eight months out of the year.

Fuckin' wuss. Go home idiot Cali fag.

Anonymous said...


(sing to the tune of Hotel California)

On a dark desert highway, cool wind in my hair

Warm smell of ponderosa, rising up through the air

Up ahead in the distance, I saw a ‘for sale’ sign

My head grew heavy and my sight grew dim

I had to stop amidst the pine

The realtor stood in the driveway;

She saw me, I could tell

And I was thinking to myself,

’this could be heaven or this could be hell’

She put down her cell phone, and walked towards my car

There were voices in the neighborhood,

I thought I heard them say...

Welcome to the Bend Oregon area

Such a lovely place

Such a lovely face

Plenty of room in the Bend Oregon area

What a nice surprise, they have a Tuscan Pines

Her mind is tiffany-twisted, she’s got a Mercedes Benz

She’s got a lot of desperate colleagues, that she calls friends

How they mill about the sub-divisions, sweet June sweat.

Some mill about to remember, some mill about to forget

So I call to the realtor,
’please bring me some wine’

She said, ’I haven’t been able to afford that since two-thousand five’

And still those cell phones are ringing, from far away,

Wake you up in the middle of the night

Just to hear them say...

Welcome to the Bend Oregon area

Such a lovely place

Such a lovely face

They livin’ it up in the Bend Oregon area

Any time of year, you may find snow here

Granite on the countertops,

Diet Cokes on ice

She said ’we are all just prisoners here, of our own device’

And in the owner’s suite,

She gazed at the coffered ceiling

Then lit the natural gas stove,

I just can’t shake this feeling

Last thing I remember,

I was running for the door

I had to find the road back

To the place I was before

’relax,’ said the realtor,

I am programmed to receive.

You can checkout any time you like,

But once you buy here you can never leave!


IHateToBurstYourBubble said...

But in fairness, what COULD we have done to build a solid economy?


Really. We spent the vast majority trying to get 1 SoCal bitch to stay 1 extra hour standing in Bachelor lift lines. We spent MILLIONS on that.

We could have BURNED the money, and we'd be better off than we are now. Instead we have City Councilors with rose colored glassed welded to their faces & rainbows crammed up their asses, and they think Juniper Ridge is still The Promised Land.

I say again: The is a forthcoming book, "How I turned a Huge Bonanza In Real Estate Revenue & 1,500 Free Acres Into a Bankrupt City In 4 Years, And You Can Too!"

Anonymous said...

(sing to the tune of Hotel California)

On a dark desert highway, cool wind in my hair

Warm smell of ponderosa, rising up through the air

Ya, you're not an idiot...

and that cat pee smell is juniper not ponderosa

Anonymous said...

Yep. And even when the sun is shining you freeze your ass off about eight months out of the year. "Recreation paradise"? Well, maybe if bowling and watching DVDs are your favorite pastimes.

just in case you missed the posting above, I wanted to second the "you're a puss" comment...puss

It gets cold here get over it. Or better yet, go away!

Anonymous said...

Or better yet, go away!

Just as fast as I can, dude, just as fast as I can. (And I don't come from California.)

LavaBear said...

(And I don't come from California.)

That is besides the point. The above poster, by calling you a fuckin' wuss AND a cali fag was being redundant. They mean the same thing. Doesn't matter where you come from you fit the description.

IHateToBurstYourBubble said...

Central Oregon homeless count jumps 29 percent

Posted: June 6, 2008 03:52 PM

Nearly 1,750 say they're homeless - 750 children

From KTVZ.COM news sources

Perhaps the saddest side of Central Oregon's growth has a newly updated profile - and as you might expect, the problem is growing, too.

Here's a news release issued Friday afternoon on the results of the second annual count of Central Oregon's homeless:


Today, the Homeless Leadership Coalition provided the information collected from its annual point-in-time homeless count, which was conducted Jan. 31.

The surveys illustrated a 29 percent increase of Central Oregon individuals counted from the first annual count in 2006. There were 1736 self-identifying homeless individuals this year and 67 percent of the individuals came from families.

For a third year, the majority of the tri-county homeless households identified that they could not afford rent. This represented a 12 percent increase of households reporting they could not afford rent from those surveyed in 2006. Results of the surveys can be found at the Homeless Leadership Coalition website,

The ‘point-in-time' homeless count provides a snapshot of Central Oregon's homeless population. This year's weather challenged access to the homeless population with at least 15 inches of snowfall leading up to the count and temperatures averaging below freezing. While it is not a comprehensive count, it provides valuable information to those serving the homeless, helps to educate the public about the growing issues of homelessness in our region and helps direct public policy planning and development.

