host

This was "the news" on thursday:
....and yesterday.....just a day later:
My observations are that is possible that Bear Stearns had some large holders of <b>NEW</b> that needed to unload their shares before the impending news, hence, the "upgrade".
<img src="http://chart.finance.yahoo.com/c/1y/n/new">
It is not as if "the news" was unknowable:
comments in reaction to the 02/04/07 New Century Financial conference call:
The point of the above info is that the DOW 30 stock index DJIA , experienced it's largest weekly decline in the week that ended yesterday, in the last 42 months...

The fraud at <b>NEW</b>, the second largest US subprime lender, and the sudden, sharp decline in it's stock price, is not an isolated incident. About 25 other sizeable sub-prime lenders have gone out of business or been "absorbed" by other companies, just in the last 10 weeks:
If you believe, as I do, that the mortgage industry, home construction industry, and the residential realty industry, and the speculative financial bubble that grew them since 2001, are responsible for most of the US job "growth", and that MEW (mortgage equity extraction), drive by bubble prices for real estate, driven by lax lending standards, and "interest only", no down payment loans, was the source of the money that drove the spending spree of the past 5 years in the US, since wages remained flat, on average, doesn't it seem likely that "the economy" will be the 2008 presidential campaign issue, as early as late this spring?

I'd also like to discuss what to do about it, both on a personal finance level, and on a macro level....

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.

__________________
"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin
"There ought to be limits to freedom." - George W. Bush
"We have met the enemy and he is us." - Pogo

host

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

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....

Elphaba

Host, I can't even claim an amateur knowledge of the stockmarket, but I think it is relevent to your discussion that Freddie Mac is refusing to further participate in the subprime lending that grew out of the "bubble."

If the surviving group of subprime lenders are no longer able to bundle and resell to Freddie using their "creative" financing, they too will be risking their own solvency. I find that preferable to citizen funded bailouts any day.

This might be a useful link:

FreddieMac

Will the economy be a central issue in 2008? Greenspan assisted in the stock drop this week by predicting a likely recession by the end of this year. His successor is now doing the 'happy happy' tour to settle down the market investors. It's the middle class that has faired poorly over the last several years and I expect economic issues to be in the forefront soon.

__________________
"You can't ignore politics, no matter how much you'd like to." Molly Ivins - 1944-2007

host

The_Jazz, the downturn, both in average selling price and numbers of new building permits issued and new homes sold, is reported to be a nationwide phenomena. The statistics of the decline are supportive of my argument, both in trend and in severity. New data comes with the consideration that most of the country experienced much milder weather than ususal, throughout the Dec. thru Jan. period.

The Las Vegas strip proximity is unique because it is a "one of a kind" locale with a unique economic base that receives more international financial investment, interest, and tourist/gambling revenue than it's closest US competitor, New York City, does.

http://www.lvcva.com/getfile/Histori....pdf?fileID=80
Las Vegas 2006 visitors: 38,914,889 Visitor dollar contribution: $39.4 billion

Tourist spending rose nearly 25 percent in Las Vegas since 2001, from $31.9 billion.

The population of Las Vegas "proper", is still under 600,000, yet revenue from tourism is more than 50 percent above the revenue received by New York, a city with 12 times the Las Vegas population.

Even with all that money flowing in, the Businessweek forecast for the Las Vegas real estate market as a whole, is dismal for 2007:
Even if the price increases in the few areas of the country mentioned here, continue, is the population in those unaffected areas, large enough to offset the job losses and business and lender failures, everywhere else?
You said that real estate acivity is "local", but as Elphaba pointed out, the market for the loans that are made and "packaged" into MBS for Freddie and Fannie to buy and attempt to resell to investors, is a narrow, national pair of two giant GSE's with increasingly questionable portfolios of the MBS's to sell to increasingly wary investors.

New Century Financial and the other large subprime lending firms were national in their business niche, and as they fail, they won't be replaced. It doesn't matter much if the buying and selling is all local, if the financing of mortgages and the lending guidelines are from a narrow, uniform, national source and structure. More failures and foreclosures in the more numerous declining local markets will restrict lending, and even appraisal activity in the as yet unaffected locales....
This gentleman sums up my argument better than I could:

eribrav

We are headed for a major flame-out in the housing market, and much of what's already been posted above clearly explains why.

But to get back to the original question: Iraq has been such a major catastrophe for the United States that it will be the major issue in the next election. I don't think that economics can trump it.

The_Jazz

Host, thanks for the well-thought out responses. While I certainly agree that there are a whole bunch of markets either in the process of or long overdue for a bubble burst, I am again going to point out that all real estate is local.

First, let me define my terms. In my world, a "bubble burst" means that housing stock is either stagnant or depreciating in value. With that in mind, I think that the very first sign that a specific market is in trouble is an inability to sell new units (almost always condos) in smaller metropolitan areas. Your North Bergen, NJ example is a prime example. It is outside of NYC and doesn't have the traditional drawing power of Manhatten.

To elaborate on my "local" thoughts, the flip side is the Las Vegas Strip, which is something that I'm involved in at work literally every day. The new Trump Tower that's going up there sold out in 2 weeks, which is a record. Every other condo/mixed use tower that's broken ground there is at least 85% sold (from what I've heard). I will caution you that I'm working from information provided by my clients, and it's not always accurate.

