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Knowing That The Frenzy Is Over

A report from CNBC. “Mortgage rates are around the lowest in three years, but buyers are suddenly much more cautious about purchasing a home. Competition is cooling, and consequently sellers can no longer command any price. At an open house in Dallas on Sunday, a few dozen potential buyers toured a home listed at just under $1.4 million. The agent for the home said the market is still moving, but buyers are getting more picky.”

“‘I definitely think it has softened a bit,’ said Kelley McMahon a Dallas-area agent with Compass. ‘It’s not a seller’s market right now. Now is not the time for sellers to put out these crazy prices. Appraisals have gotten a lot harder, and buyers are a little more cautious. They’re more willing to take their time.'”

“Just more than 10% of offers written by Redfin in August faced a bidding war, according to the brokerage’s monthly survey. That is down from 42% a year ago. ‘Despite remaining near three-year lows, mortgage rates have failed to bring enough buyers to the market to rev up competition for homes this summer,’ said Daryl Fairweather, chief economist at Redfin.”

“Dustin Collins and his wife toured the Dallas property while carrying their new baby. They are watching interest rates closely but don’t feel the pressure to move quickly, the way so many buyers did last year. ‘For us, knowing that that kind of the frenzy is over, it’s more about finding the right house for us than paying too much for it,’ Dustin said. I feel like now houses are sitting a little longer, it just gives us a little more opportunity to find the house we want.'”

The Houston Chronicle in Texas. “One of the most expensive home listings in Houston just got a little more affordable. Located at 6 West Rivercrest is a picturesque, 21,032-square-foot estate that more closely resembles a resort than a residential structure. It’s been on the market for more than a year now, originally priced at $18.99 million. It’s now being marketed for $14.5 million, that’s a price reduction of nearly $4.5 million.”

From Variety on California. “Last year, amid a deluge of publicity, an ultra-contemporary mansion in the posh seaside town of La Jolla, Calif. was listed for sale at $30 million. After a significant pricechop and a change of realtors, the architecturally significant property sold last week for $20.8 million.”

The Orange County Register in California. “From those humble beginnings, the business grew into a real estate empire spanning Orange, Riverside, San Bernardino and Los Angeles counties. In June, the Tarbell line came to an end when four Berkshire Hathaway franchises acquired the chain’s remaining 20 offices, 1,000 agents and an escrow company. The brokerage is one of at least three Southern California real estate chains to close or sell in the past year, and more shifts are likely as residential brokerages ‘go through a fundamental restructuring at its core,’ one industry analyst said.”

“Diane Wheatley, a broker hired in July 2017 to manage Tarbell’s Ontario office, said a majority of Tarbell’s offices were losing money by the time she came on board. ‘My office, in particular, would lose $15,000 to $20,000 a month. … I know other offices were losing money like that as well,’ Wheatley said.”

“Whatever the case, real estate brokers everywhere are facing mounting pressures as new business models develop. Last June, the Century21 and Coldwell Banker Beachside chain shut down. In May, Realty One Group sold its seven Southern California real estate offices to concentrate on creating a franchise operation.”

The Tri-City Herald on Washington. “Buyers who missed the chance to buy Olie the Goalie’s estate six years ago are getting a second shot at one of the Mid-Columbia’s most lavish homes. The 15,260-square-foot mansion with sweeping views of the Horse Heaven Hills is back on the market. The estate hit Realtor.com this week with an asking price of nearly $6.3 million.”

“Olie Kolzig and his wife, built the house in 2004, intending to make it their ‘forever’ home. The ‘house that hockey built’ is going on the auction block Oct. 5. DeCaro Auctions will sell the property to the highest bidder with no minimum price. The Kolzigs listed the estate in 2011 for $4.1 million. Bellevue-based brokers touted it as a wine country retreat and even attracted the attention of Puget Sound media. Despite the high-profile marketing campaign, it took two years and a major price cut to sell the property.”

“A trust connected to local car dealer Russ and Jan Dean paid $2.3 million in 2013. Washington Hillside, a property management firm, oversees it. Kolzig explained the price drop in a 2012 interview with the Tri-City Herald. ‘We are losing money on it, but we know we overbuilt for the area,’ he said at the time.”

The Auburn Examiner in Washington. “A small, but monumental change is going into effect on October 1, 2019: Real estate firms representing sellers will now be publishing the commission the seller is offering to pay a broker representing the buyer in the listing information and online.”

“There’s going to be downward pressure on the commission paid to buyers’ agents. Can we all agree on that? But given this, if today’s median house price is what it is because it’s assuming a 3% buyer agent commission if the average commission paid to buyers’ agents fall, then there will be that much downward pressure on Puget Sound’s median house price.  Said another way: If the average commission to buyers’ agents goes to 2% from 3%, then sellers will only need to markup their sale price by 2% versus 3%, thus putting downward pressure on the area’s median house price. Not a lot, but a little.”

“However, if the situation arises where a seller doesn’t want to pay the buyer’s agent, the buyer will now not only have to pay their down payment, their closing costs, their prepaid taxes, and homeowners insurance but also their agent’s commission. This can be quite a bit of additional money. Given that this scenario will eat into the buyer’s purchasing power.”