Overall there were 752 children counted, which made up 43 percent of the homeless population in the tri-county region. In Deschutes County, 74 percent of the homeless individuals identified within a family and 46 percent of the individuals were children. For the first time, a majority of the Deschutes County homeless individuals came from two-parent households, representing an eight percent increase from those surveyed in 2006.

"When 752 children are homeless in our communities there is something seriously wrong. We cannot continue to ignore the fact that homelessness is increasing at alarming rates, and that we must address the underlying causes," said Cindy Pasko, Director of Community Development at the Partnership to End Poverty. "The impact of homelessness on our communities is cumulative, and we are fast approaching a tipping point."

Although surveyed households overwhelmingly identified the inability to afford rent as a cause of their homelessness, there were significant increases with those that identified unemployment and credit as contributing factors. Of those that identified with unemployment, there was a 10 percent increase from those surveyed in 2006. Of those that identified with credit, there was an 11 percent increase from those surveyed in 2006.

"The steady increase of homelessness in our region, affecting a majority of families, emphasizes the need for varied community services providing emergency shelter, transitional housing, affordable housing, and tools to maintain permanent supportive housing," said Suzanne Reininger, Co-Chair of the Homeless Leadership Coalition.

"When our local weather demanded protection, only 15 percent of the tri-county individuals counted this year had emergency or transitional shelter. As a community, we must do more to support these families."

Anonymous said...

Lavabear, like most Bend natives you have an inferiority complex. With good reason.

Anonymous said...

Bend is a fad

for you, I guess it was, showing up all late like ya did :0

I'm bustin chops....tired of all you whiners!

Anonymous said...

Lavabear, like most Bend natives you have an inferiority complex. With good reason.

shouldn't you be moving to Florida so you don't catch cold?

bruce said...

Is it a mirage or did Costa finally decide to print bad RE news re: the foreclosure and overvalued stories today?

bruce said...

Re: shouldn't you be moving to Florida so you don't catch cold?

Phoenix or Vegas. Much closer, and not so humid...

LavaBear said...

like most Bend natives you have an inferiority complex

Now that there is funny. You obviously haven't really ever met any true Bend Natives. The deal is you have it exactly opposite. Every Bendite I know has a superiority complex. Not an inferiority complex. We are from here and tend to love it. We want to raise our families skiing, boarding, biking, hiking, climbing the way we grew up. You won't hear wussy whining about the weather from us. Where do you think the whole "Bend is #1" shit began? It's who we are. It has obviously been spun out of frickin control but it has it's roots from way back.

Anonymous said...

Your all a bunch of wussys? I had to crawl through crab guts on the boat I was on 19 79 and 1984 acutane dutch harbor litteraly had to crawl though the guts with a cutting torch to get the equipment going again ? You all don't know what opression is all about. How about a guy threating to throw your ass on shore of nome with no money and find your own ass home?He was banging a steel pipe on the processing equpment telling us to fuck ourselves.Is it really that bad here?

Anonymous said...

C'mon Man! Nobody could get our panties in a bunch like YOU!


Homee, The past 1-1/2 year on this site has been like a 'job', me don't need a fucking job. I came here hoping to educate a few kids in the cyclic nature of Bend RE, and instead, I have found a repetitive circle jerk orchestrated by some of the biggest man-twats in Bend.

You talk about the REHO's and the 44-D's and titty fucking, but at least their trying to supplement the income. The crowd on this blog, isn't making a fucking dime on the circle jerk.

I don't see BEM around here anymore, most of the non man-twats are long gone.

My humble opinion, is that this blog is a collective representation of Bend in decline, of intellectual laziness, This blog is Bend.

Add insult to injury 99% of the folks on this blog are self-defeating renter losers. You can't get more Bend than this group.

You got the 'pussy' and his gorilla wife at the bike shop, this is what this blog is all about, middle age guys camping on their computer while their wives SELL in order to pay the bills. One day I went in to the Pussy's bike shop to find a part, as its near my house. The first word was "Can I HELP YOU", this women was a white version of Grace Jones, a real man-hater. I quickly did a 180, and announced that I had a senior moment.

Bitch Slapping this group is like stepping on a newborn litter of critters, what's the fucking point?

