CNBC housing segment today @ 3:00pm

[bdc63]

There was just a teaser on CNBC for a segment that I thought some of you might be interested in ...

"How's your beach house? Still worth what you paid for it? Wait 'till you see what we found out. Today, on 'The Closing Bell'."

correction ... I believe it's 4:00pm ET

[imasunbum]

I missed it - did anybody catch? If so please share.

[spinDrAtl]

They also did a feature story this morning on the Today show regarding the 'bursting of the real estate bubble'. Usatoday.com runs an article every week or so highlighting a different area of the country where prices have come down.

If all the national news outlets are now making this one of their top stories, does that mean it's almost over??? Just a question, as usually these folks are the last to the party.

On the bright side, the 10 year treasury bond is at its lowest level in 4 months.

[Beachlover2]

I am not sure if I saw it or not - I got home for the last 15 minutes of the show and they were on other topics - but with like 3 minutes to go in the show they bring up second homes and how the market is dead there right now - but if you have a multi million dollar place - they are still selling. Mentioned a few celebrities that recently bought in the Hamptons and I think Naples area. That was all I saw. - Not much.

[bdc63]

I am not sure if I saw it or not - I got home for the last 15 minutes of the show and they were on other topics - but with like 3 minutes to go in the show they bring up second homes and how the market is dead there right now - but if you have a multi million dollar place - they are still selling. Mentioned a few celebrities that recently bought in the Hamptons and I think Naples area. That was all I saw. - Not much.

Yep, that was it. No new news. To SpinDrAtl's point, it almost seemed like out-of-date information with newsbreaks like 'inventories are up 50% over last year'.

[beerman]

I was thinking the same thing, in fact, have been kind of thinking that recently when reports come out that real estate is slowing down. Certainly the real estate slowdown that so many here are familiar with had to make headlines sometime. I think that its having done so is just another step that had to be taken. I, for one, am glad to hear that it's on the news. I wish the story would really take off and dominate the news for a while. Then, maybe, we could get somewhere.

[SHELLY]

If all the national news outlets are now making this one of their top stories, does that mean it's almost over??? Just a question, as usually these folks are the last to the party.

Almost over? No, it's just at the very beginning. Front page stories about the sales down and inventories up will be followed by stories of double-digit price declines, more broken contracts, foreclosures, some perp walks for appraisers, developers and others in the industry, etc., etc. And when the dust settles, don't expect a return to the hot RE markets experienced in the last couple of years--that won't happen again for a couple of generations. <IMO > (Think Tech Bubble--but in slow motion and more far-reaching)

[30A Skunkape]

Almost over? No, it's just at the very beginning. Front page stories about the sales down and inventories up will be followed by stories of double-digit price declines, more broken contracts, foreclosures, some perp walks for appraisers, developers and others in the industry, etc., etc. And when the dust settles, don't expect a return to the hot RE markets experienced in the last couple of years--that won't happen again for a couple of generations. <IMO > (Think Tech Bubble--but in slow motion and more far-reaching)

So do you think that I might be able to swoop in and get a good deal in say 2007-2008? That is my plan anyway.

[spinDrAtl]

Almost over? No, it's just at the very beginning. Front page stories about the sales down and inventories up will be followed by stories of double-digit price declines, more broken contracts, foreclosures, some perp walks for appraisers, developers and others in the industry, etc., etc. And when the dust settles, don't expect a return to the hot RE markets experienced in the last couple of years--that won't happen again for a couple of generations. <IMO > (Think Tech Bubble--but in slow motion and more far-reaching)

I don't necessarily think it's almost over - I just threw that out as a point for discussion because in the past, these issues become headline and lead story news well into their life cycles. I think you are a little behind as well. There are already front page stories about sales down and inventories up. There are already stories of double digit declines (see my point about usatoday above). There are already stories of broken contracts and foreclosures (not to mention projects that are not going to get off the ground now). No perp walks yet, however.

