EleBlog

30 Oct, 2008

Yogi Berra said "you can see a lot just by looking." On a visit to SDM magazine's website -- it's a security industry publication -- I noted a spot at the bottom of the page for Most Popular articles. Here they are; see comments below.

1. A Competitive Niche 2/1/2008
2. Basic Electric Concepts 11/1/2007
3. Use these Basic Wiring Guidelines for Reliable Installations 1/1/2005
4. REMOTE HOME MANAGEMENT: Dealer Shows Builders Why Technologies Can Help Grow Both their Businesses 2/1/2008
5. "Alarm-to-VoIP Connection: It's Possible, but not Recommended" 3/1/2005
6. Fire Alarm Codes and Standards 2/10/2007
7. How to Install Connectors 12/11/2003
8. Converging on Greatness 11/1/2007

I find several things interesting here:

30 Oct, 2008

Network World magazine has posted a package of articles about "The Google-ization of Bechtel." If you're not aware, Bechtel is a GIANT in the construction industry -- a privately owned company that is gigantic. The graphic below comes from the magazine; see links below the graphic.


Main article ("Google-ization")

Bechtel's guy is in the CIO Hall of Fame.

Bechtel's new benchmarks.

30 Oct, 2008

I believe Arthur B. Laffer, a right-wing nutjob supposed economic expert, is . . . a nutjob. Yes, that's a stupid personal insult, but I'm NOT going to elaborate, as this article is NOT about the guy. Having said all that, I want to QUOTE Laffer, from a 10/27 op-ed piece in The Wall Street Journal:


Let's break that down:


Are the next 10-15 years going to be like this? I don't know. No one knows. And no one who says he or she knows . . . has the slightest idea.

29 Oct, 2008

Working with PricewaterhouseCoopers LLP, the Urban Land Institute offers (each year) Emerging Trends in Real Estate. The 2009 edition is out; I don't have it. But I did read the press release, which includes this bulleted list of "best advice for 2009" --

• Investors should sit tight. Opportunities will surface at significant discounts.
• Buy discounted loans.
• Recap distressed borrowers – invest in maturity defaults, construction loans/bridge loans, or take mezzanine positions and equity stakes in properties.
• Invest in publicly-held real estate investment trusts (REITs) – they will lead the market’s recovery.
• Focus on global pathway markets – 24-hour coastal cities.
• Staff up asset managers, leasing pros and workout specialists. Separate good assets from bad.
• Retrench on development and reorient to mixed-use and infill. Higher-density residential with retail will gain favor in next round of building.
• Go green – cutting energy expenses is likely to be a priority.
• Buy or hold multi-family; hold office; hold hotels; buy residential building lots, but be prepared to hold.
• Purchase distressed condos in urban areas near transit.
• Focus on neighborhood retail centers with strong grocery anchors and chain drugstores .

See the release here. There's another, longer promotion for the product -- here. Further, there's a 10/21 posting to the National Real Estate Investor website -- headlined: "Worst Real Estate Downturn Since 1991-1992, ULI Report Concludes."

29 Oct, 2008

McGraw-Hill Construction's "Outlook '09" conferences included segments I didn't cover in the earlier posts. For one of them (from Harvey Bernstein of MHC, on "Product & Player Trends") -- well, I just wasn't in the room.

I browsed the handout. I thought this slide worth thinking about -- the bigger the project, the more likely LEED (from the USGBC) will be in the specifications.

29 Oct, 2008

As you might know, the American Institute of Architects each month releases a numerical reading of "work on the boards," called the ABI. You can find the most recent report detailed here. OF NOTE: The headline - "Institutional Sector Reports First Slowdown in Four Years."

29 Oct, 2008

OSHA has a new web page -- Preventing Fatal Falls in Construction. When people who don't know anything about the construction industry ask me to explain a bit about it, I emphasize that "this is a business in which a lot of people still die on the job as the result of falling."

I'm not poking fun. This is a serious defect. All of the work folks do in the construction industry IS important. Not a bit of it requires that you put your life in jeopardy!

29 Oct, 2008

That's how a 10/1/08 piece from National Real Estate Investor described Deleveraging (you might have to register to see it if you follow the link). Here's an excerpt:

“The cheapest money at the highest advance rate, with the least recourse, would walk away with the prize,” recalls Patrick Feltes, senior vice president of GE Capital Solutions, Franchise Finance, a hotel lender who works out of the Phoenix office.

