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

To: Smiling Bob who wrote (71570)	2/7/2007 1:44:48 PM
From: ChanceIs	Read Replies (2) \| Respond to of 306849

>>>It inflated the housing bubble by driving interest rates down to 1%<<< I think that all now recognize and agree with that notion. Forsythe closes with: "liquidity in markets is, more than anything, a function of confidence." Though that confidence is abundant now, it can evaporate in an instant. I wrote yesterday that liquidity is often a function of how much risk lenders were willing to assume (% of assets to loan out). Sometimes they prefer to keep the cash under the mattress. Folks feel confident now. Margin debt is at record nominal levels. Can confidence be shattered to such an extent that loan contractions destroy liquidity faster than the FED can run the presses?? Printing Yen didn't work in Japan. The money stayed in the bank vaults. Japan isn't the US, but there is some parallel. What could cause confidence to be shattered?? I have been told that I am cold. (Actually I am an INTJ for those plugged into personality tests.) Ten minutes into 9/11 I figured that the terrorists had basically fired all their ammo. I weighed the economic impact, and decided that relative to the economu it was infinitessimal. I figured that the market would be off about 200 points and that would be that. After all, the market had been correcting since the NASDAQ peak in Mar 2000. Was I ever wrong. (Let there be no confusion that I was deeply moved by the human loss.) So what could shatter confidence and how can we tell a priori?? I think an Iranian war would do it. Russia and Venezuela are playing hard ball with oil, but that has already been largely discounted. A terrorist attack on the oil delivery infrastructure. I think that would do it, and absent any knowledge of curent military countermeasures, we all see a whole lot of crude passing through a very narrow water way in the Middle East - a good terrorist set-up. Bird flu?? That was a subject of great fear in October '05. One hears about birds (turkeys ?) being culled in many different places around the globe. Nancy Pelosi getting her private 747??? That should be our greatest fear. ;-)