“There will be a few sellers who do, and that will put further downward pressure on median house prices overall. This will happen since once that house sells at a theoretically 3% lower price, it becomes a comp for other houses in the neighborhood. Going one step further, if that other house in the neighborhood is offering to pay the buyer’s agent commission, the door is now open to low appraisals since there is an inherent 3% difference in the sale price for what could be the exact same home.”

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  1. ‘The Kolzigs listed the estate in 2011 for $4.1 million…A trust connected to local car dealer Russ and Jan Dean paid $2.3 million in 2013…going on the auction block Oct. 5. DeCaro Auctions will sell the property to the highest bidder with no minimum price’

    Like a bowling ball going down the stairs.

    1. “Last year, amid a deluge of publicity, an ultra-contemporary mansion in the posh seaside town of La Jolla, Calif. was listed for sale at $30 million. After a significant pricechop and a change of realtors, the architecturally significant property sold last week for $20.8 million.”

      Given that an entertainment figure bought the place, it may appear like another bowling ball rolling down the steps when viewed through the lens of the rear view mirror a decade or two from now.

  2. ‘My office, in particular, would lose $15,000 to $20,000 a month. … I know other offices were losing money like that as well’

    ‘Whatever the case, real estate brokers everywhere are facing mounting pressures as new business models develop. Last June, the Century21 and Coldwell Banker Beachside chain shut down. In May, Realty One Group sold its seven Southern California real estate offices to concentrate on creating a franchise operation’

    It’s hard to spin that REIC.

    1. If there ever was a bloated workforce in need of downsizing. Practically every yard sign around here has a different face on it.

      2. The original gig economy. Low barrier to entry, and you can turn on and off when you feel like it. Like Uber or LulaRoe. Great little job for some doctor’s wife when the kids are teenagers and mom needs something to do.

      2. The agent in the story – Roula Fawaz – I knew I recognized that name. She was ubiquitous on flyers that always showed up at my parents house in Irvine.

  3. “Mortgage rates are around the lowest in three years, but buyers are suddenly much more cautious about purchasing a home.

    But…but…pent-up demand on the sidelines! Hasn’t that been a staple line of the REIC shills?

      1. I’m guessing she’s curled up in a fetal positions someplace in a Xanax haze, while what’s left of her conscience is tormenting her for all those lies she told.

  4. ‘if the situation arises where a seller doesn’t want to pay the buyer’s agent, the buyer will now not only have to pay their down payment, their closing costs, their prepaid taxes, and homeowners insurance but also their agent’s commission. This can be quite a bit of additional money. Given that this scenario will eat into the buyer’s purchasing power’

    You mean instead of rolling all that easy money into the loan. Where’s that tiny violin gif?

    1. “…the buyer will now not only have to pay their down payment, their closing costs, their prepaid taxes, and homeowners insurance but also their agent’s commission. This can be quite a bit of additional money. Given that this scenario will eat into the buyer’s purchasing power’”

      Yeah, good luck with that. “Buyers” can’t even come up with 3% down, and we’re to believe they can come up with another 3% for some leech’s commission? HAH!

  5. ‘I definitely think it has softened a bit…it’s not a seller’s market right now. Now is not the time for sellers to put out these crazy prices. Appraisals have gotten a lot harder, and buyers are a little more cautious. They’re more willing to take their time’

    And new shacks are going up for hundreds of thousands less around Dallas.

    DONG!

    ‘Just more than 10% of offers written by Redfin in August faced a bidding war, according to the brokerage’s monthly survey. That is down from 42% a year ago. ‘Despite remaining near three-year lows, mortgage rates have failed to bring enough buyers to the market to rev up competition for homes this summer’

    Eat yer crowz Daryl.

  6. “Diane Wheatley, a broker hired in July 2017 to manage Tarbell’s Ontario office, said a majority of Tarbell’s offices were losing money by the time she came on board. ‘My office, in particular, would lose $15,000 to $20,000 a month. … I know other offices were losing money like that as well,’ Wheatley said.”

    I suspect a lot of money-bleeding RE offices are getting a visit from “downtown” with a brutal version of the “Always Be Closing!” speech from Glengarry Glen Ross. “I’m here on a mission of mercy….”

    https://www.youtube.com/watch?v=GrhSLf0I-HM&t=220s

  7. Almost a third off the La Jolla property, the seller will not be bragging about that at a cocktail party. So far, the .1 percent are getting hurt more than the working class. Have not seen that for decades. The .1 percent wants its housing deductions back and the cheap illegal labor to maintain the houses.

    1. “So far, the .1 percent are getting hurt more than the working class. ”

      Stats put the net worth of the top 0.1% households at about $43M. While there are people who miss their SALT deductions, it isn’t the people with net worth of $43M.

      1. When houses are dropping by $9 million, the .1 percent is being hurt. The lack of the SALT Deduction is causing them to pay more income taxes and lose on their homes.

        1. Maybe a back door wealth tax? I’ve always thought a progressive property tax would be easier to implement and more difficult to evade than a wealth tax.

        2. From the article:

          After a significant pricechop and a change of realtors, the architecturally significant property sold last week for $20.8 million, an amount that appears to be the most paid for a La Jolla home within the last three years and could be the town’s second-biggest residential transaction ever — behind only a $23.5 million sale recorded way back in 2005.’