I saw your stats on Las Vegas, and honestly I've seen them before. I even know why they say what they say. However, I still think that you're looking at too large of a picture. The reason that I specifically said "The Las Vegas Strip" in my original post was that I meant that exact location - not the rest of Las Vegas. I think that I can successfully argue that The Strip is bubble-proof. There are always going to be people looking to buy into those buildings barring any major recession. The rest of Las Vegas is a group of individual neighborhoods - and that's what I mean by "local". While it's painfully obvious that national trends can affect local ones (lending rates being cheif among those), the fact is that there are and always will be certain neighborhoods that will always have high housing prices that will appreciate. The Gold Coast in Chicago or South Beach in Miami immediately spring to mind as other examples.

Then there's the troubling case of Southern California, which has had a housing stock shortage for the past 20 years. There literally aren't enough homes for people who want to buy them. The big problem is that there's a lot of substandard housing being built there (and several other venues), but that's not going to slow the market down. However, I do want to make that point, since I have a feeling that it's going to be very relavent in the next 4 years, especially for non-California construction (oddly enough). I make this point since I know that as soon as the economy turns there will be a huge wave of construction defect lawsuit filed around the country for substandard construction.

__________________
"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin
"There ought to be limits to freedom." - George W. Bush
"We have met the enemy and he is us." - Pogo

Cynthetiq

I happen to own property in Vegas, as do my parents. We invested there in the late 90s as costs for property where "cheap" compared to other parts of the nation. My $60k condo is now $180k outpacing my NYC coop by leaps and bounds.

As a landlord I rent out the condo at a reasonable profit below what market rate is since IMO the market rate is quite absurd. I had never raised rent and make a modest $100 profit each month, I had to reduce my rent last year by $75 to attract a new renter. Even if I rent it at a break even point I know that in the end I still come out ahead something that other investors are not as interested in.

That is my history of LV, so even if I live in NYC, I pay close attention to the LV housing market. A few of the high rises that were touted looking for investors did not ever break ground one comes to mind is the Ivana Trump building.

The housing market in LV has definitely cooled but it had to, a place cannot lay claim to biggest growth every year. This doesn't apply to just the housing market but any industry, sector, stock, or company.

As for the substandard construction, that has happened in Las Vegas as well, many HomeOwners Associations suing builders for later phases that were not up to par with original first phase buildings.

__________________
I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not.

ratbastid

The economy only looks "good" from certain broad measures. The fact is, people on the middle-to-lower end of the income scale are worse off than they've been in decades--and that's the vast majority of Americans.

That said, while I think the economy will be a major issue in '08, it won't be the #1 issue. That spot is reserved for US international relations issues, headlined by the Iraq quagmire.

dksuddeth

we're missing a third option, 'it's the government, stupid!'

__________________
"no amount of force can control a free man, a man whose mind is free. No, not the rack, not fission bombs, not anything. You cannot conquer a free man; the most you can do is kill him."

host

From my closed, "Reds" thread:
http://www.tfproject.org/tfp/showpos...95&postcount=1

aceventura3

Here is the single biggest problem with the "sky is falling" argument about the bursting housing bubble.

People gotta live somewhere!
The US population is still growing!
There ain't no new land to be found within our boarders!

Therefore, long-term demand will go up. Most of the time housing demand will go up faster than supply and prices will go up.

Until some high level economic guru addresses that argument, panic over short-term market volitility is an excercise in trivia on a macro level. On the flip side local markets are a different animal governed by thier own market issues.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

host

Thanks for clearing that up for us, ace....however, the "tell", as I see it...is that 20 percent of the new mortgages and refis done in the last few years were to subprime borrowers. Since december, with no signficant economic downturn, and no pain to the consumer from unemployment as of yet....only a slow down in the res real estate market and a slight reversal to the negative, in housing price appreciation, has triggered the collapse of nearly the entire subprime mortgage lending industry. It is easy to imagine what a spike in unemployment and a sustained decline in home valuations would cause. This is the biggest, most prolonged run up in housing prices and over building in the US, ever, and the reversal and depression in the housing market will most likely be the mirror image of the run up, both in scope and duration.....

Here are some of the top ten subprime lenders, today....the ones that haven't filed for bankruptcy...yet...or been absorbed by large banks for a pittance of their former high flying stock prices. Pension funds and mutual funds held significant positions in these companies, and the equity....is gone for good. That is not volatility....it is permanent wealth destruction:
<img src="http://ichart.finance.yahoo.com/c/6m/n/new">
<img src="http://ichart.finance.yahoo.com/t?s=NEW">
<br>
<img src="http://chart.finance.yahoo.com/c/6m/n/nfi">
<img src="http://ichart.finance.yahoo.com/t?s=NFI"><br>
<img src="http://chart.finance.yahoo.com/c/6m/n/lend">
<img src="http://ichart.finance.yahoo.com/t?s=LEND"><br>
<img src="http://chart.finance.yahoo.com/c/6m/n/fmt">
<img src="http://ichart.finance.yahoo.com/t?s=FMT">

<b>Three of four of the stocks of these subprime lenders dropped dramatically today. They lent to subprime mortgage applicants across the US, there will be no replacements for these national landers, borrowing qualifications will be tightened, and there will be significantly fewer first time buyers entering the home market. In the now ending, "bubble era:, anyone who wanted to own a home could simply fill out paperwork with little or no verification of it's accuracy, and borrow the entire purchase price and even the closing costs. Only interest had to be paid on these mortgage loans....at under 5 percent annually in many cases, for the first few years. Millions of folks who are obligated to make monthly payments on these mortgages, won't when they find themselves owing ten or twenty percent more than they borrowed, because of real estate price declines, and/or they won't qualify when their short term, subprime "buyer's mortgage", must be refinanced with a new mortgage at a new, lower home appraisal value, and with terms that include a higher interest rate and added principle payments.

