Posted on 08/01/2002 1:27:54 PM PDT by shrinkermd
It appears the usual end of the month window dressing routine may have played a role in the market's recent rebound. And this week's economic data has begun to show a creeping weakness in the nation's economy. These initial signs of weakness, while perhaps priced in over the short run, provide a good example of how markets react when the reality fails to live up to investors' hopes or expectations.
The universally rosy expectations for economic growth in light of the Nasdaq bubble burst and the terrorist attacks of September 11 continue to illustrate investors' willingness to suspend disbelief -- even in the face of rising unemployment, a declining stock market, deteriorating GDP numbers (or should I simply say "revised" GDP numbers?), weakening consumer confidence and retail sales, and a developing economic crisis that's spreading throughout Latin America.
Given the recent negative developments in the economic indicators this week (specifically the GDP report, ISM, Consumer Confidence, and the Chicago PMI), I would like to again pull out the following quote from Crash by Robert Beckman. This particular paragraph begins the chapter titled, "The Great Property Crash," which discusses the 1920s land boom in Florida.
"The way the world really works is a very far cry from the way most people think it works. Pleasant illusions are far more popular than painful facts. The normal state of affairs is perceived to be one where each of us, as an individual, has an inalienable right to increase his or her wealth through time. Your familiarity with crashes so far should tell you that human beings will go to ingenious lengths to protect and justify their illusions, postponing the day of judgement for as long as possible. People will do almost anything to pursue their dreams of future prosperity through their speculative endeavors. Yet time and again we have witnessed, and continue to witness the massive evaporation of speculative fancies when it revealed that none of these markets is ever capable of meeting the demands of the dreamer. Bubbles are the stuff dreams are made of."
People's expectations for this economy continue to be optimistically high. We remain irrationally influenced by the 90s "new era" bubble mentality and our failure to accept the changing environment remains proof that we are in a longer-term bear market.
This attitude is again clearly represented in recent articles regarding the U.S. Housing market. A recent Financial Times article titled, "Houses are as Good as Gold in Troubled Times," illustrates perfectly this attitude. Today's Wall Street Journal article titled "The Housing Bubble Loses Some Air" more accurately lays out some of the current facts. These are:
1) Sales of existing homes declined 11.7 percent in June.
2) In Atlanta, there is a 20-month supply of houses priced over $750,000.
3) In Seattle, home sellers outnumber buyers 4-to-1.
Furthermore today's news that construction spending declined 2.2 percent in June to its lowest level in two years supports the thesis that the housing market may have peaked or may be in the process of peaking. Should this remaining support to the U.S. economy begin to falter, investors could be shocked by a double whammy of a declining stock market and declining home prices. This thesis goes to the negative wealth effect and its potential to create severe problems in the U.S. financial system. Both of these trends should be carefully watched going forward.
"The way the world really works is a very far cry from the way most people think it works. Pleasant illusions are far more popular than painful facts. The normal state of affairs is perceived to be one where each of us, as an individual, has an inalienable right to increase his or her wealth through time. Your familiarity with crashes so far should tell you that human beings will go to ingenious lengths to protect and justify their illusions, postponing the day of judgement for as long as possible. People will do almost anything to pursue their dreams of future prosperity through their speculative endeavors. Yet time and again we have witnessed, and continue to witness the massive evaporation of speculative fancies when it revealed that none of these markets is ever capable of meeting the demands of the dreamer. Bubbles are the stuff dreams are made of."
The above quote is priceless as well as timeless.
Mortgages to Come With Equity Lines Attached [muslim mortgages mentioned]
I'm glad I did.
Richard W.
But soon after that "blossom," it is the banks which end up owning the properties, as loans default.
Banks become big real estate holders in poor times.
Probably, the federal government will step in, to establish local zoning controls befitting the nationalizing socialists' agenda ... but step in the name of helping folks by assuming the mortgages.
People will like it; until eventually the economy improves and then the other foot lands: the enforcment of federal laws about what you can and cannot do with your property.
See: Sustaining Nothing, Losing Everything, Sierra Times, June 20, 2002, by Tom DeWeese (posted June 21, 2002 by brityank).
"What is Sustainable Development? ...On June 29, 1993, former President Bill Clinton issued Executive Order #12852 to create the President's Council on Sustainable Development. Sustainable Development calls for changing the very infrastructure of the nation away from private ownership and control of property to nothing short of a national zoning system.
Locally elected officials will no longer be the single driving force in making decisions for their communities. Rules will be made behind the scenes in non-elected "sustainability councils" armed with truckloads of federal regulations, guidelines and money.
According to Sustainable Development policies, air conditioning, convenience foods, single-family housing and cars are among the products that have already been determined to be unsustainable. Under such a system, the federal government, backed by an army of private, non-governmental organizations.
(NGOs), like the Sierra Club, Planned Parenthood, and the National Education Association will influence, if not dictate, policy in state governments and in local communities...
...The Community Character Act (S.975), and its counterpart in the House of Representatives (H.R.1433), is the legislation that will legalize enforcement of Sustainable Development in every community in the nation. The bill requires local governments to implement land-management plans using guidelines outlined in a federal document called the "Smart Growth Legislative Guidebook." This publication was developed with $2 million provided by the Clinton Administration to "guide" counties, cities and towns on how to "update their local zoning."
The Community Character Act offers grants to communities that will pay up to 90% of the costs for localities to "update" their zoning, but only if they do it the way the federal government dictates. The Community Character Act requires localities to "conserve historic, scenic, natural and cultural resources." These are euphemisms that mean more land grabs and fewer places where people can freely go about their daily lives. It means planned economies, restricted housing, and diminished use of cars. It means government control of property. The bill contains not a single mention of private-property rights protection..."
See: Stock-Market Stinker, New York Post, June 30, 2002, by Jessica Sommar (posted by sarcasm).
See Wake-up signals from Wall Street, Washington Times, July 3, 2002, by Paul Craig Roberts (posted by JohnHuang2).
=)
bttt
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.