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We’ve Been In The Middle Of A Rollicking Party And Someone Has Snapped On The Light Switch

A report from the Wall Street Journal. “Once Silicon Valley’s highest-flying darlings, companies from WeWork to Uber Technologies Inc. have collectively lost about $100 billion in value this year. Vitaliy Katsenelson, chief executive of Investment Management Associates Inc., likens the current moment to the correction in internet stocks two decades ago. ‘We are in the dot-com bubble 2.0, except it’s not happening in the public markets but in the private markets,’ he said.”

“‘We’ve been in the middle of a rollicking party that’s gone on for five years and someone has snapped on the light switch,’ said Chris Douvos, whose firm, Ahoy Capital, invests in venture-capital firms and startups. ‘We are all adjusting our eyes and no one has any idea how the rest of the night is going to go. That’s how Silicon Valley feels right now.'”

From ABC 7 News in California. “Fremont is the fourth largest city in the Bay Area, only surpassed by San Francisco, San Jose and Oakland. Among the Big Four, Fremont has the second most expensive housing, following only San Francisco. Prices have dropped just shy of 5 percent from their height here, but the increases are still staggering.”

The San Francisco Business Journal in California. “Ken Rosen, one of the Bay Area’s most well-known economists, said Oakland’s housing market is oversupplied with new units. The influx of new apartments will benefit renters with more competitive prices and a broader selection of homes, Rosen said. But landlords could take financial hits if they have to offer discounts to lure tenants or charge lower rents than they originally planned when they started construction.”

“‘There’s going to be some turmoil,’ said Rosen, chairman of the Fisher Center for Real Estate & Urban Economics at the Haas School of Business at the University of California, Berkeley. ‘Too much supply at once is a lot to deal with. That doesn’t mean it won’t be absorbed.'”

“The city has welcomed a few thousand new homes to the market this year with 9,277 homes under construction and another 10,097 units in the pipeline, according to city data. Oakland is now adding more homes, mostly apartments, to its housing stock than San Francisco.”

“Rosen said rents have effectively doubled in many parts of the Bay Area and home prices have surpassed their peak from before the Great Recession. But that rate of growth is slowing down. ‘More development is a good thing,’ he said. ‘We need more supply, but it means there’s going to be more caution in the next round.'”

“Rosen said some companies that had been growing exponentially are likely overvalued. That includes WeWork, that is one of San Francisco’s largest office tenants. ‘We never want recessions, but there would be less traffic and housing costs would go down,’ he said.”

From Mansion Global on New York. “Nadine Adamson is a top associate broker at Brown Harris Stevens in New York, who in 2012, 2013 and 2014 received the firm’s award for the most townhouses sold by a Manhattan agent. MG: What area currently has the best resale value?”

“NA: The prime neighborhoods of Brooklyn and Manhattan. I’d stay away from areas with a lot of condo development. I’d stay in the Fort Greene, Clinton Hill, Prospect Heights area, where you’re seeing good resale. Also, Tribeca, SoHo. In Lower Manhattan, prices have gone down a lot.”

From Popville on DC. “We haven’t seen a ton of new listings hitting the market in the District this past week, but we have seen a slew of price reductions and homes returning to market via failed contracts amongst other reasons. This may just be your 2nd chance to score that home you wanted — maybe even at a discount!”

From KOLD in Arizona. “It’s a contentious issue in Oro Valley and residents are now talking about recalling the Mayor and Vice-Mayor over their handling of the town-owned Community Center and golf courses. Linda and her husband, Erich Bock, own a home on one of the golf courses. Having their property value closely tied to its success, the two brought their own chairs to assure themselves a seat at the meeting.”

“The Bock’s are worried about uncertainty in the housing market near the golf courses. ‘The Community Center and the golf course thrive because everybody knows it’s going to be there,’ said Linda. ‘[Council] has already hurt membership on the golf course, we know that. We know people who have decided to sell their houses on the golf course because they don’t know what’s going to happen. The problem is the property values go down, property taxes go down, which means we won’t have as much to put into the community.'”

