THE WOLF STREET REPORT: IPOs Crash & Burn, Debris Hits Housing, Office Markets

Signs are now all over Silicon Valley and San Francisco (14 minutes).

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  99 comments for “THE WOLF STREET REPORT: IPOs Crash & Burn, Debris Hits Housing, Office Markets

  1. Cyclops says:

    Feels and looks similar to Dot Com crash with millions of small investors that lost most of their investments and forced to sell their homes to pay off their debts. Year 2000 passed and most of the cobalt programmers were out of jobs within a year or so..

    Intuition tells me the IPOs will be a similar story but how fast will the air bubble pop?

    • Merc says:

      This time though it will be the big funds and ultra HNW investors who will take the hit on losses, alongside employees of these start ups. Most retail investors did not get access to these Pre-IPO investment “opportunities”. But there will be layoffs and if there are more than new jobs created, people will be migrating out from high rent markets or taking in roommates.

    • Frederick says:

      Sorry but if they were forced to sell their homes than they acted foolishly I remember everyone “ making a killing “ I just kept building like usual One house at a time and never missed a nights sleep

    • doug says:

      cobol – common business oriented language..
      not cobalt….
      Plenty of that ancient stuff still running..

    • X-Pat DE says:

      COBOL was at death’s door when I acquired my university degree in ’88. Systems I wrote are still running in 2019 and CoBOL has seen many fly-by-night languages come and go.
      The “immediately jobless” Y2K CoBOL programmers had been dragged out of retirement and coffins to patch enterprise systems.
      Nevertheless, when the current stock “markets” pop they will shame the dotcom bubble to insignificance.

    • Vespa P200E says:

      Indeed when profits didn’t matter and idiots in Yahoo msg boards were saying “profits are for pxssies” mantra… When on growth at any cost mattered (sounds familiar?)?

      Well, it’s been about 20 yrs so time to rinse and repeat of, etoys.con, webvan.con to today’s SillyCon Valley’s loss leaders like Uber, Lyft, Peloton and WeIdiots who were forced to shelve IPO.

      Yep history indeed repeats.

    • Just Some Random Guy says:

      Cobalt: Maker of high end boats

      COBOL: Programming language

  2. California Bob says:

    If you mean the venerable computer programming language COBOL (not ‘cobalt’), it’s demise has been greatly exaggerated:

    • alex in San Jose AKA Digital Detroit says:

      One of the little-known rules of tech: Hardware is temporary, software is permanent.

      • Skeptik says:

        As I database person, I say that software is transient, data is permanent. I’ve seen GUIs change many times over the years, but if your data has a problem, you’re stuck

    • roddy6667 says:

      COBOL is useful for counting things. Inventory is things. Dollars are things. Lots of applications.

      • Dave Kunkel says:

        I had to learn COBOL to fix some legacy code prior to the year 2000. It’s not very good at text manipulation, but I found it to be very logical. I liked the way it was structured.

    • Lisa_Hooker says:

      If you are proficient in COBOL and RPG you can make a darn good living maintaining/modifying legacy codes. More secure employment than Java and/or web developers.

  3. FinePrintGuy says:

    I see a lot of couples pushing their strollers around cow hollow and the marina. Way more than I ever saw when I was growing up around here. Probably only sticking around for the big score on their employee stock options. If that looks unlikely to materialize, think the high rents and psycho vagrants will tempt them to stay?

    • Wolf Richter says:


      Millennials starting families. It’s the largest generation ever. And they’re starting families, even in San Francisco.

      • TD Blakeslee says:

        I remember 1958 – 27 years old, 7 months out of college a six-month old baby and a deep recession started. We bought our first house, anyway.

