I love this guy’s movies. Finding out he writes so articulately to boot? Wow
You're thinking of Steve Buscemi. This article is authored by Steven Buccini, a Software Engineer and former political candidate.
Zillow lost money because they weren't willing to lose money
331–340 of 386 posts
Re: Zillow lost money because they weren't willing to lose money
#332Earlier quoted context omitted.
Basically the COMEX changed the rules explicitly to disadvantage the Hunt Brothers. The changes made to margin requirements is what made the difference here. I don't think anyone could claim that the silver market is an entirely free market, I remember last year a press release where the COMEX said they weren't sure how much they actually had in their vaults in eligible and registered, with a plus/minus 50% figure be…
Would some cryptocurrency stuff count? We have no idea how much a handful of whales control Bitcoin or Eth. The tether thing seems really shaky too with how much they actually have in reserves. Same with a number of exchanges or major market players. Cryptocurrency is also a bit wonky because of always including forever lost access to a solid percentage of the currency. Bitcoin is the most notable.
Tether is an enormous fraud and the financial reporting of the reserves has just never been up to generally accepted standards.
The thing with crypto is that much like some of these other commodity markets there's less real trading volume than many people think (there's been a lot of wash trading going on: https://cryptobriefing.com/binance-wash-trading-icebergs-tip...). Where crypto is very different from the futures markets is that you can just buy the stuff directly because the costs of holding it are much lower. Say I want to invest in oil, it's a massive pain in the ass to build warehousing to start taking delivery, whereas something like crypto is much easier for a company or individual to hold. From this point of view there's very real non-regulatory reasons why trading futures for oil makes sense whereas this is not so for cryptocurrencies.
Re: Zillow lost money because they weren't willing to lose money
#333Earlier quoted context omitted.
> You can't garauntee your (bid/ask) resting orders are executed against in the same epsilonic time window, nor would you want to Of course you can. This is the entire thesis with which HFT beat out old-school market makers in securities.
I think you maybe have some misunderstandings around the practicalities limit orders and market microstructure (not withstand some theoretical model of risk free market-making, which has broadly been superseded, if you care about the theory at all).
> you maybe have some misunderstandings around the practicalities limit orders and market microstructure
Perhaps. I haven’t been on a market-making desk for close to a decade now.
But to correct one misconception in your comment, market makers don’t commonly use limit orders. (You’d submit a quote and try to hit rebates.)
Re: Zillow lost money because they weren't willing to lose money
#334Earlier quoted context omitted.
Isn't is also true that the original pricing algorithm was built for a very different purpose? It was useful for getting a ball park estimate of value, but it was hardly accurate in the underwriting sense (for the reasons you point out). The hubris of assuming that those prices were so accurate that Zillow was willing to buy at them sight unseen is mind blowing, particularly when one takes into account the adverse se…
Even if their ML model provided excellent predictions, another potential problem they may not have accounted for is adverse selection: the only takers may have been on houses whose bids were too high.
It seems very difficult for me to imagine that they didn't anticipate adverse selection and try to account for it. I mean, clearly something went wrong somewhere, but I feel like people are acting like they had never heard of adverse selection until now.
Re: Zillow lost money because they weren't willing to lose money
#335While no doubt Zillow made many of these mistakes, I think the reality is more sobering that the author of the article realizes. The more grim possibility, is that Zillow got out of the house buying business, not because they weren't good enough at it, but because they _were_ good enough at it to realize that it was at the top. If buyers want more now for their house, than it can be sold for in a few months time (whi…
It's land, there is no top. It's a finite resource. Buy any property in the U.S. and hold for 15 years and I would be shocked if you didn't make out even if you had 2008 in between.
> Buy any property in the U.S. and hold for 15 years and I would be shocked if you didn't make out even if you had 2008 in between.
Vast swaths of rural Midwest and northeast with little industry and declining population definitely did not make out, especially factoring in property taxes and the opportunity cost of not investing in VOO as a near risk free alternative.
Re: Zillow lost money because they weren't willing to lose money
#336Earlier quoted context omitted.
It seems like you’re presenting a straw man. Being able to sell your house and not be tied to one home for life is a reasonable desire that has nothing to do with speculative investment.