I humbly disagree with your assessment of hot RE markets every couple generations. Perhaps the 100% increases in a year type market but in general terms, RE booms and busts tend to run in the 15-20 year range, not a couple generations.

[dsilvar]

So do you think that I might be able to swoop in and get a good deal in say 2007-2008? That is my plan anyway.

Almost over? No, it's just at the very beginning. Don't expect a return to the hot RE markets experienced in the last couple of years--that won't happen again for a couple of generations.

Compliments of Shelly's crystal ball...
That means you could have your grand kids also cash in on the cold RE market.

[SHELLY]

I think you are a little behind as well. There are already front page stories about sales down and inventories up. There are already stories of double digit declines (see my point about usatoday above). There are already stories of broken contracts and foreclosures (not to mention projects that are not going to get off the ground now). No perp walks yet, however.

The papers have been woefully slow at reporting and are lagging indicators of what's really happening out on the street. While it is true we are now just starting to see front page stories in the publications like the WSJ and NYT, they are usually only about the sagging sales and the soaring inventories--and most always contain a "feel good" quote from a hired gun at the NAR stating "Now is the best time to buy....it's a buyer's market!" (Which has been said every month on cue for the past year). Other stories about the bust have been tucked away in the Personal Finance, Marketplace or Real Estate sections.

This thing has just only begun to unwind. Stories are starting to come to light about shoddy construction of houses and condos thrown up during the boom. Projects being cancelled, developers filing for bankruptcy, layoffs, fraud and collusion--still not front page news.

H&R Block just announced it will take a charge of $61.3 million to reflect an increase in the number of its subprime mortgage customers falling behind on their loan payments. If this doesn't make a headline in the WSJ's Saturday edition, we're still not at the starting point just yet.

[SHELLY]

Compliments of Shelly's crystal ball...
That means you could have your grand kids also cash in on the cold RE market.

The grandkids will need the money to buy $29.95 Value Meals at McDonalds, pay $1500 per month cellphone bills and pay for their medicine and retirement (since Medicare is history and they haven't saved a dime in their 401K).

[SHELLY]

So do you think that I might be able to swoop in and get a good deal in say 2007-2008? That is my plan anyway.

What's your definition of a "good deal?"

[SHELLY]

On the bright side, the 10 year treasury bond is at its lowest level in 4 months.

And why is this good news?

[Paradise Sea]

And when the dust settles, don't expect a return to the hot RE markets experienced in the last couple of years--that won't happen again for a couple of generations. <IMO > (Think Tech Bubble--but in slow motion and more far-reaching)

A couple of generations?! Really?! I guess my grandfather shouldn't have bought all that land on the coast of FL during the depression! And here I always thought he was a visionary!

[SHELLY]

A couple of generations?! Really?! I guess my grandfather shouldn't have bought all that land on the coast of FL during the depression! And here I always thought he was a visionary!

And if we go into another Depression and you scoop up all the Florida land you can buy for your grandchildren, they'll think you're a visionary too--unless of course they say, "Why the hell did grandpappy sink all his money into a place lined with concrete seawalls and oil globs all over the beach?"

[30A Skunkape]

Shelly, my definition of a good deal is a house I like at a note I can tote-isn't that a novel concept?!

[Paradise Sea]

And if we go into another Depression and you scoop up all the Florida land you can buy for your grandchildren, they'll think you're a visionary too--unless of course they say, "Why the hell did grandpappy sink all his money into a place lined with concrete seawalls and oil globs all over the beach?"

Shelly,

Over the past year I have generally agree with your analysis of the real estate market and admit that you were correct in predicting the problems that have occurred. I just think it's unfortunate that you never seem to write a positive thought on this forum, and even worse, you can't seem to tolerate anyone else that does.