        • Zantetsu says:

          Holy heck, you have seen alot. I wish I had been alive during those times, they must he been interesting. My kids and I listen to old radio shows daily while I drive them to school and pretty much everywhere we go. We love the simple humor and good wholesome attitudes of those times. Perhaps you listened to some of these radio shows too when you were a kid. Our favorite is Our Miss Brooks but we like Amos and Andy too (don’t tell anyone, that would be very politically incorrect to admit these days). We’ve listened to hundreds of hours of these shows as I was able to download many, many episodes from the Internet Archives. Good times …

        • Frederick says:

          Same thing for me in 1981 Infant just arrived , bought a tear down and totally gut renovated it Laid off from my office job Went door to door looking for renovation work and never looked back Never bothered to go to the unemployment office either Didn’t have the time Too busy looking for work to feed my family I’ll stop ranting now

        • HobartChic says:

          Where I live “tear downs” and older houses cost the same, or more than a new house. The new houses are increasingly unaffordable due to inflated (in my opinion) land costs. There’s no option to buy a house and be unemployed here.

      • Just Some Random Guy says:

        Despite what the MSM tells you, millenials are just like every other generation. They get into their 30s, they get married, have kids and buy a house. The ones staying in SF in a cramped apartment, are an aberration who will high tail it out of the city once the stock options are fully vested.

        • Shawn says:

          I would pick SF over all the lousy cities that I’ve biked through in Marin, Southbay and Eastbay. Just saying.

  4. Bobber says:

    There are lots of big immediate problems surfacing for stock and RE markets. S&P profits are in their 3rd quarter of decline. IPOs are fizzling out. We’re heading into October with record high valuations and huge divergences. Exploding federal deficit.

    • Dale says:

      According to Zacks, Q3 profits are expected to be down 4.8% YoY. But then recovering to +1.2% in Q4, and +7.9% in Q1 2020.

      We will see.

      • Dale says:

        Of course, US corporate profits (not just S&P 500) are down from Q1 2012 and their peak in 2014, according to the BEA. Yet total market cap is up 73%.

  5. Javert Chip says:

    All kinds of investors buy unicorn & other IPOs. Some have to (funds that follow certain industries & indices), but I suspect a large component of the retail investors are millennials: inexperienced, not wealthy & (like most but not all retail investors) not exactly financially savvy.

    The play has always struck me as grossly inexperienced, crowd-following, true believers trying to beat the venture capitalists. Perhaps this crowd is either running out of money or running out of belief.

    An $80B valuation for a normal profit making taxi company would be beyond crazy; I don’t even have words for UBER, an $80B money-burning taxi company (people pay UBER for rides, not technology) that loses almost as much as it takes in as revenue. WeWork is running essentially the same con: it’s a real estate company that gives away craft beer, not a technology company.

    Chalk me up as a never-was-a-believer.

  6. bungee says:

    Thank you Wolf for the excellent reporting. My YouTube and Google recommendations have been really bad lately. very glad to be here.

    I said to one of my developer customers last week, “what’s the matter, markets still not red hot?” Developer said, “the building [brand new condos] is half empty. Days of hot selling are long gone” then after a pause added, “this citys a $#!thole”
    Property management companies are gonna start folding soon. Developers are gonna run away from lawsuits. Underwater buyers are gonna be at city hall lobbying for re-zoning. As. per. usual.
    But this last building boom was giNORmous. Its a different city than it was ten years ago. What are we going to do with these awful structures? Just tear them down? Poorly built, impossible to maintain, unrealistic, overpriced. The condo / apartment makers are desperate to finish these things and sell them asap. Too bad the last one i was in, was just about finished except the closets weren’t wide enough to fit a standard coat hanger. Literally! An agent was showing me and i was about to burst out laughing but the look on her face was not one of mirth. She was actually about to cry. Another one i was in smelled, no REEKED of garbage because an on-the-fly change of plans put the garbage area for 50 or 60 units right off the foyer. Another ones floorplan has so many firecode conflicts that essentially the doors have to be left unlocked while they sue the architect. I could go on and on. There is a lot of anxiety. New buildings aren’t supposed to have these types of systemic problems. I guess my point is that tech and finance and chinese money built this junk and when those sources of funding dry up some of this real estate may fall pretty far. Because really, whos looking for a good deal on garbage?

