Seeking Alpha

William M. Wright's  Instablog

William M. Wright
Send Message
William M. Wright and the stock market go back to 1971. Bill has twenty seven years experience working within the financial service industry and valuable knowledge of market and economic history. He's a once-upon-a-time aggressive skiier and Lake Tahoe local. Before founding Window To Wall... More
My company:
Window To Wall Street
My blog:
The Wright Inspiration Station™
View William M. Wright's Instablogs on:
  • Detroit's Second Great Depression

    China Can You Spare A Dollar?

    by William Wright

    China or the oil rich nations are wondering what to do with their new found wealth and extra US dollars...they could buy gold.  And with their spare coins they should consider buying Detroit. 

    Think you've seen some real-estate bargains over the last year?  Check out the Detroit real-estate market bargins. A once great domed football stadium, built as just one part of the Detroit area mid-70's  revival plan, just sold for 1% of what it cost taxpayers to build.

    Silverdome Stadium Sells For 1% Of Its 1975 Cost To Build

    The Pontiac Silverdome — once home to the NFL’s Detroit Lions — was just sold for $583,000, or about 1% of the $55.7 million it took to build in 1975. The land along probable sold for $3-5 million in 1975. 

    Real-estate broker, David J. Leitch said, "The property alone, at $10,000 an acre, should have gone for more than that. And you have the Silverdome, its contents, and the infrastructure already in place. I had estimated it would probably go for between $1.2 million and $3 million. I can't believe it."

    The Silverdome, an 80,300-seat stadium located in Pontiac, Michigan (northwest of Detroit), is the latest example of how comprehensively the recession has struck southeastern Michigan.

    It's Time For A Detroit Aid Concert

    Three decades of manufacturing outsourcing, downsizing, recent Mass layoffs and automotive plant closures have left the local economy a shell of its once great self. Budget deficits are deep, commercial vacancies are at 30% downtown, foreclosures are widespread, and the population shrinking – from about 2 million people in the 1960s to about 900,000 today.

    The average home sale dropped to $84,000 from $94,000 between 2006 and today, according to the Detroit Office of Foreclosure Prevention and Response. But foreclosed properties are worth one-fourth of what they were worth in 2008 – $12,000 today versus $48,000 in 2008.

    Across the four counties of southeast Michigan, there have been 150,000 this year driven by more rising unemployment. The foreclosure crisis started in the communities with auto plants, but it's hitting the more affluent areas too. Forclosuers on prime mortgages and home loans insured by the Federal Housing Administration have risen to a three-decade national high. So, we can image it's only worse in Detroit.

    Detroit Is Like Watching A 35 Year Death Of A Salesman Play

    As a former Michigander and Detroit resident I'm sadden by the death of the area.  The Silverdome stadium depression level sale price, sums up the Detroit metro economy value. Here are just a few other examples of the death of a city.

    When I worked in the Detroit area the K-Mart headquarters was a shiny new showpiece (employing thousands)and business was booming. K-Mart filed bankruptcy in 2002.

    Rockwell International (my Detroit employer) was number 27 on the Fortune 100 corporation list. Rockwell International had a workforce of over 100,000, organized into nine major divisions. By 2001, what was left of Rockwell, was split into two smaller companies. Rockwell International is no more.

    Just 10 years ago many analyst believed GM was at the top of its game, a much leaner and more efficient company from the 70's - and now their bankrupt. 

    How quickly we forget that oil was at record lows in 1998 and expensive gas guzzling SUVs where in vogue.  When I saw Detroit selling $52,000 extended cab Expeditions and Lincoln Continental pick-up trucks and Hummers I wondered if this too was the result of easy credit and ultra low interest rates. with 72 month payment plans. 

    Real Unemployment (U6) Is At Depression Levels

    Michigan unemployment now exceeds 15%, but unemployment in the Detroit metro area is at depression levels (20-25%). It's just one more example, in a long string of examples, of the shifting sands of world economic fortunes.

    According to the October BLS Metropolitan Area Unemployment Report Detroit-Warren-Livonia, Michigan, recorded the largest jobless rate increase from September 2008 (+8.4 percentage points), followed by Muskegon-Norton Shores, Michigan. (+6.8 points). Of the 49 metropolitan areas with a Census 2000 population of 1 million or more, Detroit-Warren-Livonia, reported the highest unemployment rate in September, 17.3 percent.  So, the real unemployment rate (U6) is at depression levels.

    What metropolitan area lost the most jobs from last year? You guessed it -the Detroit Metro area. The largest over-the-year percentage decrease in employment among the metropolitan divisions was reported in Warren-Troy-Farmington Hills, Michigan. (-9.4 percent), followed by Detroit-Livonia-Dearborn, Michigan. (-5.5 percent),

    An article/essay, Detroit: Death Of A City, written in September by Daniel Okrent, a Detroit native,  outlines the city's decline and economic plight from his chilhood memories to now. He compares it to a natural disaster we all recall, hurricane Katrina, which devastated the city of New Orleans to give you a better sense of the devastations magnatute.

    " Three years after Katrina devastated New Orleans, unemployment in that city hit a peak of 11%. In Detroit, the unemployment rate is 28.9%. That's worth spelling out: twenty-eight point. Unemployment in Pontiac is at 35%."

    He concludes with:

    "...the story of Detroit is not simply one of a great city's collapse. It's also about the erosion of the industries that helped build the country we know today. The ultimate fate of Detroit will reveal much about the character of America in the 21st century. If what was once the most prosperous manufacturing city in the nation has been brought to its knees, what does that say about our recent past? And if it can't find a way to get up, what does that say about our future?"


