Bigbuilder's Comments RSS Syndication from SeekingAlpha.com http://seekingalpha.comuser/162656/comments http://seekingalpha.com/article/113843-housing-where-is-the-bottom?source=feed#comment-350616 350616
1. Average house size (and features) is not constant over time. The increased size of homes represents a huge sunk investment of national capital in assets that will generate large future negative cash flows for owners. Taxes, utilities, insurance, maintenance and so forth will render the current housing stock somewhat like the SUV's during the gas price run up. In addition, the capital is fixed in location. As individuals seek to be more nimble in their jobs and living circumstances, the need/desire to own will fall.

2. The historical emphasis on home ownership is based in part on assumptions regarding desire to build "community". As social structures such as public education and safety continue to spiral down, people will be more reluctant to tie themselves down to a fixed asset for the long term.

3. The rate of consumption generally will fall in the future due to the pending bubble/ponzi scheme inherent in social security and medicare. Read "Running on Empty" by Pete Peterson. We will be both taxed to death and burdened with high shares of medical costs. Nothing that D.C. does can change that future. The result will be great belt tightening.

The above factors will shift the demand and supply curves for housing in ways that make the current projections very optimistic. I hate to preach doom and gloom, but that is how I see the future.

I think the current housing bubble is just like the bombing of Pearl Harbor. It signals the beginning of a war. The enemy is our own excessive comsumption and the resulting waste of our capital into applications that deprive us of the ability to generate positive future cash flows. We are in a competition with the rest of planet earth and we ate our seed corn. When the American people realize the extent of this mess, they will blame and savage each other rather than unify to fight a common enemy.

As Pogo said: "We have met the enemy and it is us."]]> Fri, 09 Jan 2009 09:42:15 -0500
1. Average house size (and features) is not constant over time. The increased size of homes represents a huge sunk investment of national capital in assets that will generate large future negative cash flows for owners. Taxes, utilities, insurance, maintenance and so forth will render the current housing stock somewhat like the SUV's during the gas price run up. In addition, the capital is fixed in location. As individuals seek to be more nimble in their jobs and living circumstances, the need/desire to own will fall.

2. The historical emphasis on home ownership is based in part on assumptions regarding desire to build "community". As social structures such as public education and safety continue to spiral down, people will be more reluctant to tie themselves down to a fixed asset for the long term.

3. The rate of consumption generally will fall in the future due to the pending bubble/ponzi scheme inherent in social security and medicare. Read "Running on Empty" by Pete Peterson. We will be both taxed to death and burdened with high shares of medical costs. Nothing that D.C. does can change that future. The result will be great belt tightening.

The above factors will shift the demand and supply curves for housing in ways that make the current projections very optimistic. I hate to preach doom and gloom, but that is how I see the future.

I think the current housing bubble is just like the bombing of Pearl Harbor. It signals the beginning of a war. The enemy is our own excessive comsumption and the resulting waste of our capital into applications that deprive us of the ability to generate positive future cash flows. We are in a competition with the rest of planet earth and we ate our seed corn. When the American people realize the extent of this mess, they will blame and savage each other rather than unify to fight a common enemy.

As Pogo said: "We have met the enemy and it is us."]]> http://seekingalpha.com/article/106322-why-paulson-and-bernanke-s-plans-don-t-work?source=feed#comment-308875 308875
1. We have become too much of a consumer economy. The "investments" in housing were substantially a waste. How do media rooms and granite counter tops make us more productive in the long run competition with the rest of the world? That capital is sunk and cannot be redeployed unless we mandate that those receiving foreclosure relief pay us back by providing spare bedrooms to the homeless. Our entire policy of directing money into consumption is politically popular but grossly mistaken.

2. The government machine absorbs money and produces costly outputs that are at best a waste and at worst counter productive. Education has become a joke. Public schools are like insane houses run by the inmates. College grads cannot write a complete sentence. Lavish facilities and tenured professors do not assure that we will provide the next generation with necessary skills and mental toughness. The same is true of all government programs. BUT, in times of crisis, we run home to momma and plead for federal help. Help is then rationed by the political process to prop up the status quo, punish enemies and reward campaign supports. The only challenge is to manufacture a good cover story that convinces people that we have their interests at heart.