    • fajensen says:

      New buildings aren’t supposed to have these types of systemic problems.
      Disruption basically means ‘tech and finance’ using the accelerating powers of technology and infinite money supply to get inside of the OODA-loop of ‘Government’ and run Big-Fraud schemes, based on:

      Taking a huge dump over whatever regulation, standardisation, even common sense, there may exist within an engineering discipline, while pretending this is totally above board and eventually profitable,

      The ‘eventually profitable’ ensuring unlimited access to free money from the unregulated financial industry who don’t care about ‘legal’ since ‘de-regulated’ -> ‘lawless’, ‘systemically important’ -> No jail whatever we do,

      Heavily cloak the fraudulent / failing concept with obtuse tech-sounding speak while advertising is as a brand ‘new’ concept, so all regulators and politicians MUST cut the disruptors some slack ’cause Innovation, m’kay’,

      Finally, they run off with the loot while the regulators and politicians are still pondering whatever the hell just happened.

      • Leser says:

        You forget that “regulation” is usually written by the industry, certainly in finance. It’s like asking your local burglar to fit new locks to your house and devise your at home/away schedule.

        Regulated can easily be worse than unregulated, because the exercise is typically to achieve 1) higher compliance costs to limit competition, and 2) keep and increase the upside while moving the downside to somebody else – the public.

        Given those obvious benefits of “regulation” to insiders, “unregulated” is a theoretical concept that in its pure form practically doesn’t exist anywhere on this planet – except in the lobbying pleas of interested parties pushing their version of “regulation”.

      • Juanfo says:

        Regs and Pols get their cut. People are not as stupid as they pretend.

  7. Rcohn says:

    To afford a median price house in SF required an income of $ 350,000 .

    • Frederick says:

      For now anyway Sounds to me like that will drop “ significantly” very soon Tic Toc kids

    • Lisa_Hooker says:

      Or 5 young developers at $70k each.

      • RoseN says:

        Yes, but 4 of the 5 will probably be sharing a room. Fun.

      • Zantetsu says:

        I think kids right out of college make that much, and kids that age are not in the market for buying housing. They rent.

        It is absolutely within the realm of many, many marries couples to make $350,000 per year. That’s only $175,000 per year per spouse and that’s very doable.

        The hard part is that while people making that much can afford it, what they get for their money is pretty weak, and they have to spend a significant portion of their income to get it.

        I am a single father in the silicon valley where the prices are not too far off of San Francisco’s and let me tell you, it is very difficult to compete for housing with the married couples. My income is good for an individual but it’s not $350,000/yr. As a result I can only really compete on the low end of what a married couple could afford. My minor saving grace is the fact that my ex-wife and I had saved for a long time so I came away from the divorce with a healthy downpayment amount available. Thus I have everything I need to pull the trigger on a well-priced three bedroom townhouse, which is what I am in the market for … but I refuse to pay current prices because I think they have been inflated by a feeding frenzy during hot times that has now reversed. I will wait a year because I think prices will be lower then than now, I can get something even better for my money, and I can stand my small apartment for another year …

        • Zantetsu says:

          By the way, my “kids right out of college” comment was in reply to the $70,000 per year figure, in case that wasn’t clear.

    • Just Some Random Guy says:

      $100K is basically entry level income in the tech works. With a few years experience and a bonus, $175K is almost automatic. Married couple has $350K without breaking a sweat.

  8. Josh says:

    The Palo Alto market disappeared in the last 60 days? I guess this 3-bedroom on 8,000sq/ft lot isn’t going to get the $5 million asking price… I’ll believe there is a slowdown when houses like this sit for a while and go for much lower than asking.

    • Wolf Richter says:


      Zillow sez that this house at the peak in June 2018 was worth $6.1 million. And now it’s listed for $5 million. There is a chart of this house’s Zestimate history (scroll down),-Palo-Alto_rb/19496365_zpid/

      The idea being that if you price it low enough compared to where it was last year, it will sell.

      • No wonder Californians are leaving the state in droves. You could buy 10 homes of equal or better size for that amount of money spent in any major Texas metro market, and still probably have bigger lots on each of them. Even in our inflated market, buyers expect to be able to sneeze without their neighbors hearing them.

      • Zantetsu says:

        Zillow’s housing values are completely made up fairy tale material. They almost never reflect the actual price that a property will sell for. I don’t know what their algorithm is but it makes very little sense, it’s very spiky and strange. I go to redfin to check actual housing values, theirs are much more sensible.