          You think someone lost money on this?

  8. I would say this is pretty significant.

    “After a significant pricechop and a change of realtors, the architecturally significant property sold last week for $20.8 million.”

    1. Seriously think about the comps, with the expensive real estate in the area, you may have wiped out a billion dollars or more in sweet equity.

  9. That’s is not even the average commission on the average house…?

    Yes, the office splits the commission. But with houses selling for $1 million+, this should be in the noise…like are you guys selling anything anymore?

    “majority of Tarbell’s offices were losing money by the time she came on board. ‘My office, in particular, would lose $15,000 to $20,000 a month. … I know other offices were losing money like that as well,’ Wheatley said.”

  10. There will be sellers and seller’s agents who will try to schlong buyers. They will sell less and less in this market. Get we agree on that?

    “There’s going to be downward pressure on the commission paid to buyers’ agents. Can we all agree on that?”

    1. Interesting timing of this report. Last time I saw this type of alarmism on social spending/entitlements was around the Tea Party wave. Paul Ryan couldn’t get entitlements cut ever. I think the powers at be are worried that if something doesn’t get done soon to trim entitlements, the Dems will increase taxes significantly to pay for these obligations.

  12. Markets are already fading the hopium buzz, while the usual Fed-bullion bank attempt to slam precious metals by selling non-existent paper gold and silver has largely failed. Are the central planners and market-riggers losing control?

  13. Do not worry, AOC and her favorite presidential candidates will fix everything with MMT. Got gold and silver? After the green new deal, there will not be enough electricity for Bitcoin.

    1. I was going to ask, what do people think about the various preciousss? I watch a lot of youtube and there are ton of videos of gold bugs calling recession everywhere. Of course, that’s the youtube self-enforcing echo chamber feedback loop. Watch one video, and they recommend a similar video, and another, and another, until you think the sky is falling.

      1. preciousss

        That word has sent chills up my spine since I first saw the 1977 animated version of The Hobbit. It didn’t help that my uncle was really good at voice imitations. I much preferred his imitation of Elliot from the original Pete’s Dragon.

      2. In normal times, when market forces play a substantive role in governing economic activity, recessions are deflationary, and hence very bad for gold HODLers.

        However, given a global central banking cartel that is determined to reflate the economy at all costs, this may prove a historically attractive time to own gold.

        1. Citi says gold prices may top $2,000 an ounce
          By Steve Goldstein
          Published: Sept 10, 2019 6:53 a.m. ET
          Bloomberg News
          Gold bars sit in a vault at a refinery in Australia.

          Analysts at Citi say gold prices will “trade stronger for longer” and see them possibly topping $2,000 an ounce and posting new highs in the next year or two.

          “We now expect spot gold prices to trade stronger for longer, possibly breaching $2,000/oz and posting new cyclical highs at some point in the next year or two,” the analysts said in a note published Tuesday.

          “From a birds-eye view, low(er) for longer nominal and real interest rates, escalating global recession risks—exacerbated by U.S.-China trade tensions—heightened geopolitical rifts amid rich equity and credit market valuations, coupled with strong central bank and investor buying activity, are all combining to buttress a bullish gold market environment.”
          …

    1. Orwell is already here. Look at the Peloton cycles with the real-time instructors. It is exactly the same scene as the scene in 1984, where the morning calisthenics mistress sees Winston Smith cheating at his morning exercises through the two-way telescreen, and barks at him until he touches his toes. Except that in the modern era, people pay for the privilege of being watched.

      It’s already bad that stores will ping your phone with an ad depending on which aisle you’re in. But now Metro wants to start Minority-Report style advertising on our nations’s crumbling Subway.

      Ads on Metro could soon keep a closer eye on you
      Max Smith |September 6, 2019, 1:23 AM

      “Metro’s push for more ad revenue to address continued budget challenges could lead to ads tracking riders throughout the system.

      Instructions to companies interested in taking over Metro’s advertising sales describe a major push toward more digital advertising screens that come with sensors to detect Wi-Fi, Bluetooth or other signals.

      Those signs could be used on the advertising side to make more money by individually targeting sales and promotions and — on Metro’s operations — side to determine how riders move through the system.”

      https://wtop.com/tracking-metro-24-7/2019/09/ads-on-metro-could-soon-keep-a-closer-eye-on-you/

      1. Orwell is already here. Look at the Peloton cycles with the real-time instructors

        I just ordered a Peloton tread. Excited for it to arrive. It’s kind of a pain trying to get a 4-year-old in a car seat, drive to the gym, drag him into kid care (where he doesn’t want to be), and then drive home. I figure it’s worth it to save the time just to run on a treadmill at the house. Obviously running outside is the best, but it’s not always possible to disappear for a few hours when you have a family and young kids. We’ll see if it lives up to the hype.

        1. “It’s kind of a pain trying to get a 4-year-old in a car seat, drive to the gym, drag him into kid care (where he doesn’t want to be), and then drive home. I figure it’s worth it to save the time just to run on a treadmill at the house.”

          Gallagher really nailed it in his skit about kids changing your life. And then he tosses out a boat anchor with a diaper on it.

