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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: mt_mike who wrote (51551)	5/16/2002 4:20:02 PM
From: Jim Willie CB	Read Replies (1) \| Respond to of 65232

I was knee-deep in real estate in 1987-1992 declines first, we see eye to eye on this one also are you sure you arent my parallel world twin? housing is a weird combination of hard asset and debt instrument it is tangible as they come, esp when the furnace breaks but their value is very much supported by debt in 1991 property took a second consecutive hit housing had suffered badly from a popped bubble from 1987-1989 as interest rates jumped up annually and busted the boom that typical cyclical recession hurt jobs bigtime so housing took it hard via the two central forces that it is vulnerable to: unemployment, interest rates I think the writer you refer to has it backwards the current 2000-2002 real estate rise has the appearance of a blowoff top money moved ALREADY from stocks to property during 2000 in particular I recall numerous stories of graybeard money that migrated near the top in stocks into second and third properties when rates went down hard in early 2001, the movement increased, but with a bigger effect seen in mortgage refinances I read $30 billion in refi cash takeouts supported consumer spending that money source is not available this year spending is largely coming from mastercard debt increases I have given real estate considerable thought over the last several months my best friend in Boston owns a bunch of multi-unit residential and multi-unit commercial property he sold 1/3 of his commercials this past autumn his reason was "blowoff top" just like 1987 he last sold property in 1986-87, smart guy but he is Armenian with only one eyebrow, huge hands great guy, funny guy, smart fellow, great athlete we were even partners on the tennis court he played college football as wide receiver Volt probably was faster than my buddy though anyway, I think real estate could go one of two ways, depending upon which economic scenario unfolds 1. rates rise with stagflation and energy inflation some moderate inflation produces higher rates but no prosperity, and little in the way of job security, with layoffs rising again, during an economic malaise like 1970's this scenario will pop real estate right in the living room rates would go up, but no offset from income increases, and surely no job security to enable comfort in committing to longterm mortgages if rates only go up slightly, I dont think housing comes down much in value the inflation would offset job income conditions if the dollar declines much more, and the Fed does not get carried away at its printing press, then we might have what I expect in higher rates regardless of domestic economic conditions the higher rates come with dollar sales (dollar=debt) I dont believe American investors have a clue about this 2. rates rise with Fed-inspired reflation efforts gone amok, with inflation showing up in commodities and goods/services on widespread basis this scenario would bring higher rates, but the pain would be delayed until the Son of Bubble broke inevitably, inexorably hard asset prices would rise, including gold & silver, but also industrial metals, crude oil, lumber, and property in this case property would be a great hedge from inflation it would participate but down the road comes the pain of higher rates since the Fed would DEFINITELY interrupt this process so real estate might rise another 20-30%, but then come crashing down during I mean crashing if scenario #2 happens, I would expect a Horrible Deep Recession bordering on a Climax Depression by 2005-06 a final payback for Fed abuses upon abuses our financial system has never been under greater threat now since 1929 the sheep dont realize it though it is ALL about the USdollar now if it comes down a mere 10%, we can stabilize but I think our federal debt and trade debts will overwhelm the sale of dollars then you have the 3Sigma events I expect more terrorist attacks, despite the current quiet these guys are not done if and when that happens, I believe our economy will suffer and our dollar will be sold in search of greater safety I expect us to come close to the precipice in scenario #2 just the perspective of a jackass / jim