Florida Correction ‘The Perfect Medicine’
The St Petersburg Times reports from Florida. “Port Richey is supposed to be bursting at the seams. In the spring, officials expected five condominium and townhouse complexes to break ground by year’s end, doubling the city’s population of 3,200.”
“But one of the largest projects, the 170-unit Bay Point townhouses, has stalled. And two mobile home parks, ripe for redevelopment, remain on the market.”
“That’s because a slowing housing market and skyrocketing insurance costs have left the city struggling to get developments off the ground. City officials now estimate just 700 new residents by year’s end’ a fraction of the roughly 3,000 predicted this year.”
The News Press. “Dear Bob: Due to the slow home sales market in our area, we are having difficulty selling our home. Our listing agent suggests we offer ’special incentives’ such as a monetary bonus and/or a vacation to the buyer’s agent who sells our house. She says this encourages other agents to show our house more often to their buyers. Is this ethical? It seems like blackmail to me, as we already signed a listing contract.”
“Dear Debra: To combat the slow ‘buyer’s market’ in many communities, home sellers frequently offer special incentives to buyer’s agents to show and sell their listed homes. Vacations, TVs, etc. are often given to buyer’s agents to sell homes.”
“However, before offering incentives to the selling agent, be sure your home’s asking price is correctly set. If necessary, reduce your asking price. There is nothing unethical, immoral or fattening about offering special incentives for buyer’s agents to sell your house instead of one down the street.”
The Herald Tribune. “For the lonely For Sale By Owner seller, putting a sign on the front lawn and waiting for the phone to ring is no longer the only option.”
“Donna and Gabe Boyer are a married couple who are would-be home sellers entering their fifth month of trying to sell their three-bedroom, two-bath home in North Port for $219,900. The Boyers’ first listing expired with no results.”
“They wrote in to say they interviewed numerous Realtors from ‘well-known companies to small local companies.’ ‘We are amazed by the mentality of the majority (of Realtors) that you throw a listing up on the MLS, do bare-minimum Web marketing, mail a few fliers, and HOPE that the inventory of builder spec homes will decrease enough, someday, to sell a property in North Port.’”
“‘Many Realtors appear stunned by the turn in market and other than price decreases, do not have many creative ideas for marketing an average priced home. We realize the importance of having a competitively priced home in this market, but we (the homeowners) are the ones calling and asking our Realtors for updated comparative market analysis, price reductions, etc.’”
“‘It seems as if many of the agents are still in a reactionary mode, rather than a creative, aggressive mode.’ The Boyers network with families that have only been shown spec homes by Realtors.”
Some letters to the editor. “Re: House values on the way down. Not all Floridians ‘fear’ an approaching decline in real-estate prices. True, homeowners may have to get used to the idea of their personal fortunes leveling off, or even declining, after astronomical increases in recent years. But there are plenty of us who see the so-called correction as relief.”
“My son, for example, who graduated from high school just a few years ago, has no chance for buying a home. None! From the growing number of us who have been alienated by investor-driven speculation in the real-estate market in the past decade (a quarter- million dollars as the median price for a new home in our state?), you might hear a rousing cheer. For us, it’s about time. RC.”
“The reality is that there are more buyers than three months ago and a flood of sellers has made it very easy for buyers to get more for their money. It would be nice to see an article focusing on the brighter side. RD.”
“‘Crash’ might be overstating the real estate market a bit. When did you, of all people, start thinking like a stockbroker? The boom is over..but a crash? I wish I only lost 18 percent in the stock market. That was a crash.”
“If you mean the speculators and flippers, you may be 100 percent on the money. Yes, the boom is over but your home and investment in well- managed real estate are not a piece of paper with a company name that can become worthless overnight. GM.”
“As developers, we see opportunities in this market to watch commodity prices normalize (land prices coming down to where they should be). Every retiree, speculator, flipper or investor isn’t going to make huge gains (particularly in many of the Gulf Coast areas). We just need to get all these speculators and third-tier developers driving prices up out of the market. This correction is the perfect medicine. BB.”
