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

To: Skeeter Bug who wrote (207654)	6/20/2009 9:29:52 PM
From: prosperous	Read Replies (1) \| Respond to of 306849

The economic recovery will likely happen through unintended consequences of misdirected actions, so linear thinking and acting will not help investors at this point because the actions govt is taking to get economy back on track will seemingly misfire. The key is to realize is that for financial recovery to occur the excesses need to clear off and economy does not care if they clear off due to targeted actions or some indirect consequences. Some things to watch for are: -hedge funds that would have otherwise been closed were saved by govt by giving access to TARP/TALF etc and are alive will have excess propensity to speculate and they will speculate against the govt bonds and stock market in an attempt to to get return that would keep their investors happy at the most vulnerable points. This will work against what govt wants (keep rates low and stocks high), but will be instrumental in clearing excesses, possibly be at the cost of their own existence -some of the bills govt has passed (too many to mention, Karl Denninger or Mish have analyzed these in detail) will have lot of unintended actions of clearing excesses, e. g. choking consumer credit by new regulations imposed on lenders, they will reduce available credit which is what is needed to recover and not providing even more credit which is what is intended -It seems govt is trying to save housing and stocks instead of currency and jobs (with jobs their plans seem to be far out on horizon that they may not matter at this time). It is not unreasonable to expect housing and stocks to fall much further because the actions/regulations will likely backfire, but that would help toward recovery in clearing the excesses -what most people see in this economy, the govt is also able to see it, so we can always question what the intended actions are, and it is possible that the govt does not intend the actions that are popularly described in the press and may be actually targeting recovery through seemingly unintended consequences of their publicized actions, that is, using the intentions as a decoy because publicizing unintended actions is politically not digestible Who knows, we will eventually recover, but the currently publicized actions have historically failed to cure debt induced bubbles. However, if we have to rely on unintended consequences, the path is going to be an arduous one for common citizens since they need to think many steps ahead and even then they will be looking through the fog, and most don't play chess :-), we could go through extreme valuations before settling to the new normal.