Barring absolute economic and/or environmental disaster on a scale never before seen by man, land purchased on the coast of FL now will be incredibly precious in 40 years (2 generations). I realize that there are those who truly believe that economic and/or environmental disasters are inevitable. For example, the communists thought democracy and capitalism would ultimately collaspe in disaster. Funny how that worked out, huh? I just happen to believe that humanity will find solutions to our problems and ultimately implement them in ways that work. I'm scared sometimes but I do believe in our desire to survive in a world that is better for ourselves and our children.

We always need bell ringers to sound the alarm, but frankly, your 2 generations statement came off sounding like the homeless man on the street yelling "Repent! the end is near!". Even if you're right, you sound crazy and are therefore ineffective in making your point. It's simply tiring to keep reading your predictably negative opinions. We all know you believe the opposite of ANYTHING positive posted on this forum. What I would like to read is your insight into how you think we can fix the problems we face now and in the future. Convince me you are more than just gloom and doom.

[nmosley]

Dear Shelley -
Ok, This is my first post ever - not even sure if I am doing it correctly, but I totally agree with Paradise Sea on this one. I have been reading these posts for months now and taking in all of the opinions. Shelley, though you may be correct now and again, your pessimism diminishes most of the value of your comments. I am not trying to belittle you, rather, I am just agreeing that if you have a point, and you seem to have many, they can be made without the sarcastic edge - just as readily. That would allow those of us who enjoy your insights to be able to appreciate them without the discounting applied because of the ongoing doom. Just some feedback...remember all feedback is good... Now I am going back in my shell to hide and watch! By the way, all of this Real estate stuff may be moot anyway if the bird flu or scalar weaponry warfare ever begins - not to mention the weather control underway at the HAARP center in Alaska (now that is real doom and gloom for you guys). Have an excellent weekend

[nmosley]

Dear Shelly -
I am sorry for misspelling your name...

[nmosley]

By the way, does anyone know how I easily can change my by line from Beach Crab to something nicer - like maybe Sunset Seeker?

[pgurney]

By the way, does anyone know how I easily can change my by line from Beach Crab to something nicer - like maybe Sunset Seeker?

Post a lot. I believe the tag is tied to number of posts.

[SHELLY]

Convince me you are more than just gloom and doom.

What can we do to fix everything? Stop the greed, then everything will fall into place. Easy...no?

Because I've lived in the panhandle for decades my viewpoint of "local beauty" is far different from that of newcomers. If someone had told me in the 70's Hwy 98 would be choked with traffic; condos, houses and seawalls would line the beaches; access to the beaches would be cut off by private developments; and the regular Joe couldn't find an affordable place to live; I would have told them they were out of their mind too! (And that was less than 40 years ago!)

And because I follow the economy of the US, I know we are not in a very good place--and eventually the economy is going to have to flush itself, and it's not going to be pretty for the unprepared. For those who want ignore the warnings, who cares? Keep spending borrowed money like there is no tomorrow. But like they say in the biz, "During recessions money is returned to its rightful owner."

There are plenty of Pollyannas on the forum...I don't mind playing the 's advocate.

Just like I may seem like the person who stands on the corner and shouts "Repent, the end is near"...I view those who keep trying to reform my way of thinking like a Jehovah Witness who incessantly pound on the door trying to get me to change my ways. ....it's not gonna happen.

[SHELLY]

Shelly, my definition of a good deal is a house I like at a note I can tote-isn't that a novel concept?!

You're right, that's certainly out of the ordinary in this day and age.

Lots of people will soon start to realize that real estate isn't an "everyman's" investment. If you've already got your primary residence and retirement portfolio secured, and have some extra money laying around collecting dust, it's much better to invest your money in buying "experiences" instead of "things."

[dsilvar]

Lots of people will soon start to realize that real estate isn't an "everyman's" investment. If you've already got your primary residence and retirement portfolio secured, and have some extra money laying around collecting dust, it's much better to invest your money in buying "experiences" instead of "things."