Bend is fucked, I think all of us know, and it will be years before the toilet bowl flushes the detritus. The people on this blog 100% represent the new-bend, which is why they constantly call each other cali-Ho's, because they are.

It will take years to flush the toilet. I have done a good job of educating during the past 1-1/2 years, I'm a contrarian, as duncan has said, what's the fucking point? This is what the bottom looks like.

I got fishing to do in Canada, and planes to fly, and a life other than Bend. When we started in 2006 folks said Bend was 'exceptional', we have destroyed that myth. I'm done, nothing else needs to be said. Six months ago I demanded we change the thread to 'fixing Bend', and only BEM responded.

This group is 99% losers, expecting a loser in his own life to add value to Bend, well thats the inherent probelem, COVA/COBA/DVA marketed Bend to lazy mental midgets, and now we got a population of 60k, that is over 30k brain-dead. Like I have long said, it takes time for nature to cleanse itself of detritus.

Anonymous said...

the deep sea acutan one of the oldest king crab catchers . Just a quick question? how many of you worked 7 days a week 12 to 18 hours a day? we had a contest i made it 36 hrs nonstop and no drugs or caffeine but the guy who won was a vietnam vet who made the record 42 hrs nonstop butchering king crab it is like curls and then you have do deal with what they call crab rash the white blood of the crab couglulates and causes a rash. You are so lucky to have not dealt with the barbaric working conditions of alaska so just apreciate what you have and if it means just good health you are so ahead of so many people.

Anonymous said...

Where do you think the whole "Bend is #1" shit began? It's who we are.

If this place was so fucking wonderful you wouldn't have to keep talking all the time about how fucking wonderful it is. Who the hell are you trying to convince? Outisders? Yourself? Both? It's laughable.

Anonymous Crab Boat Guy: Yeah, living in Bend is probably better than working on a crab boat in Alaska. It's probably better than being in a fucking Nazi concentration camp too. What's your fucking point?

LavaBear said...

if this place was so fucking wonderful you wouldn't have to keep talking all the time about how fucking wonderful it is.

You are confusing the marketing machine with true Bendites. Everyone I know that is from here doesn't spend much time talking it up. (exceptions are the REHO's obviously they have a vested interest) Any real Bendite isn't gonna be flapping their jaws...they will simply call you a cali fag and tell you to get the fuck out. It's better here without the riff raff.

I'm completely disgusted with the "Bend is #1" chant as anyone. Probably more because I give a shit. Yet I understand where it comes from. And I've also spent my life telling fucking idiots who move here and then complain about the (you choose: weather, economy, shopping, arts, higher education) to go home. It's a better place without you.

Anonymous said...

I guess I have experienced a lot of bad things to think? that bend is'nt that bad, Boy you have really lived a shelterd life? Think about it for a minute is it really that bad here? Have you had to bury one of your children ? I have, 13 years ago I had to bury my daughter, She was born with a disease and there was nothing we could do for her you see life can turn upside down in a matter of hours.this is the absolute truth I am not making any of this up.

IHateToBurstYourBubble said...

And I've also spent my life telling fucking idiots who move here and then complain about the (you choose: weather, economy, shopping, arts, higher education) to go home.

The weather here is much better than where I came from: the Midwest. That is the crappiest weather anywhere. This place is a paradise weather-wise, compared to that. Cali-bangers compare it to SoCal & start their whining... solution: Go Home.

I DO complain about the economy... or did. Because we had a Monster Liquidity Event that actually could have been used to diversify & improve this place. But they doubled down on REd, right up to losing it all, and beyond. This place is SCREWED. I had hope beyond a reasonable point. But look around. City Council is still bent on destruction. Bend will go broke. That is inevitable.

Shopping, arts, higher ed? Gimme a Costco & I am fine. What DOES suck is that much of the local diversity is going to get killed off because of the whole RE-bubble-causes-corporate-demographic-radar-to-go-off-and-now-we-have-a-Trader-Joes-and-a-bunch-of-other-crap-and-all-the-local-stuff-will-go-down problem. Local biz is going to be exterminated. Follow with chain restaurants & zombie BS SoCal-insanity retail imported like so many fake titties.

I WISH Bend could go back to Olde Bend, and sometimes it sounds like a lot of people here think it will. It will not. It will be transformed into a corporate nightmare. $7/hr pervasive. Lots who loved Olde Bend will leave. Then you're going to have to decide if you wanna live in a place like that. I don't. Unless prices went Damn Low. And I mean 70% of the US median.

