Shelfari & Open Social

The Shelfari team has been hard at work for while building on the Open Social platform, and last week they taped a video while at Google... here it is:



Great work guys!

what a week!

Last week was crazy! I had a chance to present at the Web2.0 Summit with Rob Currie for Dash. It was a great experience and the presentation went off without a hitch. It really is easy to present when "things just work" and fortunately the hard work of our engineering staff made that happen, so I had the pleasure of showing off all their hard work. Here is a cool blog post from Tim O'Reilly that was written during and after our presentation.

Additionally, Shelfari has been doing GREAT lately. The site is gaining traction, the team is growing, and there was even an short mention in the Wall Street Journal this weekend. This is just another case of a great team doing great work!

Not all weeks are like last week, but I am hell-bent on making weeks like last week more frequent!

Getting ready for Web2.0 summit

I am headed up to SF this week for the Web2.0 summit. I am going to be presenting with Rob Currie (President / COO of Dash) and we will be unveiling some cool new Dash features. If you are attending and want to get sync-up let me know: mark.williamson AT Gmail [dot] com.

Who wants to catch this falling knife?

Click to see full sized picture:

More bad news for housing

So the markets sold off today on the news that housing prices are dropping, and fast. I was happy to see that the data discussed today was the Case-Schiller Home Price Index, because after reading about many methodologies, I think that this is the best methodology out there. This past weekend I read the entire methodology document and I came across the following nugget of information:

The monthly indices use a three-month moving average algorithm. Home sales pairs are accumulated in rolling three-month periods, on which the repeat sales methodology is applied. The index point for each reporting month is based on sales pairs found for that month and the preceding two months. For example, the December 2005 index point is based on repeat sales data for October, November and December of 2005. This averaging methodology is used to offset delays that can occur in the flow of sales price data from county deed recorders and to keep sample sizes large enough to create meaningful price change averages.

YIKES... This methodology means that in times of fairly rapid movement the index can really get behind the actual changes since it is a moving average. I know there is a futures market based on this methodology... next step is to delve into that market and understand where people are putting their money. If I was a betting man I would say that the year-over-year declines are going to accelerate in a significant way over the coming months.

Best Baseball Game Ever!

Last Tuesday night I had one of the best days of my life. My wife (Tara) and daughter (Abbie) bought me Cubs vs. Giants tickets for Fathers Day... and last Tuesday was our night to go. Abbie had so much fun! She sat there for the entire game routing for the Cubs and making friends with all the Cubs fans in the stands. Check out these pictures!

On Intelligence...

I can't get the concepts I am learning from On Intelligence (the book I am currently reading), out of my head. The author is Jeff Hawkins, who is best known for starting Palm (of Palm Pilot fame) and Handspring (of Treo fame). Jeff's theories on how the brain works are fascinating, and the implications of his work, if correct, will be astonishing. A friend of mine named Phil Shoemaker works at Jeff's current start-up Numenta, and I am very glad that he turned me onto the book.

I HIGHLY recommend that new product developers, the intellectually curios, product designers, AI developers, parents, teachers, heck... basically everyone should read this book.

Why it will get worse - the data

MarketWatch has an article today entitled "Western states went exotic with mortgages" where they layout data from First American LoanPerformance on the types of mortgages that were taken out across the country, and specifically here in California. If this data doesn't scare you about the near term housing market, I don't know what will. So here it is:

"Payment-option ARMs" (AKA - negative amortization loans... this is where you pay LESS than the interest on the loan and the difference between your payment and the interest due is added to the principle of the loan! Your payments will reset to a much higher amount 2 or 3 years later and will be set by the new interest rates at that time)

California - 24% of all refinanced and first mortgages in 2006
Nation wide - 11% of all refinanced and first mortgages in 2006

To give some perspective, in California, payment-option ARMs made up just 0.8% of all loans in 2003 before jumping to 7.5% in 2004 and more than 18% in 2005.

Interst Only (you pay just the interest, and no principle for the first couple of years, and then your payments reset to new market based interest rates, typically after 2 or 3 years)

California - 32% of refinanced and first mortgages in 2006
Nation wide - 22% of refinanced and first mortgages in 2006

This means that 33% (1 in 3) mortgages across the country last year were either negative amortization loans or interest only. In California, more than 1 in 2 were either negative amortization loans or interest only. Let me say it again... 1 in 3 nation wide and 1 in 2 in California!!!!!!! So if you think you have seen downturn, wait for the 2 to 3 years after these ARMs reset (2008 / 2009) and see how many people default.

Credit markets...

About 2 weeks ago I wrote a post entitled "Back end of housing bust..." where I wrote about how it would be rough for consumers when wall street finally lost their appetite for mortgage backed securities. We that happened this past week. Banks can no longer package up some of their exotic mortgages and sell them off, so guess what... they aren't going to offer them any more. Read this story at MarketWatch that talks about some banks cutting WAY back on the products they offer.