“There is nothing unethical, immoral or fattening about offering special incentives for buyer’s agents to sell your house instead of one down the street.”
Huh? The agent who is supposed to be looking out for me has a side deal with the seller, and there’s nothing unethical about that? Really? I guess it would be OK for my lawyer to make a side deal with the party I’m suing in court, too.
The real estate monopoly reqally needs to be broken….
Yeah, in 1996 I needed to engineer the rapid sale of a condo that was identical to many others on the market. The early-90’s downdraft was basically over, but there was nothing at all to distinguish my POS from many others. My agent’s advice was, don’t put any money into improvements, just offer an extra $1000 to whatever agent brings about a closing. Worked like a charm: 30 showings in 30 days, despite the large number of competing properties. The 30th guy paid full price for the condo.
Excellent advice. Agents working with buyers will sell their soul to the devil for a commission bonus. I recently gave this advice to a builder struggling to sell 6 spec homes. I’ll be checking back with him to see if he was successful.
Have you all noticed the people on CNBC just being thrilled about the housing downturn. They run stories about it all day. I really just think they are trying to get more money to come over to the stock market. Is it working?
Posted Have you all noticed the people on CNBC just being thrilled about the housing downturn. They run stories about it all day. I really just think they are trying to get more money to come over to the stock market. Is it working?
The Dummies! The money will simpley go to money heaven.
Have you ever noticed CNBC or long time back FNN where they got most of thoese talking heads from, ever, ever, get on thr front side of a story or new’s event?
Where are the inside scoops about lending fraud, or the facts about the builders? You can go way back to the S&L mess, Tyco, Enron, the Orange County BK… nothing not a peep! There is not one single true reporter working there only blabsters all they do is blab like an old time “blab school”
I have more respect for James Crammer. At least you know up front it is not news it is the James Cramer Blab Show and can be funny.
I notice quite a bit of celebration that the housing slow down hasn’t stopped the American Consumer from spending.
I know that others have mentioned this phenomenom in other parts of the USA, but it has spread to Tucson. Call it the Empty Home Improvement Store Syndrome.
I experienced it on a trip to Lowes this past Saturday. Was amazed to see entire aisles that were deserted. And only one checkout line was open because, quite frankly, that was all that was needed.
I think it’s great that the consumer sheeples have kept spending. The longer the party goes on, the longer people who know what the ultimate outcome will be have to prepare for it. As long as Joe and Jane 6-pack spend their afternoons at the mall, it gives me more time to pay off debt, buy some gold and silver. Seriously, I hope the ridiculousness continues for 1-2 more years because by then I will have my house completely paid off.
There is nothing unethical, immoral or fattening about offering special incentives for buyer’s agents to sell your house instead of one down the street.
Ahhh, OK, it’s not unethical or immoral. I see.
Ummm, let me get this straight, then … It cannot be unethical to offer ’special incentives’ to the buyer’s agent, because the buyer’s agent acts in the interests of the buyer and will not push buyers towards my home just because of the incentives.
So, the buyer’s agent is obliged to ignore the tasty incentives I dangle in front of her nose. Therefore, I would be offering an incentive which will be ignored anyway! Hey, why was it you said I should offer an incentive?
Who was that I heard muttering the word ‘bribe’?
I am always thinking the same thing when I hear about RE agents refusing to show discounted listings. I wonder when some buyer will sue a broker for not showing them all the properties on the market. In NY, Elliott Spitzer hammered the insurance industry (AIG) because they steered customers towards insurance products that paid AIG a higher commission. The RE mechanism is the same.
Isn’t giving the agent a higher commission to bring a buyer to a house the same as the mortgage broker putting a borrower on a bad loan with a pre-pay penalty because it paid a higher commission ? Buyers can go directly to new home tracts and get a better deal than going there with a agent IMHO.
