Where are all the bears

I have been a bull through this whole downturn. However, I am now pretty sure that China RE is about to burst massively and am not sure if this will be a bust to NY RE or a boon to NY RE....A bursting in China could rise NYC RE or completely tank it.

Face it: the economy and NYC real estate are on life support. The government has thrown everything in its "toolkit" to try to salvage them. If anything, one has to wonder why the real estate market has not completely rebounded in this kind of environment. Since these measures are clearly not sustainable, it really is a matter of when, not if, the market resumes its downward course. The real estate market has ALWAYS reverted back to its historical price appreciation trends, and this time will not be any different. Last time I checked, we are still way, way, way above the historical trend.

I am neither bull nor bear, but there are plenty of bears on this board.

checking in.... ready for action.

i believe AR called it that this is millhouse. for the record, i told you to buy that place...

petrfitz, have you pulled the trigger yet? Last I checked, you were sniffing around Brooklyn brownstones if I recall correctly. I'm curious to hear where you're at today.

yes, glamma. and as he didn't buy last summer he's destined to never again find a property for less.

sorry ....who is millhouse? have no clue what you are talking about.....

"I remember last summer this board was full of bear postings....ie apts will go down 30 to 50%,etc"

Yes, because it HAPPENED.

Jeez.

We didn't say it would happen TWICE, did we?

> I have been a bull through this whole downturn.

And perfitz has been completely wrong during this whole downturn.

Particularly funny that he was a bull BEFORE IS STARTED!

That the morons are still saying UP is still a clear sign of bad things...

"im seeing apts selling close to ask and selling quickly......plus are bidding wars back?"

this statement applies to properties that are CORRECTLY priced at 25-30% off peak. now what was your point again?????

ab -- you are correct, and it isn't as if the bidding wars are getting the properties anywhere but middle of the market pricing. I've yet to see someone show a bidding war that has resulted in any kind of interesting pricing.

These so-called bidding "wars" are cold wars.

I love the flagrant fabrication that prices are up.

This whole 'damn' ship has completely turned around and half of you are so brain dead to realize it.

http://www.finviz.com/futures.ashx

Look at what's been rallying day in and day out. LUMBER! WELL, WHY IS THAT JERICHO????

THINK GOD DAMN IT! THINK!

I've been here since last spring pounding the table....
I really hope no one out there listened to these talk'n heads (aboutready, w64idiotstreet, nycxxx, CC, etc) here.

And where are all those folks that think the 'stock market' has NO relations to housing?????

Times have changed eh? :)

yes, 'ho, just like i always say, they continue to build unless the money spigot is turned off.

what does lumber prices increasing tell you? that the dumb asses don't know what else to do with their excess cash provided by egregiously lenient lending facilities. too many units already, and still more building. good times.

another bubble. feel free to invest.

ericho, let's see what happens after April 30th. there will be many morons like you who will buy a 1/2 mil apartment just to get their $8K... they won't get anything after that and will keep renting.

AR,

You sold in 2004. Missed most of the gains from 04 to 07 *ouch*.
Obviously you missed the bottom last year.

So, you weren't smart enough to sell at the TOP.
You obviously weren't smart enough to buy at the bottom (last year).

What are you good for?

"ericho, let's see what happens after April 30th"

I've been hearing the same thing over over since March of 09.

Wait until August 09...
Wait until October 09...
Wait until December 09...
Wait until February 10...
Wait until April 10...

And the beat goes on...and on....and on....and on....

And prices have declined the entire time you numbnut. Seriously, RE isn't trading for 10 cents on the $ but it's still declining and everything that has mitigated the decline to 25-40% is about to move in the opposite direction. Interest rates can only go up from here - they literally can't go any lower. Do you understand what happens to prices when rates go up 20-50%?

I sure do.
I remember when rates went up from 2003 to 2005...HOUSING EXPLODED TO THE UPSIDE.

:)

See...

http://mortgage-x.com/general/historical_rates.asp

Tell me...what happened to housing from 2003 to 2007????

GIVE ME A BOOYAH!!!

The fed don't dictate rates.
The market do you 'numbnut'.