3. Human capacity for ignoring reality is boundless. We chatter about the issues of the day but ignore the long run fundamental errors because we cannot accept the truth: We have met the enemy and it is us. Nothing that is created in Washington can change the underlying reality of our current state. We have squandered our capital and must rebuild it by long and painful savings and sacrifice. Everyone must work harder and consume less. It is just that simple. BUT, the political and social divisions demand that we manage our own psychology so as to blame others and seek to extract retribution. This is a recipe for further failures. IF it gets bad enough, we will trade our freedoms for promises of material security.



]]> Tue, 18 Nov 2008 10:29:03 -0500
1. We have become too much of a consumer economy. The "investments" in housing were substantially a waste. How do media rooms and granite counter tops make us more productive in the long run competition with the rest of the world? That capital is sunk and cannot be redeployed unless we mandate that those receiving foreclosure relief pay us back by providing spare bedrooms to the homeless. Our entire policy of directing money into consumption is politically popular but grossly mistaken.

2. The government machine absorbs money and produces costly outputs that are at best a waste and at worst counter productive. Education has become a joke. Public schools are like insane houses run by the inmates. College grads cannot write a complete sentence. Lavish facilities and tenured professors do not assure that we will provide the next generation with necessary skills and mental toughness. The same is true of all government programs. BUT, in times of crisis, we run home to momma and plead for federal help. Help is then rationed by the political process to prop up the status quo, punish enemies and reward campaign supports. The only challenge is to manufacture a good cover story that convinces people that we have their interests at heart.

3. Human capacity for ignoring reality is boundless. We chatter about the issues of the day but ignore the long run fundamental errors because we cannot accept the truth: We have met the enemy and it is us. Nothing that is created in Washington can change the underlying reality of our current state. We have squandered our capital and must rebuild it by long and painful savings and sacrifice. Everyone must work harder and consume less. It is just that simple. BUT, the political and social divisions demand that we manage our own psychology so as to blame others and seek to extract retribution. This is a recipe for further failures. IF it gets bad enough, we will trade our freedoms for promises of material security.



]]> http://seekingalpha.com/article/85512-just-how-terrible-is-housing-as-an-asset-class-roubini-weighs-in?source=feed#comment-210373 210373
1. Diminishing marginal utility. A family of 4 can live in 1,800 square feet OR in 3,600 square feet. They are NOT twice as well off in double the space.

2. Opportunity cost of capital. IF you live in 1,800 square feet and invest the difference ANYWHERE else, you will be richer in the long term. This is true for individuals and for the entire nation. We will miss the possible productivity increases that wiser investment would have created.

3. Over leveraged personal balance sheets are reflected, for a short time, in a strong consumer economy. BUT, leverage on the way down is a killer.

4. The nations under funded long term committments (e.g. social security and medicare) will "bust our chops" financially. Excessive debt at all levels AND capital tied up in media rooms and fancy kitchens will not pay for that.

5. Personally occupied housing is only an investment if you are exiting the housing game. When you die, your heirs will realize this "investment". Until then, you will merely shift the current value of your housing capital from one location to another, or from one form (i.e. owning) to another (i.e. renting).

6. The housing bubble will destroy neighborhoods and local governments and will inflict real costs (both dollars and quality of life destruction) far in excess of the "paper" loses on bad mortgages. The collateral consequence for national productivity and morale of the citizens is very negative.

Basically, there was no "free" market. Intervention by all levels of government to favor a specific behavior by consumers was done in order to create quick wealth for the campaign contributors of your elected officials. This mess will be an affliction for decades.]]> Mon, 21 Jul 2008 07:33:05 -0400
1. Diminishing marginal utility. A family of 4 can live in 1,800 square feet OR in 3,600 square feet. They are NOT twice as well off in double the space.

2. Opportunity cost of capital. IF you live in 1,800 square feet and invest the difference ANYWHERE else, you will be richer in the long term. This is true for individuals and for the entire nation. We will miss the possible productivity increases that wiser investment would have created.

3. Over leveraged personal balance sheets are reflected, for a short time, in a strong consumer economy. BUT, leverage on the way down is a killer.

4. The nations under funded long term committments (e.g. social security and medicare) will "bust our chops" financially. Excessive debt at all levels AND capital tied up in media rooms and fancy kitchens will not pay for that.

5. Personally occupied housing is only an investment if you are exiting the housing game. When you die, your heirs will realize this "investment". Until then, you will merely shift the current value of your housing capital from one location to another, or from one form (i.e. owning) to another (i.e. renting).