“Today, I'm the prettiest girl at the party,” says Feltes wryly. “Suddenly, relationship lending is back. If it's a good deal and you are willing to work with me so that I can bank a profitable deal, then yes there is money out there for good product and good sponsors.” His remarks came during a Lodging Conference panel discussion Sept. 24 at the Arizona Biltmore hotel.

The problem for borrowers is that lenders have no sense of urgency, emphasizes panelist Joe Epstein, president and founder of First American Realty Associates, a mortgage banker specializing in hotels. “The lenders know they're in control, and they're taking their time. They are underwriting unbelievably diligently and being tremendously conservative.” They're being very selective about those to whom they're making loans, says Epstein.

EleBlog take: This is going to take a while to bottom out. How long? No one knows. But it might very well come to feel like "forever."

28 Oct, 2008

After touring the "Smart House - Green + Wired" in Chicago a few weeks ago, I searched for the biggest baseball bat I could find:

See the rest of it here.

 (More)

28 Oct, 2008

From RetailTrafficmag.com:

“Commercial real estate just starting to correct,” Miller said. “It’s the last sector that is going to have problems.” The issue that Blank and Miller pointed to is the fact that while the credit crisis may be easing, the real recession, which could be the longest in the U.S. since the 1970s, has yet to take its toll on commercial real estate. “Commercial real estate is a lagging indicator,” Miller said.

As layoffs pile up, office space needs to shrink. It also means people have less disposable income to spend at shopping centers or to use for travel. “It’s a vicious cycle,” Miller said.

There's more bad news in the original item, posted 10/22.

28 Oct, 2008

Economist Jim Haughey, who is an experienced and smart guy, says the government's "fix" for the financial system is working.

See his blog post from today.

Read it. I know I don't agree; I was speculating with a friend at lunch today on what might happen if the "fix" does NOT work (my friend thinks China or Russia - or both - might invade. I am not kidding. And this guy is FAR from crazy!!!).

Problem: I can't argue with Jim Haughey. He might be right. Plus, no one can really track everything the government is doing.

EleBlog take: The government doesn't belong in the market buying commercial paper. The government shouldn't be providing a $540 billion backup to the money market funds. The government said it would back AIG to the tune of $85 billion, and this weekend I learned we've already advanced to that company . . . $120 billion.

Maybe all of this will "fix" the situation. Or maybe the situation we're headed for is, literally, The End Of The Fricking World!

28 Oct, 2008

There's a new banner on the site, through mid-December -- for the EcoBuild Fall conference + show. I've been to it before. It's not as HUGE and important as GreenBuild, which will be held in Boston next month and will draw 30,000 or more people.

But EcoBuild's speakers have brains. I learned stuff I needed to know at last year's event. I'm going this time (it's here in D.C.).

28 Oct, 2008

Parks Associates asked "executives managing multifamily properties in the U.S." -- in a "primary research project" -- what kinds of technologies they think wil "influence the sale and rental" of these things.

In other words, people who run apartment buildings said this:



More here.

28 Oct, 2008

This is (as the label says) -- Off The Pathen Beat. But I circled this when reading the 9/6/08 issue of New Scientist, and I just can't get it out of my head.

Earth's population right now is estimated at 6.5 billion. That's 6,500,000,000.

What was it just 6,000 years ago? If a generation = roughly 20 years, that's 300 generations ago.

. . . ????

Here's the answer, according to New Scientist: "by around 6,000 years ago there were only about 12 million people on Earth."

Wow!

28 Oct, 2008

A feature on EarthToys.com -- a sidebar to the site's coverage of the Solar Power International 2008 conference in San Diego -- carries the headline, "AZ Solar Contractor Sizes Up SD Conference."

I read it. The guy interviewed is Mark Holohan, president of Code Electric.

Code Electric? A solar contractor?

Well, yes. But first and foremost, the company is an electrical contractor. Here's some verbiage from the company's "About Us" page:

Who We Are: Code Electric, based in Tempe, is one of the top commercial electrical contractors in Arizona with roots dating back to 1962 and a reputation for quality work on a variety of projects.

What We Do: Code Electric has long specialized in electrical construction and service – and now also offers a wide variety of solar energy applications and services.

Who We Serve: Primarily commercial and institutional customers. Our specialty is large jobs. We are the exclusive provider in Arizona for commercial solar energy products made by SunPower, one of the nation’s most innovative technology companies.