Thus it is not difficult to anticipate that there is little foundation to support ace's "no problem here.....", opinion.</b>

aceventura3

Subprime ain't noth'n but a word. Is there a common definition? What was the percent 10 years ago? What was the percent 25 years ago? What are the trends? What are the trends in the changing definition of subprime?

What is really happening, worse case? People who would ordinarily rent, now buy. If they are forced to sell, they go back to renting. Same housing supply, same housing demand. Only change long-term is the name on the title.

Again, people gotta live somewhere. Even if unemployment goes up, the demand for housing won't change. There will be a change in second home or vacation home demand, so places like Miami are having and will continue to have supply/demand imbalances.

Forclosures will go up, but - so what? The family can always go back to renting.

I have not done research on the above companies, however I would bet things like PE, PEG, price to book value, debt to equity, are out of line with traditional financial institutions. If true, the stocks are due for a correction. This is healthy for the overall market, it gets rid of speculators. If conservative investors are heavily in these stocks, shame on them.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

The_Jazz

While I agree with you about the need for housing stock being an ever-hungry monster, I think that you're missing host's point. He's using mortgage lending as a barameter of the overall economy. I'm the one guilty on focusing solely on housing stock and pricing, which while relavent to the overall picture, resides outside his arguement.

Also, a rise in foreclosed properties is a major harbinger of economic problems, and it's rarely so simple that a family just "goes back to renting" since foreclosure usually means a rash of other monetary problems. The foreclosure is usually just the icing on the cake.

__________________
"They that can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." - B. Franklin
"There ought to be limits to freedom." - George W. Bush
"We have met the enemy and he is us." - Pogo

aceventura3

O.k., but my point is - if you take each argument one by one, the case for a failing economy falls apart

Here is a good one from Ms. Clinton.

Foreign ownership of our national debt is bad and can hold the US hostage.

Here is the fundemental flaw.

If you or a nation loans money with no security, I.e. buying US Treasury Notes/bonds, you want to get paid back. So the reciever of the loan - holds the giver, hostage, i.e. China wants the US to repay the debt in dollars with as much value as possible. China has an interest in a stable dollar, a stable US economy, and low inflation. Debt is not equity.

I agree it is not simple, but in the end the forclosed owner going from owning to renting is the result. Also, don't discount the interests of the lenders. They have alot of smart people making decisions to give loans. They are not in the business of wanting to forclose at fire sale prices or in the business of wanting to own real-estate. Also rather than taking $.50 on the dollar, they may be willing to work with most homeowners through short-term hard times. We have alwasys had economic cycles, there is nothing is new with this slow-down.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

jorgelito

The economy is going great right now!! 2006 and 2007 are slated to be the best in years in terms of jobs and job growth for new graduates. The Fortune 500 are fighting heavily over new grads right now. Employers are offering more incentives and bonuses than ever. The future looks bright.

Didn't the stock market grow like 2000 something points in the past 4-years before last weeks temporary lows?

The real estate market will always ebb and flow, just like anything else. Up and down, up and down. Now and then, now and then. If houses are too expensive or rates too high, then just rent and wait for it to come down. I have missed many "booms" (dot com, stock markets, real estate) but I never panic cause I know I will get my opportunity soon enough. Deferring gratification, patience, making wise decisions will pay off in the end (in my opinion). I never had a chance to capitalize on the low interest rates of the past few years, nor did I get in on the tech boom stocks. but hey, more opportunities will arise.

By the time I will be ready to buy a house, rates will either fall again, or due to the previous frenzy, there will be lots of awesome foreclosures to be had at fantastic prices.

aceventura3

Here is a definition of "subprime" - Any loan issued below average underwriting standards.

Therefore in the basket of all loans 49% of the loans issued are subprime or below average, by definition and this will always be true.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

loquitur

The subprime market is a fairly risky one. What tends to happen is that the lenders make the loans because they can get fees for it. Then they package the loans and sell them if they can, while keeping a servicing contract. That way they reduce risk while still making money.

People go to subprime lenders precisely because they can't get conventional mortgage loans. After a certain period of time of making high payments, which is what subprime loans usually require (they charge higher rates and higher fees), the borrower falls behind. This housing market has been hot long enough that the cumulative impact of years of high payments is starting to bite.

And no, it's not a good sign.

That does not mean, however, that the economy is about to tank. All it means is that one sector will retrench.

roachboy

so wait: i'm confused. much of this debate seems to turn on the question of how to develop a sense of the economy in general, and within that on the question of which indices one chooses to look at, how you weight them, etc.

anyone care to lay out the assumptions behind their views?
i have been reading the thread but am not sure i have much to say about it as i am not particularly committed to any of the ways of reading economic data that are presented here, mostly because i can't get a sense of their relative weight--only that different folk attribute different weights and on that basis refute the weightings of others.

__________________
a gramophone its corrugated trumpet silver handle
spinning dog. such faithfulness it hear

it make you sick.

-kamau brathwaite

eribrav

This is completely incorrect and does not begin to realistically address what is going on in "subprime" lending.
There are a huge number of no-doc mortgages that have been handed out in the past 2 years. They are essentially ALL sub-prime and at high risk of default. They may have lowered the average creditworthiness of the pool of all borrowers, ,but the fact that a lot of garbage loans were added at the low end of creditworthiness does not mean that the definition of sub-prime gets revised downward.
Put another way, if banks stopped lending to "low risk" borrowers tomorrow, then ALL the loans after that would be subprime, not just the worst 49%.

aceventura3

In 1950 you could not get a home loan unless you had 20% down. During other times in history the percentages were higher and in some cases mortgages where not available. The trending of "subprime" has occured over a long period of time.

