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

To: Condor who wrote (28030)	3/7/2005 6:51:14 PM
From: Ramsey Su	Read Replies (3) \| Respond to of 110194

I can describe what all hell broke loose look like before. I was licensed to sell real estate in 1978 and got into the business around 1979. Early 1980s, business was so bad that some of the local board of realtors were reporting less than 5 sales a week (you old timers remember those MLS books?) Interest rate was over 12% with C and D paper (predecessor to today's subprime) at 20% plus 10 points. OREO flood gate opened and no one, not in Southern California anyway, was talking real estate no more. Well, things got fixed. There were lots of room to drop interest rates to stimulate the markets. Reagan used his supply side and pumped up the deficit. That was basic econ 101 stuff - increase government spending to stimulate economy. Today, all the econ 101 stuff had already been used to keep the bubble inflated. If the real estate bubble bursts, what do you think is going to happen to employment? Credit card default rates? Mortgage default rates? Consumption that is supported by asset wealth effect? New cars every 3 years? It is not as if we are going to have a depression like the Great Depression. Circumstances are very different. I think it is going to be like a reverse wealth effect, reversing first the equities wealth effect then the real estate wealth effect.