      2. ping your phone with an ad depending on which aisle you’re in.

        My dad once said to me “You’re the one that turned your phone on!”

    1. “An alternative view is that tapped out debt donkey$ are piling up more debt$ that they have no ability to repay. Mi$$ion accompli$hed, Mr. Banker”

      70% CON$umer $pending I$ $upporting Thee current extended bull run$ U$ eCONomy … All i$ well! … Fa$ter!, fa$ter!, fa$ter, Thee “all.hallow$.eve” Oct. 31$t, celebration party’$ rapidly approache$! … NO if$ of butt$! ”

      Home Per$onal Finance
      Retail credit card$ are $queezing the financially vulnerable as their delinquency rate rise$

      MarketWatch |By Karishma Vanjani | Published: Sept 9, 2019

      Retailer$ pu$h $tore card$ with deep discount$

      Beach is charged an annual percentage rate of 26.24% on the Loft card and 26.74% on the Kohl’s card.

      (Loft and Kohl’s did not re$pond to requests for comment.)

      Beach is far from alone, but those with an even lower credit score appear to be falling behind on their credit-card payments. The latest Experian EXPGY, -1.54% data shows the 90-plus day retail delinquency rate for consumers with a VantageScore at or below 600 is rising

      Retail stores routinely hand out cards with perks to walk-in customers without conducting credit checks, says CreditCards.com analyst Ted Rossman. Consumers with poor credit have more option$ than ever. Amazon AMZN, +0.08%, for example, now offers a “Credit Builder” card explicitly designed for people with bad credit or who are new to credit.

      Amazon’s partner on this financial product is the dominant private-label card issuer, $ynchrony Bank. Its most recent earnings report showed more evidence of a rise in retail-card delinquencie$.I

      $omething wicked this way come$: like a t$unami!

      1. The irony is that I think that if the Fed increased rates a bit, a lot of these boomers scared to death about outliving their savings might open their wallets a bit and raising rates might, paradoxically, increase consumer saving. When rates get so low, people start hoarding. I think monetary policy doesn’t work the way it traditionally has been assumed. Lots of econ wonks are starting to suspect this.

  19. “However, if the situation arises where a seller doesn’t want to pay the buyer’s agent, the buyer will now not only have to pay their down payment, their closing costs, their prepaid taxes, and homeowners insurance but also their agent’s commission. This can be quite a bit of additional money. Given that this scenario will eat into the buyer’s purchasing power.”

    Except that buyers have been paying commissions by financing them into the purchase price for decades. If you don’t think this is the case, please re-read the above quote. Just ask a buyer to come up with a buyers commission. Most can’t and that’s why the industry and lending industry has blessed the tongue-in-cheek ‘arrangement’ for decades where the buyers commission is shown as paid on the sellers side of the Settlement Statements. Real Estate prices would be very different if buyers were required to pay their agent directly.

    If buyers were to start paying commissions, they would demand prices reflect that. This would be an industry game changer.

      1. “As well as paying property taxe$ on them.” Eye

        ah, don’t $wear the $mall (x30year$) detail$!

  20. Only a fukking moron would pay $1.4M for any house in Dallas. The taxes will eat you alive. If you can pay that, buy it in Seattle.

    1. “Only a fukking moron would pay $1.4M for any hou$e in Dalla$.”

      You’ve di$$ed a lot of fellow tayho$$ “let’$.rub.elbow$” folk$. … $mackin’em with a 21# trout might bee more $ubtle.

    1. Seattle has been cratering since the end of last year but Case-Schiller still has Seattle just barely under water. I know the way they calculate the index is a different methodology but the deviation from other measures seems anomalous.

      2. It’s a very backward-looking index, on two levels:

        1) It uses stale data.

        2) It only includes data on homes that sold at least twice, implying that the included sample is doubly stale.

        Needless to say, observations taken from yesterday’s financial euphoria are quite likely to prove wildly optimistic when compared with the harsh reality of today’s crater.

    1. I don’t need to read anything to tell you it’s liberal policies and high taxes. We’d be out of California in a heartbeat if our jobs and job prospects weren’t here and if I hadn’t spent the last 6 six years getting my son services.

  24. They say you can hear an Elephants low rumble from miles away

    Speaking of rumbles, WeWork might scratch their IPO, which will cause them to lose them access to a $6B credit line, which will likely lead to their bankruptcy. And they have $47B in lease liabilities (article here)

    Then there is this rumble. Moody’s cuts Ford’s debt (that’s roughly $84 billion of outstanding public bonds and loans) to junk. From the article:

    If it’s downgraded to junk by either S&P Global Ratings or Fitch Ratings, it will officially become a “fallen angel,” with its debt sent away to high-yield indexes.

    1. I’ve read quite a bit by Matt Levine on WeWork and their business model of slicing and dicing office space. It is very intriguing. I have no idea if this will work, though I did get invited to a cocktail party by a large hedge fund group that seems to be imitating their model. It seems that they get quite a bit of negative press from short-sellers. Hard to find even-handed reporting on their prospects.

      1. “…their business model of slicing and dicing office space. It is very intriguing.”

        You’re reminding me of something I heard about Utahns.

