Jimmy Lathrop

2009 Depression Will Be Nothing Like 1929

As to Paper Gains comment as to the destruction of wealth in their homes - as long as they are wind and water tight and the garage door still opens, guess what? Homeowners can still live in them! I have 2400 hundred shares of Fannie Mae that I bought at 5.00 - any idea what I can do with the stock certificates besides wallpapering my bathroom?

As soon as I hear the crying about the equity being drained from people's homes, I start to mentally turn off. Home is where the heart is, and if its your primary residence and you are not moving, then that's where you are staying. If you happen to live in one of those no-money down developments which resemble ghost towns, I assure you your newer neighbors will be more affluent and polite than the marginal people who used to be your neighbors and bit off more than they could chew. If you are complaining about the equity in your investment property, then you need to go to investopedia.com and re read the definition of the word risk and then complain to Robert Kiyosaki for not letting you know that investment property takes a certain type of chicken farmer and most people can't stand chicken mess. Less crying, more coping people. That is what adults do. No one is going to change your diaper for you, I don't care what the big O said on the campaign trail.

2009 Depression Will Be Nothing Like 1929

Remember everyone buying Beanie Babies and how they were going to increase in value and people would tout them as an investment? Turns out they were just crummy dolls. There was a period of time that people thought they had intrinsic value but the market said otherwise. People still buy Beanie Babies but no one thinks they are going to be fabulously wealthy hoarding them. And the world did not end when the Beanie Baby market collapsed.

This is not a depression. This is just the realization that asset prices are unsustainable and inflated. There is a natural deflation to return to the historic mean in all asset classes. If you put all of your money in Beanie Babies people laughed at you and if you put all of your money in Bank of America people are laughing at you now, but please do not compare the Depression to this market correction.

A real estate broker tells you your house is worth a million dollars. A mortgage broker tells you a $500,000 loan should be viewed only on the payments. An investment advisor tells you the Hartford has a strong balance sheet and will continue on for another 100 years. The only recurring theme to each of these examples is that these people live on commissions and make their living taking your money to pay for the lease on their BMWs. The media likes hanging out with these salesmen because they take them golfing with them and they get access, just like the New York Times got access from the Bush administration about weapons of mass destruction.

We have spent most of the last 10 years on get rich quick schemes with bank stocks, real estate investments and leveraged investment products. Once the people pushing these products have been shipped to Siberia, our life will return to normal, normal being what passed for ordinary in 1998. If you are upset about that, you'll be even more upset to hear there is no Santa Claus but we are not in a depression.