Market crash: are we there yet ?

[sailhog]

Originally Posted by TropicCat

The worst case I'm aware of is Miami condos. My brother is buying new ones for $30K apiece at auction.

List price? $180K. so that's 17% of the original price or a decrease of 83%

Here's a funny anecdote... My brother, who's a hang glider pilot, went down to the Miami area with a buddy where they were towed aloft by a pickup truck. The condo towers there serve to thrust the wind upward, allowing them to soar for hours on end. Anyway, while he was up there, he saw mile after freaking mile of unfinished construction. Expensive power tools such as table saws, mitre saws, nail guns, and tons and tons of construction material appeared to have been just left there. He said it was as if the foreman blew a whistle one afternoon, and everyone just walked away...

[chris_gee]

Rick having been there gave you an inside perspective on the mortgage industry which meant you were one of the few here but not the only one who foresaw problems.
With that success you seem to have moved to regarding the thread as your personal fiefdom.
However, the scope of problems is now shown to be much wider than sub-prime mortgages. Even experts are divided in their views. Even if your expertise extends to the economic and political domains that is no guarantee of your infallibility.
Personally I don’t give a toss if you repeatedly dismiss my views as superfluous or inappropriate. However, despite having defended you early on, I note an increasing tenor of arrogance and intolerance which I find unimpressive and inappropriate.

[craigimass]

I understand the Miami situation, but you don't mention the extenuating circumstances....and there are SOME BIG ONES.

The biggest one, of course, is that the monthly fees.....the homeowners association and condo fees.....can total thousands of dollars per month!

An investor, obviously, has to take those into account. In fact, I'm sure there are a lot of condos in Miami and elsewhere which investors would not buy FOR FREE. But that does not properly illustrate the US housing crisis. Miami was largely propped up by S. American and Euro money for years anyway...not exactly a sustainable economy.

Even elsewhere in FL - the climate is so bad (some say good, but I say bad when it comes to housing), that the cost of maintaining and upgrading real estates makes investing a difficult task. I do know of what I speak...since said family member who was banker is now in the business of maintaining FL hi-rises. It is quite typical for a condo owner to get a bill for 40K for repairs that he/she didn't figure on, but if not done - the building would have to be demolished.

I agree the CS index is accurate. But the chart you posted shows that for each 100K I spent on an "average" house in 1999 - is worth 150K today. Am I reading it wrongly?

Rest assured that those Miami properties may not be worth buying even if you can collect the rents. IMHO, a long term investor might be better buying some waterfront lots at 1/4 price on the west coast....in a partially finished development - and hope.....

[xort]

Originally Posted by chris_gee

Personally I don’t give a toss if you repeatedly dismiss my views as superfluous or inappropriate. However, despite having defended you early on, I note an increasing tenor of arrogance and intolerance which I find unimpressive and inappropriate.

You're just noticing this after two years?

ricky boy what ever happened to that 15% market correction YOU predicted
last summer?


go ahead, throw out some bullsh!t insult at me, you are low enough to do that yet again

[TropicCat]

Chris, you are misreading what you call arrogance. I have always called them like I see them. These days what I'm seeing has me not only terrified. I'm traumatized. It's little help to know what started this and where's it's going if I'm going to get buried in the process. And I will be.

Xort, your question was actually answered in this thread some months ago. I'll leave to you to go and find the answer to your question. Now, I figure your comprehension hasn't improved since the last time you posted here, so I won't hold my breath waiting for your "oh..."

[wind_magic]

Looks like precious metal spreads are finally narrowing.

[craigimass]

Hah, I'm so confident I even sold my Gold position.......
Well, that means it's headed up for the rest of you.....

The fact is, as many have always said, that if your broker or banker or expert really knew what was going on, they probably would not have to suit up at 6 in the morning and take the train to work...and then listen to what the boss says....

My dad never put 2% of his money in the stock market, preferring to invest in those old fashioned tax-frees as well as real estate which he personally managed - which turned a profit from day one. He is doing very well after using this method for 30+ years. As to how everyone else who talks Gold and Dollars and Charts and what they "know"....well, I'll let y'all figure that one out for yourself.