I HATE YOU SHELLY>>HATE YOU!!...Just when I think I'm sure your nuts, you make a loaded statement like that..invest in experiences rather than things...man thats worth smoking a doob to contemplate.
But thats were my heads at, Shel. We/I have decided that we will not persue money anymore!! thats a friggin relief..liberating. However we have also reached zero debt this year and have home and retirement cash flow in place.
So next year we will travel around the world for a year..to experience life.
One world alliance allows you to book a 6 continent/20 flight around the world trip at a good price, and take a year to do it!
Yer a sage, Shel..a veritable sage!!
Anyway wish me bon voyage.

[SHELLY]

Anyway wish me bon voyage.

Bon Voyage

[redfisher]

I'm just curious Shelly, what business are you in?...Why don't you explain to us why the 10yr yield coming down is bad?...Wow me...

P.S...I love greed...

[SHELLY]

I'm just curious Shelly, what business are you in?...Why don't you explain to us why the 10yr yield coming down is bad?...Wow me...

P.S...I love greed...

LESSON #1: The Yield Curve

[redfisher]

what EXACTLY does that mean?...and again, what buz are you in?...

[SHELLY]

what EXACTLY does that mean?...

LESSON #2: The US government gets it money by taxing its citizens and businesses or by borrowing money from people who have money to lend.

Since the government likes to spend lots and lots of money, but doesn't want to hurt people's feelings by making them pay taxes, it must borrow money by issuing treasuries (bills, bonds, notes) and since no one is going to give the US government money for free the government must pay interest.

You would think that when someone lends you money, they would demand a higher interest rate if they weren't going to get their principle back for 10 years than if they were going to get it back in only 2 years. And if the economy were "normal" that would result in a "yield curve" that sloped upward (say an interest rate of 4% for 2 years and 4.5% for 10 years). Banks use this "spread" to profit by paying savings accounts 4% and making long-term loans for 4.5% and keeping the 0.5% as profit. Sub-prime mortgage lenders were making money hand-over-fist when they borrowed money when interest rates were down to 1% and lent it out at 12%.

But I digress. Currently the twos-and-tens yield curve is "inverted" meaning people are demanding a higher interest rate for 2-year notes (and shorter term products) than they are demanding for 10-year treasuries...why do you think that is happening? Why would you lend your money to someone for 10 years at a cheaper rate than lending it for only 2 years? I'll let you think about that for a while.

[GaltsGulch]

The degree to which people are upset at Shelly is directly proportional to the degree to which they are "up to eyeballs" in southwalton real estate, one way or another. No one likes to hear the viewpoint again and again, when they feel that her/his words are pushing values down further.. Her/His words are doing absolutely nothing to real estatevalues... market forces are at work...

remember always: don't follow the market down.... price aggressively now, and avoid the inevitable retracement to reality. Obviously this doesn't apply to those so wealthy they could care less whether the value on their 3rd row beach home goes from 500K to 1.4M, back to 500K... If that doesn't describe your situation, we're now in a situation where you need to price aggressively, before the majority needs to price aggressively... these people need to listen to Shelley's advice not to follow the market down, rather than wishfully agreeing with the majority on this board - who I continue to believe have a 'vested' interest in either transactions, or valuations. It's a beautiful place, no question, but my point (ever since I sold in early spring 2005) has been and continues to be the rents are way out of line (dirt cheap) vs. ridiculously rising cost of ownership.

[Paradise Sea]

LESSON #2: ...why do you think that is happening? Why would you lend your money to someone for 10 years at a cheaper rate than lending it for only 2 years? I'll let you think about that for a while.

Wow!, thanks for the lessons Shelly, you are so smart. I'm waiting with eager anticipation for the answer. Can't wait for Lesson #3. You know it all. You are just so amazing! We "newcomers" sure lucky you are here to guide us. My 30 years as property owner and investor on 30-A pale in comparison to your wisdom!