This Post Has 102 Comments
  1. ‘ Rosen, one of the Bay Area’s most well-known economists, said Oakland’s housing market is oversupplied with new units…landlords could take financial hits if they have to offer discounts to lure tenants or charge lower rents than they originally planned when they started construction’

    ‘There’s going to be some turmoil…Too much supply at once is a lot to deal with’

    So much for that shortage bay aryans…

  2. ‘We know people who have decided to sell their houses on the golf course because they don’t know what’s going to happen. The problem is the property values go down, property taxes go down, which means we won’t have as much to put into the community’

    Linda:

    Yip yip yip yip yip yip yip bum
    Sha na na na, sha na na na na na (bah-doo)
    Sha na na na, sha na na na na na (bah-doo)
    Sha na na na, sha na na na na na (bah-doo)
    Sha na na na, sha na na na na na (bah)
    Yip yip yip yip yip yip yip yip, mum um um um um um
    Get a job

    1. Gosh, Linda, instead of being an HOA busybody, you may need to take up driving for Uber or learn to code.

    2. Arizona is high desert. So is Colorado and most of the SW for that matter. Once the water wars begin in earnest, due to overpopulation given the available water recourses, the proles might be less than understanding about seeing precious water used to keep golf courses green for a bunch of liver-spotted feckless Boomers. Ruminate on that, Linda.

      1. Plus, Millennials don’t golf, they game online. Golf is too expensive and takes up too much time for most people (outside of retirees). So no, they’re not interested in buying into a golf-centered community, especially when it means paying higher fees to subsidize something they won’t use. And if they can’t get enough income from golfers, well then, maybe it’s time to shut it down and redevelop it.

        Here in Minnesota, we have a similar issue with ice arenas. The majority of them are run and funded by cities, counties, or school districts. But the demographics are changing, the younger families with kids aren’t interested in ice hockey and can’t afford the significant expense and sacrifice to get their kids into the programs. So the user base is shrinking while the arenas/rinks are aging and require expensive maintenance and repairs. It doesn’t matter that hockey is a traditional sport here, if there isn’t enough usage to justify the public expense, some of the arenas need to be shut down.

      2. “Once the water wars begin in earnest, due to overpopulation given the available water recourses, the proles might be less than understanding about seeing precious water used to keep golf courses green for a bunch of liver-spotted feckless Boomers.”

        What is needed is a bit of marketing spin. Brag about the fact that Arizona golf courses will have the largest and most plentiful sand traps on the planet.

        1. I’m no desert rat, but a high desert natural landscaped course could be quite interesting. I’m not being facetious either. Golf could use a real shake-up away from the standard rolling green landscape. It could be new a challenge for a golf course designer, and for pro players. Imagine pro golfers trying to navigate creosote and rattlesnakes, and hitting balls off of hard-sand fairways, avoiding natural rock formations. I think it would be TV-worthy just to watch the pros try to figure it out.

        2. Once the water wars begin in earnest, due to overpopulation we will be drinking reclaimed sewer water

          Phoenix is a low desert very hot and rarely freezes. Ca has all kinds of water restrictions in place not sure if AZ does ? Ca works hard to get the citizens to feel guilty about using water while running sprinklers in the rain at government buildings. AZ didn’t do that when I lived there.

          1. AZ doesn’t make the citizens feel guilty that is. Ca tries to but there are so many people (foreigners from certain countries that are very large and on the other side of the world) here who pride themselves on cheating government and each other that I think the feel guilty message is wasted. Just today my friend who is from the other side of the world told me ( I already knew this) that if you don’t cheat you are a weakling and an idiot. good times

          2. Silicon valley what a wacky place, company HQ is there and I hear all kinds of crazy things. The higher the stock price goes the weirder it gets like most senior level people don’t even care any more about the work.. ? its all Telsa’s and million dollar homes. Its a weird drug here at the top of the bubble.

