Deflationary and derivative ka-boom, I believe. However, a note
to the bears - it can be delayed because govt stimulus will run
throughout 2010. The Fed does monitor economic activity. They
have hordes of govt. workers doing just that. I do believe
Real Estate market will deteriorate considerably if or when
the Fed stops buying MBS (where the printing goes), and the
govt. cash for shacks program runs out (end of April).
Moreover, the alt-A "true bubble" loans are just starting to
reset, the resets are scheduled to pick up considerably this
year.
That said, the resets are no longer the main problem for the
Real Estate market. The housing bubble collapse illness has
infected the PRIME Re market because many folks are out of
jobs. That problem is far bigger than resets, and foreclosures
will immediately pick up once the govt. gets off their program.
That will likely drive housing prices even lower in many
locations.
These are the risks. I believe they will immediately show up
once the Fed stops printing to buy MBS, and deflationary
dynamics will manifest itself. Once it does, I believe the
Fed will restart the printing press. That, however, remains
to be seen. Sovereign defaults and devaluations will also pick
up around the globe. Interest rates in the United States could
go up, simply because of the enormous budget gap that requires
financing. Our govt. has to sell more bonds than the Chinese,
and there could be few buyers (Who has the money these days,
or wants them? Xept the Fed)
In other words, we are not out of the economic hurricane,
we are in it's eye, where it's calm.
IMHO. |