It took far to long for this to happen. It will be very interesting to see what the fed does this week, if anything. I for one hope that they don't step in and clean this up for everyone. We need to get the housing market back to fundamentals... the norm needs to be 20% down payments on a 30 year fixed mortgages, not 0% down, interest only ARM. For that to occur there needs to be a lot pain distributed across the market (Hedge Funds, Wall Street Banks, Mortgage Companies, and Consumers).

The worst is yet to come...

The median household income of silicon valley is ~50% higher than average, yet the median home price is ~3.5x... this will get straightened out over time, and it will get ugly for many people.

Foreclosures explode in CA

As expected, foreclosures are going through the roof here in CA, and the Bay Area isn't immune. I had a great conversation with some business school friends last night about the housing market, and my point of view is that things will actually continue to get worse before they get better.

Here is the story from the SF Chronicle that details the most recent stats.

Here is the image from the story... it goes without saying that this picture is worth more than a thousand words:

Back end of housing bust...

Up and down the economic value chain of the housing market there has been pain recently. I am clearly a housing bear, and having friends working on wall street, specifically in CDOs, gives me a little insight into how they are viewing paper these days.

Here is a must watch video if you want to understand why the worst is probably still to come with respect to the housing market. Remember, when wall street loses it's appetite for mortgage backed securities there will be a huge trickle down effect to consumers:

Can we move on now???

I am a tech news junkie, and I am SOOO glad the iPhone launch is over with. We need to move on. Yes this is a game changing device, for a bunch of reasons. Other cell phone makers will have to raise their game and innovate in areas they have ignored. Probably most importantly, every carrier not named "AT&T" will need to reexamine their "closed platform" philosophy.

Techmeme....

Years ago, I would start every hour by quickly pinging News.com to see if there was any breaking tech news. That was quickly replaced by bloglines, which became the hub of all my news. Today, I subscribe to 200+ feeds, so I can't jump into my feed reader and get a quick snapshot of the pulse of the tech world... that's where Techmeme comes in. I visit techmeme about 10 - 15 times a day to find out if any stories are breaking and to see what is happening in the world of tech news. Check it out if you are a tech news junkie like I am.

What Henry Said...

I have been a bear for so long on housing that I now know what the Nasdaq bears felt during '98 - 2000. Henry Blodget (yes, that Henry Blodget) perfectly summed up my feelings on the housing market with this post:

NAR: Don't Worry, Housing Prosperity Just Around Corner

HousingcrashOff topic, but I can't help but note the similarities between the dotcom-crash rhetoric/predictions back in 2000 and the housing-crash rhetoric/predictions in the last 12 months.

Those of you who had the misfortune to live through the dotcom crash will recall that I and other analysts correctly predicted that there would be a slowdown and shakeout, but drastically underestimated its severity and duration. All the way down, we kept revising forecasts (read: cutting estimates) to previously inconceivable levels, and each time we cut them, we reiterated our expectation that the inevitable trough and upturn was about six months away. It wasn't until two years after the shakeout began, when half of online advertising revenue had evaporated and more than 75% of the companies in the sector had keeled over that the downturn finally ended... And by that time, most of us were so demoralized that we'd stopped predicting that there would ever be an upturn.

Housing obviously won't experience as deep a correction as the dotcoms did, but I haven't heard a single persuasive argument explaining why this downturn won't look like every previous housing downturn: i.e., will last a lot longer and drop much farther than most people think--until price/rent and price/income ratios return to or below their long-term trend. Instead, all I hear are arguments like this one, which are based not on long-term historical trends, but on short-term bubble-year pricing and price trends (arguments I am very familiar with, having made similar ones in late 2000 and early 2001):

WASHINGTON -- The National Association of Realtors again lowered its U.S. housing market forecast for this year, saying the market remains "soft." In its latest forecast for the real estate market, NAR projected that existing home sales will fall 4.6% this year to 6.18 million, compared with its previous forecast of a 2.9% decline. New home sales are expected to plummet even further. The NAR said new home sales are likely to fall 18.2% to 860,000, compared with the prior forecast of a 17.8% drop. While near-term prospects for housing remain fairly grim, NAR said sales should pick up toward the end of the year.

"Overall housing levels are historically strong, but sales remain sluggish compared to the recent boom," said Lawrence Yun, NAR senior economist, in a statement. "Home sales will probably fluctuate in a narrow range in the short run, but gradually trend upward with improving activity by the end of the year," Yun added. Existing home sales are projected to rise 3.7% in 2008, to 6.41 million, according to NAR's forecast.

Talking at Where 2.0 this week

While Bill & Steve debate at D, I will be talking at Where 2.0 on Wednesday. The topic... "Getting into the Car : Geo-located Information Breaks Free". It should be a fun session.

Facebook platform will be HUGE

I have spent the day thinking about and researching the new Facebook Platform. I am convinced that this is going to be HUGE, and that within 18 months Facebook will surpass MySpace as the #1 social networking site on the web. I also believe that dozens of start-ups will survive solely based on this platform. Big, Big, Big...