If I was a buyer I would not like it if I was only shown houses that had a extra bonus for the buying or listing broker .Before you know it the realtors will be wanting 12% to show a house .
“‘Crash’ might be overstating the real estate market a bit. When did you, of all people, start thinking like a stockbroker? The boom is over..but a crash? I wish I only lost 18 percent in the stock market. That was a crash.”
“If you mean the speculators and flippers, you may be 100 percent on the money. Yes, the boom is over but your home and investment in well- managed real estate are not a piece of paper with a company name that can become worthless overnight. GM.”
Wow! The R-E broker is admitting that she also took a big haircut in the stock market? And you’re trusting her for financial advice?
I, like most of the folks here, was careful to avoid those dot-com stocks, or mutual funds during that bubble. (In fact, the base rate of I-Bonds at that time was well over 3%, bringing the total real return to over 7%–not counting the tax advantage. That’s where my money went in 1999!)
And, unless you paid CASH for your house, you’ll lose a lot more than the 18%. It’s leveraged money. DUH! You can lose everything you have, if you don’t have much in savings and you need to take a loss of 20K or more at closing….)
This Realtor (TM) should lose her R-E license and go back to being the housewife she was before the R-E boom.
Watch the housewife comments! My wife stays at home with the children. I don’t think I could do the job she does. She also has more money sense than Realtors!
Thanks for this comment. I went from having an academic career to being a housewife. Staying at home with a baby is much tougher than being the director of a small library and all my degrees don’t help much.
Hey, it worked for Liar-eh. From dot coms to real estate — a natural progression aided and abetted by the egomanic Alan Greenspan.
I like Donna and Gabe Boyer’s aggresive attitude. They suggest agents need to use Creative Marketing to get us out of this housing bubble just like the dotCom CEO’s did yesteryear during the dotCom implosion. When the widgits are not selling it must be a Marketing problem; not product quality, not price, not over supply, not a lack of qualified buyers, and certainly not exogenous factors like increasing taxes and insurance costs.
Sure in the short-run and with additional costs, a louder message and wider communications channel will enable agents to reach Mr. and Mrs. JoeSchmuck. However, I suspect a more effective distribution channel already exist for the Boyer’s, it’s called the auction house.
What about a sock puppet? Or scantily-clad women?
Never underestimate the marketing appeal of scantily clad women. Smoking-hot RE agents in short skirts and stragtically unbuttoned blouses would probably bring more traffic to their listings.
““‘Many Realtors appear stunned by the turn in market and other than price decreases, do not have many creative ideas for marketing an average priced home.”"
Why do sellers pay 6% again? Most RE agents never really brought much to the table in the way of added value. During the frenzy, it was covered up by the fact that the market was hot. It made them look like genius’. The scary part is some of them actually believed that they were brilliant.
My agent almost lost me a bunch of money on the sale of my house in 2005 .It really pissed me off that I had to work and draw up the counter offer myself ,( Im retired so I didn’t want to do any work .) I had problems in a easy market with a realtor so I don’t know how these order takers are going to perform in a hard market . Wait until a tight money market comes around and 75% of the realtors won’t know what to do at all .
It’s definately crashing here in NE Florida. I received three more mailings over the weekend from housing developers trying to sell off their excess land in St. John’s county to section 8 apartment developers. The prices will definately drop faster when the overly high priced homes have projects being built across the street.
I am amazed that so many posters here seem to believe that ALL real estate agents are the devil incarnate. As a longtime agent, I can tell you that I have never once elected to show a house to buyers because I was interested in receiving a seller’s agent bonus. And if I had, don’t you think that most buyers would be smart enough to see right through that? After all, at least in Wisconsin, that “bonus” would have to be flagged in the MLS listing sheet–which I always give to my buyers when we are looking at a property. I wish it were so simple that you could entirely blame the current real estate situation on real estate agents, but agents will first have to get in line behind mortage lenders, Fannie Mae, the banking industry at large, and, yes, greedy sellers.