The headline wouldn't have been as good for EarthToys.com, apparently, if it said "AZ Electrical Contractor Sizes Up SD Conference."

But it would have been accurate. To see what Mark Holohan said, go here and page down.

27 Oct, 2008

The previous 11 posts here have been from the NAHB and MHC construction forecast conferences on 2009. There are a lot of words, a lot of numbers, and a lot of reporting. What does it all mean for electrical contractors?

1. Contractors who have specialized in housing aren't going to see relief in 2009.

2. Contractors who have seen competition in Light Commercial in 2007-08 -- from the contractors chased out of the residential market by lack of work -- aren't going to see relief, either.

3. Construction overall is going to fall back in 2009. There will be fewer construction starts. If anything, McGraw-Hill's point-of-view (a decline of only 7%) could be deemed OPTIMISTIC.

4. Electrical construction will, overall, NOT be horrible in 2009. The construction starts of 2007 and 2008 aren't yet finished. Many projects will close in Q1 and Q2 of 2009. Electrical contractors (typically) get a lot of their work (and billing) out of the end of projects. So 2009 won't be the worst year, I don't think.

5. BUT: There will NOT be new work developing to replace those projects -- at least, not in the short run (i.e., 2009 won't see a rebound in construction starts). Therefore, the year 2010 is shaping up to be a really ROTTEN year for electrical contractors.

27 Oct, 2008

McGraw-Hill Construction's forecast for the dollar value of construction starts in 2009 is $514.6B. That's down 7% from the $555.5B MHC thinks we'll come in at for 2008.

But there's a lot more to say.

Let's take the "Macro" construction elements first:

2005 was the peak, according to MHC, at $670.2B in construction starts. That's a 23% decline from the peak.

Further, construction inflation has been running HOT in the past few years. Add 4% to 7% a year in inflation to construction costs for each of 2005, 2006, 2007, and 2008. If you want to do a round number, let's say it's 20%.

....inflate 2005 by 20%, and you put the number at $804B.

....compare that with the $514.6B forecast for 2009, and it's a drop of 36% from peak to next year. Yeeeeeeeeeeeeeeeek!

====================

Let's take the sector forecasts for the 3 largest sectors:

1-Family Housing -- MHC has this peaking in 2005 at $315.5B. The declines have been steady. The MHC 2009 forecast is $126.6B, down 2% from 2008. Yes, that's horrendous.

Institutional buildings -- thie peak year for this, MHC says, was 2008, at $124.4B. Next year will be down 3%, to $121.0B.

Public Works -- this is the 3rd-ranking sector, by size, coming in next year at $109.5B -- down 5% from this year, which was down 5% from 2007, which was the peak.

27 Oct, 2008

Bob Murray, the chief economist at McGraw-Hill Construction, presented the official MHC forecast for 2009 at the Outlook conference last Thursday. Before getting into that, I want to review some basics about the MHC data, and look at the estimates for where 2008 will end up.

a. McGraw-Hill forecasts the dollar value of construction starts. So, to give you a reading on it, construction put-in-place ("construction spending") as estimated by the Department of Commerce is said to be around $1 trillion a year. McGraw-Hill's number for 2006 was $689.6B. Obviously, the MHC numbers "miss" 30% of the construction business.

b. McGraw-Hill's construction forecasts are often off the mark. I just grabbed (out of my file) Murray's presentation at the 2007 Outlook. Here are his numbers for 2006 and 2007 from two years ago, and the numbers the company is now quoting:

2006 -- $671.7B, two years ago     $689.6B, now

2007 -- forecast at $668.0B, two years ago     $634.4B, now.

I don't present these numbers of "make fun of" Murray or MHC. They are doing a tough job -- trying to look at the future. This is just a reminder: "Next year will see the industry do this" is a sentence that you best don't allow to come out of your mouth.

Murray's gotta play; he can't pass!

c. The 2008 "miss" was pretty big. The 2008 forecast was for $614.1B in construction starts. MHC now estimates that number will come in at $555.5B. The difference is huge: The forecast number is a Down 2% year. The expected number (from the presentation last week) is a Down 12% year.

Just to belabor the obvious: When Murray made the $614.1B forecast, he thought 2007 came in at $626.7B. He now thinks it came in at $634.4B.

. . . that means the $555.5B he sees for 2008, when all is done, is down further.

