The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: nextrade! who wrote (210261)	7/13/2009 8:36:24 AM
From: ChanceIs	Read Replies (1) of 306849

RE: Bonner Denning I regret that I could only recommend that once vice the ten times it deserves. What a great distillation. Perhaps the best: Recent history proves it. Despite the biggest splurge of borrowing and spending in history, the US consumer economy barely grew at all. "In the five years to December 2007," reports Grant's Interest Rate Observer, "America's credit market debt climbed by nearly 57%, to $18 trillion. However, in the same half-decade, nominal GDP was up by only $3.3 trillion." For every five dollars people borrowed, they only increased their incomes by $1. Imagine that the borrowing had an average effective interest rate of 10% (credit card debt can be much more expensive). At that rate half of the additional income earned between 2002 and 2007 had to be used just to pay the interest. Hello!!!! The party is over. China is in an interesting spot. They want neither the market value of their Treasuries nor the dollar to drop. I think the key for them is to buy assets. The US is trying to get well by basically doing a stealth transfer of assets from equity owners to the holders of (bad debt). Think raised taxes. Raised stealthily through the laughable carbon tax and health care taxes. OTOH, the printing of money screws bondholders. What I see as the future is rational reallocating of wealth/capital - but certainly not by the US government. The US government is busy trying to give that to the majority of voters - that would be the "financially challenged." They - I will suggest - are the least productive. Of course the converse doesn't apply to Jamie Diamond et.al. whose huge salaries have no proportion to the negative wealth they have produced. (Perhaps I should have said that the converse does apply in a negative proportional way.) I see real estate in a long slow grind lower as real wages shrink. I see the government actively trying to prop up real estate through the printing of money and inflation. But will that be faster than real wage shrinkage??? I guess not. The Chinese are intervening to stop the dilution of their Treasury holdings - leading to lower real estate. What to do??? As always short overvalued things - real estate, stocks in silly things (Chipolte Mexican Grill), US Treasuries. But things of real value (when properly priced) which will see increasing demand and shrinking supply. Oil comes to mind. The demand of that is tough to call. In the US unnecessary driving has dropped and we might be getting more efficient cars. Except that used inefficient cars have gotten very cheap. OTOH the former third world is starting to drive. The supply side to me is clearly shrinking.

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