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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: re3 who wrote (6593)	1/31/2004 7:17:59 AM
From: Chispas	Read Replies (2) \| Respond to of 110194

@ retired.... First hand, I know from one of my sons in the heating/air conditioning business, homeowners are stretching repairs just as long as they can. If, let's say, a heating unit truly needs replacing, they say, "Just fix it". Cash is tight....

To: re3 who wrote (6593)	1/31/2004 10:27:39 AM
From: russwinter	Respond to of 110194

<what about apartment rents > Yes, under pressure, caused by the highest rental vacancy rates since the 1930's. But my point has been that easy money is part and partial to this, as it causes distortions. In this case the distortion is easy to spot, it's moral hazard behavior. Cheap, easy credit turns people into speculators (see Cramer quote), Message 19754471 and diminishes the use of housing for shelter. When is the last time anybody thought of their housing as just another consumer spending item? Another important point to all this. Mishedlo keeps dismissing rain in Argentina, as if that alone is what is causing this inflationary outburst. I would ask everybody to answer an important question though. Why is it that inventories, and stockpiles are running so low in about everything? And since they are low, prices are spiking, why? There are two aspects to the answer IMO. First the Asian demand from the US has caused a crack boom cycle. Some of it is natural economic growth, and could have been supported. But a large portion of it is speculative and excessive. The cause is underpriced credit and capital distorting the market. The second component involves participant behavior. Production of input goods and commodities is risky business with long lead times. So you need to ask yourself, why for instance (just one small example, since Misheldo apparently is tired of my Argentina rain maps, umh dry again): agriculture.com are cattle herds at the lowest levels since 1959? Message 19753432 Why are grain stocks at mult-decade lows? And on and on. There is NO excess capacity in the input and commodity sector whatsoever. Can it get geared up? I'm not so sure, with the high input costs in energy (most commodity production is energy intensive), and given the mania in consumer based finance. The reason is that a hyper-finance based economy distorts the market by directing capital into such lending. Why take a chance on cattle ranching, or copper mining, or energy exploration when the easy way to fortune is to borrow at 1% and just do carry trades and consumer loans at a nice markup? This has just feed a bloated financial sector at the expense of real goods and commodity production. The "carry spread" is what is adding more fuel to the train wreck. The great Rasputin humor piece describes it brilliantly. Message 19747154 I can almost picture some energy company a few years ago (or even now) going into a bank and trying to get a big loan to gear up for a long development time oil or gas field. Often they were probably laughed out of the place. Instead it's like the Datech commercial where a dozen "bankers" are all lined up out in the hall dying to serve Joe and Susie Homemaker. That's a serious market and economic distortion.

To: re3 who wrote (6593)	1/31/2004 1:22:45 PM
From: marginmike	Respond to of 110194

I am renting a 2 million dollar condo for 7k a month, you do the math. The guy who owns it is getting a 2-3% return after his expences. Would cost me almost 2x to buy with fees. GOD BLESS DEFLATION!

To: re3 who wrote (6593)	1/31/2004 7:52:52 PM
From: who cares?	Respond to of 110194

I have looked at buying some rental stuff, just as cheap and as scum as possible because I figure when the bubble burst and people start losing their mortgages they will still need somewhere to live, and it will be the people on the edge that go first. People that have no job or not much of one that still had some of the sloshing credit wash over them and get them into a house when they really had no right to one should be the first to lose, followed by wealthier and wealthier that bought more house than they should have. The problem is, I want to actually make money on my investment. I've always had an aversion to being in debt so i'd like to just take some of my money, buy the property, minimal remodel, and make 10% on my money. The problem is the easy credit allows people that should not even have a place of their own, much less any rentals, to play Donald Trump. I know a guy that has been in this business for a long time. He said a few years ago he might be the only one to show up at one of the auction on the court house steps govt. repo type things. Now there's a big crowd and the speculators use their easy money from the bank to outbid each other, paying more than a property is worth. By the time they do a remodel, and pay on the loan they're only making a couple of points, but it's not their money so they're making it up on volume. Add to this people that normally are stuck renting because their credit is such a mess can now get out of the rental and get a house of their own thanks to the willingness to lend, and rent rates are low. Personally I figure when things turn their will be some overleveraged Carlton Sheets geniusus that will be puking up their properties at bargain basement prices, it's just a matter of being patient. The tempation is there though, even for someone that hates debt like me, to borrow at the low rates, especially with the printathon of money, as I would be paying off the loan with more and more worthless dollars. That's what the government wants though, no one saving, everyone in debt, so I resist.