6. The housing bubble will destroy neighborhoods and local governments and will inflict real costs (both dollars and quality of life destruction) far in excess of the "paper" loses on bad mortgages. The collateral consequence for national productivity and morale of the citizens is very negative.

Basically, there was no "free" market. Intervention by all levels of government to favor a specific behavior by consumers was done in order to create quick wealth for the campaign contributors of your elected officials. This mess will be an affliction for decades.]]> http://seekingalpha.com/article/82623-the-current-market-atmosphere-easy-money-hard-to-come-by?source=feed#comment-193073 193073
Those who sell investment products do so to generate income for themselves NOT to help their clients. All of Wall Street knew the last few years were based on lies, but they let it happen (with help from Republicans AND Democrats).

I think the future will be dark.]]> Thu, 26 Jun 2008 07:44:37 -0400
Those who sell investment products do so to generate income for themselves NOT to help their clients. All of Wall Street knew the last few years were based on lies, but they let it happen (with help from Republicans AND Democrats).

I think the future will be dark.]]> http://seekingalpha.com/article/80256-calling-a-housing-bottom?source=feed#comment-181306 181306
This will put us in balance with historical ratios, never mind falling below them.

Housing will not hit bottom until that reversion to the mean takes place. Perhaps inflation will raise other nominal measures to return the balance, but it still is fundamentally true that we have squandered trillions of precious capital by placing it in "non productive" fixed long term investments. (E.g. granite counter tops; media rooms; extra bedrooms and baths, etc.). This capital "investment" will produce negative returns for quite a while (unless cash strapped owners of McMansions start taking in boarders!).

Years of heading in the wrong direction will not change overnight. This is a world calls blunder for the ages! You may die of old age waiting for a bottom in housing.]]> Sun, 08 Jun 2008 12:22:20 -0400
This will put us in balance with historical ratios, never mind falling below them.

Housing will not hit bottom until that reversion to the mean takes place. Perhaps inflation will raise other nominal measures to return the balance, but it still is fundamentally true that we have squandered trillions of precious capital by placing it in "non productive" fixed long term investments. (E.g. granite counter tops; media rooms; extra bedrooms and baths, etc.). This capital "investment" will produce negative returns for quite a while (unless cash strapped owners of McMansions start taking in boarders!).

Years of heading in the wrong direction will not change overnight. This is a world calls blunder for the ages! You may die of old age waiting for a bottom in housing.]]> http://seekingalpha.com/article/80438-preparing-for-the-fall?source=feed#comment-181175 181175
In the process, there will be some of both. For example, how many $100,000 medical procedures do you think that Obama's recommended government health programs will be able to provide for those over 85 years old. It is harsh to say this, but reality is that the nation will untimately "sacrifice" the elderly by refusing the pay for state of the art medical care AND by inflating the economy as a hidden way of taxing all savers.

Add to the above the following:

1. Trade protectionism will destroy export markets.
2. International strife will strain our will and financial resources (e.g. North Korea, Iran, fundamental Islam, left wing dictators).
3. Global warming and other enviornmental issues will create political roadblocks to efficient economical responses to the various challenges.
4. Consumer debt, as measured by any historical metric, is grossly out of balance. This will mean years of substantial pull back.
5. Everyone, both private sector and public leaders, is primarily out for their own short term monetary gain. Each will engage in whatever lies or intellectually dishonest statements they believe will give them something today. The distrust of the people for both business and government cannot be overstated. Even well meaning, creative and honest proposals will be savaged for political reasons.

Finally, we are in for a ruthless competition with the rest of the world. We have had it too good for too long and we lack the willpower needed to handle the tough times. We will turn on each other before we will honestly determine that we need to change the nation in responses to the realities of the world. Just like the fundamental Islamists, we will be satisfied if we have someone to blame.

The above is the bright side.

Consider these possible future events: Nuclear terrorism; killer antibotic resistant bacteria; a return to ethnic and religious tribalism; global warming out of control; breakdown of worldwide financial systems and resulting riots over food and energy (already beginning). Bad enough for these to possibly happen...Worse yet, we simply cannot manage our minds and emotions to deal with either the RISK of any of them, or with the consequences of any of them.

]]> Sun, 08 Jun 2008 09:13:07 -0400
In the process, there will be some of both. For example, how many $100,000 medical procedures do you think that Obama's recommended government health programs will be able to provide for those over 85 years old. It is harsh to say this, but reality is that the nation will untimately "sacrifice" the elderly by refusing the pay for state of the art medical care AND by inflating the economy as a hidden way of taxing all savers.