  3. ‘We are all adjusting our eyes and no one has any idea how the rest of the night is going to go. That’s how Silicon Valley feels right now.’”

    Oh, I have a pretty good idea how “the rest of the night” is going to go.

  4. ‘Once Silicon Valley’s highest-flying darlings, companies from WeWork to Uber Technologies Inc. have collectively lost about $100 billion in value this year…‘We are in the dot-com bubble 2.0’

    If you read this article it goes over the many billions lost on such high tech endeavors as skooters! And taxis and car rentals!!

  5. “‘There’s going to be some turmoil,’ said Rosen, chairman of the Fisher Center for Real Estate & Urban Economics at the Haas School of Business at the University of California, Berkeley. ‘Too much supply at once is a lot to deal with. That doesn’t mean it won’t be absorbed.’”

    I bet Rosen looks quite fetching in his Captain Obvious costume. And this non-expert lowbrow at the HBB will add another statement of the blindingly obvious: all shackage gets absorbed, once it’s at the right price point. Bear in mind that the coming implosion of Tech Bubble 2.0 is probably going to mean a huge outflow of tech weenie Bay Aryans back to mommy and daddy’s basement in Peoria or Omaha, and a pressing need for flop houses for those that remain.

    1. On the contrary, it may mean they get to stay.

      You read to the bottom of the article, people in the Bay Area are practically begging for a recession to stop the insanity and reduce traffic and housing prices.

      1. people in the Bay Area are practically begging for a recession to stop the insanity and reduce traffic and housing prices.

        On the assumption that it’s everyone else’s employers that are part of a bubble and not theirs? Or that everyone else in their office is deadwood but not them?

      2. This is assuming they keep their tech jobs. I mean Uber has like 24,000 employees or something? WeWork like 12,000 or is it 10,000 now after the layoff? Why do they need so many people and the prices these unicorns are paying in salaries and rents must be astronomically HIGH in the bay area!

    1. BTC will likely go back up again and the BTC fanboys will be back. IMO until Satoshi is willing to raise a private army, BTC will be a day-trading gimmick. There does appear to be some promise in blockchain.

      1. There’s a succession movement afoot in Colorado for a bloc of 11 mostly rural, conservative counties to break away from the progressive malgovernance of the Bolsheviks in Denver, and to form a 51st state. If the idea gets traction, the new state is going to be a beacon to productive enterprises and citizens fed up with Blue State corruption, malgovernance, and never-ending wealth extraction from the honest portion of the populace.

        1. The best, and easiest, solution to the Californication of Colorado would be to not allow anyone who moved here after marijuana legalization to vote.

          As much as I love to bash Denver, it’s just too easy to make money here. And REALTOR, in case you forgot, I have so much money left after “throwing money away on rent” every month that I don’t know where to throw it.

          1. Been in Denver 3 years now and I agreed making money is easy as a renter. If I can stick it out 3 more years I can take my windfall back to the rust belt and live mortgage free.

        2. Can I move to that place.

          Actually I am surprised that there has not been more rebellion Nationwide to the Globalist/Elite playbook. Regular working stiffs have to survive for God sakes and buying overpriced real estate isn’t working.

        3. A little googling — wow there’s a fair number of secession movements afoot.
          The northeast corner of Colorado wants to secede.
          The western counties of Maryland want to secede.
          Northern Cali and Southern Oregon want to split off their respective states to make their own state.

          It wouldn’t surprise me to see secession fever spread to Virginia. The urbanization of Northern Virginia has turned the state from red to purple to blue, now including the state legislature. The rest of Virginia (except Richmond and Virginia Beach) is rural and they already hate sending their tax money to support illegals in the city. Same for New York State — where do you think those sky-high property taxes go? You could say the same for Pennsyltucky. And who knows about Texas.