No, it's that if I need to sell it I've structured my finances and my life to be able to take time to do it--because I've intentionally made decisions with the remodeling in my home to be suboptimal for selling anyway . I'd have to put up a wall and reroute a bunch of plumbing for my laundry room off my master bedroom so I could turn it back into a bedroom because that's what the dollar-signs-for-eyes crew values, so…
> structured my finances and my life to be able to take time to do it
so you do agree that it takes time to buy and sell real estate. The reason liquidity is better for market efficiency is that liquidity allows the price of the asset to move towards the "true" price, where either party of the transaction doesn't feel they've been cheated.
If you claim that house flippers are "cheating" the long term buyers, then you must also agree that the market is currently inefficient, and that the long term buyers is paying above the "true" price. Liquidity would actually alleviate that problem!
if you don't agree that flippers are cheating their price higher, then you must also agree that the long term buyers are getting a better deal.
So either way, liquidity makes the market more efficient, and results in the "true" price of the asset to be revealed sooner and easier.
Re: Zillow lost money because they weren't willing to lose money
#337Zillow lost money, because they were hit really hard during pandemic. This article does not mention that. Instead, the rest of the article deals with Linkedin-wisdom and hard platitudes, such that it is not possible to build a good model on someone else's data (as if Zillow even was). Data scientists remarking on the Zillow fold, are like psychiatrists or engineers remarking on non-clients and bridges build by others…
How exactly were they hit hard during pandemic? Their main income stream is the funnel of services they provide (or get a cut of) through lead generation (agents, title, insurance, etc...).
During the time of the pandemic, the house prices rose and so did the volume. If anything, they made out like a bandit.
Re: Zillow lost money because they weren't willing to lose money
#338Earlier quoted context omitted.
What's even arguable about it? Liquidity is good for market participants, period.
Liquidity is NOT good in a dire-necessity supply-constrained market like housing, because it invites capital which could've been spent elsewhere to lock up unnecessary housing units (houses are empty while being flipped), further constraining supply of a critical resource. Imagine if drinking water was treated as a speculative asset, with large percentages of a countries water supply being stored in tanks and sold ba…
> Imagine if drinking water was treated as a speculative asset, with large percentages of a countries water supply being stored in tanks
then you'd see people not waste any water at all, and fix any pipe leakage, and conserve water, and use water efficient agriculture methods etc.
The price of a commodity determines how much and how easily it is available. The fact that water is so liquid (both in terms of the price, as well as being an actual liquid) is because of the high amount of investments made into obtaining it over the past centuries. Liquidity of any asset (or commodity) is a good feature to have imho.
Re: Zillow lost money because they weren't willing to lose money
#339Earlier quoted context omitted.
Yes, you might discover that your average price is accurate, which is just fine for a reporting site. But beneath that there could be some structure, for instance there might be blobs of houses that your model makes too cheap vs reality, and blobs that are too expensive. If those are identifiable, eg via some sort of local knowledge, you might find that people will sell you houses that you've marked too high, but you…
Totally. There’s a surly creep who lives on our street and the houses next to his are worth less because of that. But Zillow would never know that.
Where I am all the houses sell for above asking, often before an open house. It seems hard to imagine a buyer would even have a chance to get scared off by the neighbors.
Re: Zillow lost money because they weren't willing to lose money
#340Earlier quoted context omitted.
Liquidity is NOT good in a dire-necessity supply-constrained market like housing, because it invites capital which could've been spent elsewhere to lock up unnecessary housing units (houses are empty while being flipped), further constraining supply of a critical resource. Imagine if drinking water was treated as a speculative asset, with large percentages of a countries water supply being stored in tanks and sold ba…
> Imagine if drinking water was treated as a speculative asset, with large percentages of a countries water supply being stored in tanks then you'd see people not waste any water at all, and fix any pipe leakage, and conserve water, and use water efficient agriculture methods etc. The price of a commodity determines how much and how easily it is available. The fact that water is so liquid (both in terms of the price,…
You'd also have people die of thirst, just like the homelessness problem in expensive cities in the US right now.