Susan J.
Sure there are good real estate agents out there . In the last 7 years the market was flooded with alot of questionable agents that will tend to be weeded out in a hard market .I agree that many factors are to blame for the big market mess right now .
I agree, If you look at the number of Realtors who have entered the market in the last 5-7 years it has almost doubled. This flood of new Realtors and the good times that were had reduced the number poeple examining the practices of their trade. Now that times have shifted there will be numerous stories of unethical behavior even though they were taught and expected to uphold the Realtor standards which are actually pretty high. These agents will go before the Realestate commissioner and some will lose their license, while others will pay a fine and continue. The problem was easy money attracted less ethical and somewhat lazy people looking to make a fast buck but those days are behind us and these people will get flushed out of the system, well most will!!
Credit where credit is due: Last house I sold I got a full-price offer in the afternoon and then another full-price offer that evening from someone who had cold-called my (long-time) agent. This was a 5% listing. My agent went back to the buyer’s agent of the first offer and came back to me with a new offer up $3000. I felt a little bad about doing the deal for the sweetened offer because it meant cutting my agent out of a two-sided commission, but she never showed any interest in anything other than me getting the best deal. Of course we were friends and had done a lot of deals together, but, yes, there are a lot of good and honest RE agents out there.
There are a lot of good and honest RE agents out there.
The fact that “incentivizing” buyers’ agents is suggested, and done, shows that there are enough buyers’ agents out there who are corruptible, to make the “incentives” worthwhile and not just money down the drain for sellers.
I’m with Susan on this. I think realtors bear a relatively low responsibility for the run up in prices. The main reason, IMHO, has been easy credit, mostly lose lending practices. The only group charged with watching this is the regulators, who should have provided more guidance to the funny money loans. Just my 2 cents worth.
Susan J,
Yeah, uh…. no. The Realtor (TM) is the individual in the sale process that has the most direct contact w/the buying public. In my industry I get approached w/regularity for products that are unsuitable, poorly designed and just generally unattractive for my investors (or anyone for that matter). General Rule of Thumb? The higher the pay-out, the crummier the product. Also as the “point man” for the buying public no one was in a better position to steer their clients away from shady mortgage brokers, “hit the number appraisers” and title companies fluffing up their fees! In fact those very functions should be the primary responsibilities in their job description. Why didn’t realtors take a more proactive role in 2004/2005 when “geedy sellers” were “testing the market” with EACH AND EVERY listing? I’m just sick with the whole process. Let’s scrap it and start over!
DinOr,
You may get your wish about starting over. With discount/online RE brokerage, the RE agent will slowly evaporate like a travel agent or stockbroker. When online brokerage came about, stockbrokers morphed into financial advisors who focused on relationship building as oppossed to being a stock or bond jockey. Not sure what an RE agent can morph into which is why I don’t feel their services will be needed, especially at 5-6% commissions.
Also, as the bubble unwinds I have a feeling newer and more restrictive guidelines will be in place for RE agents, mortgage lenders, appraisers, title companies, etc. It will be far more regulated, much like the securities industry and tougher to break into as well.
Why, they can take a page out of the “financial advisor” book and become real estate advisors!
Exactly Slim. In fact, a real estate consultant would be held to higher ethical standards. Those “commissions” would become “kick backs” and the whole house of cards would come tumbling down.
realtors are commission only sales…. recruiters, car salesman, insurance sales, etc — the only goal being to close the sale as quickly as possible for their own benefit.
the “good” ones realize they have to maintain a certain level of customer service to get referrals and repeat business.
I think it’s foolish to believe “all realtors are evil”. each day they wake up, look themselves in the mirror and repeat two sentences over and over:
“I will sell this house today” and “there is no housing bubble”, then they ride into work and drink the latest industry punch.