          If the fever runs high enough, we could be looking at a new Missouri compromise just to keep a balance of power in the Senate. “Sure Oregon, you can form the new blue State of Jefferson, but only if Massachusetts swallows Rhode Island… Western Maryland can secede but only by annexing to West Virginia. Weld county et al have to annex to Wyoming…

          1. Nice to see this much discontent oxide. The problem is that the MSM would like you to believe that liberal discontent is the only newsworthy discontent.

          2. Realistically the federal district (DC) should be much larger than its current boundaries, considering that the majority in metro Washington are directly employed by the federal gov’t. That would go a long way into turning VA back into a “red” state. The idea behind a federal district without power in the legislature was to prevent it from voting for itself.

          3. I have advocated dissolution of union for 2 decades. The US is too big to be managed properly. Regional governance by culture could eliminate most of the nonsense we deal with to manage 50 states.

      2. The article goes on to say that the Dallas Campus will be 7000 jobs.
        Schwab would only transfer a few of the employees from SF to Dallas. Any other jobs will be lost through attrition. But overall Schwab intends to keep its presence in SF.

        Riiiiight. And I’m Heidi Klum. And Jeffrey Epstein killed himself.

        IMO this is CYA. My speculation is that Schwab intends to eventually quietly move out of SF, perhaps leaving only a branch office behind. If I were Schwab, I’d go to Charlotte and possibly Columbus. They are big banking and IT centers.

  6. ‘Silicon Valley’s highest-flying darlings…have collectively lost about $100 billion in value this year’

    This is where the usual posters can chime in and say central banks won’t allow poof! Shazaam, it already poofed!

    Like the Canadian title the other day. This easy, crazy money is what causes the busts, it doesn’t prevent it.

    1. This is where the usual posters can chime in and say central banks won’t allow poof! Shazaam, it already poofed!

      As long as central banks keep adding to their balance sheets, their Ponzi markets will go up, as true price discovery will not be allowed. But it’s game over when tapped-out proles in the oligarch-looted economy start walking away from their financial obligations, like they did in the run-up to the 2008 financial crisis, and the value of all that collateralized debt is suddenly anyone’s guess. That day is coming, and it’s going to be exponentially worse than 2008 thanks to the massive expansion of debt and off-balance-sheet derivatives over the past ten years.

      1. ‘As long as central banks keep adding to their balance sheets, their Ponzi markets will go up’

        Except it just crashed.

          1. I’m talking about the $100 billion. Gone. Why didn’t the central banks stop it? Or did they cause it in the first place? Why didn’t they stop the Oakland glut? Or did they cause it?

          2. Trillions in Yellen Bux valuations have been wiped away, but with Powell pumping $120 billion a day into the overnight repo market, true price discovery (and a market crash) can be held at bay as long as the Fed keeps printing and monetizing debt.

          3. the $100 billion

            That’s impressive today, but won’t be so much when $20Tr evaporates in the RE market. They can’t stop it, they are causing it. The interesting thing will be when tens of millions of families decide they never want to be in debt again, ever.

          4. What part of $100 billion in Silicon Valley “poof!” doesn’t seem like a crash? Is the Wall Street Journal headline news story not sufficient evidence to convince you?

  7. I don’t know why Brooklyn commands such high rents and sales. I grew up there in the 1960s and it’s nothing like it was back then. Now, it’s a pit with run down brick buildings, double-parked cars on potholed streets with stop signs at every block, dirty restaurants and a polluted waterfront. Every inch of space seems to have been plugged up with some oddball shack. My parents sold our brick row home at 3708 Shore Parkway in 1970 for $33k. The owners who lived there since then recently sold it for $655k after a year and a half on the market with multiple price drops from $838k. I visited the home a couple of years ago and was invited inside, and I have to say, the listing description was far from accurate. The flooring settled and sloped downward toward the front door, they emptied the dining room and installed an awkward spiral staircase in the middle of the room down to the finished basement apartment, which I recall was a dump even when my aunt used to live down there, the sliver of a backyard is decrepit and the original 1940 black primer painted garage door, covered in dents, looks like someone tried to park inside without bothering to open it first. The entire shared driveway behind the row homes, which used to be smooth concrete, seems to have disintegrated into cracked gravel. At least I lived there when it had seen better days, but you have to be nuts to pay a fortune to live there now. I’ve owned my fair share of old homes since then, and I think, after pouring tens of thousands of dollars into unprofitable and therefore regrettable renovations, I’ll just rent for the rest of my life.