Free Start-up idea of the day

I have an idea or two a day for a start-up, and I am booked working on 3 companies (Dash, Shelfari, & MyTinyHands), so I am not looking to add a fourth anytime soon. Therefore, I am going to start blogging some of my ideas to see if they are interesting to anyone else.

Today's Idea - Using SMS to track business expenses. I would pay a few bucks a month for a service where I could SMS my business expenses as they happen, and then the service would automatically transform the messages into an expense report. I know I always forget $20 - $50 a month in business expenses like cabs, airport meals, etc... and this could save me lots of money.

Where is my killer Rhapsody Widget?

I use Rhapsody all day at work, and I am constantly jumping between applications to manage my music experience. What I need is a killer Rhapsody widget (built on Yahoo's or Google's engine) that will sit on top of other applications and make it simple for me to manage my music experience. Here is a simple set of features I would need:

- Skip a song
- Add a song to my library
- Switch channels or playlists
- Jump into my library to switch albums

So... come on Rhapsody, where are we at here. There was a widget created a long time ago for Yahoo! but it hasn't been updated in years... hook me up!

Gov't Bail Outs in Housing?

I am trying not to turn this into a "housing market blog", since my intent is to focus on technology, having said that, there is just too much here to keep my mouth shut. The State of California is considering getting involved an bailing out consumers who are in danger of entering foreclosure. The government should step aside and let the market deal with this issue.

Foreclosure data

This is the outcome of the dynamic I just posted about:

Housing Data

So I have long held the belief that the housing market is way over priced. My thinking is shaped by the rate at which home buyers were using "exotic" mortgages (read interest only / negative amortization, etc.) to buy the homes they wanted. I also believed that most people didn't fully understand what they were doing when they entered into these mortgages, which is why I think there will be a rash of foreclosures at all price points in the housing market.

Having said all that... why is that the data the press and government talks about is around median home prices and volume of houses sold? This is really meaningless data. What really matters, in my opinion, is the "income" (I am using income here as an approximation of the buyers ability to pay their monthly mortgage) of the buyer compared to the size of the mortgage taken. The housing bubble was fueled by "volume" and "median price" watchers, but if anyone analyzed the "income" of buyers compared to the mortgages they took out, it would have been CRYSTAL clear early on that is was a giant house of cards, the same way the stock market was a house of cards in the late 90's.

If anyone knows of a firm that analyzes data around buyer "income" and mortgage amount and structure, please let me know.

Microsoft

Paul Graham wrote a post called "Microsoft is Dead"... I was midway through reading the post when I had to go help my daughter with something, and I was thinking as I walked back to my computer... "This is *really* old news"... funny enough he ends the post saying that there will be two reactions... one where people say "don't underestimate Microsoft", and the other "this is old news"... great anticipation!

Housing again...

Silicon Valley seems to be in a housing bubble that just won't pop easily... but for all of you who think that SV housing is immune, please check out the following graph:


The above chart is for housing across the country, but I would love to see the same data for housing in Silicon Valley. I bet the index would be off the charts... literally.

How cool is this?!!!

A few hundred million later...

After flushing hundreds of millions down the drain in marketing & hardware subsidies, XM & Sirius finally did what anyone with half a brain would have done years ago, they announced their intent to merge. The combined company (if approved by regulators) should be able to significantly cut marketing, content, and hw costs. I am really looking forward to pouring over their financial statements after the deal closes to determine the synergies.

Dollar vs. Yuan

Since the Chinese government has allowed the Yuan to "float" (and I am using that term loosely) against the dollar the above is what has happened.

LinkedIn, worth its weight in Gold!

So I know there has a been a meme running around about the value of LinkedIn with respect to sourcing talent for job openings... and all I can say is that it is true. I posted a job opening for Shelfari, and I have gotten at least a dozen SOLID applicants. And all it cost Shelfari was $145 to post the opening!

Friday was a great day!

Yesterday was a BIG day... I will provide more info in the next few weeks.

Good Bye ESPN.com

I have had it with ESPN.com, and their continued use of ANNOYING pop-up ads. I will never visit their site again. CBS Sportsline... here I come. Don't let me down!

Short Rants

There are a few things bothering me these days, and I just need to get them off my chest:

1) Pop-ups - How does any self respecting website still run pop-ups? How are there ANY companies left who want to be associated with these incredibly annoying ads? I have stopped visiting websites that have pop-ups and I am considering dropping any relationship I have with companies that run pop-ups. If I see another Vonage or Netflix pop-up I will cancel my account with each of them.

2) Mid Season TV Show Breaks - It feels like 6 weeks since the last new episode of Heros aired. It feels even longer for Lost. These huge mid-season breaks KILL my interest in these shows. As if young male consumers like myself need another reason to ditch TV! One of the reasons I love 24 is that the season runs uninterrupted.

3) TV Shows Running 1 Minute Late - I HATE it when a TV show runs 1 minute long. It is a Bull Sh*t trick to F'up DVRs and other technologies... and it pisses me off. If this practice, which has been around for far to long, I am going to start boycotting these shows.