        These days I see listings on that have been sitting on the market for 70 days and are still listed by zillow as having a value higher than their asking price. If they really were worth that much, they would have sold nearly immediately! So obviously the estimate should be decreased. Any property that is on the market for longer than the current average time to sell, at a listing value below zillow’s estimate, should obviously result in zillow lowering their estimate. But they do not.

        In summary, zillow’s valuation estimation algorithm is garbage. redfin’s is not perfect, but it’s much better. Therefore, you should never make any argument about the value of a property based on zillow’s estimate.

        • Zantetsu says:

          And to bring my point to bear here, the property you listed in Palo Alto has a redfin estimation history that is much more sane … it peaked at $5,166,000 in Dec 2018 and has slowly declined to $4,928,000 now. Nothing like the zillow bizarre land of a peak valuation of $6,100,000.

        • Just Some Random Guy says:

          Zillow works for houses that have a lot of similar comps. Think newer subdivision with 300 houses where every house is very similar. Zillow works well for that since House A that sold for $500K is 95% the same as House B next door, so Zillow can estimate House B is also worth $500K.

          Where Zillow is all over the map is for things like custom built houses for which there are no real comparisons. Or 100 year old houses that could be worth $550K or $350K depending on what has been renovated over the years. In those instances Zillow is pulling numbers out of its azz.

        • Wolf Richter says:


          Palo Alto is in Santa Clara county. In August, the median sales price of single family houses in Santa Clara County, according to the California Association of Realtors, was down 8.1% from August 2018, and down 18% from the peak in March 2018:

        • Zantetsu says:

          Wolf – yes, I realize that the trend you cite is real. I’m just saying that zillow’s estimation algorithm is poor, at least in the bay area. Might work better in other places, I don’t know.

          Keep in mind also that the graph you cite is for median price which is affected by what kind of properties are selling. Zillow comparisons like the one you are making are for the same property over time, which is a different thing. Zillow is not accurate, period. Redfin is better.

      • Tom says:

        I’ll let the Chief know that we must fire all ” tobacco spittin rednecks.” Unless of course if its “fair trade” tobacco to go along with their “fair trade” coffee. Prob. have to change out the beer in the fridge as well. I’m sure we can pool our $$ for some craft beers.

        How dare they volunteer to save property & lives!!

        Then again if all it takes is chew to keep it rural & redneck…..might have to make it a requirement.

      • alex in San Jose AKA Digital Detroit says:

        “San Jose next to Palo Alto?” there’s no part of San Jose that’s near Palo Alto.

        Flood plain/sinking might describe Alviso, as for having to carry a gun etc., that’s only places like Oakland, Bayview/Hunter’s Point, East Palo Alto and gangbangers gotta live somewhere, sane people don’t live in those places.

        As for tobacco spittin’ I think you might be confusing two groups, rednecks and the (dunno if this term is still OK) white trash. As someone put it once, a redneck will help you change your tire, white trash will steal your spare. Chaw’s addictive and bad for your gums, but as drugs go, there’s far worse.

    • fajensen says:

      I think it looks very ‘heavy’, dark and stuffy, with those low ceilings and broken lines everywhere with those different materials dotted around.

      It looks like the properties built in the UK ever since the 1980’s or so; ‘homes’ made exclusively to satisfy the needs of the builders.

      I would not pay 5 million USD for that thing, the renovation will be 500K and then the running costs + taxation ??. Nah!

    • Bobber says:

      You could build that house from scratch for less than $500,000, so they are asking $4.5M for a postage stamp plot of land, that comes with a nice future RE tax burden.

      So, what is so good about Silicon Valley that people will pay a $4.5M cover charge just to be there?

      • Zantetsu says:


        • Bobber says:

          The salaries in Silicon Valley are 30% more than in the Midwest, but home prices are 500% more. If salaries are the draw, then the area is a magnet for dreamers and the financially illiterate.

          More likely, these people are making sacrifices to be part of the action and excitement.

          Interestingly, the vast majority of gold rushers never saw a dime for their efforts, but when asked about the experience many of the hearty souls said it was worth the sacrifice. Those that died expressed no opinion.