    https://www.zillow.com/homes/3708-shore-parkway-brooklyn-ny_rb/30792251_zpid/

    1. “I’ve owned my fair share of old homes since then, and I think, after pouring tens of thousands of dollars into unprofitable and therefore regrettable renovations, I’ll just rent for the rest of my life.”

      This guy WINS the HBB today.

      1. Meanwhile in my nabe, renovations seem to be profiting fairly well. Say an “average” house with outdated but functional interior sells for $400K.

        Flipper buys a foreclosure $325K in shady transaction, puts in $75K of new baths, new kitchen, new 1ba + flooring in basement, Minimalist Millenial Gray paint job. Re-lists for $500K, gets pending for $475K. That’s a tidy profit. This only seems to work for trashed shacks, when the flipper buy for cheap. If he had to buy something average and upgrade, he’d break even or make ~$20K at best.

        I don’t blame you for renting. Owning is a long-term commitment.

        1. Owning is a long-term commitment.

          Not so much. Paying off a loan that is many multiples of yearly take home pay is a long-term commitment though.

        2. “Flipper buys a foreclosure $325K in shady transaction, puts in $75K of new baths, new kitchen, new 1ba + flooring in basement, Minimalist Millenial Gray paint job.”

          These snaggle-tooth contractors are going to be up schitt creek when their buyer’s interest rates increase pricing them out of the market.

    2. Wall Street is written all over the face of real estate today. Making money off a investment by it going up fast with a whole lot of churning going on . Than have the taxpayers pay for the downside of the false market.

    3. “I’ve owned my fair share of old homes since then, and I think, after pouring tens of thousands of dollars into unprofitable and therefore regrettable renovations,”

      IMHO that depends.

      If you renovated an old house you lived in to give your thirteen year-old daughter her own bedroom and then sold the house a couple of years later for no profit, it wouldn’t be regrettable in my book. Same thing as a new family room or kitchen for your wife.

      Back in the 1980s and early 90s I used to ask the “I’ll never get my money out of this renovation” crowd…

      Do you, your wife, your kids like your new kitchen, family room, bedroom etc.

      The answer would come back “yes” and I would say, well what’s that worth? Life is short, you made your wife, husband and or kids happy, what’s that worth? Enjoy it.

      Now, if you put in a granite kitchen in 2007 for a flip and lost your @ss I have no words of wisdom or sympathy.

      1. Life is short, you made your wife, husband and or kids happy, what’s that worth?

        Priceless! Happy Thanksgiving!!!

    4. “…brick row home at 3708 Shore Parkway in 1970 for $33k.”

      According to the CPI calculator it should be worth $219,750 today.

      1. Well, then the people my parents sold it to lived there for over 35 years, and they made out like bandits. I have to say, they did a nice job renovating the tiny kitchen, but I didn’t see much else to write home about. There’s actually not a.much you can do with a small 3 bedroom attached townhome anyway, except remodel the kitchen and bathrooms, since you can’t extend up or out. There was no room for a washer and dryer anywhere, and my parents removed some dead space under a counter in the kitchen to make room for a dishwasher in the late 60s when they were becoming popular.

    1. In response to some posts above I think the evidence shows the RE market has crashed already. Now it’s what the prop up measures will be in terms of faulty lending and rates lowered.

      Once a false market turns it’s over. The short term speculator get stuck holding the bag unless they can sell to a greater fool.

      The market was never tied to average wages so that demand , that they didn’t build for, won’t save the market.

