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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Pogeu Mahone who wrote (7301)	5/31/2004 10:42:12 AM
From: Peter Joseph	Respond to of 116555

Re: the housing market must be farking horrible? Not yet. Simply because the Fed and the lenders are pulling out new tricks from their bags every day. How much longer will this go on is anyone's guess. Re: these poor bastards are going to be forced to make 300 to 350 thousand dollars in 3 years! They won't, especially if the majority of the homes on the block are up for sale. Bubble deflating, right before our eyes. And the Fed fighting it with massive increases of money supply! From a dated (2001) report: Note: The general conclusions (below) have been wrong thus far. Simply because the typical American consumer confuses money (or wealth) with credit (or debt). IMHO, the real consequences will play out in due time. "Goods and services that are usually purchased with MZM types of money, cash and checking accounts and money market balances, are almost certain to rise in price significantly next year in response to current outrageous 20%+ MZM inflation. Next time you go to the grocery store or movies, note the fact that your bills go UP every year, not down as you would see in a general deflation. If you generally pay for a good or service with cash or a check, you will probably, in a macro-economic general sense, be paying more in the near future for these particular goods and services. Goods and services that are usually purchased on time with debt, like houses and cars, will fall dramatically in price as credit becomes less fashionable and even harder to obtain for the lion’s share of Americans sporting really ugly personal balance-sheets. The deflating credit bubble will decimate the prices of these debt-financed goods and services and force their new equilibrium prices much lower to more fundamentally reasonable levels. On balance, inflation will probably win the epic struggle for the cash markets and deflation will probably emerge victorious in the debt markets." zealllc.com

To: Pogeu Mahone who wrote (7301)	5/31/2004 4:21:08 PM
From: CalculatedRisk	Respond to of 116555

Obviously housing is strong (I haven’t seen anyone post that it is “horrible”). Several of us feel that the housing market is nearing an inflection point, and that both prices and volumes will start to decrease. This presupposes that housing is in a “bubble” or at least overpriced. Along those lines, I’ve posted several articles on both sides of the housing argument. I’ve also posted my own analysis with my conclusion that housing currently is in a bubble. Calling the inflection point is difficult in any market. At the top everything usually looks great. That is why we are looking for building inventories, rising rates, market saturation, signs of speculation or other indicators that we are near the end of the cycle. In my case, I’m not just interested in housing, but I’m interested in the impact of a housing slowdown on the general economy. I’ve expanded my analysis (in previous posts) to include the estimated impact on employment, if we see a normal cyclical slowdown in housing. Right now I believe that housing will lead the economy into a slowdown (my analysis / opinion is that housing will go first). The magnitude of the slowdown is not yet obvious, but I expect GDP growth for the 2nd half of this year to be below expectations (currently expectations are around 4.5%) with the possibility of a recession in early to mid-2005. If I am correct, whether there is a recession in 2005 or just anemic growth is difficult to quantify.