In fact, to put a figure on it, the actual 2008 figure (if it indeed comes in at $555.5B) is 9.5% lower than the initial MHC forecast. And that's with the full impact of the credit crunch NOT YET FELT.

--- OK. Now all of the above is a prelude for the next entry, which is about the 2009 forecast.

27 Oct, 2008

Baker is the chief economist for the American Institute of Architects and also has a title with the Joint Center for Housing Studies (at Harvard U.). He's got a good handle on this stuff. Some points from his presentation, and the EleBlog take:

1 -- "This downturn is shaping up to be the worst in the post-war era." No kidding!

2 -- He visited the "inventory of vacant homes is too high" issue (as did several speakers at the NAHB event). His date (from the Census) show 2,169,000 vacant for-sale homes at the end of Q2 2008, vs. 1,370,000 at the end of Q2 2005. So the "excess" -- the amount to work off to get back to "normal" -- might be 789,000 or so.

3 -- In the past, Baker has presented info showing that strong immigration will make for a strong housing market in the future (i.e., the 2010-2020 period). I've sat through a couple of those. He went over the same ground here, only in brief. It's worth a reminder, or a refresher, or a New Take (for those who haven't heard it before). But I'm not sure whether the info he reviewed here takes into account a stronger U.S. determination to combat illegal immigration . . . and the number of illegals who may have gone home (i.e., left the U.S.) thanks to the lack of opportunity here in the past year . . . or in the next year.

Most importantly, Baker challenged those of us who might have figured that a tougher economy and lower housing prices might mean:


First, Baker noted that all of the data show that the major remodeling investments occur immediately after someone buys an existing house. Since the turnover of existing homes is down, that's bad.

Next, he noted that homeowners can't borrow the money (due to lower home equity levels and the inability to easily refinance) to do the major remodeling projects.

Finally, he noted that more houses are going to be rented out (for one reason or another) -- and that renters don't remodel, and owners of rental homes don't do it, either.

Baker presented a slide from the JCHS which showed the four-quarter moving average of remodeling reached $147.4B in Q2 of 2007 (the peak). It is projected to be only $113.2B in Q2 of 2009. That's a significant decline, obviously -- and a bigger drop, if you factor inflation into the numbers.

27 Oct, 2008

I'd heard about John Mothersole before I first heard him speak, a few years ago. He's an expert on commodities prices and his topic at McGraw-Hill Construction's "Outlook '09" conference last week was -- The Building Materials Outlook.

A few notes first:

a. Predicting commodity prices at this particular moment is IMPOSSIBLE. Prices have been flattened. Copper at this moment (check prices here) is near $1.75 per pound -- a price I didn't necessarily think we'd see again. BUT ON THE OTHER HAND: One the deleveraging is finished (it's not yet, clearly) . . . commodity prices, including copper, might just experience one heck of a pop (up).

b. Mothersole is spozed to have a particularly great record. That doesn't make him right at this moment, and we should cut him some slack if he's not.

c. Another perspective: I've seen him speak at these MHC "Outlook" events three times now. He got copper WRONG both in 2006 (predicting for 2007) and in 2007 (predicting for this year). And copper is "the metal with a Ph.D in economics" -- in theory, it should be easier to predict than others.

With all that as prolog, here are the figures Mothersole gave for Copper + Aluminum. The prices he gave were for Q4 of each year -- I assume they are AVERAGES for the 90-day periods. One is historical, obviously. His presentation was made on 10/23, so therefore his Q4 2008 figure was an estimate/prediction. The Q4 2009 is the forecast. I converted prices from metric tons to cents-per-pound.

COPPER (per pound prices, average per quarter)

Q4 2007 = $3.259
Q4 2008 = $2.574  (geez. it's at $1.76 today!)
Q4 2009 = $2.501

If you want to look at this reasonably, he's seeing prices remain REASONABLE between here and the end of next year.

ALUMINUM (per pound prices, average per quarter)

Q4 2007 = $1.108
Q4 2008 = $1.077
Q4 2009 = $1.175

26 Oct, 2008

Rick is the founder and boss of the U.S. Green Building Council. I sat through a presentation from him at the 2007 McGraw-Hill Outlook conference; they limited him to 30 minutes, and he filled it admirably.

