Posted on 11/09/2007 12:42:25 PM PST by Hydroshock
It seems to me you’ve been paying attention.
I work in retail finance. You’d be amazed how many people are excited about this great buying opportunity. I’ve warned enough people about that, to make me lose my voice. Stupid...
Your right, this is something that has not been seen for at least 20 yrs anyways, and it could be worse.
We have yet to see all the losses, the credit downgrades haven’t even started yet, dividend cuts/elimination are coming, congressional inquiries, federal indictments, qtr after qtr of bad numbers.
And the average idiot thinks a “sale” is going on.
Oh well, go ahead...
I wanted to say that soooooo badly!
Every single one of these threads has at least one, and often several, Freepers who refuse to address the fundamental problems in the economy and just spew this irrational Vast Left Wing Conspiracy mantra and then call everybody a bunch of liberals.
I wish to heck they would get educated and discuss economic issues on their merits and not just spout off the way they wish life was, not the way it is shaping up to me.
I’m not happy the economy is on the brink of recession and I’m not responsible for putting it there. I’m just trying to prepare for what I see happening.
Members like the one you responded to really rile my feathers, because they don’t discuss the real issues working their way through the economy today, they just discard all bad news as propaganda of the left and hyperbole.
I wasn’t going to call anybody a name but I can sure agree they deserve the label.
Are you professionally involved with real estate? Sounds like it.
As far as all these “good buys” that hasn’t happened yet. What I see is a massive spread between bid/ask.
The bid price is going to win...
Most peopel have a house, or maybe two. At what point do you own enough houses? So lets say I buy a bunch of houses, that means I need to find renters, maintain the property, pay taxes on it, mortgage.... I’d better find a tenant that is willing to pay me a reasonable rent, or I’d be a mess.
There are today, far more houses than are needed. Someone is going to own many houses, with few people interested in living in them. As much construction as has been going on, you’d think that Mars indeed, did invade us.
You can’t fault the people that are in r/e professionally, for either ignoring the problems, or thinking they are overblown. You can imagine that in their circle of friends, colleagues, etc, that they are all in the same group think. I feel a bit sorry for these folks, because they have been making good money, they most likely will not see again for many years. Some career minded people will stick it out, and do pretty good, but the majority of today’s real estate professionals will soon be in another line of work. Sorry if that hurts anyones feelings, but that is reality.
This is only part of the problem. The private economy is in even a bigger mess. The Federal reserve printing money and giving it to the US government is bad enough, but that gets spread pretty thin pretty quickly because most of it goes to individuals in the form of entitlement spending. The money printed and given to Wall street as super low interest rates is altogether a different thing. The bankers get a concentrated dose of those dollars first. It would have been one thing if all that money had been going for capital investment in the engine of manufacture to keep our exports strong. But instead we have had 20 years of asset hyperinflation - more and more dollars chasing paper, real estate and other nonproductive "investments." CDO squareds, leveraged and swapped are the result of all of this thinking that investment is trading paper rather than putting assets at work on the ground.
Much of our consumption has been financed by selling our paper overseas, where the promise of high leveraged returns was very alluring. Well those returns aren't happening, and the dollar dropping 10% per year makes turns a return of 7% per year into a loss. So they don't want this stuff anymore either.
Either we get massive defaults, or we monetize our bad debts which produces hyperinflation. But this can't be from the Federal reserve printing more money and loaning more of it to banks to lend and buy more paper. This will require broad fiscal stimulus by the federal government to get lots of extra money in circulation.
Remember, stocks fall, when peopel sell them. BAC was late to the banking party, along with WFC. Both were a bit caught in the bad loan debacle of the recession. But they caught up with the banks that had done well. THey lagged on the way up, will lag on the way down. Most investors have very good profits in those stocks, reluctant to sell. But, at some point the trend will weaken their resolve, and then, well, you know. I suspect GS is similar.
It has been a long time since the numbers have worked on real estate - where rents covered the mortgage plus labor and costs for maintenance. This is because everyone expected to make their money off of price appreciation. This is an example of how Greenspan's free and easy money policies have cooked the nations economic books so badly that no one knows what is genuinely profitable and productive anymore.
A large fraction of people live not off of return on capital and labor, but rather off of asset inflation. This may or may not continue, but if it doesn't a lot of folks are going to have to adjust.
If the cash flow works, then you’re sure to see heavy construction of new properties and or apartments. So, this is waht we got.