There’s nothing magic about the RE industry. It’s gonna attract the good guys and the bad ones, for a host of different reasons. As no one here is shocked that the conflicts of interest attract a lot of sleazeballs, neither should anyone be shocked that there are *some* ethical realtors out there, just as in almost any other business.
“The prices will definately drop faster when the overly high priced homes have projects being built across the street.”
This very thing happened to my sister’s family in La Place, La. when the oil boom crashed and the market began its downward climb.
She bought a new home in a subdivision, added and improved it for about 5 years. When the crunch came, vacate land that was supposed to be a commerical shopping area became a “subsidized housing market”.
Naturally, with the migrant minorities wandering through the neighborhood, crime increasing and the general destruction that follows Public Housing, here home went from 85k, to 44k in short order.
Needless to say, they were glad to get out of there.
Imagine the same thing happening next to a neighborhood of $750,000 McMansions. The Developer sells out the neighboring property that they were going to use to build more McMansions and someone builds Sec 8 housing. So the McMansion which was sold at $750,000 and which had dropped in value to $500,000 due to lack of demand now drops to $250,000 or less because of a drop off in local housing values.
In florida, I can see some large McMansions being rented out to groups of kids for spring break, summer vacation, etc, effectively “ruining” a neighborhood, too. Who wants to live on a block with nothing but “frat houses”
“Crash might be overstating the real estate market a bit….yada-yada.” The realtor tries to compare the real estate decline/crash with the stockmarket decline/crash. Sorry. Doesn’t compute. The stock market decline/crash took over 2 years to finally reach bottom. Check the QQQQ ETF using a 6 year chart for confirmation. The loss was over $5 trillion for the sucker money. The difference between stocks and property is that stocks can be liquidated very quickly. Property declines move slowly and at a difference pace. For instance, the real estate top was in around the third quarter of 2005. Most of the spec buyers and flippers STILL do not recognize that fact or the signs and, just like the sucker money in the tech boom, are not willing to face up to reality. The stock market was EXACTLY the same. It’s NEVER DIFFERENT. Millions of small investors stayed in the tech section of stock market, fully expecting a rebound. It didn’t happen and it still hasn’t happened. Top for the QQQQ’s was $120. The QQQQ’s finally bottomed over 2 years later around at $20. They are now $42. I doubt VERY MUCH that the property decline will match the extremes of the stock market decline but if that realtor is holding any property she bought in the last 2 or 3 years, that 18% she lost in the stock market will pale in comparison by the loss she will see over the next 2 or 3 years. I suspect the price increases for 2004/5/6 will be wiped out. Possibly inceases during 2003 will be hit if we hit a reasonably steep recession which looks to be in the making.
Caveat: Unless the Fed manipulates (as usual) the interest rates in order to save the US economy and the over extended banks both of which which will head into the crapper as property declines. Of course, lower interest rates and the Fed cranking up the printing machine (yet again) will hit the value of the dollar. The world is getting bored watching the US print money to pay of it’s massive debts.
Home-buyers are also way more leveraged than investors in the stock market. If I put $100,000 in the stock market and lost 18%, I’d lose $18,000. If I put my $100,000 down on a $500,000 house that declined 18% in value, I’d be almost wiped out.
Absolutely true!!! This is why banks used to require a 10-20% down payment. It allowed them a cushion of that 10-20% fall before it started to eat into their money. Since buyers had money in the game they were more cautious on buying property THEY COULD AFFORD and banks since they HELD their mortgages were more cautious on who they lent to. Of the 2 entities making the deals lately neither has anything invested in the deal so where is the oversight saying that the deal should no be made? This has allowed the irresponsibility in lending which in turn created the credit bubble. This is why a downpayment is a key component and needs to be brought back or the buyer must pass stringent rules aka no liar loans without a 20% downpayment- IMHO.
