October 18, 2007



Jambu said...

OK it is offical. Keith is obsessed with Mozillo. Seek help while you still can.

And for the love of man do you get paid for using the word ponzi? Geez man find a synonym will ya?

Anonymous said...

LV is at the top of the list when it comes to hyperfraudulent markets. Worse than Sacramento, Miami, and Phoenix.

Maybe the flippers can move in with Mac C Pimp. Learn some financial discipline.

keith said...

Thanks for dropping by Angelo

Good luck in prison

Robert said...

Hi there. I, like Keith, have dropped out of the US and do a lot of traveling (I write from Copenhagen now). I don't have enough money to practice serious geo-arbitrage, but I am putting my stake in the ground by going homeless even though I earn a fat salary. I've been thinking of turning this the below story into a blog. Keith gave me permission to post it here first.

The Homeless Executive
January 2, 2007

1. Becoming Homeless
I am a thirty-something, gainfully employed working professional, and I am homeless. Actually, I am a bit more than that, I am a VP at a successful company, I manage dozens of employees, deal with Fortune 500 clients and prospects, speak at international business conferences, jet set around the world for work, and I earn several times US per capita income. But I am still homeless. Because of the exorbitant price of housing in the US, particularly on the West Coast, where I am from, I decided as of this January 1 to become without a home, rented or owned.

This is only a feasible lifestyle because (1) I am single and (2) I travel so much for work (I am on the road about 4 days out of 5) that I was almost never at my apartment even when I had one. I realized that it was cheaper to rent a decent hotel room for the few days a month when I wasn’t traveling than it was to rent an apartment. Not that that isn’t a little depressing, not having a place to call your own, if only or a few days a month, but I have decided I can tolerate it, at least for a while.

During the late 90s and for the early part of this century, I called the SF Bay Area home. In 1997 I started a well-paid job, and thought about buying a house in Oakland for around $250K, which could actually buy a decent house back then, even if it was quite a bit more expensive than most areas of the country. For no particular reason, I put that plan on the shelf and decided to focus on work, which was an unlucky break because that’s when the dot.com bubble hit in the Bay Area, driving housing prices (both sales and rentals) through the roof. Preoccupied with the buzz around Silicon Valley, I didn’t think about housing again till the collapse of the Internet boom in 2000.

In most of the country, housing prices hardly budged in the late 90s, but in the Bay Area they had increased 50-100%. So if I had been anywhere almost in the country, I easily could have put less than $25K as a down payment on a decent house. In Portland, for example, houses could still be had for less than $100K. But looking around the Bay Area, I didn’t see any easily affordable housing, so again I put house buying on the back burner. Besides, I thought, the dot.com bubble is over, and it’s a recession, so housing prices aren’t likely to increase.

Obviously I was wrong. Low-interest rates (perhaps an excessive of liquidity caused by the entry of China and India into the world labor markets) and other factors fueled a house buying spree that gathered momentum with ARMs and marketing and greed to fuel a housing price boom, which was really a second consecutive boom for the SF Bay Area.

In 2005, I started my new job (my first at the executive level), and with my fierce international travel schedule, it became almost arbitrary where I decided to call home in the US, so I chose Seattle, though I spent more time in hotels and on a plane than in Washington State. Of course, by then, the nationwide (some would say worldwide) housing boom had sent housing prices in Seattle and the Pacific NW through the roof as well, so even there, $25 or $50K wasn’t be enough for a down payment on a substantial house, unless I was willing to take on one of those new exotic mortgages (I was not).

So on January 1 of this year I abandoned my apartment and my official home became a mailbox. Now, clearly, I could afford to continue renting an apartment. Rental prices have not kept pace with housing prices (a sure sign of a bubble, in and of itself, many would say), so I truly don’t HAVE to be the homeless executive. Partly I have become homeless to save a little money. And I am not homeless in the truest sense of the word, the poverty and desperation it conveys, for I do have friends and family who are willing to let me spend a few days at their places, and for that I am deeply grateful. I also could book a room at the Marriott or Hyatt any time I want, and not even have to spend cash (I have a LOT of frequent flyer and hotel points accumulated from the past two years).