This year, they gave Rick a full 60 minutes. I listened carefully. He spoke at greater length (obviously) -- and with the same passion, But I struggled to identify anything NEW in his talk. Several notes, then a look at the ONLY new thing I heard:


ONE BIT OF NEWS: Rick addressed the thought on some minds -- will the recession, contracting, depression, or whatever-it-turns-out-to-be -- as it is having an effect on construction -- work against the Green Construction movement in at least the short term? He said it wouldn't, but there's no evidence (either way) to discuss. It basically sounded as much like an assertion, or a prayer, as a fact!

26 Oct, 2008

On 10/22 at the McGraw-Hill Construction "Outlook '09" conference, the chief economist of Business Week magazine -- Michael Mandel -- spoke. He took the spot of a professional economist and a polished presenter, David Wyss of Standard & Poor's, who normally has done the "macro" economic presentation at these conferences.

Mandel was introduced as an award-winning journalist. That he might be, but he was a non-award-winning presenter. Still, he had a point-of-view, expressed clearly . . . as in this sentence: "The economic outlook is a disaster."

Mandel's take is that we had this correction coming (something with which I would agree). "We were running a very unbalanced economy." The good news, from this point-of-view, is: After we get through this whatever-it-is, we're probably going to regain "balance." OK -- so WHAT was out-of-balance? The excessive consumer spending in our society. The fact that folks took on so much debt to continue spending.

Noteworthy contentions from Mandel:



Let me cut to the chase: I was underwhelmed by Mandel's presentation style. But then, I'm not that great a presenter, and I'm no "award-winning journalist." The guy works as chief economist for a magazine, so maybe it's dumb to expect his presentation style to be wunnerful -- right?

But I also was unimpressed by the content. In my mind, I guess, I contrasted Mandel's information with the annual presentations I've sat through in the past from Wyss. Wyss has a polished style, but he also always managed to put forward an idea or two -- or at least a few nuggets -- of information I hadn't seen elsewhere. That's got value!

Here are a few things worth noting from Mandel's presentation:

26 Oct, 2008

David Seiders is the chief economist of the NAHB. He's retiring soon after 20 years in that position (see release here).

He's been an advocate for the homebuilding industry in his time, speaking on TV and testifying before Congress. I don't know the guy, but I've watched him speak, in person, perhaps one dozen times over the years. He's good at it. Listening to him is (compared to most other economists, at least) enjoyable.

More improtantly, my impression is that he's honest. In years past, I remember one time he took on the fact that the housing economists had (year after year, in the 1990s) underestimated the next year's housing starts. The fact was, NAHB's estimates were closer than anyone else's. Still, Seiders took on the regular "misunderestimation" and tried to explain it. The best he could do was immigration . . . more immigrants were coming into the country, forming households, and buying houses, than economists could figure.

The reason: Government numbers on this inflow of people were almost certainly not accurate. But the housing boom's ability to, year after year, exceed estimates meant that the illegal immigration factor was bigger than most economists were estimating.

This time (fall 2008), he provided another sample of his honesty. He answered a question that was in the back of my mind (and probably the minds of others listening to him) -- given everything that is now going on in the U.S. economy, and the fact that the country hasn't yet implemented most of the "fixes" to the credit crisis . . . how could anyone be sure enough of the future to predict the 2009 housing market?

Seiders take: If you pushed him, he said, he'd have to admit that there was a 60% probability. That is to say, it's 60% that the predictions are going to be right, and 40% that they are gooing to be wrong.

26 Oct, 2008

Mark Zandi is the chief economist at Economy.com, which used to be an independent service (to which I once subscribed). It's now owned by Moody's -- one of those rating services that took a look at a bunch of garbage and rated it "AAA" . . . and is now harvesting a piece of the blame for the mess in the financial field.

You can often see Zandi on TV. He speaks clearly. I have tended to like him based on his personal appearances at the NAHB Fall Forecast events over the years. Reason? His point-of-view (much more "bearish" -- altho I would call it Realistic -- than the other economists) came closest to matching mine.

Zandi's forecast presentation was divided into two parts: (a) The BAD news; (b) the GOOD news.

Here's the bad: Things are going to get worse. He summed it up as: The next 6 months will be extremely painful, the 6 months that follow will just be painful, and the final 6 months after that will just be bad. It was a neat little statement; if it's correct, the bad times are going to last through most of 2009, and things might start getting better in the middle of 2010.

Zandi thinks the national unemployment rate (most recently 6.1%) will get up to 8.0% before things get better. He discussed the housing mortgage foreclosure problems -- and Zandi thinks before all is said and done, there will be 15 million homeowners under water in their mortgages (the figure now is 12M).

