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Originally Posted by The_Jazz
Host, I find this very interesting from a professional perspective since residential construction currently accounts for about 45% of my income. While it's certainly true that the housing bubble has burst in certain places, what's true about politics - that it's all local - is true about real estate. There are current housing booms in 5 major cities that I deal with on a daily basis that aren't showing any signs of slowing down appreciably. Las Vegas is the most obvious one, especially for condos on the Strip.
That said, I think that you've drawn too narrow a window for a look at the fiscal health of the country. While I agree that the economy could be heading for a downturn, I disagree that the lending standards and housing boom are the cause. If we do see a recession, I think that it would be a minor one at best but the timing would be absolutely crucial for the 2008 election season. We've already seen how foreign regulations can affect our stock market, but the trends that I see in the industrial manufacturing arena don't really lend themselves towards a major recession around the corner. Sales on big-ticket consumer products are going up, and that's my most accurate assessment of national economic health. People are buying more RV's than they did last year, and that's been an excellent barometer for me for the past 10 years.
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The_Jazz , I don't take your opinion lightly....you're the professional, while I am a self educated amateur who has intensely focused on the US stock market (before being distracted....to a degree....by the political events...post the November 2000, election....) since taking a "stab" at being a full-time "short term" and "day trader", back in 1997.
That said... I am especially surprised at your much more optimistic opinion than the one I'm currently holding. I view real estate as a "bottom up", demand situation. These sub-prime lenders made it possible for what would have been the "bag holders" of entry level houses, condos, and studio apartments, to unload them at inflated prices to the sub-prime borrowers of New Century, et al. IMO, the new lending "standards", announced to include eliminating zero down payment mortgages to applicants with FICO scores below 700, will kill demand from the "bottom up" and, in much of the country, the "top" of the market has been dead for some time, now:
On friday, I initiated a small "short" position in this one. Icahn's position aside, this is a BK candidate, IMO, and much sooner than the longs in the stock would think:
http://news.google.com/nwshp?ie=UTF-...n&tab=wn&q=wci
Carl Icahn has initiated a fight to take over the board of WCI. That is reason enough for me to protect my stock position by buying put options at a $20 strike price, a few months out....but everyone holding this stock will increasingly feel the need to sell it, I believe.
WCI has ceased building new towers, has tried to sell it's land holding and options, is stuck with more cancellations than closings, and is technically in default on it's loan convenants.
It's not "just in Florida", either......
http://www.wcicommunities.com/
On the conference call, the other day, the management admitted that they have been unable to sell their remaining 29 units at their NJ tower, Watermark:
http://www.wcicommunities.com/defaul...ID=79&vid=1000
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http://news.google.com/news/url?sa=t...business&cid=0
WCI reports quarterly loss, blames Florida housing market
Naples Daily News, FL - Feb 27, 2007
<b>WCI officials withdrew their financial guidance for the year</b> and offered no profit predictions. Going forward, company officials said the focus would be on ...
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I'll go so far out on a limb as to say that the participants in your "still booming" real estate markets, do not know that they are "dead men walking",
yet....but this week, the DOW and the S&P behaved as I have expected, and waited for them to behave....
The way that I think this "works" is that the financial markets always end up surprising the maximum number of investors....and it has to be that way. Politicians will always be followers of the trend, not the leaders. Just as with the war in Iraq, and in the GWOT.....unfortunately, the democrat who takes the lead on describing the coming economic decline, and offers a plan to cope with it's effects, will be accused of not "supporting the US consumer".....of "talking the economy down"....etc.
So....either I'm wrong.....or you are. I actually think that your optimism is a "tell" that indicates that there will be much greater damage from the suddenness and the depth of the economic downturn that I am expecting.
On March 13, 2000, the Nasdaq 2000 stock index crossed the 5000 mark, up from a low of 2800, in October, 1999. The Nasdaq ended up retreating to near 1000, by early 2003.
In March 2003, when the DOW had retreated to 7200, I bought a couple of call options on that index. I sold them way too early, at a profit.....the DOW rose to 12,800 recently.....I think that was the high for the DOW for the next few years....
Sept. 1929 Dow = 393 July 1932 Dow = 41 ....and 393 was not surpassed again until....1953.
Not trying to scare you....I am an amateur, I don't have a crystal ball. I'm better at picking market bottoms than tops. If I can share what I'm observing, and my experience with a few interested folks, maybe it'll help....