        • unit472 says:

          Maybe enough time has gone by and enough new money come in to overcome the Dot.Com era dilemma companies faced finding executives. A senior management type did not want to live on street where his neighbors might be tradesmen or public school teachers who had bought their homes 25 or so years ago but those were the only neighborhoods he could afford.

          I remember one new arrival asking me about Marin when he learned I lived there. He wanted a 5 acre ranchette type home. When I told him there were no 5 acres ranchettes he would be able to afford and West Marin lots were zoned R-20. Also that a million dollars would get him a 1960’s 3 bd 1.5 bath track home in Terra Linda but if he didn’t mind commuting from Sonoma county there might be something in his price range

    • NARmageddon says:

      Nothing screams “I’m management material” more than buying an extremely overpriced house in Palo Alto.

      (yeah, let that one sink in for a moment).

      • Shawn says:

        I don’t see any tech managers buying 5 million dollar homes. Maybe IPO rich can afford that, not salaried folk. In SF houses at that range are bought by investors from everywhere. And in my neighborhood on Halloween they all lie dark and empty, more than half the street. I wish I had numbers for to describe this phenomenon.

  9. michael yates says:

    See the homeless people, rats, and garbage overtaking more and more of the city?
    That trend will continue and speed up significantly in 2020 and beyond, until one day you will look around any West Coast city and realize it has become a slum.

  10. MC01 says:

    There’s one thing I cannot but wonder: how could supposedly sophisticated investors fall for the obviously and obscenely inflated IPO valuations of these companies?

    Besides the unsound financials underlining the whole business, none of these companies has what can be called a unique technology: if you own a business, regardless of its size, you are probably being besieged by companies trying to sell you cloud computing and online security services. And these days Silicon Valley faces increasingly stiffer competition: there are all sorts of software companies from Sweden, Germany, South Africa and even Russia and China competing on the worldwide market.
    In short it’s a brutal market out there, and the ready availability of cheap money ensues this will be a long, grinding and bloody war of attrition. Not exactly conductive to crazy IPO.

    I understand that many people believe these IPO are part of the “greater fool” scenario, with people buying high and hoping to sell to somebody else at an even higher price shortly after, but it’s a trick you cannot pull all the time, despite desperate attempts to turn everybody holding stocks, no matter how worthless, into a winner. Just ask those who bought GoPro shares, which at $4.99 are now a penny stock as defined by the SEC and in my opinion still overvalued.
    How many GoPro are out there?

    • polecat says:

      I give you .. Exhibit A – Theranos

      Just look at the ‘Who’s Who list of supposed wokesters (Not!) that comprised the Board of Directors attached to THAT unicorn kerffufle …

      • Max Power says:

        At least Theranos supposedly had some kind of unique novel technology which could be patented. Now that technology turned out to be fiction but unless you were allowed to peek through the black box it was difficult to tell this was so for sure, at least at the beginning.

        With many of those other unicorns however, as MC01 notes, it is patently obvious and self-evident that there is nothing unique about their business. Anyone could start up a competing business. Just look at all of the food-delivery joints out there. Or GoPro – anyone could build a camera in a tough, resilient housing. This is why it’s so perplexing why investors put such high valuations on these sort of companies.

        Heck, even Netflix is about to get hit by a whole bunch of big competitors. Streaming combined with a big content library (as in from Disney, Viacom or Warner Brothers) too isn’t some kind novel concept.

        • Rowen says:

          I’ll still trying to figure out how Garmin is still close to all time highs.

      • charger01 says:

        No kidding. No less of a figure than Warren Buffett was taken in by that particular scam. If a professional investor can be buffalo’ed by a sham company, what chance does the average investor have?

        I can understand why ETF index funds are popular for normal people. As the average 401k investor has been burned several times, but they need more growth than bonds/T-bills/CDs can provide. We’re all shacked to the awful market without much else available.

  11. Lance Manly says:

    Great quote from a WaPost story this morning.

    “As a result, Uber is “turning [into] an operations company — not a product/tech company,” said one former senior employee, who declined to be named publicly, citing a separation agreement with the company.”