You really don't have a clue what you're talking about. You're that kid who always raises his hand in class to answer the teacher's question - your answer is 25% correct but only because you threw some random fact out but you don't understand how to interpret the fact or what answer it really supports.

See if you can figure out what happens to mortgage rates when the Fed's MBS program expires (maybe you can read and figure out when it expires) and what impact that will have on mortgage rates, and what impact higher mortgage rates will have on RE.

http://www.newyorkfed.org/markets/mbs_FAQ.HTML

You bought in LIC thinking you got a great deal (and bc you couldn't afford manhattan) but give it another 2-3 years and you'll be joining the ranks of the strategic defaults when you realize you're 50% underwater.

I hope to god you don't teach children or manage anyone's money.

"Fed's MBS program expires"

ha! Did the fed went bonkers buying MBS back in 2003-2007??
You don't have a clue do you?

You've been saying 20-30% down MORE since SPRING OF 2009! YOU'VE BEEN PROVEN WRONG.

for bulls to be right they need long term sustained income growth and NOTHING ELSE!!!!

" Where are all the bears "

One potential answer is they got tired of getting answers with circular reasoning and epithets thrown back at them when they were trying to have reasoned conversations and realized it wasn't possible to do anything productive so they cut back a lot on banging their heads against the wall?

Not safe for work - here they are.

http://nymag.com/lifestyle/sex/annual/2005/15059/

LOL, 30yrs.

an increase in activity does not mean that prices have rebounded, or even that they will rebound anytime soon... i am neither bear nor bull, just a realist...

What really should be avoided is the perma-bear or perma-bull tendencies that some seem to have around these parts. You can usually tell pretty quickly - nearly every single one of their posts is in the name of either "RE has/will continue to crash and buying is dumb" or "RE will be fine and renting is dumb." It's some combination of agenda, being overly defensive about their initial position, and a perverse need to repeat themselves. I wouldn't be too worried about these people's whereabouts, but my guess is either Las Vegas or, well, somewhere else.

"an increase in activity does not mean that prices have rebounded, or even that they will rebound anytime soon"

Indeed, the increase in activity seems to be leading to an increase in listings (UD says close to 9000 now). So we will soon see whether the demand is really there to soak up more supply. If it is, than we have stability.

If not, what have the people who waited to sell learned? Do you think they will pull their listings (again) so they can hope that it will be better next year?

I wonder what happened to all of the people that said we would be living in Central Park, there would be a mass exodus from the city, NYC would be back to what it was in the 70's, Charlotte would be the capital of banking, the stock market would never come back, and NYC real estate would fall 50%-70% off of 2007 levels. Where are all those people now? Stand up and be counted!

I wonder why you have to trot out this bullshit every time you post something. If somebody said all those things post them or stop wasting everybody's time.

New 52 week highs on LUMBER!

http://www.finviz.com/futures_charts.ashx?t=LB

Housing to pick up steam in the Spring/Summer.

Great. Now prove everyone wrong and offer a coherent explanation of how this will affect NYC real estate.

Malthus,
You were one of those fools. There!

malthus, if I could choose people to "waste their time" you would definitely be in my top 5. That said, the thread is about "what happened to the bears" and my post is perfectly relevant to the topic. If you don't believe these things were said, use the search functionality, it is pretty good.

Yup. I didn't think so.

"Where are all those people now? Stand up and be counted!"

I don't know that anybody said all of those things, Juicy, but let's go back to the Idiot's Thread for a moment.

Nah! We know what that's all about.

Prices are 30% off peak - still plenty to fall before they equal rents, which have stabilized over the past few months. When they're the same - when it's possible to buy a unit and rent it out for profit using rational financing - is when the market will have bottomed.

The last bear market lasted 10 years. It had monthly peaks and valleys. This one will be no different.

I maintain my forever-held position: with the exception of Long Island City (which is a dump), buying is a fine thing to do as long as you can lock in a risk-adjusted flow of future rent payments below what comparable market rent would cost. That is still virtually impossible.

Now - back to trading.

malthus, you do realize that you're denying anyone made these doom-and-gloom proclamations under a screen name whose namesake describes a certain type of catastrophe, right?

"When they're the same - when it's possible to buy a unit and rent it out for profit using rational financing - is when the market will have bottomed."