That means they'll owe more to the lender than the homes are worth.

. . . to put that figure into perspective, there are 75.5M homes with owners in the U.S., according to Zandi. 51.5M of them are owned in part (large part, maybe) by banks -- there are 1st mortgages on those. That means the other 24M homes are owned OUTRIGHT by citizens . . . no mortgages!

But if you back up, 15M out of 51.5M means nearly one-fourth of those homeowners with mortgages are under water. That's close to 30%.

Zandi's three reasons for optimism, come 2010:

-- houses are becoming more affordable.

-- there are 2.125M housing units that are Vacant and are For Sale. Normally (back in 2004), the figure would be about 1.125M. Therefore, we have something like 1.0M vacant housing units -- an "excess" -- that we have to work off. That would take two years. So by August 2010, we should be back to equilibrium.

[Note that others have said the excess is more like 750K to 850K)

-- lower interest rates.

- - - - - - - - - - - - -

EleBlog take: I was more bearish than Zandi on the Downside, and I was right. Now, I'm much more bearish on the Upside. My hesitations on his three reasons include:

-- housing more affordable: what if unemployment goes above 8.0%? Housing is NOT affordable to people who are looking for work (or, for that matter, underemployed).

-- vacant housing units: it's possible that working off the excess won't be that easy. We're not adding newly constructed housing units to this total, but we can easily add houses from which people "walk away" . . . and mail the keys to the mortgage company. How many of those 15M people who Zandi says will be "under water" will be willing to keep making payments on such a house?

-- lower interest rates are NOT a sure thing. In fact, given the amount of debt our country may (or may not) be selling, it's hard to believe that interest rates/bonds are NOT the last Bubble to pop.

23 Oct, 2008

I've got more from the NAHB conference -- some comments on Mark Zandi's presentation (he's been negative forever, and thus is my favorite economist -- and, obviously, he's been right). There will also be something to say about David Seiders, the NAHB vp/chief economist. And I've got notes on an economic presentation from a Business Week staffer at yesterday's McGraw-Hill Construction forecasting event.

This morning, I'm returning downtown to catch the rest of the MHC forecast shindig, which includes release of the official forecast (which is probably THE main series of numbers in the construction industry). There are other speakers.

MAIN MESSAGE: If you're interested in this stuff, TUNE IN in the next few days (10/24, 10/25, 10/26) . . . there will be a lot more about construction forecast info and data in the next bunch of posts.

23 Oct, 2008

Michael J. Moran is an economist with Daiwa Securities America. He's spoken at several of the earlier NAHB fall forecasting conferences; I believe I've attended every one of them since 2001, and I think he's spoken at almost all of them.

Frankly, it's impossible to dislike Moran -- he's got a great personality, and explains economic concepts so even a moron (like me) can understand them. But I always listen to him in disbelief. He's always VERY POSITIVE. I think of him as "Little Mary Sunshine."

So the suspense, for your humble reporter, when Moran's presentation began was . . . could this guy possibly be Positive NOW?

Short answer: YES.

Best case in point: He slapped several slides on the wall that engendered disbelief for anyone -- even a moron (like me) -- who knows what's going on. Here are my comments on three:

- - - - -

1. Household Perceptions of Home Values -- showed that 40% of homeowners responding to a survey thought their home was worth more now, 22% said "no change," and 38% said their houses were worth less. This data came from Zillow.com. Moran said something to the effect of -- these people can't be wrong, can they?

Actually, YES. Surveys of the same sorts of people (typical Americans) in 1999-2000 showed they expected the stock market to gain 34% annually for the next 10 years. People don't know what things are worth -- it's a generalization, but it's true.

Further, 38% of 75 million homeowners is nothing to sneeze at -- now is it? It's 28.5 million Americans who own assets who say they are worth less now than they were before.

Finally, Zillow.com offers all kinds of data. Most of it is VERY NEGATIVE on the housing sitch. Moran or a researcher in his employ must have turned over tons of earth to find this one!

- - - - -

2. Firesale Pricing -- this slide was pretty intricate. It showed off an analysis that Moran did on the "rates of return" that the U.S. government is likely to capture in the process of buying mortgage-backed securities, holding them, and then selling them off over time.