    You can’t be a mutli-billion dollar losing company and not be a growth company. They are in the same trap as WeWork. Maybe if they cut everything they could make a little money, but that market cap would plunge because the growth would go poof.

    • wkevinw says:

      I like that “turning into”.

      Example: Amazon- if it weren’t for Amazon Web Services (opportunity they recongized- good for them- but I guarantee wasn’t in their original mid-90’s biz plan), Amazon would be a different animal. They really don’t make any money on their retail business.

      Lots of vaporware masquerading as business plans.

  12. David Hall says:

    A Pelaton exercise bike costs $2245 and requires a $39/mo subscription. They spent huge on advertising to try to boost revenues.

    A couple of years ago I bought a Schwinn exercise bike for $300 and set it up near my TV. No subscription required.

    I am not surprised to learn Pelaton is a cash burner.

    • PressGaneyMustDie says:

      “A Pelaton exercise bike costs $2245 and requires a $39/mo subscription.”
      Just blew my morning coffee from my nose. Wow. The Pelaton IPO makes seem like a sensible investment.

      • PressGaneyMustDie says:

        “A Pelaton exercise bike costs $2245 and requires a $39/mo subscription.”
        Just blew my morning coffee from my nose. Wow. The Pelaton IPO makes seem like a sensible investment.

        • robt says:

          And they’re facing a $300MM lawsuit because they don’t want to pay royalties for the music they play while you’re exercising.
          But they warned us about that in the IPO offering papers.

      • Mike G says:

        Yuppies pay $38 at Soul Cycle, for basically riding an exercise bike in a group with a trainer pushing you on.
        More money than sense.

        • alex in San Jose AKA Digital Detroit says:

          Back in the day(tm) they were called “spinning classes” and it kinda makes sense in that you’ve got a group to spur you on, like any group sports activity. It’s funny that they’re being called something new, though. The Schwinn Air-Dyne is just about the best exercise bike ever made and has been around for many, many decades.

    • Arizona Slim says:

      I think I’ll just roll my Trek out the door and go for a ride. Thing doesn’t require a subscription, and it’s ready whenever I am.

    • Just Some Random Guy says:

      Pelaton bikes aren’t bought to exercise with. They are bought to take a picture of and post on TwitFaceGram and show all your “friends” how cool you are. It’s a form of virtue signaling.

      • Wolf Richter says:

        Just Some Random Guy,

        Peloton, with an O in the middle (since you just corrected the COBOL spelling of another commenter).

        Peloton is a formation in bike racing where almost all riders draft behind each other, with the front riders fighting the wind. In a well-functioning peloton, the riders rotate and take turns at the front. This saves a lot of energy and allows all riders to go faster. However, there are “escapes” when one or more riders try to break away from the peloton. The peloton might eventually decide to chase, or it might break up, with some riders chasing and the others not, based on a variety of tactical decisions. This is quite suspenseful to watch — and even more suspenseful to do. I used to race, decades ago :-]

        • Rowen says:

          For decades, I had assumed that the Tour de France (or most bicycle races) was everyman for himself. I had no idea that the much of the team consists of support racers who have no chance at ever winning. Guys that would burn energy trying to pull the peloton, or guys that literally take turns forming a draft for the team leader. Ant mentality

        • alex in San Jose AKA Digital Detroit says:

          Rowen – it gets more involved than that, even. There are some good documentaries about it, “Stars And Water Carriers” being one. Another one is called “Tete en Course” and concentrates on Eddy Merckx, the now-retired Belgian cyclist who some consider one of the very best athletes in any sport ever.

    • Pat says:

      I just bought one for $189 free shipping and put it near a TV. I also have an i-pad that can go on it. No surprise peloton will fail

    • NBay says:

      It’ll maybe keep the trophy wife away from the tennis pro or personal trainer for a few months. Meanwhile there’s still the gardener and pool guy to worry about.

    • Mars says:

      I used to ride 2-4K miles a year, for fun. One wobbly knee later from non-bicycle accident and I have a used Airdyne and an old roadie on a mag trainer sitting in front of my large monitor and a townie for short trips. I do not understand “virtual fitness” having experienced the best of heat, wind and rain on Oklahoma roads.