Steve, I posted this a while back, but here's an example. Rhino loudly denied it, but have yet to hear a compelling argument that the guy who bought and rented this out didn't make out quite well:
http://streeteasy.com/nyc/sale/385277-condo-72-berry-street-williamsburg-brooklyn
http://streeteasy.com/nyc/rental/590534-rental-72-berry-street-williamsburg-brooklyn

bjw, if anybody rented that apartment out for $4,900, they are a fool. You can get bigger in prime Manhattan for $1k less a month - not dumpy Williamsburg, miles from the subway.

But if it happened, then the owner was very lucky, indeed!

"This whole 'damn' ship has completely turned around and half of you are so brain dead to realize it.
Look at what's been rallying day in and day out. LUMBER! WELL, WHY IS THAT JERICHO????"

This is where geniuses like ericho just demonstrate that they don't get it... AT ALL.

Call me whatever you'd like, but I've been saying over and over again "the economy will recover." "things will get better" "the world will not end".

The giant mistake RE bulls seem to make is.... a recovery post a bubble NEVER MEANS A RETURN TO BUBBLE PRICES (and often sees no real "recovery" at all.

Permabulls, whatever you want to call them, COMPLETELY miss that while housing is certainly tied to the economy, a recovery in the economy doesn't mean you're getting your bubble back!

This is investing 101, kiddies.

Guys like ericho made the HUGE mistakes that would have cost you big on the way down. THey didn't get much smarter, so expect bad advice on the way up too.

"I wonder what happened to all of the people that said we would be living in Central Park, there would be a mass exodus from the city, NYC would be back to what it was in the 70's, Charlotte would be the capital of banking, the stock market would never come back,"

Thats funny, I said over and over again it wouldn't be the 70s (my point was it didn't HAVE to be the 70s to see a major decline, just returning to 200 hot levels would me a major jump) AND I said to buy with the dow in the 6000s.

Where am I? Right here reminding folks that Juice said there would be no crisis, and no decline!

(whoops)

> just returning to 200 hot levels would me a major jump

Thats 2000 levels.

btw, I'm still cracking up about "TARGET BUYERS WILL SAVE MANHATTAN RE" from Ericho!

That would kept me laughing for days.

> I have been a bull through this whole downturn.

btw, did perfitz just admit he was wrong? no way!

"You can get bigger in prime Manhattan for $1k less a month - not dumpy Williamsburg, miles from the subway."

Steve, you're a bit eager to write it off. That area is not dumpy at all, and is all of 0.2 miles from the subway, which is one stop from the village. I don't think it's a huge stretch of the imagination to see that that might be pretty desirable, but either way, I'd avoid making such off-hand comments when you don't bother to look at the facts.

"AND I said to buy with the dow in the 6000s."

Definitely agree it's a good idea to buy equities at the bottom. That is trenchant insight.

I am 1 bear that can be counted. My housing search is limited to hudson heights, but in that neighborhood the decline continues. When I started looking at 1 beds pre-peak, river view units were asking near 500K. Now, BIG units with direct river and GWB views are asking around 350-375K. That's about a 30% decline, and that is the case for these 'best' units and buildings in that hood.
I'm SO glad I did not believe the "buy now or be priced out forever" mantra. Those that did and bought at peak in my target nabe are theoretically underwater now.

"Where am I? Right here reminding folks that Juice said there would be no crisis, and no decline!"

What is more interesting is what I actually said, which was no more than a 10% decline. Also interesting is that I said this at the end of 2007. Even more interesting is Miller Samuel's latest chart which says we are off about 15% of 2007 prices.

That's a whole lot of interesting.

"Yup. I didn't think so."

C'mon malthus, you can do better than that. I really want to waste some more of your time.

"Now - back to trading."

steve, are you a day trader now?

Rather than try to predict the future--a dangerous activity--let's assess the recent past. Prices do not march in lock-step, so we have to talk in ranges, but Manhattan real estate fell approximately 25-40% between 2007 and early 2009. After massive government stimulus and a practically criminal transfer of wealth directly from the taxpayers to Wall Street (including yours truly) prices stabilized and perhaps have risen 5-10% in recent months. Whether this will lead to a sustained recovery remains unclear.

