Tried turning off hardware accel. No change.
Here is the file.

SKETCHUP GLITCH.skp

@tig said:

Your view is upside down
The Z/blue solid axis line should be up...
However, I suspect it might be a graphics-card issue.
What's your card?
Have you updated the drivers?
Is Sketchup allowed to adjust the cards settings in the card control-panel?
What 'OpenGL' settings do you have in Preferences?
Try some permutations of these to see what that does...

ATI Radeon X1300PRO
Drivers updated
I don't see anything in the ATI control panel that would allow or disallow a program from adjusting the card settings.
OpenGL - Use hardware acceleration

Perhaps "phantom" isn't the most accurate term for this object since it will affect other objects and there is entity info for it. See new attached file.

It's invisible until another object is drawn over it, and it won't go away.

In one of my models, whenever I creat an object at the origin, another phantom object appears. See attached file. In this case, I created a rectangle and the circular object appeared. The circular object has no edge lines, just a surface. It disrupts the edge lines and surface of the rectangle. The rectangle can not be rid of the effect of the phantom object by any sort of editing.

Any idea what this is and how can I remove it?