  13. Stephen says:

    America is living in the last days of Rome. For some reason, the crowd today does not believe that the global economy is subject to the same cycles of boom and bust that have been with us for millennia. I have to admit that we have a far more diverse global economy that does offer some mitigation to sharp cycles of boom or bust, but massive debt loads and increasing complexity eventually create sharp fault lines that break. 2020 should be ‘interesting.’ Wolf – your reports are going to get a nice uptick in interest as things careen off the tracks this next year.

  14. Great analysis. Very interesting times in Bay area. When the bubble pops it is going to make California Government look like Illinois. But dip needs to happen to make bay area affordable again.

  15. Money (and credit) is still booming, and the worse things get the more the EU and Japan will create. China has no plans to cut back production in a global slowdown. The lesson of 2016 is that if (globally) you push enough money through the system you can buy your way out of a bear market in stocks and mitigate the damage. Before the global economy can move forward they need to bring new economies like the ME. (S.A. announces tourism initiative?) China sends manufacturing to Iran? Meanwhile in the US we recycle old office buildings. Money is running one way (US) while growth is running the other (EM). IPO is a metaphor for growth, and nobody is buying it, not here, and hot money destinations are very fickle investments.

  16. joe says:

    “and buy local craft beer”
    Very incisive Wolf of both the cultural and finances.
    BTW, you should have gone to Korea instead of Japan.

  17. Bobber says:

    The damage inflicted by Amazon has spread. Not only is brick & mortar retail being wiped out, along with Ma and Pa businesses, Amazon has influenced many investors to bet the farm as they attempt the same “blitzscale” strategy in other areas of commerce. The goal is to dominate everything in a few years and be “King of the world” as Neumann would say, by throwing some capital around.

    What ever happened to the concept of working hard for decent pay? Everybody is looking for the quick and easy route to riches. A good life isn’t enough.

    • Frederick says:

      Greed is NOT a good attribute No doubt about that And just because you have more it doesn’t make you happier That’s coming from personal experience

    • GSW says:

      Anecdotal; but a friend of mine owns several bars in SF, and just closed two of them. 35% of my neighborhood is vacant storefronts (in a premier part of SF). It really is amazing.

      His takeaways:
      1) Minimum wage laws kill the restaurant/bar business, when you have to pay $15.80 for all employees just to start. Margins are thin as is.
      2) Rent; landlords are out to lunch. Many of them live offshore anyway, and if they leave it vacant, they take a tax deduction and move on.
      3) The biggest effect in the bar business: the current millennial generation doesn’t go out. Not an editorial as to whether it’s good or bad, but this crop of twenty-somethings doesn’t seem to do the “lets meet at the bar Friday and see where the night takes us” mentality. They order Netflix, GrubHub, they can swipe left and right to meet women (which you used to have to leave your apt to do); and they get their groceries, booze and even weed delivered via an app. Not judging, but the combination of these three factors is a death knell currently for retail. Amazon and all these apps have brainwashed people.

      • Bobber says:

        I noticed that on the East Side of Seattle too. None of the young people go out very much. The techies are not social creatures.

      • Just Some Random Guy says:

        “Minimum wage laws kill the restaurant/bar business, when you have to pay $15.80 for all employees just to start. Margins are thin as is.”

        But AOC says that’s not true. Hmm who should I believe?

        • Wolf Richter says:

          There are about 8,000 restaurants and cafes in SF, for a city of only about 880,000 people. SF is teeming with new restaurants and cafes. The competition is HUGE and EXCELLENT. Everyone is trying something new and different. You’ve got to stand out.

          The problem isn’t min wage in SF since min wage is the same for all establishments, and therefore there is no competitive disadvantage between establishments. The problem is excellent competition everywhere, rents, and finding people to do the job despite wages being offered that are higher than min wage.

          I know two people who own restaurants. And they both say that. They’re both paying over min wage to retain people, and if they lose someone, they’re having trouble filling that slot (in the kitchen, and other places where tips don’t apply).

          Then there are rents. When a lease comes up for renewal after 10 years, the new rent may more than double. And many restaurants close when the lease comes up for renewal because the numbers just don’t work out.