The crash will happen here for good reason. Hell, Great Reason. Lots of marge's & Busters & Dunc's will leave, disgusted. Mark my words. Half the people who came for the Olde Bend lifestyle will leave & seek it elsewhere.

You can't be a Virgin twice.

timothy said...

>>Lots of marge's & Busters & Dunc's will leave, disgusted.

Now that's an interesting though. Old timers leaving because Bend fails to revert to its former self.

A Bend that is neither fish nor fowl. Not what the Californians want and not what the Old Bend crowd wants.

Anonymous said...


Buster is back!

He came.

He shit on everybody.

He left.

What else is there to do, but exactly the same thing, yes?

Buster is right on. This blog sucks, with only man-twats left. BruceyPussy, and his band of losers. I too saw his man-wife earning the family income at the bike shop. Sad.

I will come back with the snow for some pow pow skiing, and to check up on the BP and his 10,000 page manifesto, you know, to see if the Pussy has scrapped up enough coin to print off his manifesto at Kinkos and submit the complaint to Judy. (ROTFLMAO!! LOL)

No, really, the Pussy is almost done with the complaint, just a bit more polishing of the turd before he submits it to the Ethics Commission and Chair Judy.

Buster has declared this blog done. The Buster has spoken, so shall it be.

Bend Economy Man said...

Just wanted to point out that last June, Bend was #1 on that National City list.

You would think they'd point that out. Of course, last June 2007 it would have been too controversial to report prominently that Bend was rated the #1 most overvalued market in the USA. Everyone knew in 2007 that RE was toast but The Bulletin didn't have the green light to report on it. Now it seems the cat's officially out of the bag. Next headline in The Bulletin "There's a nose on your face."

As has been pointed out many times, it doesn't matter if there is a "high percentage" of wealthy retirees, trustafarians and high-income telecommuters. First of all, are they a bunch of money launderers? Why doesn't their income show up in tax returns? REAL wealthy places like Malibu, CA, Greenwich, CT, Bainbridge Island, WA or Naples, FL have high median incomes in addition to high median house prices. What is so special about our Bend wealthy that their income is invisible? Maybe they were a bunch of fraud-prone poseurs who were never wealthy in the first place, but in debt to their eyeballs?

I believe there are some such people in our town, but I don't think it's a "high" percentage (>10%), but for the sake of argument let's say half the town is made up of wealthy people. I'll even grant you that this would prop up the price of very-high-end real estate in Bend, even though I believe even Awbrey Butte McMansions and Drake Park riverfront property will also fall in value.

But how how do wealthy retirees and telecommuters prop up the price of STD crapshack subdivision houses?

Anonymous said...

BEND IS STILL #1, STILL #1 over-valued RE in USA. We really are exceptional.

( Glad to see that BEM is still here, we need at least ONE non man-twat )

Many homes in five Oregon cities overvalued
Portland Business Journal
June 7, 2008

Bend has the second most overvalued homes in 330 metro areas in the United States, according to a real estate report from Global Insight.

Waltham, Mass.-based Global Insight said Bend has 49.5 percent overvalued homes. No. 1 was Atlantic City, N.J., at 55.6 percent overvalued.

Anywhere over 35 percent, according to Global Insight, runs "a risk of substantial price declines" of 10 percent or greater.

The median home price in Bend is $306,500.

Four other areas in Oregon ranked in the top 20 list of overvalued homes areas.

Portland, where the median home price is $286,500, ranked No. 7 with 36.2 percent of homes overvalued. Eugene, with a median home price of $228,500, ranked No. 11 with 32.8 percent overvalued. Medford, with a median home price of $237,900, ranked No. 12 with 31.9 percent overvalued. Salem, with a median home price of $199,575, ranked No. 16 with 28.9 percent overvalued.

Global Insight uses various factors to determine under- and overvaluation in each area, including median home price, household income, the density of households and mortgage rates.

Anonymous said...

The crash will happen here for good reason. Hell, Great Reason. Lots of marge's & Busters & Dunc's will leave, disgusted. Mark my words. Half the people who came for the Olde Bend lifestyle will leave & seek it elsewhere.


This is where you are WRONG Homer, buster, marge, and dunc will not leave, Bend is already returning to its former self.

