scotty1560

Seven Reasons the Market Has Already Bottomed

mlonz you have a bit of a point.
Real Estate is staircase stepping down, and for the moment at least in South Florida, there is some support.

OK, so we are in peak season for say another 3-4 weeks, then what? Very few of the sales are sellers with equity, they are mostly short sale or foreclosed. Lots of sellers just got cleaned out for hundreds of thousands of dollars in equity and improvements and taxes paid. I doubt many are in the mood to put hard earned money at risk, and they have damaged credit ratings.

Most people make less money or have no job at all, lending standards are tighter, the dollar for now is stronger. The bulls
are way early, the economic model for this country has major issues.

The Rally, When It Comes, Will Be a Doozy

Depression era equities corrected 90% and post 1926 real estate corrected as much as 80% in Chicago and Florida.. what makes this so different..bailouts for the cronies?

100 years ago the government was much more supportive
of middle class policies. That has changed post 1980
America via all the presidents..status quo elites
throw bailout money to the same people who created
the problems, while throwing the masses to the wolves.
Tax codes, bankruptcy laws, Glass-Steagall repeal,
property and capital gains.. all favor the wealthy.
Didn't Warren Buffet have that famous quote about his 60k secretary paying higher tax rates than he?

Rallies will happen but the trend will be down through
2011 in both equities and real estate. My friends tell
me inflation will save them...sorry, look at Japan.

Five Predictions for This Market

The Great Real Estate Bubble of the 1920's

by Polly Cleveland

Economists conventionally attribute the Great Depression to blunders by the then-new Federal Reserve Bank. According to this story, promoted by Milton Friedman and the Chicago School, after the stock market crash of 1929, the Fed kept interest rates too high, strangling the economy. This story made most economists confident that it couldn't happen again.

But there's a different story: the story of the giant 1920's real estate bubble. It began with cars.

Starting in 1899, the auto industry took off exponentially, dipped for two years during World War I, then took off exponentially again during the 1920's. Production reached a peak of over 4 million vehicles in 1929, before collapsing. It did not again pass 4 million until 1949!

The auto suddenly opened up vast suburban and rural areas to housing. Developers--legitimate and bogus--leapt at the opportunity. Banks jumped in too, creating so-called "shoestring mortgages"--effectivel... allowing property purchases on margin. Within a few years, tens of thousands of acres around major cities had been subdivided and sold. In rural areas, developers bought up farms, dug a pond, built a "club house" and sold cheap "vacation" lots. As reported in Homer Hoyt's classic One Hundred Years of Land Values in Chicago, from 1918 to 1926 Chicago population increased 35% and land values rose 150%, or about 12% a year.

In 1926, land values stagnated, then fell. By 1933, Chicago land values had fallen some 70% overall; peripheral areas fell even more dramatically. After 1929, home construction collapsed, and--paralleling the auto industry--did not again pass the 1926 level until 1950. Around Detroit, over 95% of recorded lots were vacant as of 1938. Nationally, there were an estimated 20 to 30 million vacant lots, compared to about 30 million occupied housing units. According to economic historian Alex Field, the barren subdivisions ringing the cities hindered the recovery of construction: Missing titles of defaulted owners and poor physical layout created de facto brownfields.

The real estate bubble helped set off and then worsen the Depression. Collapsing land values left people suddenly much poorer, so they cut spending. They also defaulted on mortgages, sticking the banks with "toxic" assets: liens on near-worthless property. The struggling banks in turn cut off lending even to good customers. Bank runs--panicky depositors withdrawing cash--further crippled the banking system. Between drops in spending and lending, businesses failed, unemployment soared, and prices fell.

Thus a radical innovation of the early 1900's--the automobile--set off a destructive real estate bubble in the 1920's. Another radical innovation took hold in the late 1990's: "securitization", that is, the aggregation of consumer debts, especially mortgages, into marketable packages known as "collateralized debt obligations" or "CDO's." CDO's set off another giant real estate bubble by making houses "affordable" to poorer Americans. The collapse of the CDO bubble stuck banks once again with "toxic" real estate.

Fortunately, economists--and markets-- now recognize that to limit damage, we must force banks to write down the garbage quickly. But write-downs will reveal that some big banks' liabilities exceed their assets, requiring drastic remedies, including restructuring, breakup, and possibly temporary nationalization. Unfortunately, so far our new Treasury Secretary, Tim Geithner, either lacks the nerve or the authorization. Unless he acts soon, we face another "lost decade" like the 1930's.

Five Predictions for This Market

I wouldn't count on any real turn around for at least 2-3 years.
Yes, counter rallies will come along...dow to under 4000.
This is an "L" and life will not be the same for my generation..
the damage is to deep on to many levels... not to mention
the corrupt leaders intent on taxing people into poverty.

Stop down in South Florida and look at all the brown lawns..
it's depressing down here... Real estate has fallen off a cliff and
has at least 3 more years of downside to weed out foreclosures.
People here are just starting to realize it's over..middle classes wiped out... pilots, realtors, dentists, yacht industries, hotel, restaurant, financial
services, merchants... I could give you a long list of successful people who
are losing their homes...not flippers either.

Go read some books on the depression- here's one:
"Hanging on or How to Get Through a Depression and Enjoy Life"
or "Only Yesterday" by Frederic Lewis Allen.

What happened to civil unrest in this country.. bonus marchers...
war protest, Vietnam, Watergate... we, including me, are nothing more
than domesticated sheep.. no stomach to tackle the octopus in power.