(Just whistling...) Can't get enough of that doom and gloom, doom and gloom, doom and gloom, can't get enough of that doom and gloom early in the morning...

[Bobby J]

This is a really good thread. I have always made money by following my gut. I never really analyze or worry about it. I could never look at anything the way Shelley does. Nothing personal Shelley but I would have to lock myself away if I had all that info. I guess that is what makes the world go round. Your comments make you appear to be happy about others misfortune... I find that odd and probably a good thing you remain anonymous.

[redfisher]

LESSON #2:
But I digress. Currently the twos-and-tens yield curve is "inverted" meaning people are demanding a higher interest rate for 2-year notes (and shorter term products) than they are demanding for 10-year treasuries...why do you think that is happening? Why would you lend your money to someone for 10 years at a cheaper rate than lending it for only 2 years? I'll let you think about that for a while.

This is long-winded and doesn't answer my question..."What exactly does it mean"..."Why is it inverted"..."What do lower rates mean" ...and finally "What biz are you in?

[Sandcastle]

LESSON #2:Currently the twos-and-tens yield curve is "inverted" meaning people are demanding a higher interest rate for 2-year notes (and shorter term products) than they are demanding for 10-year treasuries...why do you think that is happening? Why would you lend your money to someone for 10 years at a cheaper rate than lending it for only 2 years? I'll let you think about that for a while.

Couldn't this simply mean that people are expecting inflation to slow? Maybe locking in a slightly lower rate for 10 years is better than receiving a higher rate for short-term money and waking up one day to find that your bond has matured and you interest income has disappeared.

[SHELLY]

LESSON #3: Inverted Yield Curve (Condensed )

An inverted yield curve is usually a sign that the market sees an economic slowdown looming...and in times past, this situation presaged a recession (except when the Fed created asset bubbles to ward it off).

Folks who think the Fed is going to lower interest rates to fight a recession rush to "lock in" long-term interest rates by buying (in this case) 10-year treasuries sending the yields lower. The bond's price and the yield are inversely related, so when folks "demand" more bonds, the price goes up and the yield goes down (or if they rush to unload them, the price goes down and the yield goes up -- same situation as stock prices and their dividends). Hold this thought for now.

This situation worked pretty well in the past, but here is the rub. Foreign countries are holding over $2.4 Trillion in US debt. The foreigners are feeding the US money so we can buy their oil to put in our SUVs, their plasma TVs and their plastic junk from the Dollar Trees. We take out HELOCs or use credit cards to buy their stuff, and most all of the money finds it way to Japan and China (the #1 & #2 holders of our debt) so they can pass it back to the US in return for treasuries where it ends up in banks for us to borrow so we can continue to buy their junk. Swell! But can you see the downside? Neither can the people who are in debt up to their eyeballs. And too much money chasing too few goods causes inflation--for those too young to know what this feels like, let's just say it blows!

The Fed would normally slow down the economy by increasing discount rates (the rates banks charge each other for overnight loans) which usually moves the prime lending rates higher. They want the citizens to stop spending like maniacs and put something into savings. Raising the rates is supposed to raise the long-term rates in tandem and make putting money into savings an attractive option. Unfortunately for Greenspan, it didn't work this time--he raised the rates in "measured" paces and too slowly so as not to upset the economy. The short-term rates increased, but the long-term rates held fast (the famous conundrum). Underestimating the greed of the nation, he kept going and going...people kept spending and spending. When mortgage rates got a little too high in one type of loan, they came up with other "exotic loans" to make the ever-increasing housing prices affordable to all the masses--"Don't worry about that 1-year ARM, you'll have this condo sold in the blink of an eye and have $50,000 profit with no risk at all--just sign here. GREAT! Psst...we've got another tower going up, how about a preconstruction--just take out an equity loan on your primary residence, you won't need to worry about a mortgage, when it's finished people will be lined up to throw money at you to take it off your hands....sign here."