I accept Tropics POV for what it is - an intelligent point of view based on what he knows and experiences. Now...if I just put that together with what a couple thousands other people know, stir it up, calculate it out and then take action....well, I might get somewhere.

I'm always a little torn between "take the money and run" and "well, the whole world is going to poop no matter what, so I'll just sink with the masses"....in other words, if there were a nuclear winter (real or so-to-speak), I would just as well vanish than survive. Sure, I cover the basics, but don't keep a years worth of food and water stored in the basement.

In terms of the market, that means I have plenty of cash, plenty of bonds and plenty of equities.....some real estate, a boat, a bunch of tools and a loving family.....as well as a small continuing income from consulting, writing and teaching.

Unfortunately - they keep these threads forever. That is why someday I may be sorry for saying - yes, we are probably there. I predict the general market will not hit new lows. In the case of Real Estate it still has not leveled out, but money is sitting around ready to pounce and that will drive prices slightly upward after it sinks a bit more.

Hey, if you want to feel good look at Apple Computers earnings. If things are so bad, how do people afford those top of the line computers and iphones? Those are NOT purchases which need to be made.

Look at googles earnings. Again, those are advertising dollars which do not need to be spent unless the advertisers are getting a return (selling stuff).

That is not fake. That is real.

[wind_magic]

Originally Posted by craigimass

I'm always a little torn between "take the money and run" and "well, the whole world is going to poop no matter what, so I'll just sink with the masses"....in other words, if there were a nuclear winter (real or so-to-speak), I would just as well vanish than survive. Sure, I cover the basics, but don't keep a years worth of food and water stored in the basement.

In terms of the market, that means I have plenty of cash, plenty of bonds and plenty of equities.....some real estate, a boat, a bunch of tools and a loving family.....as well as a small continuing income from consulting, writing and teaching.

Sounds to me like you have your priorities straight, but I do think you are focused a little too much on the negative. I am not upset about the recession, it is a good thing, and long overdue. My thoughts on this haven't changed since September 2007, just before the market top, I still feel exactly the same way.

September 2007 Post

[TropicCat]

Originally Posted by wind_magic

Sounds to me like you have your priorities straight, but I do think you are focused a little too much on the negative. I am not upset about the recession, it is a good thing, and long overdue. My thoughts on this haven't changed since September 2007, just before the market top, I still feel exactly the same way.

Long overdue? OK, that's one way to put it. We are looking into the face or Armageddon and you make it sound like it's a minor pull back. This table shows it clearly.


Take a look at this.

We are $21 Trillon overdrawn 'at the bank'. Not $1 or $2 Trillion. Heck, there's more than a $1 trillion sitting at PIMCO in MBS bonds, and they're not even a bank. What they are is the largest manager of pension fund investments in the country and it's political suicide not to prop them up.

Least I remind you, if you have debt that can not possibly be paid back, it stops being a debt and becomes a loss. The difference so far between today and the 1930's has been the Government's willingness to write checks. This is debt that can not ever be paid back. Every Administration has made it a point to "kick the can down the road", Obama is no different.

This time the stakes are much higher as the debt service on these huge numbers will quickly outrun our tax receipts. So, the real difference is that they are pulling us out of a near depression today only to be absolutely sure that our entire economy collapses a few years later.

Some plan....

Incidentally this isn't Voodoo economics or even doom and gloom prognosticating. Anyone with a calculator can arrive at this conclusion. Of course, they can always quadruple our taxes to forestall the inevitable. Or resign themselves to hyperinflation and hold on for dear life as we turn ourselves into just another banana republic.

My friend, I think you are grossly underestimating what's going on. To feel this was not a big deal in 2007 is understandable, but with what we know today, it's down right disturbing.

I can't make your link connect to the post you wanted us to see.

[wind_magic]

This is it Trop, your browser probably stopped another window from popping up, sailnet brings up a new window when you link to a page.

Originally Posted by wind_magic

Totally it's going to be a good thing.