          The restaurant business has one of the highest failure rates. Last figure I heard is that something like 90% of all restaurants fail within the first few years. Being able to fill up your restaurant every lunch and dinner is very tough, especially in SF where there are so many choices with great food. You’ve got to be really good.

          Some of my favorite restaurants have been here for decades and some of their employees have been there forever. And they’re so busy you can’t get in until after 10 PM, or you have to make reservation a long time in advance. These people know how to run restaurants – and they treasure their employees and pay them well above min wage.

          There are tons of restaurants I went to and will never go back. They’re doomed. A continual shakeout is natural. That’s why SF has so many relatively low-key but excellent restaurants. You have to be excellent to survive. To blame failure on minimum wage is delusional.

      • HobartChic says:

        Young people are broke. Middle aged people are broke, or in massive debt. Retirees don’t spend. Retail will struggle under these circumstances unless government focuses on providing well paid, secure jobs and affordable housing and cheaper store rentals. Without that, retail is stuffed. Though I expect more stores to shut regardless, there’s too many.

        • GSW says:


          His perspective isn’t the minimum wage per se, but the fact that a new baseline of $15.80 or whatever per hour for those positions means you have to pay above that to keep anyone in such a tight labor market. You can raise prices until a certain point, but there is a ceiling for that, especially with bars. I know of at least 2 bars in my neighborhood that used to serve food but now the kitchen isn’t even used because the margins aren’t there to support the extra labor.

  18. Carlos Leiro says:

    What about this:

    This Tuesday, September 17, the Federal Reserve of the United States had to offer 53 billion dollars in the “repurchase market”, a sort of “money table” to which the banks go as a guarantee offering US public debt bonds to obtain liquidity and weather the transitory difficulties in general for 24 or 48 hours. This is a considerable sum almost equivalent to the IMF loan to Argentina.

    The strong demand for liquidity due to the difficulties of some banks, the rumors name the Citi, was causing an increase in the interest rate at the precise moment at which the Federal Reserve, the Central Bank of the United States, was preparing to decrease them Loans between banks are usually made at a rate similar to that of the Federal Reserve, that is, between 2.0 and 2.5 percent. However, something began to malfunction because some liquidity holders due to a demand considered excessive proposed, on Monday, due to attacks on the refineries in Saudi Arabia not less than 6 percent and even 10 percent on Tuesday morning.

  19. polecat says:

    EVERYONE wants the benefits of an acquisition suitable for a Ferengi ! Right ?

  20. ft says:

    I worked my whole career in Silicon Valley. It always amazed me that so many people could make a good living producing mainly a bunch of crap that nobody needs. It always amazed me that so many people could have such a grossly inflated sense of self-importance. Bring on another recession. I look forward to less congestion on the roads.

    • Lex says:

      Less traffic also means fewer taxes being paid. Not a fan of taxes (moving law firm to Puerto Rico for the Act 20), but having lived in Marin for 15 years, the taxes covered the California good life. What will happen if people continue to move?

      • ft says:

        Lex, maybe it will set us back fifty years. Overall quality of life in Silicon Valley, before all the tech hype, was better in 1969 than it is now.

        • polecat says:

          That means replanting an fruit tree orchard or two .. I mean, if we’re gonna go full-on historcial ..
          It proably wouldn’t hurt to reduce some of that awful commercial space, no ?

    • Bobber says:

      Upon graduating college and for many years thereafter, the average overachiever counts on being a CEO or at least making some famous indelible mark on society. The companies in Silicon Valley exploit this young, naive and cheap fodder.

      When 90% of them wind up being 45 year-old working stiffs in Texas, Philly, Salt Lake City, etc., they’ll wish they had saved some money.

  21. frisco lens says:

    This is what the tycoons to keep failing profits up. First the coffee and small perks, then 800 employees, then 25 percent of their salary. I wonder how Uber and Lyft profits and Wall Street look will be once all the drivers who make them profits can become employees.

  22. kiers says:

    Maybe Peloton will become the virtual reality company. Virtual biking. Virtual sex. Virtual vacation. Virtual fighting. Virtuall……. put a screen in front of millenials and they cream their pants.

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