It is true some firms have taken higher risks due to the recent real-estate boom. these firms will and have paid a price for the risk. However, the overall market is not supported by subprime loans. The overall market is supported by homeowners who have owned their homes for a long time and have equity. These people are not subject to short-term trends. Even if these people have re-financed or have used equity loans they still have net positive equity and would not be forced to sell on a short-term dip in the market.

I stand by my first post in this thread. The sub-prime definition was my way of illustrating how the term only has meaning in the "eye of the beholder". Given the worse case - what has happend in the subprime market? Some people who were renters became homeowners. Some people who were doing little or no investing bought some investment property. Given that - if they loose - their credit score goes down and the bank owns some real-estate that will be sold at below market prices. When that happens strong investors and strong buyers will benefit. Like the old saying - the rich will get richer.

So again, I ask for the economic guru who can explain what is going to happen to net demand for housing and how long-term, the market goes down. Everything else is just smoke and mirrors and a means to sell newspapers and TV ads.

P.S. Also - if you don't own stock in a subprime lender, didn't get a subprime loan and lost your ability to pay, don't own property in high risk areas what going to happen to you if the subprime market blows up - pretty much nothing. But you say there will be a chain reaction - but thats where you or the economic guru needs to make the link with long-term demand and supply and a short-term market correction. No one has done it yet, other than to say the sky is falling. Last time I checked Chicken Little is not a trained economist.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

loquitur

In terms of the answer to the question at the top: I am friendly with a number of bankruptcy lawyers and other bankruptcy-related consultants. Their business is slow and they tell me they can't see anything on the horizon that will change that.

aceventura3

Remember when:

Y2K was going to ruin the economy?
Highly leveraged hedge funds were going to ruin the economy?
Highly margined stock day traders were going to ruin the economy?
The weakening dollar compared to the Yen was going to ruin the economy?
The Reagan supply side tax cuts were going to ruin the economy?
Three dollar gas? Two dollar gas? One dollar gas? All were going to ruin the economy?

I am sure there are many others. All items getting major headlines at the time with experts saying the end to normal economic long-term growth was near an end.

The real problem facing this nation economically is social security and medicare. Those two issues truely need to be addressed, but ironically those are the issues that mostly get ignored.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Cynthetiq

That is what your hope is. I have collegues who thought that as well and seem to be chasing something they may never attain in NYC, SF, LA because the cost of housing is outpacing the pay scales. So some of my friends who make good salaries have 2-3 hour commutes in order to have housing that they can afford.

Also, start looking into the rules of foreclosure purchasing and you'll find that a) most of the best foreclosures never hit the streets and get sold to those inside the market first, b) must be purchased sight unseen, so you cannot even look inside and walk the premises and see structural faults/issues, c) must pay cash up front since most foreclosures don't accept financing.

Lastly, even if prices become "good" keep in mind interest rates fluctuate and also affect how much "house" you can buy.

As far as Grads are concerned, most grads are heavily debt laden in order to get that education. While yes, they can be deferred for some time, they do still have to be paid back and can never be defaulted on. Some people I know have educational debt in excess of $50k. This does not include their credit card debt for their "lifestyle" that they lived in college which could also be an additionaly $20k. All that gets factored in when qualifying for a mortgage, again affecting how much "house" you can buy.

__________________
I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not.

aceventura3

I just looked a LEND the shares opened at $8.03 on 3/10/03, the company went public in February '03 at $7.31. Today the price is $17.42.

My only question is - why didn't you tell me about this stock 4 years ago? Did you see it is up$1.32 this morning or over 8%. You should start a contrarian investment fund.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Cynthetiq

Let me also qualify some of this with the fact that many people I know don't want to sacrifice more than they have already in order to get the 20% down. Gathering up $50,000 so that you can buy a $250,000 home gets harder and harder to do especially when distracted by new cars, vacations, new gadgets, full cable TV subscriptions, dining out, memberships, baby.

Many new graduates do not want to sacrifice feeling that they got the new job and they deserve it after 5-6 years in college scrimping to get by.

__________________
I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not.

jorgelito

Ah, but this is where choices and decision-making matter. Defer gratification, make good, sound consumer choices, and make sacrifices. All the things you list are a consequence of choice. College debt is very manageable, again, it is about good budgeting and smart lifestyle choices.

Your colleagues, they choose to commute, the choose to live in LA, SF or New York. Accumulating $20K in college for "lifestyle" is highly irresponsible and will not illicit any sympathy from me. They made a choice, they have to live with it. Saving for 20% down is relatively simple if people would just exercise some planning and discipline.

Throughout college I budgeted my finances. I spent $25 a week on groceries by buying produce in season and on sale, clipped coupons and made 98% of my mreals at home and bagged the lunch. I quit smoking, saving myself $1000 a year. I didn't own a cell phone, cable TV or a car or car insurance, saving thousands a year on these expenses. In fact, I was savvy enough to budget my needs and have enough money left over to travel extensively throughout college.


I live in LA. I just graduated and got a job. Now I'm going to buy a car. A nice, simple starter car (Honda Civic). I'm also moving and getting an apartment. Not a house. Not yet. Why? Cause I can't afford it just yet. I know what sacrifices I will had to make to get here and what sacrifices I will have to make to get where I want to be. I also have student loans to pay off and maybe $300 Iracked up in credit card debt I accumulated last month but I will pay off this month. Student loans should not be a problem as long as you have a monthly income.

I stand by my contention that the economy is hot hot hot and the outlook is good.

Bottom line: Spend less than you earn. Live within your means.

host

loquitur, when other large speculative bubbles "burst", everything was fine....new high prices attained, surpassed.....up and up and up.....fine, until it wasn't. Depending on the size of the bubble, and on the length of time that it lasted, and on the amount of money and the number of speculators it attracted,
...then the longer it declined, and the lower prices dropped from the "all time" highs.

