Dotcom bubble: Stocks vs Real estate


#1

We had some discussions on the percentage of correction in home prices in the bay area after the dotcom bubble burst. Here is a good link that describes what happened. Housing did not drop much even though the stock market crashed (e.g. Cisco down 80%, Amazon down 90%). But the Great Recession of 2008 was a different story because it was due to bad housing loans.

The recession in 2001 dropped the average price for single-family homes 19% from its peak ($750,039) in the second quarter of 2000 to the low ($605,286) in the fourth quarter of 2001; compared to the 48% drop from the housing market bubble peak ($1,083,930) in the second quarter of 2007 to the low ($568,542) in the first quarter of 2009.

Lesson here: Sell stocks and buy Bay Area homes until you see loans given with zero down payment and zero income.


#2

Exactly. Sell all the stocks quickly then buy houses gradually.


#3

What should you have done after the dotcom bubble burst?

That seems to me the right question to ask.


#4

Buy amzn, nflx, aapl.

After another burst in 2019 or 2021, what should we buy?


#5

I think this one will be a small hiccup in a secular bull market. If so just carry on with whatever you have been doing. No need to change game plan.


#6

Who knows peak time of stocks? Everything after the fact. If someone sells stocks at high, they are lucky.

Regarding zero down payment and zero income, it is history as those sub-prime loans are shelved after year 2008-2009 downturn.


#7

During 2000-2001, Cupertino and Sunnyvale during the DOT.COM had the largest foreclosure and home prices dropped as much as 10-12%(median price/sf). The rest of the SJ was somewhat insulated and the price drop was modest 5-7%. High tech and immature internet industry precipitated the whole thing… If major employers here like Tesla, FB repeat the same scenario it will have an immediate impact. Personally I think people are getting tired of social media stocks.
With recent bad publicity on social media, SEMI etc many techies just took a hit in their options. Many local company stock prices are virtually flat all year I wonder whether people have the means for spending big ticket items in 2019?

Sam Shueh


#8

Good info :grinning: Always like to hear from guys who have been around for a long time. Much better than reading articles and charts. It is possible for Fremont prices to tumble 15-20% :nerd_face: if the unfavorable happen :shushing_face:


#9

@SamShuehRealtor, Cupertino dropped 10% while San Jose dropped just 5%? Sorry, I have to say it sounds like unreliable news. Do you have any proof of that?


#10

It was dot com high tech workers who got mostly canned. Fiberglas, JDSU, Excite at Home (RWC), downtown San Jose First street empty buildings. Government employees, service workers, medical workers, non-dot com workers who lived in other parts were spared. Only the techies jobs were mostly lost totaling about 85,000 leaving the area. The realtors were busy unloading homes that few took interest in.

If Apple was letting go its workers during the Great Recession you will see also experience a huge price erosion in these neighborhoods.


#11

Never say never, but the cash positions and financial security of the FAANG companies is very different than the dotcom days.

It’s the young upstart companies that will likely struggle in a downturn this round. I actually think SF is far more susceptible to a downturn than the peninsula.


#12

:scream:

Btw, which FAANG + NVDA + TSLA didn’t build a HQ in SV?
With no ‘physical building’ commitment, it is possible for them to move elsewhere quickly.
Clearly AAPL is staying since they have Apple Park, Infinite Loop and many Apple BOO buildings in Cupertino/ Sunnyvale.

manch - Sell and move quickly to SV or Austin.


#13

Did you forget your fortress theory? When trouble comes the exurbs will get bombed first. Which means Austin will drop more faster compared to SV. :smiling_imp:


#14

For 2) I also feel the same way as it happened in Year 2001 and year 2009

For 1) Even if cash positions are good, they do drop employment to keep up their margins, increase productivity and to keep up their mgmt jobs (CEOs, and CFOs). Otherwise, they are likely be kicked out .

I remember Sun Micro and HP struggled to lay off their employees as they were against such policies, finally they were unable to control and forced to lay off. Market, investors and board members are forced to go for lay off model.


#15

Deflection!


#16

Companies often put the fringe projects in far away sites. Projects that are more exploratory and not the core money making ones. These core projects are done in SV HQ.

When tough time hits which projects do you think they will abandon first?


#17

@hanera’s Austin investments will drop like a rock when hard times arrive…


#18

Who is more evil? :thinking: Harriet or Wu Qi Jun?


#19

They both like to dance on people’s graves.


#20

FAANG management has already said they don’t manage for quarterly earnings. They manage long-term. They aren’t going to layoff due to short-term recession. A and A are the only 2 companies I’ve worked for that didn’t do layoffs while I was there. Most management gives in to wall street’s demands for quarterly results and sacrifices the long-term for short-term.