        Does Utah deserve the title ‘fraud capital of the United States’?
        By Dennis Romboy, KSL | Updated – Apr 29th, 2019 @ 9:40pm | Posted – Apr 29th, 2019 @ 7:00pm

        SALT LAKE CITY — Utah has a long-held reputation as the fraud capital of the United States, mostly based on anecdotal evidence.

        But a nationwide Ponzi scheme database that Florida attorney Jordan Maglich compiled offers proof that the ignominious label appears deserved.

        Utah had the sixth most Ponzi schemes among all states from 2008 to 2018, despite ranking 31st in population, according to ponzitracker.com. Only California, Florida, New York, Texas and Illinois, in that order, had more.

        When Salt Lake attorney Mark Pugsley ran a per-capita analysis of the numbers, Utah topped the list for the most Ponzi schemes — and it’s not even close.

        Pugsley found Utah has 1.35 Ponzi schemes per 100,000 people. Florida is the next highest state at 0.51 per 100,000 people, nearly two-thirds lower.

        “This is a question people have been asking for a long time, ‘Is Utah really that bad?'” he said.
        …

        1. I have no doubt Utah is one of the highest ponzi scheme states. You can chalk it up to affinity fraud. Lots of church members want to believe that their religious leader of the predominant religion is upright and honest and it makes them easy prey for a swindler and scam.

          From the article:

          “Pugsley said Latter-day Saints are taught to trust their feelings, but while that might be a valid basis for religious decisions, it’s not for business decisions. He also said he found people who believe if they’re using the money for good, God would protect it.”

          “The new Ponzi scheme data comes amid two of the largest cases in Utah history. Federal authorities last fall accused Rust Rare Coin and its owners of running a $200 million Ponzi scheme. The case is pending.

          “Next month, a federal judge will sentence Claud R. “Rick” Koerber for a $100 million Ponzi scam. Prosecutors say Koerber preyed on many fellow members of The Church of Jesus Christ of Latter-day Saints to take investors for $100 million.”

        2. PS That “slicing and dicing office space” idea hss been out there since at least the late 1980s, when the cubicle farm revolution overtook the American workspace by storm. But maybe these WeWork dudes have some special magical version that will buffet them against a waning economy.

          1. They do. They use craft beer, artisanal shade-grown coffee, and hippy-dippy sharing-economy ideals to dupe starry-eyed Millenials into using the WW app to rent WW office space to work their start-up which writes apps.

          3. “to dupe starry-eyed Millenials into using the WW app to rent WW office space to work their start-up which writes apps.”

            You can do that from home and save $$$ your start up doesn’t have.

        3. $511 Million$ … Where does rate in Utah’s li$t of un.chri$tian type behaviour$?

          2 Utah polygamous group members plead guilty in $511 million tax $cheme

          Written by Associated Press | July 21, 2019

          SALT LAKE CITY (AP) — Two executives of a Salt Lake City biodiesel company linked to a polygamous group have pleaded guilty to charges filed in what prosecutors have called a $511 million tax credit scheme, according to documents made public Friday.

          Washakie Renewable Energy once described itself as the largest producer of clean burning and sustainable biodiesel in Utah, but prosecutors said the company was actually creating fake production records to get renewable-fuel tax credits then laundering the proceeds from 2010 through 2016.

          Prosecutors plan to seize items, including a $3.6 million home in Huntington Beach, California, as well as a Bugatti and Lamborghini, as a result of the pleas.

          Company CEO Jacob Kingston pleaded guilty Thursday to more than three dozen counts, including mail fraud, money laundering and obstruction of justice. His brother and company CFO Isaiah Kingston pleaded guilty to more than a dozen similar counts.

          https://www.stgeorgeutah.com/news/archive/2019/07/21/apc-2-utah-polygamous-group-members-plead-guilty-in-tax-scheme/#.XXfAjt9lA1I

          2. The same inclination that allows them to be the prey of fraudsters also apparently prods them to help their fellow neighbors.

    2. Interesting excerpt from the Ford article:

      “The erosion in Ford’s performance has occurred during a period in which global automotive conditions have been fairly healthy. Ford now faces the challenge of addressing these operational problems as demand in major markets is softening, and as the auto industry is contending with an unprecedented pace of change.”

      Ford debt = $156 Billion
      Tesla debt = $13 Billion

      Ford recent quarterly sales = $35.2 Billion
      Tesla recent quarterly sales = $6.3 Billion

      Ford’s long term debt is 4.4x their quarterly sales
      Tesla’s long term debt is 2.06x their quarterly sales

      I would be more worried about Ford’s debt than Teslas.

      1. Does Ford have a better capacity to make profit than Tesla does? I think so.

        IIRC, Ford is phasing out sedans in favor of trucks and SUVs. IMO this is a good move. Ford’s daily driver sedans have always been weak. It’s much better for them to yield that segment to the Asian makers and concentrate on being a truck specialist for heavier industry.

        1. Does Ford have a better capacity to make profit than Tesla does? I think so.

          We will see. What made the major automakers go bankrupt last recession was a heavy focus on trucks/SUVs when gas spiked. In my view, they are repeating this folly at a time when the auto market is changing dramatically. We haven’t even seen what Apple is doing with its car division. Ford risks becoming Nokia or Blackberry if they don’t innovate quickly, which is why I think they invested heavily in Rivian. VW announced their ID3 EV a few days ago and the specs are amazing. They also announced they are producing batteries at less than $100/kWH. That basically means game-over for gas cars.