Add to the above the following:

1. Trade protectionism will destroy export markets.
2. International strife will strain our will and financial resources (e.g. North Korea, Iran, fundamental Islam, left wing dictators).
3. Global warming and other enviornmental issues will create political roadblocks to efficient economical responses to the various challenges.
4. Consumer debt, as measured by any historical metric, is grossly out of balance. This will mean years of substantial pull back.
5. Everyone, both private sector and public leaders, is primarily out for their own short term monetary gain. Each will engage in whatever lies or intellectually dishonest statements they believe will give them something today. The distrust of the people for both business and government cannot be overstated. Even well meaning, creative and honest proposals will be savaged for political reasons.

Finally, we are in for a ruthless competition with the rest of the world. We have had it too good for too long and we lack the willpower needed to handle the tough times. We will turn on each other before we will honestly determine that we need to change the nation in responses to the realities of the world. Just like the fundamental Islamists, we will be satisfied if we have someone to blame.

The above is the bright side.

Consider these possible future events: Nuclear terrorism; killer antibotic resistant bacteria; a return to ethnic and religious tribalism; global warming out of control; breakdown of worldwide financial systems and resulting riots over food and energy (already beginning). Bad enough for these to possibly happen...Worse yet, we simply cannot manage our minds and emotions to deal with either the RISK of any of them, or with the consequences of any of them.

]]> http://seekingalpha.com/article/78398-did-we-learn-anything-over-the-past-two-years?source=feed#comment-172456 172456
I understand he makes house calls to OFHEO.]]> Fri, 23 May 2008 08:00:37 -0400
I understand he makes house calls to OFHEO.]]> http://seekingalpha.com/article/77092-john-hussman-home-price-erosion-will-continue?source=feed#comment-167931 167931
This does not include state and local negatives.

Couple this with an unending demand for consumption and a gross misapplication of capital (e.g. media rooms, crown molding and granite counters) into non productive assets and the future for the average Joe is dim in terms of material standard of living.

Prediction: We will become protectionist on trade, raise taxes, further regulate business into inefficient oblivion and the masses will clamor for more state action. Each political demagogue will further destroy our national unity by search for scapegoats.

I think the housing mess is the canary in the mineshaft. Profoundly greater problems await us.

We so lack moral fiber and resolve that we will panic in ways that will destroy the nation. Top that off with a cultural battle with fundamental Islam and see where we end up.


]]> Thu, 15 May 2008 08:39:25 -0400
This does not include state and local negatives.

Couple this with an unending demand for consumption and a gross misapplication of capital (e.g. media rooms, crown molding and granite counters) into non productive assets and the future for the average Joe is dim in terms of material standard of living.

Prediction: We will become protectionist on trade, raise taxes, further regulate business into inefficient oblivion and the masses will clamor for more state action. Each political demagogue will further destroy our national unity by search for scapegoats.

I think the housing mess is the canary in the mineshaft. Profoundly greater problems await us.

We so lack moral fiber and resolve that we will panic in ways that will destroy the nation. Top that off with a cultural battle with fundamental Islam and see where we end up.


]]> http://seekingalpha.com/article/67789-nowhere-near-a-real-estate-bottom?source=feed#comment-124997 124997
That having been said, I do agree generally with the observation that it will take some time for balance to return to the residential market. I saw an analysis that indicated that the current total value for residential property in the USA is about $22 trillion. In order for that total value number to return to the long term trend line that measures the relation of the value of housing to the total economy, there needs to be a drop in value of $4 trillion. This adjustment could come via increases in the rest of the economy, but in any event, this is a long painful journey and those who tied up significant capital in assets that consume $$ rather than produce $$, the pain will be great.]]> Tue, 11 Mar 2008 08:23:41 -0400
That having been said, I do agree generally with the observation that it will take some time for balance to return to the residential market. I saw an analysis that indicated that the current total value for residential property in the USA is about $22 trillion. In order for that total value number to return to the long term trend line that measures the relation of the value of housing to the total economy, there needs to be a drop in value of $4 trillion. This adjustment could come via increases in the rest of the economy, but in any event, this is a long painful journey and those who tied up significant capital in assets that consume $$ rather than produce $$, the pain will be great.]]>