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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Don England who wrote (87647)2/18/2001 6:57:16 PM
From: patron_anejo_por_favor  Read Replies (3) of 95453
 
OT <<(the entire housing thing seems quite anomalous) is it not possible that our excess liquidity is now mal-flowing into that mkt. and that the demand isn't really there, hence here comes a bubble?>>

Since you've been reading The Credit Bubble Bulletin by Doug Noland lately,

prudentbear.com

you may note that he stated "in a bubble, liquidity chases inflating assets". He is referring to the phenomenon (in the real estate bubble) that you cite. Back last year, the loans that were expanding fastest last year right up to the crash were margin loans for stocks. Now its real estate, even though there is little fundamental reason why real estate prices should go much higher in the near term. It's a result of altered "price signals" created in real estate borrowing by the GSE's (ie, Fannie Mae), and securitization of real estate loans (ie, the ultimate "lender" who will be stuck if things go bad is FAR removed from the actual loan underwriting process...in many cases its a money market fund!)

In other words, because lending costs are held artificially low in real estate borrowing, that's where loan demand occurs (even though its not "needed" or "productive"). An anomaly? You bet! And an unsustainable one at that.
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