Moran didn't say whether these were total rates of return or annual. I assume total. He pointed out that the U.S. government gets to finance its purchases of these things at 4% (that's the going interest rate on 10-year bonds).

My reaction to this visual and his words were a tidal wave of DISBELIEF:

a. Most importantly, if he's right about all of this, why aren't private investors RUNNING to get these rates of return? They should be bidding on these mortgage packages and crowded the federal government right out. There is a lot of cash around, supposedly . . . why isn't it chasing a potential return of 19.6% on the low end and 34.6% on the high end?

b. Secondly, how does Moran know that the U.S. government will be able to borrow HUGE amounts of cash -- forever, seemingly -- at interest rates of 4%? He can guess at that, but he can't be sure. You could make the argument that, despite the ocean of cash that Maury Harris (see previous post) says is out there in the world, there is going to be a limited appetite for IMMENSE U.S. government bond issues at a 4% annual return over 10 years.

c. Additionally, my thought was -- OK, Moran is a smart guy. Maybe he's the smartest economist now alive!!! But here he was, splashing this info on a screen in public. At the very least, other people will look at it. At the very most, other smart guys and gals might have had similar thoughts. Where's the evidence that this is considered a likely development?

 . . . I imagine Moran's answer to (a) and (c) above would be -- FEAR. I actually think Fear is healthy. It worries me that my government is going to run after this outcome with my tax dollars. You know . . . the U.S. government hasn't always been seen as the smartest buyer of things, and the best-run business . . .

- - - - -

3 -- How Bad Can It Be? -- In this slide, Moran took on the total of Subprime & Alt-A mortgages out in the world, and did a quick -- and, he said, worst-case -- analysis of how bad the losses could be if EVERYTHING continues to go wrong. His bottom line: The losses woulid come out to less than $300 billion . . . or about 2.1% of annual Gross Domestic Product.

Sure, it's bad, Moran said. But it's not the end of the world.

My mind immediately shot to -- What About Derivatives? The problem with all of the bad mortgage debt out there is not only the debt itself, but the derivatives. Someone actually asked Moran about this (in relation to this specific slide) during the Q-and-A.

[SIDE NOTE: I don't ask questions during the Q-and-A for the following reason -- as a press registrant, I am a guest of NAHB at these events. Other people PAY to get in; some 200 locations were watching via webcast as well, and could have e-mailed questions in. I figure the paying customers SHOULD get to ask questions first, second, and third.]

When asked the question about Derivatives, Moran's answer was:

-- first, in terms of macro economic theory (I swear he said this), derivatives are a zero-sum game (I swear he said this). What he meant was -- some people will lose money in derivatives, some will make money, and the gross amount won/lost will "zero out."

This was intellectually correct but a bunch of hooey.

-- to his credit, Moran then went on to say that the derivatives were part of our national problem. He went into detail, and I'll skip that.

The answer to "how bad can it be?" is -- VERY bad. It's VERY bad now. Bad mortgage loans are one of the reasons (NOT the only one, but one of them) the derivative problem exists. In a nutshell, everyone knows there are a lot of bad mortgage loans, but no one knows which financial entities (banks, brokers, etc.) have winning positions and which have losing positions in derivatives. Plus, the winners don't know if the losers will make good on the money owed.

It's a total F-ing mess, and the "only" 2.1% of GDP worst-case is creating MASSIVE problems in the global financial system. The ultimate answer to "how bad can it be?" -- this single Moran slide -- is "how long is this gonna last?" and "how much worse is all of this gonna get?"

No one knows the answers to those two questions. Therefore, Moran's slide was, at the very least, intellectually accurate -- and totally DISHONEST.

EleBlog take: I don't think Moran is a dishonest man. I DO think that it's goddamn hard to be "Little Mary Sunshine" in the current financial predicament.

22 Oct, 2008

Harris is a respected economic analyst & forecaster. He spoke at the NAHB conference (as he has for many years). His current title is U.S. chief economist for UBS. A few notes:

a. I sat through his presentation with a smirk on my face. To my certain recollection, he never hinted that the global economy was going to fall off a cliff. I've seen him speak at a number of housing forecast conferences and I don't remember him saying "The Sky Is Falling!"

So if he didn't get ANY of that right, what are the chances he's right now?

b. One of Harris's slides showed "world gross national saving rate" -- a positive chart, with a line going upward. The legend: "The U.S. ability to keep attracting high global savings likely requires new, credible government intervention steps."

