Wednesday, September 19, 2018

Hmmmmm, the economy

California: "Housing market falters for fourth straight month", Inventory up 17.2% YoY 
California’s housing market dropped below the 400,000-level sales benchmark for the first time in more than two years as high home prices and eroding affordability combined to cut into housing demand, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today... 
....While home prices continued to rise modestly in August, the deceleration in price growth and the surge in housing supply suggest that a market shift is underway,” said C.A.R. Senior Vice President and Chief Economist Leslie Appleton-Young. “We are seeing active listings increasing and more price reductions in the market, and as such, the question remains, ‘How long will it take for the market to close the price expectation gap between buyers and sellers?’”  
...Statewide active listings rose for the fifth consecutive month after 33 straight months of declines, increasing 17.2 percent from the previous year. August’s listings increase was the biggest in nearly four years. 
What does the economy look like for you? Are we close to the top, or is there still room to grow? I'm feeling like things are either near the top, or it's past us. Readers, what do you think?  

11 comments:

  1. Is this just CA or more general? It seems like (to me, living in a much cheaper place) that housing costs in CA are not sustainable and that they exclude enough of the potential market that any perturbation in their target purchasing market could be a problem.

    I don't know how much room to grow there is either. The problem is that any downturn will squeeze poorer people worse, and I didn't think there was much to squeeze. Add the government debt load/lack of restraint/lack of sanity and us managing to anger all the other countries that we play with (unless they have dictators, I guess) and it doesn't look good for us. Clancy had the quotation about America being a shared idea and optimism (i think in Debt of Honor, and since much of the problem seems to be us being malicious to one another, it seems like we have reason to feel less optimistic about ourselves, which is a longer-term problem than a downturn.

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    1. America was a different country back in 1994, when Debt of Honor came out. Just consider that Roy Vagelos was president of Merck!

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    2. I think companies are finally figuring out that they can get their magical innovation fairy dust in Portland, Austin, Denver, etc for a fraction of the cost of SF, and that workers who commute two hours each way are less productive.

      Roy Vagelos was the last president of Merck who was trained as a chemist and not as an MBA. His retirement was the beginning of the end for the pharma industry.

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    3. Hey, show some respect! Ken Frazier was trained as a lawyer! (sarcasm font)

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  2. At the risk of sounding like a harbinger of doom, here's a link to an interesting piece from the NY Times:

    https://www.nytimes.com/interactive/2018/09/12/business/the-next-recession-financial-crisis.html

    The authors are careful to point out that there's no impending crisis yet, but they frame an interesting argument that another storm could be on its way.
    Referencing this article, outspoken political commentator and former secretary of labor Robert Reich posted the following comment:

    "I don’t want to scare you, but I’m starting to see the signs of a sharp financial downturn – piles of consumer and corporate debt that can’t or won’t be paid off as interest rates rise, a stock market whose price-earnings ratios are way out of whack, corporations that are using profits to buy back stock rather than invest, and public policies (trade wars, budget deficits, an unhinged president) that could get out of control at any time.

    If you’ve got savings, don’t put them under your mattress. Put them in a widely-diversified portfolio of stocks and bonds, and keep them there even when the euphemistically-termed “correction” hits."

    I'd agree that--by and large--the economy is very near the top and possibly heading for a correction.

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    1. P/E ratios are not out-of-whack at the moment. Stock buybacks are normal. Warren Buffet seeks companies that buy back stock.

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    2. With some notable exceptions, companies that buy back stocks typically do so at the expense of investing in innovation or people. I can't blame Warren Buffet for being attracted to such companies; fewer outstanding common shares means that he can swoop in and pick up preferred stock if and when a company gets in trouble later on, just like he did with Dow.

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    3. http://www.multpl.com/table

      P/E a little frothy, but not monumnentally out of whack historically. (to be fair, I'm mostly in cash here).

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  3. In the midwest still a lot of room to grow. Lots of construction projects are underway. Neighborhoods that were on a downward spiral are being revitalized. Company I work at is expanding (every time we expand we quickly run out of space). We are also engaged in new product innovations that will be on the market in the next 6 months.

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  4. America is great again, markets just going to keep going, we're creating so many jobs, so many, so many more than crooked Hilary would of, the maniest, really many many jobs, believe me, America's just going to get greater and greater. No collusion, total witch hunt!

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  5. Actually still housing "crisis" in socal: https://www.kpbs.org/news/2018/jun/19/san-diego-takes-steps-alleviate-housing-crisis-rep/ and nocal: https://www.businessinsider.com/san-francisco-affordable-housing-solutions-2018-6

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