If this gets enforced expect to see prices 40% of what they are now. Imagine having to come up with 20% down. The US savings rate is in minus territory, and people won’t be able to get cash by selling their homes so hardly any money for down payments coupled with no more i/o loans and we’re talking a serious collapse. Going back to 1999 prices, even then they were based on maybe 5% down. Banks WILL WANT 20% in the future, so that will definitely depress prices big-time. Going back to 1999 prices would be a 50% haircut across the board based on 5% down and 30 year loans. 20% down and a fixed 30 year will take us back to 1992 - 1994.
The leverage of real estate makes small drops much more significant. And, the leverage over the last couple of years is increasing. I do not know what the average downpayment is, but probably lower than 10% in areas such as SoCalif. All those 0% down purchases are negative 7% immediately, due to selling expenses. An 18% drop in real estate prices plus 7% selling expenses results in 100% loss in equity if your down payment/equity is 25% or less.
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“…This correction is the perfect medicine. BB.””
“It is all good” is how a local bubblehead (all his assets in RE) greets me. Home prices going up is good; prices going down is good; defaults are good because they allow people to buy at auctions on the cheap; people losing their homes is good because that would help the rental market. Yes, yes, it is all good.
I need more coolaid.
Jas Jain
Jas Jain ,
Spot on . The market correction that is needed is not good for thousands of people that will lose their house or have their household budgets strained for years because of the belief that appreciation would save the day . A major correction is certainly not good for the banks and MBS investors .
Yes, I agree that some will be hurt by a correction. But a popping of the bubble is a very good correction for the economy as a whole. Right now, way too many people are lending mortgages, selling real estate, installing granite countertops, and trying to ‘flip’ houses. This is because they are reacting to the bubble prices. The faster that prices fall to fundamental values, the better.
Oh, and let’s not forget the fact that for every house sold at a lower price, a house is bought at a lower price. There are a whole lot of future buyers out there who will be thankful that prices are coming down.
Are you the Jas Jain that posts articles on financialsense.com?
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Affirmative.
Jas Jain
Cool.
dear bob: why not ditch the agent- offer 5% lower price- ever heard of the internet ?
“‘Many Realtors appear stunned by the turn in market and other than price decreases, do not have many creative ideas for marketing an average priced home.
There’s the rub, bub. Average Priced home, my ass.
Exactly. There’s the point, within the trickery and semantics, that the buyer shouldn’t let the RE agent get away with. These aren’t “Average Priced Homes”. They’re Bubble Priced Homes.
Have all the balloons, granite countertops, and vacation giveaways you want. Unless a house is priced about 40% below market in most areas, I think only a dumbass would buy today.
Excellent Mike Morgan article- http://safehaven.com/article-6109.htm . It appears that things are a little worse off than the NAR and the media would have you believe.
More evidence from that article that builders are will lower prices with extreme aggression, while resale owners will not.
Morgan’s donut analogy is appropriate. The country has record home ownership (70%), yet due to inertia, builders continue to attempt to meet speculative demand. Expect builders to continue to lower prices aggressively; after all, builders must sell to survive.
Also well worth reading is Mish’s link to “Scenarios for the Next U.S. Recession, a PDF put out by the FDIC in conjunction with Meredith Whitney, Executive Director, CIBC World Markets, a subsidiary of Canadian Imperial Bank of Commerce.”
http://safehaven.com/article-6109.htm
Maybe Mish is right and the FDIC is understating what is coming, but it is clear that they see problems ahead.
Of course things are worse but we have to remember the majority of these people, including the shills like Kudlow and Cramer or other anchors on the CNBC Comedy Business Show, all own property. All probably make well over $200,000 a year and in many cases much, much more. Mostly they own property in expensive areas because they buy big in order to get maximum tax deductions on their mortgages. They are only human………well, most of them anyway….and they don’t want to see the 2006 value of those New York townhouses and high priced apartments going into the toilet. I fully expect a period of “hype” on tv and in the business news outlets at some point with the old, “Looks like property values have finally hit bottom. Realtor Joe Blow, tells CNBC it’s time to get back into real estate before prices start up.”