Soon all these empty commercial prop's will get looted, then covered with plywood, to prevent looting, at that point in the coming year, 1/2 of bend will be covered with plywood.

Best of times, we'll NOT leave, but all you newbies ( less than 15 years ) will leave.

I have said since day-one here that 1983 was the best of times, and in that day, all of downtown was a plywood ghost town.

BEM is right ON, BEND was never real rich, it was always phony credit rich, this place will clear out quick, when there is NOTHING to hustle. Us old-timers will NOT spend a nickel, and the carpet-baggers who came to bend in the last +10 years will leave, when there is nobody to suck blood from.

I know lots of 'rich' people in Bend, and most are NOW not so rich, that their HOME is worthless, and unsaleable. 1,000's of Bend, newly located 'rich' are now trapped, and fucked, as I have said all along here the +$1M homes will get hit the hardest.

Bend is NO longer cool, and when even the BULL reports that fact, you know we have hit the fucking bottom.

I repeat Marge, Dunc, and BUSTER, will NOT leave. This is our base-camp.

I can give a rats ass if Bend population drops to a 1,000, will NOT effect me one iota.

I'll be once again able to walk/bike around town without fear of being run over by a cali.

Anonymous said...

I have said since day-one here that 1983 was the best of times, and in that day, all of downtown was a plywood ghost town.

I read shit like this and what I see is a guy who is envious of anybody who has more money than he does and wants them to go away so he can go back to the "good olde days" when everybody in town was broke and he didn't feel inferior.

I too was living here back when half the downtown was boarded up and the big social event was standing in line to get your government surplus cheese. I do NOT want to see Bend go back to those "good olde days." I too am annoyed by the poseurs and the scammers and would like to see them go away, but I would like to see our housing market and economy stabilize at a more modest, sustainable level without dropping back to Appalachian poverty. I'm not sure we can bring that off, but I'd much prefer that outcome to a return to 1983.

Anonymous said...

blownin out my status said: One day I went in to the Pussy's bike shop to find a part, as its near my house. The first word was "Can I HELP YOU", this women was a white version of Grace Jones, a real man-hater. I quickly did a 180, and announced that I had a senior moment.

You went there to check out Bruce's wife plain and parts needed. Like the other 2 bike shops within a stones through wouldn't have your part?

It's pretty funny that you feel it's your duty to "bitch slap" people around but when you get called on your bullshit, you want to take your toys and go play elsewhere.

One of the things I like about Bend are the people in our community who's list of been there done that's are pretty impressive. You'd never know it because they are don't talk about it much. The real deal doesn't need to blow out one's status to the crowd. It's always best to keep your ego in check because nobody gives a fuck about your financial status. At least none of the people who have been here a while.

See you in another sandbox Buster...

IHateToBurstYourBubble said...

This is where you are WRONG Homer, buster, marge, and dunc will not leave, Bend is already returning to its former self.

I mean Long Timers will leave. Maybe.

Like Tim says, no one will know what to make of this Frankensteinian beast. It won't be what you remember. Plywood on windows WILL become commonplace... but what goes in afterwards is what will be unpleasant.

Bend is in a slow grinding process of squeezing out local businesses. Super Burrito goes from the core to the periphery to...? This will keep happening until downtown is just an abomination.

IHateToBurstYourBubble said...

I don't think we "clicked" on hundreds of corporate demographic radars in the last busts. This boom set off every corporate radar in the World. We're on every corporations Must Have list.

These companies will "re-populate" Bend, and it won't be like the last times. Teen zombies working at $7/hr in soulless shells.

Nice for a visit, not to live.

Anonymous said...

I repeat Marge, Dunc, and BUSTER, will NOT leave. This is our base-camp.

Right on that one!

I will not permanently leave until my dust is spread here. I will, however, finally stop working in RE and get a gas guzzling motorhome to start a new phase in my life of travel.
I still like Bend and do wish it would revert to the 80's. We all know that can't happen. I love Sunday mornings in town. No traffic, the boom box teenagers are passed out in bed after partying all night. No gravel trucks or kiddie packed SUV's. Sunday AM in Bend is like it used to be most of the time in the 80's. I can lament the good ol days but it won't change things here. So we just go for the ride. The easy money is gone, even the dishwashing jobs are drying up. I don't know how bad it's going to get around here but we need to ready for a storm. Nuff said.

Bend Economy Man said...