Here are two examples, and it is amazing how both of these contemporary bubbles unwound so relentlessly, to such dramatic lows....with hopeful buying into the decline, all the way down......and the disappointment of those who bought into the long series of false recoveries, and then watch the new, lower lows, until the final lows.....to date....were put in. Both played out, in price decline and in duration, witn uncanny similarity to the 1929 Dow index crash.
That index declined from 393 to 41, in a little less than 3 years, and the recovery from the 393 high to a new high, took 24 years.

Compare the 1929 unwinding to these price movements:

Nasdaq 2000 stock index
<a href="http://finance.yahoo.com/q/hp?s=%5EIXIC&a=02&b=01&c=2000&d=02&e=15&f=2000&g=d">10-Mar-00 open 5,060.34 high 5,132.52</a>
<a href="http://finance.yahoo.com/q/hp?s=%5EIXIC&a=03&b=01&c=2000&d=03&e=15&f=2000&g=d">14-Apr-00 open 3,597.44 high 3,615.64</a>
<a href="http://finance.yahoo.com/q/hp?s=%5EIXIC&a=11&b=01&c=2000&d=11&e=15&f=2000&g=d">15-Dec-00 open 2,688.66 high 2,697.93</a>
<a href="http://finance.yahoo.com/q/hp?s=%5EIXIC&a=02&b=01&c=2001&d=02&e=15&f=2001&g=d">15-Mar-01 open 2,023.79 high 2,030.73</a>
<a href="http://finance.yahoo.com/q/hp?s=%5EIXIC&a=03&b=01&c=2001&d=03&e=15&f=2001&g=d">4-Apr-01 open 1,668.37 high 1,698.21</a>
<a href="http://finance.yahoo.com/q/hp?s=%5EIXIC&a=09&b=01&c=2002&d=09&e=15&f=2002&g=d">10-Oct-02 1,116.76 1,165.83 1,108.49</a>

<b>....and today, almost 7 years to the day that the Nasdaq was at 5132, it is still below half that level.....</b>

Nikkei 225 stock index

<a href="http://finance.yahoo.com/q/hp?s=%5EN225&a=11&b=15&c=1989&d=11&e=31&f=1989&g=d">29-Dec-89 open 38,913.00 high 38,957.00</a>
<a href="http://finance.yahoo.com/q/hp?s=%5EN225&a=01&b=1&c=1990&d=01&e=28&f=1990&g=d">27-Feb-90 open 33,346.00 high 34,001.00 low 32,793.00</a>
<a href="http://finance.yahoo.com/q/hp?s=%5EN225&a=02&b=1&c=1990&d=02&e=31&f=1990&g=d">30-Mar-90 open 31,002.00 high 31,002.00 low 29,828.00</a>
<a href="http://finance.yahoo.com/q/hp?s=%5EN225&a=07&b=1&c=1990&d=07&e=31&f=1990&g=d">24-Aug-90 open 23,731.00 high 24,485.00 low 23,547.00</a>
<a href="http://finance.yahoo.com/q/hp?s=%5EN225&a=09&b=1&c=1990&d=09&e=15&f=1990&g=d">2-Oct-90 open 20,222.00 high 22,899.00</a>
<a href="http://finance.yahoo.com/q/hp?s=%5EN225&a=02&b=1&c=1992&d=03&e=30&f=1992&g=d">10-Apr-92 open 16,622.00 high 17,851.00 low 16,622.00</a>
<a href="http://finance.yahoo.com/q/hp?s=%5EN225&a=03&b=15&c=2003&d=03&e=30&f=2003&g=d">28-Apr-03 open 7,679.11 high 7,685.36 low 7,603.76</a>
<img src="http://chart.finance.yahoo.com/c/my/_/_n225">

<b>It's 17 years after the Nikkei 225 put in it's 38,957 high, and 4 years since it reached it's latest "new low" of 7603. I've shown you the effects of the three most prominent bubbles having to do with financial speculation of the general public, of the 20th century. All of my posts are filled with linked facts that support my opinions. Those who disagree with me have provided no citations to support their opinions, and indeed, don't even seem willing to consider that what I am saying is a possibility, let alone that it is actually taking place now. Given what we know about the duration, scope and the size of the residential real estate "run up", the amount of "easy", low qualification and low interest financing that it has needed to "make it happen", and to sustain it, and the fact tha almost anyone who wanted to obtain a mortgage and buy a housing unit, now has one, now is in "the market", who will the "holders" sell to, now?

If you agree that the increase in housing prices that spurred the building of huge numbers of new units, and that the overall economy benefited from the jobs that the housing construction, real estate marketing, and mortgage brokering, from the manufacture and sale of building materials and home furnishing, and from the extraction and spending of the increasing home equity of those who owned home during the price run up....wealth extraction by homeowners that reached $800 billion,</b>
<img src="http://www.safehaven.com/images/mauldin/6603_g.gif">

....in a decline like the one that we are seeing now.....in price, in the number of houses sold, and in the amount of wealth extraction that homeowners are able to get from their home values into their wallets...to be spent on second homes, home improvements, vacations, restaurant meals, consumer goods, new cars....etc., and in the decline (disappearance) of the profits of builders, realtors, mortgage brokers, and "flippers",

<b>what can you say to support your opinion that the disappearance of all of this former stimulus won't drag down the economy in the same way that, when it was there to stimulate the economy, promoted it's growth? What will take the place of consumers taking equity from their homes in an amount that exceeded, at it's high, over $200 billion, every three months, in an environment of increasing inflation and chronically flat income levels?></b>

....and my question does not even consider the negative impact of mortgage defaults and foreclosures, and the BK of home builders and the financial institutions that lent them, and the homebuyers, the money to build and buy the housing units.....