Thoughts on this: Are we GUARANTEED access to global savings at low interest rates? Are you sure?

c. Harris emphasized that, despite all that the U.S. government has already done or committed to do, it needs to do more (this was a general theme of the four NAHB conference presentations to which I listened). He presented data on the first half of 2008:


Voila, Harris said -- foreclosure sales were pushing out new home sales. Thus, he said (and later repeated) that something needs to be done, and WILL be done (in his estimation), about foreclosures. By the U.S. government.

22 Oct, 2008

Single-family housing starts (U.S.) hit a high of more than 1.7 million in 2005 -- see historical data here.

Here's what the National Association of Home Builders said yesterday in its Housing Forecast (at a conference NAHB sponsored):


That means the 2010 forecast is for roughly 1 million FEWER housing starts than we had in 2005.

EleBlog take: Back on 8/14, TEDMAG posted a column with the headline "Recovery 2012." Thoughts expressed there got a lot of backing at yesterday's NAHB conference.

. . . which means I'm thinking I need to push out the expected date of recovery to 2015 or 2018. Contrarians get uncomfortable when people start to agree with them!

22 Oct, 2008

Where has The EleBlog been the past three weeks? First, I attended the NECA Show. Then, I celebrated my 55th birthday (with a week off).

Now, it's back to bidniz.

03 Oct, 2008

From a 9/17 post, here:

And my very astute friend Jeffrey Saut at Raymond James (who has been spot on about energy and who has become more bullish of late) pointed out something very interesting yesterday. Evidently China – the previous “buyer at the margin,” the force that kept sopping up all supply for so long, which contributed to the big rise in energy before – has been pretty much out of the energy markets for a couple of months.

The reason: pollution concerns during the Olympics and the Paralympics (the games for those with disabilities.) Many factories and industries were shut down and idled during that period so as to improve air quality during a time of so many visitors and so much world attention being focused on China. (We know China is image-conscious. Just ask the little girl who was not considered pretty enough to sign the anthem live and was replaced by a more attractive lip-syncher.)

The Paralympics end on September 17, and this means that China may very soon reopen manufacturing and transport – particularly so since there is a massive earthquake rebuilding to be done. And they could well be back in the energy market as buyers almost immediately – like on the 18th. The implications for the energy commodities are positive and a psychology shift in those markets could quickly spill over to the beaten up stocks of the energy companies.

You might find the entire post of interest. I am a regular reader (free e-mail subscription) of InvestmentPostcards.com. 

Please note: I've been making the same contention about China, and did at first in an 8/15 post here.

03 Oct, 2008

This might be old news, as the release came out in March -- but I just found out, while doing some work on Honeywell. It's a Security Convergence Study -- about how IT and security are (or are not) coming together. From an article on the study:

03 Oct, 2008

Abu Camp in Botswana -- a place my wife and I have visited -- has a baby elephant (born in February), Lorato. She has pink ears! There's always a link to Abu Camp, at the right.



What's this doing here? This is the electrical industry's blog, but the blogger (me) has a serious sideline interest in Elephants!!!

03 Oct, 2008

Somehow, I stumbled across a page of the 23rd EU PVSEC 2008 -- a European photovoltaic conference. It had 30,000 visitors, of which 2,387 were from the U.S. There are some graphics with info on the site, including this -- 275 exhibitors and 9,000 square meters at the show in 2005 in Barcelona, 715 exhibitors + 50,000 sq. meters this time.

I kind of wish I had gone. According to another graphic, there were 237 "manufacturers of wafers, solar cells, PV modules, concentrators, silicon providers, ingots." That would have been something to see!!!

03 Oct, 2008

In doing some work this morning, I discovered a page from which you can download back issues (free) of LonMark magazine. This publication is about Echelon's technology. I've read all of one issue; there was at least one must-read article. 

03 Oct, 2008

I went to Santa Clara in May to learn at ConnectivityWeek. I didn't learn. The conference was fine; I was exhausted, as I had spent the days immediately before at the NAED Leadership Summit (at which I hosted a session on Green).

So I never wrote up much from ConnectivityWeek. It deserves better. And it did get better, from Ken Sinclair (of AutomatedBuildings.com) -- who wrote up a neat ditty, "my 10 takeaways."

If Ken's piece turns out to whet your appetite, you can go to this page on the 2008 CW site, and go through the agenda. You'll find downloadable presentations (PDFs) on many of the pages.