If anyone still cares to hype Bend's economy, they'll say that the point is that the wealthy people who live here don't have income, they have assets. They live off of assets, rather than income like the rest of us jerks.

That makes sense for about 2 seconds.

If you live an affluent Central Oregon lifestyle, you are spending money. That money has to come from somewhere, and it's called income.

If you're wealthy and you're really smart, your income will be made up of interest and dividends and deferred compensation, annuities, payments from a trust, real estate rental payments and other types of income FROM investment without needing to sell off your assets.

If you're wealthy and less smart, you'll gradually sell off your assets to maintain your lifestyle.

If you were a high-income person your whole life and don't have "wealth" but have a high retirement income from your previous career (pension, IRA, 401(k)), you'll live off that.

But contrary to what the Realtors say, in none of those cases does the money you make available to yourself to spend somehow "not count as income" or not show up on a tax return. Interest is income. Dividends are income. Capital gains from investments are income. Rent from tenants is income. Withdrawals from an IRA or 401(k) are income. And it's all taxable and it all needs to be declared in your tax return.

About the only way I know of to have money flowing in and it not be considered income is if you're selling off assets for less than what you bought them for, in other words, realizing losses. In which case you're probably not so wealthy. Or you could have tax-free income from interest on municipal bonds, but that's still (exempt) income.

Anyone got some different ideas? Because I think that the local media have been a bit negligent in not blowing holes in this "the wealth of our residents doesn't show up in income statistics" theory.

Bend Economy Man said...

I thought of another way where if you have a lot of assets, you can have money to spend without taxable income: use your assets as collateral to take out loans.

Eventually you have to get some non-loan cashflow coming in in order to make interest payments, though.

Anonymous said...

The only other way it wouldn't show up is if the home they own here is a second home. There is no huge majority of that however. Most are still in Sunriver, which is counted in the area median income.

IHateToBurstYourBubble said...

Eventually you have to get some non-loan cashflow coming in in order to make interest payments, though.

And there's the rub: This Ponzi Scheme has been played by MILLIONS of Americans to good effect for well over a decade. It FEELS like ever-increasing income.

Bend RE assets inflated some, so we borrowed. It inflated some more, and so we borrowed. RE assets have increased from just over $1.5BB 20 years ago, to something like $30BB at the top. That's a WHOLE LOT of borrowing, and a whole lot of Feel Good from Ponzi Scheme Income.

I would put to you that THIS, Ponzi Scheme Loan/Income, is the primary driver of our economy, and has been for 20 years.

That is why the Bend Crash will be the Most Spectacular Crash EVER.

Anonymous said...

Anyone got some different ideas? Because I think that the local media have been a bit negligent in not blowing holes in this "the wealth of our residents doesn't show up in income statistics" theory.

So where are they all-inclusive income statistics you're referring to? Interest and dividend income doesn't show up in the payroll data reported by the state of Oregon.

Anonymous said...

Is anyone here worried enough about the future that you are stocking up on anything? If so what do you stockpile?

Anonymous said...

Interesting comments BEM. The Census Bureau statistics shed some light on different types of income. Let's compare Bend with the country as a whole.

Population 16 years and over 58,225
With earnings 25,054 (43% of population)
Mean earnings $58,011
With Social Security 7,440 (13% of population)
Mean Social Security income $12,814
With retirement income 4,787 (8% of population)
Mean retirement income $25,083

Population 16 years and over 234,243,963
With earnings 89,607,878 (38% of population)
Mean earnings $66,733
With Social Security 29,902,386 (13% of population)
Mean Social Security income $13,877
With retirement income 19,457,645 (8% of population)
Mean retirement income $19,141

So Bend has a higher percentage of wage earners than the country as a whole, but local workers earn less than average (not a big surprise). Our percentage of Social Security recipients and retirees with income matches that national percentages, but on average retired Bendites receive 30% more in "retirement income" (i.e. interest & dividends) than retirees in other parts of the country. That lends some support to the "higher percentage of wealthy retirees" theory.

-- bendbb

IHateToBurstYourBubble said...

RE assets have increased from just over $1.5BB 20 years ago, to something like $30BB at the top. That's a WHOLE LOT of borrowing, and a whole lot of Feel Good from Ponzi Scheme Income.

That's Deschutes County RE assets.

Anonymous said...

Marge wrote: Is anyone here worried enough about the future that you are stocking up on anything? If so what do you stockpile?

yep, staples and bullets

IHateToBurstYourBubble said...