I followed this guy's writings, for the last four years, (below) on the farce of the fed lowering interest rates to one percent, in an attempt to remove the negative effect of the wealth destruction that would have been a consequence of the 2000 to 2003 crash of the Nasdaq and Dow stock indexes. He went so far as to detail a "character", a mortgage broker who worked for NEW CENTURY FINANCIAL, and he detailed the ridiculousness of New Century lending money to anyone....regardless of income, or even resident status in the US....to buy houses at inflated prices, which further inflated the housing prices, which allowed the houses to turn into an ATM, into "free money" for their owners.....money to buy whatever they wanted with.....and his first post is in Feb., 2003, and his last was yesterday, when the stock price of "NEW", finally imploded, and the NY Times wrote an article about an actual former NEW CENTURY broker, who seems describe the reality of what "Mark" had commented on for the past four years:

[/quote]
The March 5, 2005 NY Times article described by "wndysrf" in the preceding quote box:
(Consider that the articles' description of New Century's stock price was written before the stock, trading under the synbol "NEW", closed at $4.56 per share in todays' trading.)
<b>The disconnect here is obvious..... some of the same folks who take the other side of the political argument than I do, don't see the economic conditions of the last six years as an artificially contrived, unsustainable farce, as described so well in the "Mark to Market" posts above. Since they don't see "the folly".....the ridiculousness of the idea that vast numbers of folks could experience the transformation of their homes into financial "holdings" that throw out equity at them, as they refinance their mortgages annually, at ever lower terms......their homes that are ever rising in value....and not have the result be the financial failures of the lenders of those mortgage loans, and a reversal in the value of the homes, and in the ability of their owners to spend, and on the employment numbers of all of those in the realty, realty, finance, and housing industries, and then, in the economy, itself.......that disconnect....evident here.....is confirmation to me that this will end up having an even more negative impact on our economy, and on many of us in the US, than I have been considering.</b>

aceventura3

My "simplistic" or "black and white" response is that there is intrinsic value and there is speculative value. During periods of market euphoria speculative value increases and gets out of control, however intrisic value stays grounded in the fundementals of the market. Personally, I always try to stay focused on intrinsic value. I think smart money or wise investor gurus like Warren Buffet, or the late Benjamin Graham also stay focused on intrinsic value. Speculative value comes and goes. when a market crashes it normally is not a crash but more of a sudden decrease in speculative value still supported by intrisic values. If intrisic values suddenly declined, in my book that would be a crash, if this happens it doesn't last long because smart money comes in for the easy gains when the intrisic value goes back to equilibrium.

My point is that real-estate has intrisic value. That value will increase over time and has historically increased over time. Speculative value is currently being taken out of the market. This is good. Smart money wants this to happen. Smart money sees this as healthy, you don't. All the citations, quotes, stats in the world won't prove the above - you either get it or you don't.

Those who don't get it will generally always be on the wrong side of the trend.

Six months from now when we look at the stats we will see that today we have already hit and past the real-estate bottom. You can say you heard it here first.

That is my market call. What's yours?

How about a wager. If you are correct and I am wrong I will donate $100 to your favorite charity, and you do it if the opposit is true.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

host

ace, thank you for the reasonable tenor I detected in your last post, and your offer of a wager between us that would ulitmately benefit a charity of our choosing, but....as I posted earlier, I'm already putting my money where my mouth is, via stock market investments in the direction of the deteriorating economic trend that I am forecasting.
If you turn out to be correct about the direction of the economy in the next six months, I promise to post the dollar figure of the losses from making the "wrong bets" in the stock market.

I also do not want to make a wager with you until you can post something similar to this Feb. 20 Forbes article, with facts to counter reasons for a downturn.
ace, what I want to read from you are answers to where the economic stimulus will come from to mitigate the loss of a sizeable portion of the consumer financial "bonus" that the recent $800 billion per year of "MEW" - "Mortgage Equity Extraction" was, to expand GDP, and now, to even sustain it at a $13 trillion annual level.
Below, in the Bloomberg.com article:
....ace, supply us with your "take" on what will drive further GDP growth, or even sustain it, if what has driven it to where it is today....a $4.7 trillion mortgage lending binge that drove the homebuilding, realty, and mortgage underwriting industries, and the quadrupling of "MEW" in just five years, the effect of federal tax cuts that
are in the past now....priced in....and federal spending deficits that exceeded $500 billion per year, but are now, in your own belief, declining significantly? How will the decline in housing sales and in the prices offered for houses, avoid "feeding on itself", just as it did in the run up phase? How will increasing homeowner mortgage defaults not result in more foreclosures, auctioned into a housing market already suffering from lower demand and lower prices?
How will a consumer who grew accustomed, every 18 months, to refinancing his credit card balances and car loan into a new mortgage refi, while taking cash out...to boot...begin and sustain a new cycle of spending and trading up to an even bigger and better home, when he can no longer do the "cash out", debt consolidating "refi"...stuck paying his recent credit card balances and newest car loan, with no hope of again......making it disappear into his mortgage balance?
Will the new homeowners who are forced to refi their "no money down"...."buyer's ARM" into a mortgage that raises their monthly payment by 50 percent, while they observe a drop in value of a home that they already had no equity in...react to their dramatically higher mortgage payment? Will they pay...or will they walk away?

