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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Elroy Jetson who wrote (33218)6/12/2005 1:38:41 PM
From: Wyätt GwyönRead Replies (1) of 306849
 
But they can't -- because there are no wealthy buyers from outer space to take their place.

that is the problem with any Ponzi scheme--it doesn't create real wealth, just phantom wealth driven by more outsiders "coming in" (and more and sloppier credit to make up for the gap between income growth and price growth). but of course everybody cannot monetize this wealth because that would be like everybody making money in a Ponzi scheme. instead, only a lucky few walk away clean.

what is interesting about the current bubble is that there is so much artificial monetization (i.e., monetization of paper "profits" via cash-outs, as opposed to selling bubble properties and realizing gains outright). this is far in excess of artificial monetization in the stock-market bubble of the late 90s, when margin debt only reached a total of two or three hundred billion (cumulative)--that is less than today's home bubbleheads take out in home margin in a single year through cash-outs. cumulatively, of course, mortgage debt is, what, 30 or 50 times what margin debt was?

the artificial monetization ends when credit can become no easier. the focus on rate of change, and rate of change of rate of change, will be important indicators for this monumental shift. those are the things that CI is so helpful in keeping tabs on.
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