The next time real estate is a really great buy, is when the cash flow is zero. Then, the prices will be nothing.
We’re heading there, but the sellers are still inclined to think their properties are worth X, but it is actually only worth X-25%-40%.
Inventories are massive, because the ask side is still thinking some sucker is going to buy the place.
One of the things that astonishes me is that the commissiion on real estate sales is still 6%. With the advent of advanced information technology, transaction commissions in virtually every other are of the economy have plummeted, including stocks, and airline tickets to mention just a couple.
The cash flow didn't work and isn't working which is why there is a glut and a boom in the foreclosure business. It was speculative, encouraged by Greenspan's 1.75% interest rates.
Regulatory bodies, fed, all sorts of folks had an obligation to stop the madness, but they didn’t.
Please add me to your list.
Thanks,
adm5
Done
“You are an idiot. “
Why thank you, right back at you.
“My heating bill will go up, and virtually everything else will become more expensive because it has significant components of energy or foreign commodities or manufactur”
And that has what to do with JPMorgans $56 billion in bad loans? Food costs are going up in part because of the ethanol debacle.
“Our economy is finally foundering in the mire of its own paper, and we have so difficult times ahead because no one wants it anymore. (Question, what causes the price of something like the US$ to drop. Answer: Because demand is dropping below supply at the current price).”
On the other side exports are increasing as foreign countries get great buys. People like you seem to want a economic disaster.
“Every single one of these threads has at least one, and often several, Freepers who refuse to address the fundamental problems in the economy and just spew this irrational Vast Left Wing Conspiracy mantra and then call everybody a bunch of liberals.”
Not a liberal and not an idiot. I just don’t think the sky is falling. The biggest risk is not the economy its that people will stop spending.
Yes our government has been spending a lot. What happens to that money it spends? Why they pay people for goods and services. What do those people do? They pay other people for goods and services. IMO, Bush’s strategy to get us out of the recession that Clinton left behind was to use government spending to stimulate the economy and it worked.
“Members like the one you responded to really rile my feathers, because they don’t discuss the real issues working their way through the economy today, they just discard all bad news as propaganda of the left and hyperbole.”
Hyperbole? You idiots (there I said it) are the ones repeating the mantra of the liberal media. “ OH WOE!!!! This is bad, or that is bad. We are DOOMED!!”
The real issues you seem to want everyone to toe the party line are is that JPMorgans problems will result is an overall disaster. What do you have a bunch of shorts out there to sell?
The proof is gold which is anticipating the effects of the resulting inflation, especially the very damaging inflationary expectations.
Everything actually. JPMorgan, Citicorpse, Goldman Sachs are major investment banks whose raison d'etre used to be to raise capital to finance our great engines of commerce (you know, rails, steel, etc. like back when JPMorgan himself actually ran the bloodly place). Now it is pushing loans on overvalued properties, packaging the mess and selling the worthless paper to pension funds, etc. not just here but in Europe, etc.
It is not a bad scam that you (we) finance consumption by selling worthless paper to the producers of those goods, if you can get away with it, but at the end of the day, a lot of potential capital spending gets mispent, the ability to raise capital for legitimate projects diminishes, and when you can no longer balance your imports by exports of pieces of paper with lots of zeros, your currency tanks.
I want a strong US economy, believe me. I just have a very clear view of the structural imbalances that have accumulated over the last 1/2 century as a consequence of living off of the world's reserve currency. Me, I look forward to the workout so that we can be healthier.
But I am not for one minute a starry-eyed observer who thinks that this is the best of all possible worlds.
The probably paid purveyors of doom'n'gloom are blaming the rise in food cost upon the minuscule cut in basis-points by the FED, not the ethanol scandal.
On the other side exports are increasing as foreign countries get great buys. People like you seem to want a economic disaster.
Furthermore, the dollar is now a bargain, making the greenback a value.
Economic disaster will get votes for which party?
Yes, it worked along with the FED rate cuts following 9/11, causing Americans to get the homes of their dreams.
The real issues you seem to want everyone to toe the party line are is that JPMorgans problems will result is an overall disaster. What do you have a bunch of shorts out there to sell?
Since the "subprime crisis" was pure smoke'n'mirrors before Americans became frightened into buying homes by the media, why did the JPMorgans get their sycophants to promote these "crisis?"
Shorts to sell, hmmmmm?
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