ace....the subprime lenders who I earlier covered, about 30 of them now....in distress, acquisition or BK, just since December, flamed out, even with no increase in the US unemployment rate. Explain how job losses in the realty boom related segments, and in building materials, trucking, construction equipment, etc., will be minimal, if the decline in realty related activity continues. What will replace the lost jobs and the related activity, to prevent the decline of GDP growth?
a huge number of articles in the following piece, ace. They detail the last realty run up, and decline....from 1981 to 1995.
Explain ace, given that the recent run up was much longer and peaked much higher, how it will "be different, this time"?
You've convinced me that you "feel" good about our recent and continued economic growth, and you've told me that you believe in the "intrinsic value" of residential realty properties. I know, from my own experience, that....when you have to sell, because of the circumstance you find yourself in at a given point in time, even if you have waited, three, four, or more years for a "better market", you sell for the price that "that market" will bear. It is of no consequence, at that moment in time, whether you are selling for less than your own cost, or even for less than it would cost to buy the lot and build a clone of that residence. You can only get what the market into which you are selling, "will bear"
I predict that the decline will last more than ten years, ace, in the majority of US local realty markets....ten years from now, or from sometime in 2005, depending on local conditions. I predict, that...just as the housing boom drove a period of unparalled prosperity for a fortunate, and sizeable minority of American homeowners, speculators, and realty industry participants, and that it is already, and will continue to "spill over"on the broader economy, affecting US GDP to the point of a sustained period of negative GDP, low enough and long enough to be declared by the Federal Reserve as an economic depression, accompanied by double digit unemployment numbers and record personal BK filings and residential foreclosures.
Earliest date when national median home price is equal to that of the high during the last two years, and when new and existing home sales are equal to the highest monthly median number during the last two years, (even a collapse of the dollar would not make both median price and number of units sold, quickly achievable, IMO), is at least no sooner than the spring of 2015, IMO.

aceventura3

Here is where I am going to start to see if we have any basis of a common understanding of economic markets.

Lets assume there is a residential property with a fair market rental value of $1500 per month. After expenses (taxes, insurance, maint., etc) the net cash flow is $1,000 per month, assuming no inflation or other variables, and that cashflow held constant for 30 years. What would you be willing to pay for that cash flow?

Discounting the cash flow using 5%, I would pay about $186,000.

Next lets assume the property has a residual value at the end of that 30 years, simply the value of the land and lets i say it is going to be $50,000. How much would you pay today for a lump sum of $50,000 in 30 years?

I would pay about $11,000, discounting at 5%.

If you found such a property that was selling a lot less than $197,000 would you buy it?

I would.

You could argue that there is no guarantee in the rental value being $1,500 per month. That is a good questions and that is the fundamental issue that begs an answer in regard to any real estate bubble bursting. There is a demand for housing. The demand is not getting smaller, it is getting bigger. In most cases supply growth lags demand growth. In none of your posts have you cited a source linking a drop in housing demand and the "crash" or whatever you want to call it. to me it it is obvious that housing demand will not materially change in the overall market, hence there is a floor to the "crash". We know what it is. Property values will drop to their intrinsic values, if that far - because speculator will never completely leave the market.

In the above example if the property is selling for $250,000, it is clearly over valued. But when it drops to $197,000, that is not a "crash", is it? If it dropped to $150,000 smart money will quickly come in, and over a short period of time the value will go back to $197,000

You ask the question where is $800 billion going to come from to replace funds that where taken out of the real-estate market? I know we have discussed this in the past, i.e. in the early '90's money flowed into stocks, then started shifting into real-estate, and will shift into something else. And remember we are really only talking about speculative money.

But the driver of our economy is productivity growth. that combined with job growth will keep our economy going strong. Here is a link from GWB, just so you have something to say is not credible.

http://www.whitehouse.gov/infocus/economy/

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

Cynthetiq

thanks host and ace for your tete a tete... very informative.

and yes, I agree about the housing market demand outstripping the inventory. there are many people out there who do own multiple properties but don't rent. many people in NYC have a city dwelling and a country dwelling. so there are a good number of housing that doesn't make it into the rental inventory.

right now in Vegas there is an interesting point wherein rents and mortgates are about equal, downpayments are disounted heavily in some cases to 1% down. So the Vegas market seesaws back and forth.

Now the biggest benefit that I'm a firm believer in is that more often a home owner is a better community member than a renter. Home owners have more of a stake in community since their values are tied to community health.

__________________
I don't care if you are black, white, purple, green, Chinese, Japanese, Korean, hippie, cop, bum, admin, user, English, Irish, French, Catholic, Protestant, Jewish, Buddhist, Muslim, indian, cowboy, tall, short, fat, skinny, emo, punk, mod, rocker, straight, gay, lesbian, jock, nerd, geek, Democrat, Republican, Libertarian, Independent, driver, pedestrian, or bicyclist, either you're an asshole or you're not.

host

RE: your post #26:


Here's today's trading range on stock symbol, "LEND", ace"

ACCREDITED HOME LE (NasdaqGS:LEND) http://finance.yahoo.com/q?s=lend&x=60&y=16
Day's Range: 14.93 - 18.15


....and here is the problem:

The financial "community" in the US sold and "packaged" sub-prime mortgage into MBS's...mortgage backed securities. In order to make it "attractive" to investors to assume the risk associated with buying these "junk" credit reting level
investment "vehicles", the issuers (the crooks at the big brokerage houses), described below....inserted clauses that gave MBS buyers the right to force the sub-prime lenders like LEND and NEW and NFI, to buy them back from the investors if too many of the individual mortgages conatined in a given MSB, defaulted due to non-payment of monthly mortgage payments, during an initial period of a yera or two after the MBS was purchased.
LEND is down today, because stock market participants are finally asking who will buy the MBS's currently being packaged from newly issued sub-prime mortgages.
Weighing against these now failing lenders are returns of formerly sold MBS's accompanied by demands for refunds by the investors who bought them. Difficulty in obtaining new funds to lend on future mortgages sold to home buyers increasingly viewed as poor risk.
Less mortgage and re-fi business due to shrinking numbers of homes sold......