Looking for the hidden agenda when dealing with politicians, financial and real estate brokers and used car sales people (there’s no difference in the mentality - only in the clothes they wear) is always the #1 consideration.
The majority of people don’t watch these shows, period. Their effort is wasted on themselves.
“However, before offering incentives to the selling agent, be sure your home’s asking price is correctly set. If necessary, reduce your asking price.
Finally, sombody who GETS IT!
When a home purchase involves financing it’s more like purchasing stock options rather than stock. If prices go down, you lose not only your downpayment, but are responsible for the mortage balance (reverse leverage). In this situation your losses could be well over 18%.
Real estate never goes down!
Didn’t you get the message??
“‘Crash’ might be overstating the real estate market a bit. When did you, of all people, start thinking like a stockbroker? The boom is over..but a crash? I wish I only lost 18 percent in the stock market. That was a crash.”
Real estate crashes occur much more slowly and subtily than stock market crashes, which tend to happen in dramatic 1-day moves (or at least they did before the PPT was up and running). Wait until six years from now before you decide whether 18% was the extent or just the beginning.
P.S. Once it comes to light that the PPT has been actively propping up the stock market for the past 20 or so years, I expect the mother of all corrections to ensue on Wall Street. Before again everyone tars and feathers me as a conspiracy theorist, let me offer the disclaimer that I am only 95% certain that the govt is actively propping up the US stock market, based on a reasonable interpretation of scant evidence. Anyone who is 100% certain the govt is not engaged in such asset price targeting should offer an explanation of how they reached this religious conviction.
I disagree, The PPT only prevents short term falls and prevents panic and automatic selling once the stock drops below a certain level. It prevents a chain reaction of shorts being hit and sold thus dropping prices and increasing volitility. I think its merit are a necessity in todays digital world with automatic triggers. Maybe I am missing something so please expand your theory!!
I meant to say a chain reaction of stops or stop losses not shorts
Shakes, maybe you need to rethink “The PPT only prevents short term falls and prevents panic”:
http://tinyurl.com/ygjuuw
I am myopic in my comments but Hedge funds investors are a different breed of investors then myself as a buyer of individual stocks with 100% of my own money. They are similar to todays mega flippers who have leveraged way past reason with hardly any of their own money and have everything riding on a single number at a roullette table. IMHO this leveraging goes way beyond what I can stomach and most can’t stomach it either, therefore it creates a panic that the PPT was not designed to or has little capacity to address.
Hedge funds are “similar to todays mega flippers” is an excellent analogy. Regarding the PPT, they can pull lots of strings within their sphere of influence, however I agree that the scope of any meltdown will overwhelm their ability to “manage” the situation.
The PPT only helps prices go up. Think about taking a giant fan and using it to blow a bunch of balloons up into the air. Maybe the fan will work forever, and blow the balloons higher and higher until they touch the sky, but maybe not.
I’m no conspiracy theorist because the government has demonstrated they can’t keep secrets longer than 5-10 years, and regardless, they generally bumble through anything they become involved with.
The US stock market has largely been transformed by two things: 1) Although this was overstated during the dotcom days, the rise of 401Ks DOES result in an “overhang” which mitigates declines, and 2) Globalization has shifted many countries toward capitalism.
During the Great Depression there was general fear that communism/socialism would replace “flawed” capitalism, whereas today societies have split the economics from the politics and are largely all hybrid socialist-capitalists.
We’ll have a major crash ONLY if a significant percentage of the world drops out of the current system and picks another ideology. Based on historical trends (of 75 year political swings), I’d put the most likely date for that change somewhere around 2050. The last transformation occurred between 1990 and 1995 (fall of the USSR, US gov’t switching to conservatives).