      1. I make a distinction between the Fed’s asset bubbles, i.e. real estate, and its Ponzi markets, i.e. the Dow, Nasdaq, and S&P. The Fed’s asset bubbles are clearly starting to deflate, while loan delinquencies are increasing, signifying a deterioration in the underlying collateral a la 2008. The Ponzi markets will likely remain propped up by QE-to-Infinity until the next “Lehman moment” liquidity crisis appears on the scene.

        1. Does the increase of overnight REPO operations already suggest that a Lehman Momement(s) is being forestalled? Something happened to cause banks not to want to lend into the REPO market at 8% to 10%. Somebody knows something and these are more than likely many of the same somebodies that remember what happened last time.

          1. The Fed was forced to step in and pump massive liquidity via the repo window because banks were not accepting each others’ collateral for interbank lending – because they knew the collateral was toxic waste crap. The Fed has become the buyer of last resort, accepting toxic-waste crap at par to keep financial markets from seizing up like they did in 2008. But all they’re doing is buying a little bit of time, while making the financial reckoning day, when it arrives, that much worse.

  8. Got my laugh of the day from one of the new banner ads on the HBB:

    “Ask us about the closing fees on FB, we’re covering customary closing costs”

    Next to a big logo with the letters FB, which apparently are the initials of the bank. Lol!

    1. Seems Kirk failed math class. Great acting role but not to good with money like most helpless Hollywood hacks.

    1. They might, but not in the scenario described in the article. From what I have observed, many billionaires these days are leftists, especially the outspoken ones from tech.

  9. Going by this article, The Mexican government is managing their finances much more responsibly than the US government is.

    They have a budget surplus, while we have an annual deficit pushing 1 trillion dollars. And check out the interest rate!

    “President Andres Manuel Lopez Obrador’s administration has also curbed government spending to build the country’s budget surplus. Meanwhile, the Bank of Mexico has the country’s overnight interest rate at 7.5%, well above the rates seen in the U.S.”

    https://www.cnbc.com/2019/11/26/mexicos-economy-has-not-been-this-weak-since-tequila-crisis.html

    1. AMLO is an oddball. On one hand, he has promised free cheese to poor families that keep their kids in school. On the other hand, from what I have heard, you have to bring your own medication if you’re in a government hospital, as their pharmacies are empty.

      And as that article tells, the Mexican economy is shrinking. Personally, I don’t buy the budget surplus story, as the Mexican government has been auctioning off confiscated cars and real estate to pay the bills. The presidential jet, a Dreamliner purchased by the previous administration is for sale. AMLO briefly flew on commercial airliners until his security staff said it was too risky, so now he charters private jets.

  10. Speaking of math, fraud, gullibility, cluelessness, money going to heaven and unicorns:

    Tesla’s Cybertruck Tug-of-War Stunt Was Pointless

    Easily wins the pull because it’s heavy as a tank, and the F150 was RWD.

    1. 😂 @ 5:22-5:29
      🤣 @ 7:27-7:41
      +1 for BlueSkye @ 10:00-10:11
      His “realization” that “the mission” is a farce @ 10:32-12:10

    2. Fat, gullible and clueless is no way to go through life, son. I would like to see the drag test done with the F-150 in 4 low with racing slicks on the wheels.

  11. The goal for the government and central banks is to keep people moving, engaging in economic activity, while chasing the almighty dollar. In this they are successful.

    The problem is (think of an hourglass turned on its side): they are starving the commoners (on the left, whose bubble is shrinking) who actually provide the goods and services which improve the quality of life, while transferring more and more purchasing power to the elites (the bubble on the right) who… it’s a little unclear what they do that’s worth so much purchasing power.

    1. To your average Tesla fanboy, Elon Musk is Jesus. An eccentric CEO is the centerpiece of any corporate cult.

    2. Ha! When I watched the presentation video, I wondered about the various lights that are required to be placed in certain spots around a vehicle.

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