......added to the above, new "vicious cycle" is the fact that more than 40 percent of recent new home sales were to investors and second home buyers, the liquidation.....foreclosures of individual homes and unsold inventories of home builders, and your "intrinsic value", formula, IMO, is as unpersuasive as your "productivity" argument as an answer to what will replace the support for GDP growth in the coming years, that was the wealth effect from pumping $4.7 trillion into creation of the new mortgage debt that fueled the housing bubble.
The answer, ace, is that the replacement "stimulus" and the replacement jobs to offset the decline caused by the unwinding of the housing boom, just ain't there, and the liquidation that is coming will not be orderly, and will not behave as your "intrinsic value" assumptions would need it to.
There will be huge numbers of formerly employed and prosperous home equity withdrawing, and spending.....former homeowners filing for BK, and looking for the cheapest rental housing that they can afford, and the oversized houses that were recently built in great numbers....the second homes, the homes demanded by now gone flippers, the homes purchased by unqualified, sub-prime buyers with fraudulanlty obtained "no doc" , "low doc", and no down-payment, interest only mortgages, will end up sitting vacant, a new blight on the American landscape, to join the still un-lit, excess fiber optic network buildout of the last malinvestment in America, the internet stock bubble.
Non-productive malinvestment, ace....not the stuff that facilitates a "productivity miracle", like the one that would be needed to make your idea of what will stimulate our economy, now that the housing bubble has blown up.....

aceventura3

I am not trying to persuade you or anyone of anything. What we have is just a different view of market economics. That's o.k., when I am a buyer I need sellers like you and when I am a seller I need buyers like you. Either you win or I do. that is what I love about free markets.

Subprime is the problem of the day. Next week there will be a new one. However, the real problem involving entitlements won't go away - social security and medicare.

On LEND - I am not a short-term trader. I just hppened to pick LEND from your list and looked at it in more detail. It is actually not a bad stock. Once it gets through this subprime issue, it will be o.k. Also, your chart doesn't show it but the stock "gapped down in August of '06 on strong volume, it gapped down again in October '06 on strong volume and gapped down again in March. The time to sell was in August or October. Some large institutional investors were clearly getting out at that time and have continued selling. LEND was over-valued, and most likely still has about 20% fat in its price depending on what happens next in the subprime lending market. If it drops to about $13, that would be a good time to buy, assuming about a 6 PE, 6% growth and about an 8% discount rate . The estimated 5 year growth rate is about 10%, but analyst have started making reductions.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

jorgelito

Ace, I have to add or amend to what you are saying. I don't believe it's a zero-sum game (necessarily), I believe that both parties can be winners. If you sell or buy at a price you like and same for me, then we both win. That's what I like about free markets.

aceventura3

I agree. I got carried away with the discussion in terms of the market being out of balance.

When two parties transact with the same information and the same method for establishing value then it is a question of different variables, i.e. I might use an 8% discount rate and you use 10%, or perhaps you or I are buying and selling for different reasons, like retirement, etc. These transactions are actually the most fun, because you don't mind having lunch with the guy or gal afterward.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

host

ace....I quoted you because your comments remind me of what Greenspan had to say about the <i>"Evolution of the Consumer Finance Market"</i>, less than two years before the "subprime" portion of it, imploded, almost overnight. I read Greenspan's 2005 comments, and I read your comments, and jorgelito's, too....and I have the same reaction to the comments of all three of you....what WERE you thinking....where, on earth, did you get "that stuff"?

ace, jorgelito, and host have all had an opportunity to "paint" their respective opinions on the state of...and the prospects going forward...of the US economy. It is, as it always is here, a competition of the presentaion of ideas and opinions. There are few things that are of greater concern to me than the looming, and probably imminent, economic depression that I see unfolding in front of us. The complacency of those who posted in disagreement is displayed on the same forum pages, in sharp contrast to my presentation.

.....fair enough....you read what I've posted....or not.....nothing that follows in this post is highlighted text, but.....I find all of this information...especially Greenspan's "disconnect", and the folly of lending unqualified borrowers 100 percent, $700k "home mortgages", for the purpose of supporting ridiculous "bubble level", residential real estate "valuations", that rose into the stratosphere on earlier stages of the same wave of liquidity, eagerly loaned to borrowers who qualified because they were able to "fog a mirror"....."highlights" of my argument that they economic decline will be a proportional reaction, both in duration and intensity, to the excesses that enabled the accumulation of $4.7 trillion in new mortgage debt in the US, in just six years. The debt (malinvestment) remains to be paid, and the constantly added liquidity required to even maintain real estate valuations at current levels, is now absent, in a system driven by lending that could only be justified, by the ever rising prices that the profligate "easy credit", guaranteed to perpetuate.

aceventura3

Pay day loan companies and pawn shops are next in line to ruin the economy. More on that next week.

__________________
"Democracy is two wolves and a sheep voting on lunch."
"It is useless for the sheep to pass resolutions on vegetarianism while the wolf is of a different opinion."
"If you live among wolves you have to act like one."
"A lady screams at the mouse but smiles at the wolf. A gentleman is a wolf who sends flowers."

host

On this forum, we all have an opportunity to post competing presentations of opinions and ideas, and....after we've posted them, we "own" them. They are also retrievable via the major search engines. Our posts are a snapshot of what was going on in our minds and they form a record that we can later reference.