Now the short-term yields are higher than the long-term yields (and the yield curve is inverted), foreigners are still buying up the US debt because they've got tons of US money laying around collecting dust to lend and 4%+ which is a pretty good deal. BUT...there is a problem, the housing market is toast and the businesses aren't picking up the economic slack like they were supposed to do. Corporations are FLUSH with cash from the economic boom, but instead of buying all sorts of capital goods and opening up new businesses to keep the economy humming along, they're using the cash to buy up their stocks, raising CEOs compensation and paying SEC fines. The market smells economic hard times are ahead--maybe a recession. The world is a troubled place and there is a flight to quality (read 10-year treasuries). At the same time, other central banks around the world are also starting to raise their interest rates as well.

What is the FED to do if there is a recession? Most people think that they'll ride to the rescue, as in the past, and lower interest rates and start the machine back up again. Now there is a problem though...globalization has happened. Foreign countries hold a good deal of their reserves in US dollars (our debt) and if they think the US is going to start dropping interest rates (which will cause their investments in US dollars to lose value) they will seriously consider diversifying out of US dollars and into other currencies (that pay higher interest) and/or into gold.

The US doesn't want them to do this, because if the likes of China starts "cashing in" its $639 Billion in US treasuries, the supply flooding the market will outstrip demand. And if we can't sell our future debt (which we use to pay off our current debt) we will be in worse shape...folks will demand ever higher yields which the US will be forced to pay or risk a default of US treasuries.

Now, do you remember the part of the lesson from above about the inverse relationship between the price and yield of bonds?--if China floods the markets with a slew of treasuries that outstrip demand...bond prices will drop like a rock, causing yields will soar (that inverse relationship) and the cost of borrowing money will skyrocket. If no one wants to buy our US debt because they can get better interest elsewhere, we've gotta raise the interest rates high enough to attract investors away from other bonds which will also cause the cost of borrowing money to skyrocket. So this is why the FED needs to walk a tightrope when considering lowering the interest rates again in the future. It's very different this time.

If people think "oh goody" the interest rates are dropping, so mortgage rates will drop and the real estate market will come roaring back bigger and better than ever...I'm here to say that it just isn't that easy. (IMO)

[goofer44]

SHELLY
You reduce your explanations to very simplistic and outdated economic logic. you are a big proponent of supply and demand.......think about that.

[goofer44]

This is a really good thread. I have always made money by following my gut. I never really analyze or worry about it. I could never look at anything the way Shelley does. Nothing personal Shelley but I would have to lock myself away if I had all that info. I guess that is what makes the world go round. Your comments make you appear to be happy about others misfortune... I find that odd and probably a good thing you remain anonymous.

That about sums it up Shell.....Schandenfreud.......remember ????

[SHELLY]

SHELLY
You reduce your explanations to very simplistic and outdated economic logic. you are a big proponent of supply and demand.......think about that.

Lots of slick folks with stuff to sell make money off of people who only know one side of the economic story (that being the side the seller wants them to hear).

The slick folks make the money, and those who are clueless in the ways of supply/demand and fundamentals end up betting their retirement on tech stocks and "dot condos" ...think about that.

[redfisher]

I love it...which one are you? are you slick or uninformed?...I'm just now reading your "Lesson 3" - boy its sure concise - back in a few...Red

[redfisher]

Originally Posted by SHELLY
LESSON #3: Inverted Yield Curve (Condensed )

Sorry for the long post folks, I usually hate these...


Folks who think the Fed is going to lower interest rates to fight a recession rush to "lock in" long-term interest rates by buying (in this case) 10-year treasuries sending the yields lower. The bond's price and the yield are inversely related, so when folks "demand" more bonds, the price goes up and the yield goes down (or if they rush to unload them, the price goes down and the yield goes up -- same situation as stock prices and their dividends). Hold this thought for now.

Who are "folks" and why are they rushing to buy bonds...Hint, its not to lock in yield...Identify "folks" and then you'll know why they buy...Addl'ly, are you really suggesting that bond yields somehow interact similiarly to divs?..

