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

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To: mishedlo who wrote (74947)	12/7/2006 7:35:23 PM
From: Mr.Creosote	Read Replies (1) of 110194

"I do not know what constitutes "your area" but whatever it it I assure you it is multiple standard deviations from the norm." Mish, that's just the point I think you are missing. I live in a middle income community, homes here are valued in the range of 700K-1M, nothing extravagant for southern CA. We are not talking about Beverly Hills here. Middle income families with low 6-figure incomes are NOT multiple standard deviations from the norm. They ARE the norm. They have jobs and they spend their disposable income. I'll grant you that they are probably not saving anything beyond their 401K contributions but so what? They are certainly not rich but they are buying $60K+ automobiles, taking vacations around the world, renovating their kitchens and back yards, etc. etc. I don't see how this is such a bad thing. As for how many people will lose their jobs due to the possibility of a future housing bust I don't claim to know (and neither do you). We have only given up a few percent in housing values, let's not immediately extrapolate from this that prices are automatically going to zero. But even if such dislocation occurs you may be overestimating its impact on the overall economy and the stock market. We live in a highly globalized, interconnected and robust economy that should be able to absorb the shocks and adopt accordingly. Those who are looking at 1929 as a parallel of what's coming to us will most likely be disappointed. What happened in the past rarely happens in the future in precisely the same way. Yes, at some point we will correct 20% or so in the averages but so what if we go from 12.4K to 10K on the Dow? Some people these days are afraid of everything including their own shadows. Sorry for digressing, my point remains that the job market is the foundation of this economy and further that it can absorb quite a few of those displaced by the coming compression in realty-related jobs. Smart human beings will always find something to do, it's the American way. We are versatile, adaptive, and enterprenurial by nature. We will survive and prosper. Show some faith Mish, it's not really that bad.

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