But the idea that some people continue to deny the 25-40% decline in prices is truly stunning. The evidence is in every neighborhood, every size, every price point, prewar, post-war, and new construction. Just one example: Abby Disney paid $10.7 million for an apartment in 2006 that she had to unload for 7.15 million three years later. This is not an anomaly.

Is NYC real estate a good investment right now? No one knows for sure. What we do know is that it has been a hellovalot better an investment this past year than it was at any time in the previous 6 years.

Personally, I expect Manhattan to be just fine over the long term. I would not be surprised if prices drift a bit lower and stagnate for a while. But I am not a clairvoyant. What I can say with certainty is that a price decline of 25-40% over an 18 month period is a major collapse.

happyrenter, great post. I'd quibble with the range you chose (in my view, it was more 20-30, with a few outliers on either side, obviously), but there's no denying that real estate here too a tumble from the peak. I think some are in disbelief because the run-up was so fast and the decline was even faster, so the doom-and-gloom attitude that some have adopted comes off as strange even to someone who bought as recently as 2004-5. It's been a strange trip.

bjw,

the thing that people forget is that real estate prices in NYC were dead flat from 1989-1999, coinciding with a huge bull market in equities. There was an incredible bull market in NYC real estate from 1999-2007, but it should really be divided into three periods: 1999-2002 the market shot up, but this was justified catchup. 2002-2004 it grew strongly, but probably justifiably. 2004-2007 it was a bubble.

a good friend of mine just bought an apartment for $2.5. this apartment sold for $1.5 in 2001. then it sold for $3.6 in early 2008. i'd say that on average apartments purchased pre-2004 are still above water--at least not factoring in transaction costs, taxes, and inflation. that may obscure the severity of the bear market for a lot of folks, but it doesn't diminish its scope.

happyrenter....."Rather than try to predict the future--a dangerous activity--let's assess the recent past. Prices do not march in lock-step, so we have to talk in ranges, but Manhattan real estate fell approximately 25-40% "

Best post of the week.

> But the idea that some people continue to deny the 25-40% decline in prices is truly stunning.

Yes, I've been saying this for some time... the lengths folks will go to to avoid admitting a loss will far exceed their effort in avoiding the loss in the first place.

All this talk of bulls, bears... bulls were DEFINITIONALLY wrong and I still haven't see one admit it yet!

well, I certainly found me some BULLS (with some awesome predictions):

http://streeteasy.com/nyc/talk/discussion/2651-where-are-all-the-idiots-who-made-the-2007-doomsday-predictions

I love where Juiceman argues with Noah...

this one too!

http://streeteasy.com/nyc/talk/discussion/2496-the-sky-is-falling

too funny...

I agree with happyrenter's assesment. Not saying there is no downside risk in the market, but I don't think the sky is falling anymore. I generally agree that part of the 10 year run up was just catch up from profoundly undervalued real estate (due in large part to the equity boom), and some of it was "deserved" based on changed fundamentals.

The bears will continue to say price / rents in Manhattan are historically 12x and we have to get back there eventually. Candidly, I disagree entirely with this (although the peak of the bubble when the ratio was 20-25x was probably not the right level either).

Two things are different: interest rates are signficantly below historical rates (even if they go up a couple points, they will still be below historical rates; if there is more than a couple points rise in rates, this is likely to be accompanied by inflation, which means rents will rise too) AND families are staying here. Some people argue this is flawed logic and say "well, that affects rents too, so it shouldn't affect price/rent ratios." Time frame, however, is absolutely relevant to this discussion. If you think you are going to hold something for 10 years, and rents rise 3% per year (just with inflation), then even if your carrying costs are slightly greater than rents initially, over time this may not be true. The greater the time frame, the less of a factor transaction costs become, since you have to amortize them over the holding period. Lastly, families are more likely to want to own for a variety of reasons - sense of permanance. I never understood this until I had kids, but it's hard to make decisions about schooling, etc. until you know exactly what neighborhood you will live in. Yes, you can try to keep renting and moving in the same neighborhood, of try to find one place and stay there for years, but this is easier said than done. People will jump all over me for this, but my guess is, they don't have kids. But the proof is in the pudding - in wealthy suburbs houses NEVER rent for anything close to what the carrying costs would be if you owned.

