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Pastimes : The Naked Truth - Big Kahuna a Myth
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To: Oblomov who wrote (81767)12/31/1999 12:03:00 PM
From: Mike M2   of 86076
 
My comments on real estate. Traditionally RE has been an excellent inflation hedge but keep in mind that real estate cannot continue to appreciate faster than incomes indefinitely . The ding dongs in the press praise low rates and easy credit for making housing more affordable but they fail to see that this increases the amount of credit ( inflation) available to purchase homes thus driving up the price of homes. Another problem with this debt fueled consumption bubble is the excess investment in real estate geared towards consumption: retail, restaurants, stadiums- politicians like to build stadiums instead of attracting manufacturers -g- . The current level of consumption fueled by dissaving, wealth effect of the stock market, and easy credit cannot continue indefinitely. Office space- who needs it we can day trade and telecommute -g- Corporations continue to cut costs at the expense of workers failing to realize that these workers provide revenue for other companies. I can see a scenario where we have a little bout of inflation but once the bubble bursts the trend will be deflation. The majority of the paper wealth is hopelessly locked in the bubble - if you attempt to pull enough out of the bubble it will burst leading to a most severe dose of MTL & EV. Looking at history the major financial bubbles have ended in deflation. BTW , my late Grandmothers house was bought in the 20s for $800 in CT - I think it is worth $ 200,000 - talk about infaltion. Mike ho ho ho
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