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Politics : Welcome to Slider's Dugout

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To: Aggie who wrote (8866)	3/29/2008 11:14:13 AM
From: jim_p	Read Replies (1) of 50671

Hi Aggie, How is the oil patch treating you these days? I suspect the traffic in Houston is pretty bad today with oil over $100. Those were pretty scary days in Houston back in the 80's. I did enjoy the reduction in traffic driving to work downtown every day. It's hard to forget about the abandoned subdivisions that never developed enough to even be able to support their MUD taxes and all of the strip shopping centers that were brand new and never had a single tenant. The office building that Enron expanded into sat there brand new without a single tenet for years it seemed along with a few others totally empty. It's hard to believe that something that bad could happen on a more national scale, but unless you lived through it back then it's hard to have an appreciation on how bad it could get nationally today. Lots of parallels today with what took place in Houston and what is taking place in a number of places in the US today. The only way I can see it getting that bad would be if the US recession spilled over to other parts of the world and jobs took a major hit both here and abroad for a sustained time period. The odds of that happening are pretty slim with the Fed being as aggressive as they have been, but historical deleveraging from the extremes that we have today have taken a very long time period to correct in other countries and they were also very aggressive in solving their crisis. Lots of people forget that back then the problems started with the housing sector, but the really big losses actually came from the eventual spillover to the commercial real estate. Today the housing sector losses alone are projected to be about them % of GDP as the total losses were back in the 80’s from both commercial and housing real estate. The big questions are what impact the recession will have on future housing losses and to what extent will we see a spill over into commercial real estate like we saw in the 80’s. It took almost 6-8 years back then before the big losses showed up on the commercial side. The scary parallels to me are those that relate to the 1920's and 30's such as the amount of leverage the consumer has today vs. the 1930's and the amount of negative savings today vs. the 20's. The big unknown still has to be the impact of close to a trillion dollars of mortgages with either zero down or no income verification. This is new territory that has never taken place before anywhere in history and the spillover to the rest of the housing market is a big unknown in my mind. At least in Houston back in the 80's we all started out with a lot of equity in our homes. I still have my “Houston Poor” starter kit from back then. Take care, Jim

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