"It's some combination of agenda, being overly defensive about their initial position, and a perverse need to repeat themselves. I wouldn't be too worried about these people's whereabouts, but my guess is either Las Vegas or, well, somewhere else."

Reviving two-year old threads = case in point. Apologies to the conspiracy theorists, but you'd almost think I scripted it.

kspeak, good post - aboutready convinced me that there are a select few out there who actually enjoy moving, but I still think they're a small minority. And there are a few perma-renters on here who paint the benefits of owning as little more than being able to paint your walls the color of your choice. There SHOULD be a slight premium for owning. I'd definitely agree it was sky-high during the bubble, but to call renting and owning direct substitutes doesn't make much sense.

JM, since the market is locked in a trading range - and I and my broker buddies agree that it will stay that way for awhile, maybe years - the only way to make money is to trade, not to invest. So I set aside a relatively small amount that I use to trade. Cashed out banks today, made a pretty 40% in a month.

And I'll buy them back when the market goes back down again.

Fairly easy, if I make $2k a day I'll be happy. No need to get greedy.

kspeak - the sky is no longer falling, and thank g-d! I think the way this will play out - and I might be wrong - is that prices will fall another 20% from where they are now, then stagnate for years until incomes and rents catch up. That's the way it usually happens.

Don't pooh-pooh 12x. That ratio exists for a reason - it's the same as 30% PITI.

"Cashed out banks today, made a pretty 40% in a month."

Good call

steve, what about transaction costs and taxes? As with housing, those can be easy to ignore, but I assure you, they're significant.

"So I set aside a relatively small amount that I use to trade."

"Fairly easy, if I make $2k a day I'll be happy. No need to get greedy."

LOL, Steve. I think that unless the "relatively small amount that you use trade" is in the 7-figures, looking for $2k a day puts you in the "greedy" category.

"Lastly, families are more likely to want to own for a variety of reasons - sense of permanance. I never understood this until I had kids, but it's hard to make decisions about schooling, etc. until you know exactly what neighborhood you will live in"

True... but that was already factored into pricing.

"But the proof is in the pudding - in wealthy suburbs houses NEVER rent for anything close to what the carrying costs would be if you owned."

Thats not actually true. My folks live in a wealthy suburb, and this flips from time to time. Last few years, of course not. But the numbers also get tough to measure because its tough to find the rentals in those places. Generally, the "rentals" are the crappy ones next to the train tracks, or near the co-ops for the worker class, etc.... so nothing they are "lower" doesn't show much.

> Lastly, families are more likely to want to own for a variety of reasons

And, of course, families aren't the only buyers. As many folks have noted before, some folks prefer renting. There are advantages on both sides, particularly in a city of renters...

"JM, since the market is locked in a trading range - and I and my broker buddies agree"

Is this the same bunch that agreed that buying china pre-crash was a good move, too? And then selling out before the recovery?

"the only way to make money is to trade, not to invest."

The line most often spoken by those about to lose money.

Yeah, JM, banks was a good call. Mistimed emerging markets, but I'm working on correcting that problem. Made about 15% on real estate, bailed a little early, but reached my goal & so I don't look back.

inonada, $2k a day is really easy. Even if you only have $100,000 and make 2% a day - easy on most days - you're in.

bjw - what are you referring to, trading? There are no "transaction costs" with trading - it's $7.95 a trade. Taxes I'm not worried about - I have enough carried forward losses from 2008 not to have to worry about paying gains tax for a while. Shouldn't kick in till 2011, as 2009 I didn't do anything as I watched the market's new behaviour, and rebuilt capital.

And for real estate, I'd certainly buy if I could get something similar to what I have at what I pay, $3,600 a month. But alas, it doesn't exist.

"There are no "transaction costs" with trading - it's $7.95 a trade. Taxes I'm not worried about - I have enough carried forward losses from 2008 not to have to worry about paying gains tax for a while. Shouldn't kick in till 2011, as 2009 I didn't do anything as I watched the market's new behaviour, and rebuilt capital."