This situation worked pretty well in the past, but here is the rub.

Why did it work well?...Because if it worked, you loose the majority of your "Greenspan's an idiot" argument...

Foreign countries are holding over $2.4 Trillion in US debt. The foreigners are feeding the US money so we can buy their oil to put in our SUVs, their plasma TVs and their plastic junk from the Dollar Trees. We take out HELOCs or use credit cards to buy their stuff, and most all of the money finds it way to Japan and China (the #1 & #2 holders of our debt) so they can pass it back to the US in return for treasuries where it ends up in banks for us to borrow

Wrong, Japan and China do it because their own debt situation is so bad they can't put that much money into their own system...

They want the citizens to stop spending like maniacs and put something into savings. Raising the rates is supposed to raise the long-term rates in tandem and make putting money into savings an attractive option.

This stmt is just false...

Underestimating the greed of the nation, he kept going and going...people kept spending and spending. When mortgage rates got a little too high in one type of loan, they came up with other "exotic loans" to make the ever-increasing housing prices affordable to all the masses--"Don't worry about that 1-year ARM, you'll have this condo sold in the blink of an eye and have $50,000 profit with no risk at all--just sign here. GREAT! Psst...we've got another tower going up, how about a preconstruction--just take out an equity loan on your primary residence, you won't need to worry about a mortgage, when it's finished people will be lined up to throw money at you to take it off your hands....sign here."

This is just class envy...

Now the short-term yields are higher than the long-term yields (and the yield curve is inverted),

When was the last time the curve was inverted and by how much?

foreigners are still buying up the US debt because they've got tons of US money laying around collecting dust to lend and 4%+ which is a pretty good deal.

What is the current debt sit. in China...What % is Chinese bad debt to GDP?...Now why do they buy?...see above

businesses aren't picking up the economic slack like they were supposed to do. Corporations are FLUSH with cash from the economic boom, but instead of buying all sorts of capital goods and opening up new businesses to keep the economy humming along, they're using the cash to buy up their stocks, raising CEOs compensation and paying SEC fines.

Wrong again;
Ind. Production stands @ 4.9% yoy as of 8/16/06...Capacity use @ 82.4%-same date-Factory order are 8% yoy as of 8/24/06...Inventory to sales ratios lowest ever...

What % of publicly traded companies paid SEC fines and Boards of Directors approve pay packages...Thereby what % of Boards have been prosecuted for CEO comp?

The world is a troubled place and there is a flight to quality...why?

(At the same time, other central banks around the world are also starting to raise their interest rates as well.

Have been for awhile, whats different now?...

What is the FED to do if there is a recession? Most people think that they'll ride to the rescue, as in the past, and lower interest rates and start the machine back up again.

You stated that this strategy works...

Now there is a problem though...globalization has happened. Foreign countries hold a good deal of their reserves in US dollars (our debt) and if they think the US is going to start dropping interest rates (which will cause their investments in US dollars to lose value)

This stmt. rides contrary to your little lesson of price/yield inversion

they will seriously consider diversifying out of US dollars and into other currencies (that pay higher interest) and/or into gold.

Why didn't they do it in '94, '98, '00...

Now, do you remember the part of the lesson from above about the inverse relationship between the price and yield of bonds?--if China floods the markets with a slew of treasuries that outstrip demand...bond prices will drop like a rock, causing yields will soar (that inverse relationship) and the cost of borrowing money will skyrocket.

What will happen to the redeeming country's currency if this happens...Why haven't they done it...see above

If people think "oh goody" the interest rates are dropping, so mortgage rates will drop and the real estate market will come roaring back bigger and better than ever...I'm here to say that it just isn't that easy. (IMO)

By the way, What biz are you in?...I hope it ain't economics...

[goofer44]

Lots of slick folks with stuff to sell make money off of people who only know one side of the economic story (that being the side the seller wants them to hear).

