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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Oral Roberts who wrote (8198)	8/28/2007 10:55:18 AM
From: MulhollandDrive	Respond to of 33421

oral, Message 23833239 jrhana posted an interesting comparison between the tech bubble and the housing stocks bubble of course the housing stocks don't represent the housing market, but it was of course the fed keeping rates artificially low that set the stage for the housing boom that sent the housing stocks soaring (higher than the naz at it's peak) iow, fed intervention at the bursting of one bubble, fed the next sad to say, despite warnings about a housing bubble for years from economists like robert shiller, the markets don't recognize bubbles until they burst

To: Oral Roberts who wrote (8198)	8/28/2007 3:42:18 PM
From: Augustus Gloop	Read Replies (1) \| Respond to of 33421

I just had some jaw work done (from the same issue I had in June)....I'll toss out some thoughts on the topic when I feel a little better

To: Oral Roberts who wrote (8198)	8/28/2007 6:05:27 PM
From: Augustus Gloop	Respond to of 33421

Let me see if I can reason out my thought process for folks. I don't expect everyone to agree with me - its never happened before and it wont now. I need to add another disclaimer though - I think when people on SI talk about a bailout (in this example) its assumed that they've made poor personal decisions on their home. I can assure you thats not the case for me. I'll be fine regardless of how this thing plays out. With that said - here's my thought process and opinion. <<The value of your house needs to drop because it was artificially inflated by this boom>> Thats's true - I have no problem with my appraised value dropping because I wouldn't pay the price my home is appraised at. Now, I'd rather it didn't have to drop but I've owned it for 10 years so even if it drops I'm in very good shape. <<It's no different then the boom in the stock market>> I don't agree with that. Stocks are liquid - if need be you can sell them. It may be for a huge loss but they can be sold on the day you choose. Property is not liquid. I remember seeing the show "Flip that house" or some such shit and looking at my brother (he does commercial real estate) and saying - THERE'S THE TOP OF THE HOUSING MARKET. Having just experienced a stock bubble the signs seemed pretty clear to me as I'm sure they did you as well. Here's the problem. I think its pretty clear that we have inflation issues and those will only be made worse if we lower general interest rates. In spite of those inflation worries I really believe the FED is going to start dropping rates. I'm not sure thats in the best, long term interest of this country. It also gives way to potentially another housing bubble which would lead to round two of credit issues. Thats what I was driving at in this post Message 23829127 I'm not thrilled with the idea of bailing out institutions and borrowers for making bad decisions - thats not my style. However, if we're going to do it anyway with lower rates my thought process is that we may be able to better control the debt situation if we take an alternative course of action. The last thing I want is for the fed to lower rates, flood the market with cash and not solve the problem! Thats a double stupid on us move! That kind of move will for sure artificially prop prices. I'm not willing to scream and kick about ideology when we could be facing a problem that will hurt all of us. This will impact the stock market, retirement accounts, savings, deadbeat borrowers, good borrowers, bad lenders, good lenders and pretty much everyone under the sun. Lets just say the state of Wisconsin puts this new insurance idea into action. You and I would probably leave the state, right? Well, what if 10% of the homes are on the market? What if banks are selling blocks of property (like they are in Vegas) for 40 cents on the dollar? That means you and I, through no fault of our own because we've made good borrowing decisions, get killed. Thats not right. Why should we get crushed in price for the bad decisions of somebody else? If I sat and thought long enough I could come up with a bunch of scenarios where people who made the right choices get hurt and it seems to me thats what we'd like to avoid when we say NO BAILOUT. I do NOT have the answers. Maybe this will come and go like the change of seasons. I'm concerned it has the potential to be much larger than any of us know. For that reason I'm open to some ideas that I normally would oppose. I really believe this may be in everyone's interest to solve before it becomes a problem that can't be fixed. There is no benefit to seeing our neighbors get roasted because they lived beyond their means. It's better if the situation can be contained and fixed over time than it is for them to be forced from their home. In the end (if this gets bad enough) you know we'll end up bailing out the banks - we'll have no choice. So if its going to get out of hand (and thats not clear yet) why not move in and actually fix the problem in a way that helps both the consumer and the lending institutions.