Steve, if you're trading as frequently as you're implying, $8 a trade adds up very quickly. That can eat into your earnings considerably, unless you're lucky and always pick winners anyway. As for taxes, your reasoning is strange - carried forward losses should NOT be justification for accepting short-term capital gains taxes. I'm not here to dispense financial advice, but I've learned enough to know that day-trading or whatever you want to call it is just not a sound approach.

> it's $7.95 a trade

Fidelity actually came out with free trades on the major ETFs. No SSOs, but some decent index stuff in there.

"inonada, $2k a day is really easy. Even if you only have $100,000 and make 2% a day - easy on most days - you're in."

Yes, in a market that jumps 60% in a few months, its very easy. I remember tons of folks saying just this in the dotcom boom, too.

What steve leaves out is that he and the others got crushed when it wasn't boom time. His $100k was probably $500k before.

"Fidelity actually came out with free trades on the major ETFs. No SSOs, but some decent index stuff in there."

swe, interesting - is there any catch there? I guess they're just trying to get you in with a few free ETFs, knowing/hoping you'll spend on other equities.

> I have enough carried forward losses from 2008 not to have to worry
> about paying gains tax for a while

Ah, there's the rub. Its easy to "make money" when you leave out what you've lost.

Its the classic "best way to get a million trading... start with two million"...

>>> Don't pooh-pooh 12x. That ratio exists for a reason - it's the same as 30% PITI

NYC is the only city with such a historic ratio - most other major areas have historically been 15-16x. When NY was entirely transient and fewer people - especially the people renting the higher-end properties - wanted to stay here that made sense. It may no longer apply. Again, not saying it should be 20x+ like it was in the bubble.

>>> Lastly, families are more likely to want to own for a variety of reasons - sense of permanance. I never understood this until I had kids, but it's hard to make decisions about schooling, etc. until you know exactly what neighborhood you will live in"
>>> True... but that was already factored into pricing

Not if you are comparing pricing today with the historical price to rent over the past 30 years. It wasn't factored into pricing in the 1990s and 1980s, and that is the basis of comparison. This is the point that some of the upswing was catchup to historical levels, and some was perhaps based on some of these other factors, and some was bubble... I would argue this was certainly factored in by 2004 but probably not in 2000, and probably over-accounted for in 2007.

>>> Thats not actually true. My folks live in a wealthy suburb, and this flips from time to time. Last few years, of course not. But the numbers also get tough to measure because its tough to find the rentals in those places. Generally, the "rentals" are the crappy ones next to the train tracks, or near the co-ops for the worker class, etc.... so nothing they are "lower" doesn't show much.

I would argue this is true to a lesser degree in NYC for larger, family sized apartments. Try finding a really nice large rental for a family that IS NOT IN AN UNSOLD CONDO BUILDING OR SUBLETTING SOMEBODY'S CONDO. Subletting somebody's condo is great but it's hard to do it indefinitely. Trust me - I have had this problem myself (had a great rental subletting some guy's condo for cheaper then it would cost me to buy it for a couple years - but now he wants it back) and it's part of the reason I am now looking to buy. I have not been able to find anythig comparable in true rental buildings.

Steve, you need to check your assumptions on making $2k a day on $100k in capital. There are about 250 trading days a year, so you're talking about making $500k a year on $100k in capital. I.e., 500% annually. If you're a fan of American Greed on CNBC, that's not even Madoff levels of returns, but rather church-scam-promising-believers-in-good-things levels of returns.

Also, you should consider opening an account at Interactive Brokers. They charge half a cent a share, with a minimum of $1 per trade. So if you like to spread your trades around at 200 shares at a time, you'll end up paying $1 rather than $8. Do the math on the amount of trading you do, and you'll realize that you can improve your returns by multiple percents annually without any additional market risk. Their margin rates are also "proper" in that they charge something reasonable (currently 0.64% to 1.64% depending on margin balance) compared to something like Schwab that charges amounts that are usury in my eyes (6.0% to 8.5%). Again, this is an amount that can be huge when annualized (with no market risk) if you run any leverage. They also pay you interest when you short with a reasonable spread (that currently puts it at 0%). I.e., they give you structures similar to what professionals are given.

Full disclosure: I am a shareholder. I have accounts at the big boys as well, but I'd never even for a moment consider "trading" anywhere but there.

2% a day?

That's totally whacky!

