The Epic American Credit and Bond Bubble Laboratory Message Board

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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: GraceZ who wrote (49014)	1/7/2006 7:26:09 PM
From: kris b	Read Replies (1) of 110194

"They took out approximately 300 billion up to 2004 according to your chart but according to the drunks at the Joint Study for Housing Studies at Harvard they put 1.06 trillion into their houses in improvements and repairs between 2000-2004. Count it up yourself page 31." Your logic is flawed. You neglected to mention that the entire 1.06 was borrowed against the houses. So if the value of the houses went up (asset side of your ballance sheet) by 1.06, but at the same time the debt went up by 1.06 as well, the equity gain is ZERO. My friends are on the fourth house in this game. They never put a penny of their own money (They don't have any. It is all tied up in "equity in their houses") but piled up more debt against the three existing houses. Their aggregate equity never goes above 5% because they always mortgage up the difference as fast the appreciation allows. It is called a pyramid or Ponzi scheme. It works great when everything is going, up but kills you on the way down. Leverage is a two edged sword.

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