          Tesla unveils their truck in a few months. They only need to take a little market share to do serious damage to Ford’s business model.

          1. VW announced their ID3 EV a few days ago and the specs are amazing. They also announced they are producing batteries at less than $100/kWH. That basically means game-over for gas cars.

            game-over

            I read that VW wasn’t even making their won batteries but buying them from the usual Asian suspects. Game over though.

            What I find particularly ironic about this VW thing is the backdrop of how expensive Germany electricity has become, due to their big push into what they call “renewables”. Something like $0.35/kWh. Game over?

          4. What I find particularly ironic about this VW thing is the backdrop of how expensive Germany electricity has become, due to their big push into what they call “renewables”. Something like $0.35/kWh. Game over?

            Gas (petrol) in Germany is about $6/gallon. So here is some math on EV vs gas

            $.35 kWH electricity x 75 KwH (Tesla model 3 long-range battery = $26.25 for full charge

            310 miles / $26.25 = $.12/mile for EV

            $6 gas / 35 mpg (average fuel economy in Germany) = $.17/mile for petrol

            That makes EVs 30% cheaper with Germany’s high electricity rates.

          5. $6/gallon

            You gotta love apples and oranges.

            Why is it over twice the price of gasoline in the US? Infrastructure taxes! Let’s call it $0.10/mile. Since it’s “game over” for the gasoline cars, the EVs will have to pay that or there will be no roads to drive on. EVs will have to pay for more grid infrastructure and the roads (plus government waste in general). On a level playing field, EVs are significantly more expensive to buy and drive.

            However, the top of the line VW EV will blink it’s headlights at the owner, like a human. Priceless.

        2. The Asians (Japanese and Koreans) have plenty of SUV models, many of which are far more reliable and durable than what Ford produces.

          The one area where the Japanese haven’t been able to make much of a dent is in the full sized pickup truck market.

        3. Ford’s daily driver sedans have always been weak.

          I wouldn’t say that…but for quite a while now, yeah. I’ve had some really bad experiences with them though. TFI modules in the 80s, hacked together wiring harnesses that don’t work right on a first year Mystique in the 90s. In all cases not standing behind the product and making it the customer’s problem. So I have a hard time wanting anything from them even when it checks all the boxes I’m looking for.

        4. the EVs will have to pay that or there will be no roads to drive on.

          Yes, EVs will have to pay their fair share of taxes, in the US too.

          But in the US, the gas tax isn’t even close to paying for roads and infrastructure. I think the best recent estimate is that the gas tax would need to be 5x what it is now to cover the cost.

          It’s important in any discussion of cost to realize that cheapest != best. The cheapest form of calories is the $.98 candy bin at Walmart if you are talking about calories/dollar. But cheapest fails when full costs are taken into consideration. The discussion of EVs being more economical than gas (which they are for operation purposes) is secondary in my opinion to reduced tailpipe emissions. After all, Germany is banning older diesel cars because they recognize just how bad the emissions are. Let me repeat that, Germany is banning diesel cars in big cities.

          https://www.citylab.com/transportation/2015/01/the-real-reason-us-gas-is-so-cheap-is-americans-dont-pay-the-true-cost-of-driving/384200/

          1. Germany is banning diesel cars

            Probably dieselgate has something to do with VW’s rebranding effort.

            I agree that there is advantage to the city dweller to have the smokestack out in the country rather than rolling past house and office windows. The fact remains that EVs use more energy than gasoline powered cars. If you want to use less energy, the ultimate solution will be housing very close to working, and using smaller/less. The two ton luxury Tesla is exactly not the answer.

          2. Electric car cost/mile is 38% higher than internal combustion vehicles, directly attributed to the fact that they continued running long after electric vehicles fall apart.

            Why pay 38% more for transportation?

          3. The fact remains that EVs use more energy than gasoline powered cars.

            This fact does not remain. Cite one credible source that shows this. Every reputable academic and non-Koch funded source shows the exact opposite.

          4. Of course electric cars cost more to operate than IC cars.

            Gas is about $2/gallon. So here is some math on EV vs gas

            $.18 kWH electricity x 75 KwH (Tesla model 3 long-range battery = $13.50 for full charge

            310 miles /13.50 $ = $.23/mile for EV

            $2 gas / 35 mpg = $.05/mile for gas

            That makes internal combustion engine powered cars 79% cheaper to operate than electric cars.

            Getting into the capital cost and life span of electric cars, internal combustion vehicles with that category hands down with IC vehicles 38% less than electric.

          5. So here is some math on EV vs gas

            Everything in your calculations is wrong. Average US electricity price is $.12, not $.18. Average US gas is not $2/gallon, but rather $2.56. Average MPG in the US is 25, not 35.

          6. 310 miles /13.50 $ = $.23/mile for EV

            You flipped this upside down. Try it again:

            It’s not $13.50 where I live because I pay $.09 KwH for electricity.