BTW, 2% a day for 250 trading days in a year grows a paltry $100,000 to $14,126,772.15

Think of the apartment you could rent then!

inonada, I've looked into Interactive Brokers. I haven't made the decision yet.

The money I make I take out - keep the profit. I keep the trading account at the same balance - it minimizes the risk. Thus Topper's calculation, while clever, is reductio ad absurdum. It's not possible to invest $14 million like that, without raising eyebrows. Nor would it be smart to do.

"Steve, if you're trading as frequently as you're implying, $8 a trade adds up very quickly."

I didn't imply anything; you inferred it. I don't qualify as as a pattern day trader, though I trade much more frequently than I used to, as it's the only way to make money in a range-bound market.

kspeak - NYC is not the "only city" with that ratio: it's the average around the country.

"Steve, you need to check your assumptions on making $2k a day on $100k in capital. There are about 250 trading days a year, so you're talking about making $500k a year on $100k in capital. I.e., 500% annually. If you're a fan of American Greed on CNBC, that's not even Madoff levels of returns, but rather church-scam-promising-believers-in-good-things levels of returns."

Good points. Its especially hard when you've got the trading instincts of Steve. ;-)

"Also, you should consider opening an account at Interactive Brokers. They charge half a cent a share, with a minimum of $1 per trade."

You need to be careful though. Paying one cent a share, but losing 50 cents because you aren't getting the best price isn't worth it. One trick lower level discount brokers used to use is trading on lesser-used exchanges with bigger spreads and such.

You might actually be paying more...

BTW, one of the reasons I went with fidelity... tax lot accounting. HUUUUUUUUUGE. I think some others might have added it, but I don't know how anyone trades without it.

>>> kspeak, new york is not "the only" city with that ratio

actually, new york DOES have a lower 15 year average than almost any major city. I would argue it will not return to this.

http://money.cnn.com/magazines/fortune/price_rent_ratios/

The problem is that stat clearly isn't Manhattan. 17.8 in June 2007? Not really...

kspeak, I can't help but think that Money included rent-regulated rents in their ratio for New York, which obviously would skew things a lot. In fact, it's not clear that they include condos at all, not to mention coops. So it's probably all SFRs, which are (I'm pretty sure) rented at a much lower rate in NY than in other metros.

The rent increase forecasts for the various metros are very interesting.

And Chitroit continues to have bizarre numbers altogether.

I take back the first part, because it would skew NY in the opposite direction from what they state.

I sure do like sidecars.

"You need to be careful though. Paying one cent a share, but losing 50 cents because you aren't getting the best price isn't worth it. One trick lower level discount brokers used to use is trading on lesser-used exchanges with bigger spreads and such."

Err, on what exchange have you found 50-cent spreads? I think last time spreads were that wide, Eddie Murphy was on the "silver screen" trading frozen concentrate orange juice. I don't know about the places you're talking about, but at Interactive Brokers you can choose one of eight exchanges to route your order to, or you can tell them to use SMART order routing to hit all the exchanges. The brokerage is actually a new business for the company, as the original business is market making for equity options where they account for 10% of all US listed equity option trades. So while they may be lesser-known to most people, they have been in the business for a long time and decided to enter the brokerage business through a niche for active traders & high-worth investors.

Some of the stuff most brokerages do is criminal, IMO. For example, try finding a single iota of documentation from Schwab or TD Ameritrade or Fidelity that explains what happens to your money that comes from shorting a stock. Not only do they not pay you interest on the cash raised from selling the position, I don't think they pay you interest on the margin you're posting, and worst of all, they don't even acknowledge the existence of such things anywhere.

somewhere else - i agree that wasn't only manhattan, because the ratio was higher in June 2007. No doubt it was citywide. But the point still stands that 12.0x price/rent ratio is not some sort of law of the universe. I generally hate arguments that say "it's different this time" to defend a bubble - I'm not defending bubble prices - I am just saying the assumption that until we fall back to the 15 year average of 12.0x, NY real estate is overvalued. Real estate in NYC was a bargain in the 1990s. Not sure such a bargain will ever exist again.

Honestly, IB's fee structure was too complicated for me to understand on a first reading. I agree with Warren Buffett - if you can't explain it, then it's not a business you should be in.

