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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: GraceZ who wrote (6536)	11/3/2002 2:47:50 PM
From: Wyätt Gwyön	Respond to of 306849

The worst thing, the very worst thing, you can do is let a bear market turn you into a bear i guess that would make sense if bear markets always ended at a PE of 48 on the SPX like now. because if one is to be unbearish, then one must believe the market PE of 48 is cheap or at least reasonable. or else one must believe that valuations do not matter, which is a bit too March 2000 for my taste. or perhaps it would work if the only purpose of bear markets was to provide buying opportunities for the next bull leg, as from 1982 to 2000. but if you don't think history is totally irrelevant, you might want to look at what happened at other times in the history of the United States, or even what has been going on over the past decade in places like Japan. there are numerous times throughout history, and in any market, where the best thing, the very best thing, you can do is let a bear market turn you into a bear. people who have not been bearish these past two years have had their heads handed to them. of course, maybe you're right and the PE of 48 is really a buying opportunity with a destination PE of 500. maybe Greenspan can magically bring back the bubble (he was just kidding about the first 11 rate cuts--it's really the 12th rate cut that is the kicker...and if that doesn't work, why, he can try negative interest rates of -10% to tax everybody who isn't Amurrican and putting all their money into large cap US schlock stocks run by scumbags whose only goal is to milk the corporation for personal gain so that they can become billionaires, or at least centimillionaires while lying about earnings through pro forma legerdemain) so that people can perpetuate their bullish fantasies and bail out their retirements. i seriously doubt it, but we'll know in 20 years.

To: GraceZ who wrote (6536)	11/3/2002 2:55:18 PM
From: Michael Sphar	Read Replies (1) \| Respond to of 306849

No flames from me Grace. One thing that often seems to be neglected in terms of liquification, its not just America's money that the Fed is providing, its the world's money. Like the language we speak as a first language, the US dollar is the world currency. Almost everywhere I've traveled a greenback was gladly taken in preference over the local currency. I think much of the "highly inflationary fiscal stimulus" of the Fed just virtually vanishes into foreign exchange at all levels of finance despite perceptions of the relative strength of the dollar.

To: GraceZ who wrote (6536)	11/3/2002 3:07:14 PM
From: Wyätt Gwyön	Read Replies (2) \| Respond to of 306849

Good grief, a look around SI shows that almost everyone does exactly the opposite. while one could use any large group as a contrary indicator, something to keep in mind re SI is that there is a certain survivorship bias to bears here. that is, many of the permabulls had their portfolios totally wiped out, so they have less interest in posting. whereas bears have prospered, and thus have presumably maintained an interest in financial matters. and on an ideological level, bears have had their convictions borne out by the market, while bulls have been refuted. thus certain once-popular threads, like the G&K thread, are now but shadows compared to their glory days. so it would be rather oversimplistic to say that everybody on SI has suddenly become a bear. rather, most who didn't become bears simply "went home". this makes sense in society at large as well, where many people who never adjusted to the new climate have simply lost interest in the market. stocks are not such "cocktail party" fodder as before. however, given that household ownership of stocks is now over 50% for the first time ever, i suspect the degree of nonparticipation will have to wax considerably before Darfot is done with his work.

To: GraceZ who wrote (6536)	11/3/2002 3:07:17 PM
From: SouthFloridaGuy	Read Replies (2) \| Respond to of 306849

Historically real estate has lagged the stock market by 2 years. The extreme interest rate policy by Greenspan for a supposedly "mild" recession was obviously the biggest factor in that sectors inflation. Doug Noland on Prudent Bear calls it the "great experiment." Let enough people refi their house, extract cash, and perhaps we can avoid a recession. Very myopic strategy by the Fed, IMO. As measured by closing prices and inventory levels, the bubble is deflating out here - it started in August (8% price drop in last two months) - and I can't wait for the October figures. I get giddy watching the next house being added to the MLS listings while the others remain unsold for 3+ months. It's like a slow motion way of watching the market fall back in 2000. NY and CA will be especially hard hit and that is meaningful to the US Economy as a whole since those two states have 20% of the country's population. Add in surrounding states like MA, WA, NJ, and a few other bubble states and you can have an issue that will have national implications regardless if you can still buy a house for $100k in some states. I think the slow upward trajectory of gold and the CRB is a signal of things to come. Kind of like the stock market lingering the 1000 level in the late 70's/80's when nobody would have defined the period as a "bull market" but in fact it had started in 1975. You never really know you're in a bull market until the talk of the town is about it, and by that time it's ending <vbg>. Bring up gold to most academics at a cocktail party and they'll laugh you out of the room. <<Credit crunches occur when there is too much demand for loans not when there is too much supply. We have a situation of falling demand for loans. If interest rates are rising for certain companies it is because banks are factoring in a perception of higher risk and/or higher inflation expectation.>> I am a little unsure of that defintion. Perhaps I will be repeating what you just said, but in simple terms, credit crunches occur when you need the money but nobody will give it to you. This generally occurs when you have a cash flow problem. The banks themselves are still lending at fantastic rates to companies that have good balance sheets, the problem is that those companies are few and far between. If Cisco wanted to take a huge loan tomorrow, the banks would give it to them at a much better rate than AT&T because Cisco has tremendous free cash flow to support interest coverage. So I think at this point in time, the higher inflation perception by banks is not there because the industry is so competitive and borrowing rates (for banks) are so low. <<On a company specific basis, companies with little or no debt have a serious advantage over the big dinosaurs who thought the good times would never end and loaded up with debt. When I look for investment candidates I look for companies without debt.>> I have to whole-heartedly disagree. Debt is an important part of the capital structure, particularly given its tax-free nature. It allows companies to take advantage of good times and I pesonally would question management that is not taking on at least some debt during good times. Levering the capital structure and taking advantage of good situations is a crucial part of the business cycle and capitalism. Like anything it can be absued, and it is the job of a good analyst/investor to run a Monte Carlo risk scenario for every company he/she covers and see if the debt issue is a problem.