            So here we go again: $.09 x 75 = $6.75

            $6.75 / 310 miles = $.02/mile

          7. Incorrect.

            Gas is about $2/gallon. So here is some math on EV vs gas

            $.18 kWH electricity x 75 KwH (Tesla model 3 long-range battery = $13.50 for full charge

            310 miles /13.50 $ = $.23/mile for EV

            $2 gas / 35 mpg = $.05/mile for gas

            That makes internal combustion engine powered cars 79% cheaper to operate than electric cars.

          8. Gas is about $2/gallon.

            Nope, gas isn’t $2 a gallon on average:

            https://gasprices.aaa.com/

            With regards to your strange, inverted calculation:

            310 miles /13.50 $ = $.23/mile for EV

            You haven’t calculated cents per mile, you’ve calculated miles per dollar. Your math comes out to 22.9 miles per dollar. You’ve switched the numerator and the denominator, so math is just nonsensical.

      2. Like Dole Food$ back in the ’80s, Ford has a$$ets other than the product$ that roll off the robot a$$embly line.

        1. My husband and I had a serious discussion this past weekend about purchasing an EV. He’s a year or two out from needing a new car and drives a lot for work. Houses we’re looking at either have solar or a place for solar. Given the trajectory of CA, an EV makes sense. That being said, any product in Musk’s admitted “pyramid” will not be permitted on the premises.

          1. That being said, any product in Musk’s admitted “pyramid” will not be permitted on the premises.

            There should be plenty of good offerings from other auto manufacturers out by then.

    3. Sounds like the gig is up.

      The Financial Times
      We Company
      SoftBank urges WeWork to shelve IPO

      – Cool reception from investors to proposed float of lossmaking property group

      – WeWork’s listing document raised concerns over co-founder Adam Neumann’s influence over the US office space provider

      Eric Platt and James Fontanella-Khan in New York yesterday

      SoftBank, the biggest outside shareholder in WeWork, is urging the lossmaking property group to shelve its hotly anticipated initial public offering after it received a cool reception from investors, according to people briefed on the discussions.

      WeWork’s parent company, the We Company, has been aiming to raise between $3bn and $4bn in its flotation. But it has faced criticism from investors and analysts on Wall Street over its governance, payments made to co-founder and chief executive Adam Neumann and its use of a complicated corporate structure.

      SoftBank and its Saudi-backed Vision Fund have pumped more than $10bn into the office space provider. But SoftBank’s enthusiasm for a listing has waned as bankers have slashed the valuation they believe the We Company can attain when it lists.
      …

      1. Uber and Lyft proved that disruption and sharing-economy is not enough. Now investors want to see profits. WeWork may not survive. What’s left? AirBnB. They are making nice profits, but they are treading on the thin ice. If state and local regulators force AirBnB back into their original primary-home box, AirBnB might not survive either.

        1. What’s left? AirBnB.

          So you’re saying that of this whole new tech bubble only the criminals actually made any money?

        2. Uber and Lyft proved that disruption and sharing-economy is not enough.

          The thing I am interested in will be Uber/Lyft demand as they raise fares in the next year or two, which they invariably will have to do.

      2. “SoftBank and its Saudi-backed Vision Fund have pumped more than $10bn into the office space provider.”

        And they can kiss that money goodbye.

  25. “Just more than 10% of offers written by Redfin in August faced a bidding war, according to the brokerage’s monthly survey. That is down from 42% a year ago. ‘Despite remaining near three-year lows, mortgage rates have failed to bring enough buyers to the market to rev up competition for homes this summer,’ said Daryl Fairweather, chief economist at Redfin.”

    Luckily any day now we are going to have negative mortgage rates, which is certain to bring back the buyers in droves.

  28. Are you missing out on one of history’s greatest ever bond market rallies?

    PS If you borrowed money to buy an overpriced house, then you are on the wrong side of the market. It’s the lender who owns the mortgage, not the borrower who bought real estate, who makes money when home prices and bond yields are sinking in tandem.

    1. The Wall Street Journal
      Markets
      In Bond Anomaly, Negative Yields Bring Positive Returns
      Currency hedges help U.S. investors squeeze gains from what look like losing bets
      By Daniel Kruger and
      Sam Goldfarb
      Sept. 8, 2019 9:00 am ET

      Who is buying the negative-yielding bonds that are swelling in number outside of the U.S.? The surprising answer, in some cases, is U.S. investors.

      They are entering into complex strategies that generate a positive return even from negative-yielding debt. That is made possible by the unusually wide difference between positive U.S. interest rates and their negative European counterparts.

      There are risks. But the strategies highlight the lengths to which investors have been going to boost returns in the midst of a world-wide bond rally driven by fears of an economic slowdown. Though the rising bond prices have benefited investors in the short term, the rally has dragged down yields on government and corporate bonds to record lows, leaving investors scrambling for ways to generate future income.

      There is more than $16 trillion of bonds with negative yields world-wide, most of them sold in Europe and originally offering positive yields, according to Deutsche Bank Securities. Most buyers of this debt are European pension funds and insurers, which need safe long-term securities to offset future liabilities, as well as bond funds and the European Central Bank.