Maybe someday, but not right now.

Fair enough, Steve. It might just be highly worth your while to work harder on understanding it.

Suppose you've got a $100K portfolio that you're turning on average once per week, so $200K in trades weekly (buy and sell), or $40K a day. Let's say your average trade size is $10K on a $25 stock, or 400 shares. You'll do 4 such trades a day, or 1000 a year. At $8 a trade, you're paying $8K a year in commissions. At $2, you're paying $2K. That's a 6% differential on your $100K capital. I don't know about you, but most professional money managers would go gaga over being able to improve their annual returns by 6% without taking any additional market risk.

I like you, appreciate your public service in explaining the benefits of renting incessantly to SE readers as I think you were helpful to many of them, but I'd hate to see you turn around and hand all the money you've been saving by renting straight to Chuck. If & when you'd like any help in understanding the fee structure, I'd be happy to help, whether through this forum or IRL.

That's fair enough, inonada, but I don't plan for the time being to engage in that many trades. Probably not ever. My turnover ratio is and will always be much, much lower, as I run other businesses at the same time, so I only glance over at the screen occasionally.

Obviously inonada is a bad handle. Inonada knows alot.

Thanks, Dreamer.

Steve, glad to hear you don't trade that often -- that 8% annual commission rate would be a real drag. I at some point had a "highly-educated" friend who was doing that sort of thing, but with even more turnover, and with leverage where he was throwing out another 6% annually on overly high margin rates. I walked him through how he could be saving 10% annually and how even though $8 was nothing compared to how much he made or lost on each trade, it still added up to something big annually. I hope he listened...

When you're trading less, obviously other concerns and services start becoming more important. I am personally paranoid about the fact that anyone can blow up at any time, so I make sure to spread my holdings around. However, when I actually want to buy something, especially of it's some $5 stock with bid/asks of 200 shares where I gotta do 10 trades to get to $10K, I do it through IB.

"I didn't imply anything; you inferred it. I don't qualify as as a pattern day trader, though I trade much more frequently than I used to, as it's the only way to make money in a range-bound market."

Uh, yeah, so like I said, $8 a trade adds up quickly. I'm not sure what you proved or disproved with your statement. I "inferred" you trade a lot and then you say that you do trade fairly frequently.

I didn't say I traded "fairly frequently" - I said I traded more than I used to. It's a necessity in a range-bound market.

$8 does add up in an environment where you do a lot of trading. But convenience and transparency also matter. Being self-employed, my largest investment is in a solo 401k account, which means I have to keep that money in an institution that offers those accounts.

There aren't a lot: Fidelity, e-Trade, etc. Then each plan has its own peculiarities and limits, based on which e-Trade offers the best, most flexible solution. It may be that one day I switch some money out to IB to take advantage of its broader range of offerings. Right now, though, it's not my top priority.

inonada, does interactivebrokers do tax lot accounting? I'd gladly pay a lot just for that.

> But the point still stands that 12.0x price/rent ratio is not some sort of law of the universe.

I agree. For one, I never thought that was the breakeven, I thought it was higher, more like 15x.

That being said, I think its a mistake to assume that it only swings one way. Thats now how these things go.

We could easily OVERSHOOT it. So whether 12 or 15x is the spot, it could go lower. Things often overshoot in areas like this.

> Real estate in NYC was a bargain in the 1990s. Not sure such a bargain will ever exist again.

Remember, it doesn't have to be a bargain, just a bargain relative to rents. Thats the point. Rents, too, will change with the times.

The difference is, this isnt' a measure of "value", its just a measure of the RELATIVE costs. Thats it.

http://blogs.wsj.com/developments/2010/03/11/fha-says-higher-down-payments-risks-double-dip-price-decline/

Responding to critics, officials of the Federal Housing Administration are set to warn in Congressional testimony Thursday that a double-dip decline in housing prices may result from even a slight increase in minimum down payments on FHA-backed loans.

"inonada, does interactivebrokers do tax lot accounting?"

I'm actually not sure as it wasn't something I care about too much given what I do in my accounts. You can declare trading to have a FIFO, LIFO, or "Maximize Loss" tax basis, but I don't know if they actually keep track of everything. Poke around on their site, I guess, to find out...