Are We Headed Back to 1980?

3500 dow..using adjusted for inflation that is overshooting the bottom.
75%-80% correction for dow and boom real estate.
just my theory... about 40% to go?

Dow/Gold Ratio of 1:1 or 2:1 in Coming Years?

Long shot for dow at 2000.
How about dow at 3500-4000 and gold at 1750-2000?
2 to 1 is my theory...
My theory is 70-75% correction in dow and real estate from peak.
Real Estate correction in the boom areas.. FL, Cal, Nevada, Phoenix.

Why the Market May Hang On by Its Fingernails

I see us headed lower...
oil.. real estate.. equities..
no buyers... no confidence.. weak earnings.. layoffs... credit crises.. broken economic system

hard to see any meaningful rally in the current environment..
the only way to spur some trader rally is through continued price cuts..
so I say support breaks down here..
gold looks ok... looks like a multi year run towards $1500-$2000

Don't Expect a Recovery Anytime Soon as Dow Makes New Bear Market Lows

stocks and real estate will correct 40-50% down before we reach bottom..
1995-1998 real estate prices and 3500-4000 dow..
timing is beyond my abilities...within two and one half years...
gold should do well... $1500-$2000 looks to be in the cards..
depressions wipe away lifetimes of investing and dreams.
structurally, the current economic model is broken for this generation.
cash.. gold...a good waterproof safe... watch your bank carefully also.
bank holidays, nationalization, moratoriums could be sooner than we think

Wall Street Breakfast: Must-Know News

axelrod is so correct..
major major missed opportunity and so far Obama is missing the ball
at every angle...appointees, policy.

Obama has only a few swings at the plate before the money runs dry
and the window of opportunity vanishes....government refuses to get
serious about regulation and has yet to come up with a strategy that
makes any sense.... all paths lead down.

Get Set for the February Bull Run

Sell into any rally above 10k on the dow...
we'll see how good the new bull market looks in 12-18 months..
Hoping to see an equities boost from the stimulation packages.

the facts are tight credit, job losses, and declining salaries do nothing to create higher earnings. Bank closures and credit card defaults are in the cards.With foreclosures in the jumbo market probably 2+ years from peaking, we'll see how generous people are feeling.

Maybe Dorothy will appear , we can join her down the Yellow Brick Road,
and everybody has a happy ending. Personally, I think Judy (Dorothy) and
Frank Morgan (The Wiz) are on sabbatical for a few years. Don't forget
that trade imbalance with China, which has yet to be addressed.

524,000 Jobs Lost in December; The Economy Is in a Depression

good article Peter and I agree...

axelrod has a good point about credit....if you look at 35+ years since credit
cards and more sophisticated credit...the result has been terrible for much of
this country...first we had credit card problems...now it's foreclosure....

trade is maybe the biggest issue and responsible use of credit another....
good or bad ending this will take years to play out...

Remember, Investors: This Too Shall Pass

understand the authors point...and he could be correct...

some of the posts say we are far from out of the woods...I tend to agree..

Anyone who thinks this real estate mess is bottom is dreaming...
yes, we have little spurts of two good months....then a month later the
price reductions come flying at us....so no no no...we are in the forth
inning perhaps....those foreclosures are a cancer that will not go away...
remember...option arm resets peak in 2011 or 2012...

The U.K. CPI Inflation and RPI Deflation Forecast for 2009

Well thought out article Nadeem and I tend to agree.

The US market was fictitious for 8-10 years, so now we will find out what the
next catalyst will be...path could lead to painful pre-bubble resets..

Stagflation "could" rule the next few years...lower wages..lower growth..
real estate and luxury items are dead imo...equities will have huge
bear market rallys before the humbling reality sets in..

The wild card is "regulation", so if we go back to 1-30 reserves or 100% financing or deritives, then bets are off....1970's or lost decade 2?

I would also imagine the US government is desperate for revenues, so let's see where that path leads..VAT? They are scheming as we speak. I like oil as well with a few year timeline...the future holds depressing realities in food, water, and energy...last year should have been the wake up call..low prices will entice people into the old habits and "undercut" the alternative investment.

Still Waiting for a Real Bottom

good good good..nothing to add

2009 Economic Forecasts Ignore Demographic Shift

Steve's articles are the best..always enjoy them.
Guess what..demographics will occur in a natural fashion over time.
Parts of the country like upstate NY, PA, Ohio will deal with smaller
and aging populations, while warmer states deal with growth.
Those empty condos in Miami will become rental complexes and
the poor malls and strip centers, well...mmm...ghost towns?
I'll bet the iguanas are licking their chops about new territory.
I like upstate NY, traffic is light, still a few trees left, the lakes are nice
to...ditto Maine...life could be worse...I can always plant a garden.
I'm "hoping" they lower the school tax..less and less kids upstate.

I see no "real" recovery. 100% financing and 30 times reserves does wonders
for assets- without those artificial steroids what do we really have. We
have an non-functional, corrupt model of growth and trade. Expect lower
salaries and years of "under par" equities and real estate. Commercial
real estate was totally overbuilt, and those anchors look a little shaky.
We are "stuck in the mud", bailouts are little "band aids".

This leveraging "experiment" has uncloaked itself, we have lost and
now wait for the punishment, slow painful growth and a more humble existence. The only inflation I see is the bad kind ala Gerry Ford's "WIP - Whip Inflation Now!", where's "federal agent" Elvis when you really need him?

The good news is the airports will be less congested. Old fashioned crime
probably headed "much" higher- good for the securities providers.