When the market finally corrects, either in the near future or after another new high, or when ever it ends up being, it'll be a blessing in disguise. A bubble doesn't do anybody any good be it in real estate, the Nasdaq, or anywhere else. Nasdaq is a good example actually. During the .COM bubble honest technology companies doing real work often had a hard time finding financing because they didn't have the zappy looking brochures and stock prospectus to show they were going to triple their market size in the next 3 days. A lot of companies are privately owned, or partnerships, etc, and never got a dime of the money that flowed into wall street unless it was through customers. That much waste and in some cases outright fraud isn't good for anybody except for the speculators who want to take your money on the dips and crests, it's just non-sense, and it had to end. Waste and inefficiency is not good for the economy, period, it only helps a few who are in on it.

At the worst of the .COM stock market boom companies were hiring people to do technology jobs that didn't know a damn thing about what they were doing. It was crazy, I'd never seen so many unqualified people making decisions beyond their abilities in my life, it was beyond funny. Companies seemed to be trying to out-do each other with whatever crazy ass idea they had in mind, ferrari's for the board members, offices run under some stupid organizational chart created by eastern mystics, or whatever. And a good strong correction in the Nasdaq got rid of that, many of those kinds of inefficiencies are gone (thankfully), or are being culled. At the worst of it there were so many facades that called themselves companies you couldn't even count them, they were everywhere, "companies" built entirely out of paper, wild ass ideas that could never work, etc, it was a relief when all that finally got blown away and some kind of sanity was restored.

The economy needs bad times, they are necessary. Over time waste and inefficiency just builds up, and you need lean times to get rid of it. It's easy for example for a company to hire inefficient suppliers or waste money on unnecessary expenses, etc, when times are good. But a good strong recession makes it tough on them, and they optimize their operations, or die, and get weeded out. It's a darwin thing, and it's necessary. It also gives small companies a chance to shine because it creates an environment where the strong and agile can not only survive among giants, but actually thrive and BECOME giants. Lean and mean is important during down times. And the most important product of busts is better decision making, because decision makers either start making absolutely brilliant decisions that align well with reality, or their delusions quickly undo them. Many decisions that are considered to be "good decisions" during a boom don't even qualify as "entertaining fantasies" during a bust.

During booms you just get a lot of non-sense going on, bad loans, huge numbers of unsustainable derivatives, false expectations not based on reality, etc. Everybody thinks they are a prophet when the market is in a bubble, because everybody thinks they are making money. Like now, when the Dow is reaching new heights every person in the market thinks that the stock they own is actually "worth" what the price is, meaning that they think they could all sell for that price and cash out. It's an illusion, if even 1% of the people try to sell at that price it'll cut the price in half during a bubble, and having so many people base their entire future on illusions and .. well, delusional, a giant mass delusion, it's just not sustainable. The world is simply a better place when we all have a rational expectation about the future, when peoples hopes and dreams are actually attainable and within their reach, etc.

In debt and financing a busted bubble is fantastic for "the little people". Property values fall so that average home makers with children can actually afford to buy a house, using a house for what it was intended to be and not just as an instrument to make capital gains. Having money in the bank becomes a good thing because you actually get a real return on investment and not just the illusion of fantastic wealth in the stock market bubble. Lenders become sane again and actually start lending money to people who can pay it back. Expectations about who can borrow and who shouldn't will become more reasonable, right now banks loan on credit report numbers which are in effect "facades" for most people which allow them to over-extend and borrow dangerous amounts of money just by paying their payments on time every month even while it breaks their backs. A collapse of the debt bubble will increase the savings rate giving people peace of mind and making the money in your pocket valuable again, it'll bring some sanity back to lending, and at the bottom will increase investment into small profit making endeavours that have trouble finding financing right now because they aren't "easy" to invest in.

And a bust also brings sanity back into peoples lives too. It stops being about big SUV's and who has what model BMW and starts being about taking good care of your children, enjoying your life, and other more tangible assets. Communities and people always come together during times of bust, and though it is hard for everyone, the adversity makes people appreciate the good things in life and restores peoples hopes and faith in the future. During bubbles nobody is satisfied, but during times of bust most people can feel good about their lives and feel they are good people and that the have a role to play in the world. Sure, it's bitter at first, but it's necessary for national perspective.

It's good stuff. And necessary on a periodic basis to get rid of fraud, inefficiency, and waste.