    Nov 21 12:57 AM | Link | Comment!
  • Steepest 5 Year Housing Decline Is Over

    The chart above shows the trendline of American new home sales back to the 1960's. The blue lines represent recessions and durations.

    Declining new home sales markets tend to bottom in January. And this seemingly endless 5-year continuous decline ended this January 2009 at new historic lows.  This bust surpassed every other American reale-state decline since the 1960's.

    The magnitude of this decline is amplified by the fact the number of households in 2009 is around 112 million...more than double the 53 million during the 1960's.

    Below are two real-estate news reports from the 1st quarter. Combine this depressing news with relentless negative news about Banks, stress-test...and it's no wonder we were a depressed Nation preparing for a Great Depression.

    "New homes made another new record low, with sales down 10.2 percent to 309,000 units. Despite this reading, inventories relative to sales actually made a new high. The months' supply of unsold homes rose from 12.2 to 13.3, a new record high. This means that home prices will remain under downward pressure."


    "The drop in new home sales is not unexpected. Home buyers are remaining cautious as the current economic storm takes its toll on jobs and confidence and thus, home buying. Those forces against buying will remain strong so while there might be a slight boost ahead due to tax incentives, realistically things are going to remain weak for some time."


    "This is of course yet another indicator that the housing market is in shambles and we are not out of the woods yet. There is a glut of supply on the market and more people want to sell than buy and that is driving prices down generally. A lot of people are seeing bargains, but are not ready to buy. Rates have fallen, but home prices continue to fall. People think they will fall more, so they are staying on the sidelines."

    "Eventually we will get to a bottom and these people will kick themselves that they did not buy. At the very least, new home sales should continue to fall for the next few months."

    Now with the benefit of hindsight and a chart we can see this was the bottom of a long and painful 5-year decline.

    New home sales are now up over 30% from their lows, in yet another sign that the economy is improving. This, in combination with the more than doubling in the price of major homebuilders stocks from last year's low, constitutes strong evidence that we have seen the bottom in the housing market. All this activity also suggests that the combination of sharply lower prices and relatively low mortgage rates has created the conditions necessary to clear the housing market. Market forces are fixing the housing problem.

    While the bottom in new home sales appears in...more price declines are to be expected. And commerical real-estate trends tend to lag 1 to 2 years behind individual homes expect to hear more negative news in that sector.

    Should you buy a major home builder stock now? By the looks of the stock prices of the highest quality names you're already to late. Consider buying after the $8,000 first-time home buyer sugar high wears off or on any major market pull back. You might also want to consider the lower quality dogs in the sector e.g. HOV, BZH. Lately it seems dogs with fleas are in vogue and making traders money. You can also look south of the boarder at HXM.

    Disclosure: Other then my mortgage free properties I own no reale-estate stocks at this time.
    Aug 27 11:34 PM | Link | Comment!
  • What Would Jesse Livermore Do Now ?
    Jesse Livermore
    What Would One Of The Most Famous Traders Of
    1907 & 1929 
    Do In This Market?
    If you are a market trader you've known nothing goes straight up or straight down for six months.  So rather then debate if the market is moving in a rational or irrational direction based upon economic indicators let's just get down to protecting our assets.  

    I wonder what Jesse Livermore would do? Stay the course in what's been working? Short the market? Rotate out of the cyclical stocks that got us to the party into the health care stocks that missed the party? Cash in your chips and avoid the notorious months of September and October?

    The Traders Motto
    The legendary early 20th century stock trader Jesse Livermore said, "They say there are two sides to everything. But there is only one side to the stock market; and it is not the Bull side or the Bear side, but the right side"

    Jesse Livermore started his trading career at the age of fifteen. He ran away from home with his mother's blessing to escape a life of farming his father wished him to have. He then began his career by posting stock quotes at the Paine Webber brokerage in Boston. He went from these humble beginnings to owning a series of mansions around the world, each fully staffed with servants, a fleet of limousines, and a steel-hulled yacht for trips to Europe. He married his second wife Dorothy, a beautiful Ziegfeld Follies showgirl when he was about 40 years old.
     So, Jesse Livermore's rise to riches and persona matched the roaring 1920's.

    Was It Skill, Luck Or Manipulation ? 
    The legendary trader status of Mr. Livermore leaves new hopefuls with the notion Jesse became rich, famous and lived happily-ever-after. The critics claim that prior to the new regulations of the 30's and in the days when news took time to travel, it was easy for stock manipulators and traders to make fast money.

    The facts show, during his lifetime, Livermore gained and lost several multi-million dollar fortunes. Most notably, he was worth $3 million and $100 million after the 1907 and 1929 market crashes, respectively. He subsequently lost both fortunes and in 1940 committed suicide while married to his third wife. I found it interesting that his third wife had been married four prior times and all four husband committee suicide. I find no discussion of an investigation also interesting. Tragically his son and grandson also committed suicide.

    So, much for living happily-ever-after Walt Disney style.

    The Right Side Is The Only Side
    Yes, knowing Jesse Livermore's whole life story gives new meaning to his famous quote, "...there is only one side to the market; and it's not the Bull side or the Bear side, but the right side".
    Aug 17 10:41 PM | Link | 3 Comments
Full index of posts »
Latest Followers


  • Market down BUT Cliffs Natural Resources (CLF) up 7%? Only headline I see is "Moody's Reviews Baa3 Rating for downgrade"...any other news?
    Jul 25, 2014
  • Can Market repeat 2009's July & August move upward?
    Jul 23, 2010
  • Oct. 10.2% unemployment is worse than expected. Worst since 1983. The market soared up 60% in 1982. What did it do in 1983?
    Nov 6, 2009
More »

Latest Comments

Most Commented
Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.