      For opportunistic U.S. investors, currency hedges are a key driver of their buying.
      …

      1. Sounds like still-more negative yields are soon to come. Good luck to bankers working in the negative yield zones!

        The ECB’s challenge: Pushing rates further into negative territory without wrecking eurozone banks
        By William Watts
        Published: Sept 10, 2019 5:00 a.m. ET
        ECB widely expected to introduce ‘tiered’ deposit rate as it delivers another round of easing
        AFP/Getty Images

        The European Central Bank is widely expected to push its deposit rate further into negative territory Thursday, but the move comes as investors, economists and policy makers worry that the move could take a further toll on the region’s battered banking sector.

        After all, the negative rate means banks must pay for the privilege of parking excess reserves at the central bank.

        The worry for policy makers is that a further hit to the banking sector’s profitability would add to worries over financial stability while also limiting the ability of banks to provide new loans to the real economy.
        …

    2. Your parents tell you to invest in bonds? They had no idea what was coming
      Published Sat, Sep 7 2019 8:00 AM EDT
      Mitch Goldberg
      Key Points
      – Investors in a negative yielding bond, like the 10-year German government bond, known as a bund, are accepting the fact that they will receive less money — a negative return — for lending money to their government.
      – The U.S. 10-year Treasury bond is paying only about 1.5%, but that’s great in comparison to negative yields around the world.
      – The recent increase in cash account rates that gave savers some comfort are heading down again, and all the action in yields will create tough decisions for investors.
      …

    1. 5 major changes the Trump administration wants to make to housing finance
      By Jacob Passy
      Published: Sept 9, 2019 5:32 p.m. ET
      Creating competitors to Fannie Mae and Freddie Mac, and loosening mortgage regulations are among the proposed reform
      …
      The federal government’s guarantee should be funneled through Ginnie Mae

      One of the most notable changes the Trump administration has called for is Congress drafting legislation to create an explicit catastrophic backstop from the federal government for Fannie and Freddie.
      …

      1. From the article:

        One of the key recommendations the Treasury department made in its plan was to work with the FHFA, the regulatory body that oversees Fannie and Freddie, to consider allowing each enterprise to retain earnings beyond the $3 billion in capital reserves they are now permitted.

        This would be a terrible step in my opinion. If Fannie and Freddie are going to have an implicit government-backed guarantee, then they should not be giving any profits to the private investors. No more of this “privatize the profits, socialize the loses (with taxpayer money)” stuff. These so-called reforms are sounding more and more like a Wall Street give-away to the investor class. I may have been right to be skeptical.

  30. Ideas
    Trade War? What Trade War?
    The response to the president’s tariffs has been surprisingly quiet. Here’s why.
    6:00 AM ET
    Chad P. Bown

    The tariffs are piling up. By December 15, President Donald Trump plans to hit nearly everything Americans buy from China with duties, covering 20 percent of total U.S. imports. Predictably, Beijing has retaliated by eliminating access to a 1.4-billion-person market that took soybean farmers and other American businesses years to develop. Relations with China are getting more toxic by the day. No deal is in sight.

    And yet, although all the major watchdogs—the Fed, IMF, World Bank, and OECD—are certainly worried about the trade war’s impact on the global economy, so far, at least, it is hardly in a tailspin. And despite some shrieks of horror when the tariffs were first announced (from me included), there has been no real public outcry.

    Were the doomsayers just paranoid?
    …

    1. China will have to buy its soybeans, pork, chickens, milk, etc. from someone else. And that someone else probably already has customers, which means that either China can displace those existing customers, or it will have to buy from the US after all. And if it can displace those customers, then the displaced will have to buy from someone else, like the US.

      1. “Its rapidly growing footprint burns cash, so traditional credit metrics will view the company poorly,” said Arnold Kakuda, a senior credit analyst with Bloomberg Intelligence.

        “WeWork would need to exhibit stable profits, before it can be seriously considered to be an investment-grade company.”

        Translation: This company is f**ked.

        1. “WeWork would need to exhibit stable profits, before it can be seriously considered to be an investment-grade company.”

          Sounds like so many other failed New Age businesses that went up in flames during the bubble era…

  33. This fact does not remain. Cite one credible source

    Oh that. I studied pre-med and ChemE almost 5 decades ago. Graduated High Honors NJIT. Started working in the energy industry in the ’70s. I understand the Carnot cycle and the Redox equations, how Solar works and battery technology. You understand Nursey things, booking AirBnB, and being a dad (good for you) plus some other stuff no doubt. I understand some Thermodynamics.

    If I try to share some obvious truth, it means I am a tool of an evil empire. This is how you know it’s a mania.

    Anyhow, it remains a fact. You weren’t willing to do the long math.

    1. If I try to share some obvious truth, it means I am a tool of an evil empire.

      This alone tells me OAM reads, and sadly believes, too much Tesla propaganda. God forbid EM, as CEO, claim any responsibility for any of the many messes his companies are in.

      1. Still no sources

        A wise young man once told me that arguing with a stranger on the internet might not be a productive use of time.

        I guess that arguing about basic principles of science with someone who has no training and virtue to defend doubles down on that.

        1. A wise young man once told me that arguing with a stranger on the internet might not be a productive use of time.

          On that I agree with you. I am the bigger fool for engaging in a discussion with someone who resorts to ad hominem attacks instead of cites data.

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