The slick folks make the money, and those who are clueless in the ways of supply/demand and fundamentals end up betting their retirement on tech stocks and "dot condos" ...think about that.

That is the downside of capitalism. Caveat emptor. Perhaps if people educated themselves and would you use common sense in understanding relative value, they would not get themselves into a pickle. Greed and stupidity have gone hand in hand in the tech wreck and housing bubble. The high schools should be teaching teens basic economics and personal money management skills. If they had been doing so 20 years ago perhaps many people would not find themselves in the present dilemna. Losing money is always a great life lesson.....if you learn from the experience. Believe me, I have had many such lessons in my life but I think I ultimately profited from those experiences......I call it paying tuition in the game of life.

[SHELLY]

By the way, What biz are you in?...I hope it ain't economics...

Incredible!

[redfisher]

nothing happened grasshopper...I sifted thru the code and there's something about sides of the story...I don't get it meat....

[SHELLY]

[QUOTE=redfisher]nothing happened grasshopper...I sifted thru the code and there's something about sides of the story...I don't get it meat....[QUOTE]

Is there a secret decoder ring to go along with this message?

[redfisher]

[spinDrAtl]

And why is this good news?

It is good news because actual buyers (end users) who are purchasing homes to live in are able to obtain better long term fixed rates.

[spinDrAtl]

Shelly,

Over the past year I have generally agree with your analysis of the real estate market and admit that you were correct in predicting the problems that have occurred. I just think it's unfortunate that you never seem to write a positive thought on this forum, and even worse, you can't seem to tolerate anyone else that does.

Barring absolute economic and/or environmental disaster on a scale never before seen by man, land purchased on the coast of FL now will be incredibly precious in 40 years (2 generations). I realize that there are those who truly believe that economic and/or environmental disasters are inevitable. For example, the communists thought democracy and capitalism would ultimately collaspe in disaster. Funny how that worked out, huh? I just happen to believe that humanity will find solutions to our problems and ultimately implement them in ways that work. I'm scared sometimes but I do believe in our desire to survive in a world that is better for ourselves and our children.

We always need bell ringers to sound the alarm, but frankly, your 2 generations statement came off sounding like the homeless man on the street yelling "Repent! the end is near!". Even if you're right, you sound crazy and are therefore ineffective in making your point. It's simply tiring to keep reading your predictably negative opinions. We all know you believe the opposite of ANYTHING positive posted on this forum. What I would like to read is your insight into how you think we can fix the problems we face now and in the future. Convince me you are more than just gloom and doom.

I think you are being quite generous using ONLY 40 years as Shelly's two generations. :)

[SHELLY]

It is good news because actual buyers (end users) who are purchasing homes to live in are able to obtain better long term fixed rates.

That's very true and in that case (end users) it is better news--although the home sale prices are still way too high at this point to draw much interest.

But what lots are folks are thinking is that these lower rates will send investulators clammering back into the market--the people who drove the RE boom in the first place. Investulators don't use long-term fixed rates.

[spinDrAtl]

That's very true and in that case (end users) it is better news--although the home sale prices are still way too high at this point to draw much interest.

But what lots are folks are thinking is that these lower rates will send investulators clammering back into the market--the people who drove the RE boom in the first place. Investulators don't use long-term fixed rates.

Home sales are not way too high to draw interest. If you are talking about sowal, maybe so - I am not as familiar with the market there for end user housing. But people all over the country are buying homes to live in - people change jobs, cities, etc. everyday and those that are homeowner's typically do not go back to renting while they ponder the fact that prices have gone up.

You asked me why I thought it was good news. I told you. I said nothing about rates bringing the investulators back into the market or investulators using long term rates. A simple statement regarding it being good for end users. And of course, after I answer your question, you toss in the typical generalization about 'what lots of folks are thinking'. I think you just feel the need to use the term 'investulators' in every post you make.