Let's compare Bend with the country as a whole.

Further points of interest:

While we have 43% of our locals working (vs 38% nationally), they earn 13.07% less, per person. Workers in Bend MAKE LESS than the nation as a whole.

Poor Retired (ie Social Security) make 7.66% LESS than the nation as a whole.

The SMALLEST sector makes more locally, but it's 8% of the population.

Retirement income, while higher here per capita, is NOT an overwhelming number of people. Total income here & nationally, is DOMINATED by wage earners, and we are FAR below the nationwide AVG.

But to hell with that.

What matters is purchasing power, and this is where Bend is utterly crushed. The purchasing power of each dollar earned locally, NOT MATTER ITS SOURCE, is PATHETIC.

The nationwide housing median just went below $200K nationally, and we are still at $300K, despite the fact that we make 13% LESS. THAT is what matters.

And it's getting worse. It costs $12 to have lunch in most spots downtown. WTF! That's ridiculous.

The misery index (Unemployment rate + Inflation) jumped dramatically on Fri. But the US will have NOTHING on Bend & look what happened. When the inflation & unemployment monsters rear their heads here... total destruction. And it hasn't really started here...

Duncan McGeary said...

1984. Those were hard scrabble days.

I'm not sure I'd be in a hurry to get back to them. I'd like downtown Bend to stay busy for another 5 to 10 years, at least.

I think Paul-doh's got a great point about the big box stores being the biggest employers in town: once they arrive, they rarely leave, unless they go bankrupt, and even then...

I've actually thought about going to someplace like Baker City, but not for another 10 years or so. And only if I could sell my house in Bend for a lot of money and buy something equally nice but much cheaper, and who knows if that could ever happen?

It has the same high desert air I like, and beautiful mountains and such.

Our kids...and hopefully someday soon, our grandkids....seem ensconsed in Portland, and that drive isn't much longer and much better certainly in the winter over the interstate.

And, Hey Buster. Don't give up on giving up, just yet! There's still plenty of fun to be had.

Anonymous said...

While we have 43% of our locals working (vs 38% nationally), they earn 13.07% less, per person. Workers in Bend MAKE LESS than the nation as a whole.

Like I said that's not a big surprise, but it's worth pointing out that having 13% more people working (43/38) balances out the 13% lower average wage which is why Bend family income matches the national median. What surprised me is that retirement income is 30% more than the national average. That's significant and it helps explain the prevalence of the Broken Top-type developments. Since you didn't attempt to refute the "higher percentage of wealthy retirees" theory I'm assuming you agree with that.

-- bendbb

timothy said...

There are a slice of very wealthy people in Bend, but as has been pointed out, that doesn't really help the median.

The median wage earner can't come near to buying the median house in Bend if the appreciation isn't there for the house to pay for itself.

As has been said, the real disaster is the $400-$700k house in Bend. Who the hell can buy those now? The rich don't want them, the poor can't afford them, and speculators are busy trying to get out from under them.

bruce said...

Bets on NODs for this year anyone?

673 to date. I'm betting we get real close to 1500 total.

Anonymous said...

bruce said...
Bets on NODs for this year anyone?

I'll take that bet, I think they accelerate the next several months to hit 1800.
Is this a burrito bet? Or?

bruce said...

Burrito and a beer, winners choice.

Just had one filed on a house around the corner yesterday. It's getting close to home.

bruce said...

Hey, Buster, nice to see your back. I'm going out to chase a little white ball around at the same place I punched a time clock at 4:58 AM this morning. Just like I do five days a week, before I go teach angry young men to control their emotions for which I get another paycheck every month. Oh, that's on top of the patent royalty checks that come quarterly...I could get by without working hardly at all, but that's fucking boring.

Oh, and on the way to Widgi, I have to stop by the bike shop and do the books. It pays for my health insurance. And keeps my wife happy. To me, she's more gazelle than gorilla, but I guess when you're a midget she might seem pretty tall.

What does a bitter old man do with his free time--count his riches?

Anyway, nice to see you've just been lurking after you got spanked so bad that you decided that we weren't worth "educating" about how to get rich. Every place needs its own asshole, just like it needs its own pussy to pick on ;)

Anonymous said...

Buster, I have been missing you too! No one speaks better and
right on the money than you.
Marge likes Buster!
Homer, I think I want an affair with Buster.
May I Honey?
We do have an open relationship, NO?
I am really getting bored with RE.

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