Mostly, my current homeless state is simply an expression of frustration with the lack of affordable housing in the US. The recent run-up in housing prices can simply be summed up by:

The New York Times, Aug 26, 2006.

I am well into my 30s and I would like to set-down roots, married or not. But the graph above, based on Robert Shiller data, daunts me, both in the present and for the future.

If one looks at the current housing boom as simply a phenomenon, without an actor or villain behind it, my act reads as one of frustration. Some do see a moral, or rather, immoral dimension to this, and thus search for villains (a fiscally-mismanaging Fed, lenders handing out irresponsible loans, glib marketers and realtors, greedy condo flippers). Others are not focused on finding someone to blame, but still have a sense of moral outrage, that the situation is somehow wrong, that some, by dint of luck and location have seen huge appreciations (which really don’t count until the homes are sold), while others, through alternative life choices or simple youth (so you were 19 when the housing boom started?) simply weren’t given a chance at all. One ex-coworker of mine sold her Bay Area home in the mid-90s to help pay for her ailing mother-in-law’s health care, probably at several hundred thousand dollars below its current price. She and her husband, both middle-aged, may never be able to reasonably afford to buy a home again in their lifetimes.

I personally do not feel the need to finger a real villain in all of this, but I do feel a kinship with groups such as Bay Area Housing Boycott (http://www.boycotthousing.com), and others who are similarly frustrated and/or outraged. If this is indeed all a serious bubble, then I feel especially sorry for the twenty-something who is simply too young to remember when decent houses could be had for well under $200K. She or he will stretch her $45K salary to buy a $500K house with an exotic mortgage, only to become indentured to her upside-down exotic mortgage, as the value of the house drops below the value of the mortgage. If this isn’t a bubble at all, or only a minor one, then we are in a new economic equilibrium where buying a house will simply require a previously unknown level of financial commitment, with all the risks (losing one’s job and then house) and narrowing of life options that such a commitment entails. That’s not great either.

I’m hoping this blog will attract other bloggers and posters with similarly bizarre or difficult life situations that are a result of the housing bubble/boom.

Breton wood

Labor markets

What is inflation anyway, going to target v buying a house


Amanda Gleason’s Young and Broke blog (http://youngandbroke.typepad.com) even though I am not so young)


8 houses 2005 2006
Casey Serin


Houses, based on incomes, simply aren’t affordable in the US. This New York Times graph, based on Robert Shiller data, explains It is also true in many others places in the world that I would consider living. Five years ago, $50K could have bought a pretty nice house in say, Perth, Australia, and at that price I might be willing to wait it out there, as remote as it is (it helps that they have nice beaches). But Perth has seen a pretty big run-up too (the author of http://housingpanic.blogspot.com, Keith, calls this concept geo-arbitrage).

Anonymous said...

To the homeless executive.

Get married, settle down, rent if you have too and be happy.

Life is too short to be single and live in a hotel room. don't glorify it. It's silly.

Anonymous said...

Don't listen to jambu!!
I couldn't get a better laugh anywhere else when it comes to the Angelo!

I so appreciate the humor every day working in this crazy market!

michael said...

"OK it is offical. Keith is obsessed with Mozillo."

thank god mozillo distracts him from casey fracking serin.

i boycotted keith's site because he paid that shitass money for advertising.

i came back to HP after casey's site got bought.

Kathleen said...

I'm sorry.

That was AWESOME!!!!.

I have an old t.v. (10+ years) imagine what tangello looks like on that!!

Anonymous said...

The last 10 years we have been through two ponzi schemes that have created fake wealth out of trillions in debt.

Anonymous said...

Just so long as no one ever lets Angelo around any kids. He and disgraced former Baylor basketball coach Dave Bliss deserve to be in Afganistan on landmine eradication duty.

Anonymous said...

Americas's New Scheme

Gotta love it. The rich get richer by screwing the poor. First in stocks now in real estate. What's next any predictions?