“P.S. Once it comes to light that the PPT has been actively propping up the stock market for the past 20 or so years, I expect the mother of all corrections to ensue on Wall Street. Before again everyone tars and feathers me as a conspiracy theorist, let me offer the disclaimer that I am only 95% certain that the govt is actively propping up the US stock market, based on a reasonable interpretation of scant evidence. Anyone who is 100% certain the govt is not engaged in such asset price targeting should offer an explanation of how they reached this religious conviction.”
It’s not religious conviction to question your vague and completely unsupported statement about “actively propping up the stock market.”
Spell out in detail what you are claiming the Plunge Protection Team is actually doing, and supply some evidence to support it.
We know that they can act in an advisory/regulatory capacity, and we know that they can stop trading in some instances. We don’t have any evidence that they engage in any trading or financial transactions with entities that engage in trading, but that seems to be an implication of your vague assertion.
‘It’s not religious conviction to question your vague and completely unsupported statement about “actively propping up the stock market.”’
Question away. Even insinuate my arguments are crazy, with no merit, etc. But please bring data next time.
I believe it. Let’s see, no more M3, and the main difference between M2 and M3 is repos. Let’s see, we also have Paulson at the treasury now so it’s not too far of a stretch for him to get the cash from the Treasury via a repo and then direct that into the stock market. Two very telling indicators there, hidden M3, and the CEO of one of the largest if not the largest investment house in the world now works for the Treasury. What’s up with that sh!t?
“Spell out in detail what you are claiming the Plunge Protection Team is actually doing, and supply some evidence to support it.”
I wish I could do this, and I would if I were a fly on the wall in the right time and place, but alas, I am not omniscient.
“We don’t have any evidence that they engage in any trading or financial transactions with entities that engage in trading, but that seems to be an implication of your vague assertion.”
Others have made the case in great detail; I have other demands on my time, so will not waste it trying to reinvent the wheel.
http://www.sprott.com/pdf/TheVisibleHand.pdf
That makes a case that investment banks have intervened at the direction of the Working Group, and suggests that the Fed has itself purchased assets. Thanks for the link, it is an article which makes specific claims which can be investigated.
Here in Tucson, I’m amazed at who I see going into real estate. It seems like every doofus in town has entered the field.
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And what % are doofusettes?
I recall an experience. I entered a Fred Sands’ office in SFV with a friend who had some business. It was organized like an open space rather than cubbyholes. I counted one man and close to 50 women. This may be an extreme example.
Jas Jain
Jas, I’d say that more than half of them fall into the “doofusette” category. Locally, I’ve heard them called much worse.
Why is FDIC-insurance so important?
The only saving grace of the FDIC is their ability to induce more inflationary momentum by the FRB. Big deal. Bank goes under, FED inflates money to cover the debt of the FDIC. Everyone dollar-assets go down in value.
There NO protection for the US dollar in terms of insuring its VALUE. Sure, the number of dollars might be safe, but if they’re worth less, they’re worthless.
Gold. Silver. 100% owned zero-debt living need assets. First, downsize your home. Then, downsize your cars. Then, downsize your assets that you really don’t need. Then, work a second job to pay off your mortgage right away. Just do it. 5 years of double duty is better than 43 years of fear. Pay off those new used cars you bought. Finally, put all that hard earned income in an inflation-proof device like gold or silver. Then take it easy for 38 years while everyone else worries.
The FDIC provides an implied governmental guarantee. The FDIC is not directly tied to the Federal government. It’s an insurance system that member banks pay into. However, in the event of a large-scale banking meltdown in this country it is 100% sure that Congress would bail out the FDIC.
That’s a little naive. The FRB is also an implied government body. The FDIC didn’t solve the S&L problems — the federal government did. The FDIC in fact solves almost NO problems, it just sits there giving investors “hope” that they’ll get the same value out of an insured account.
Without the FDIC, I’m sure we’d have private insuring bodies, like the NCUA.
Savings and Loans weren’t backed by the FDIC. Banks are. Not that that doesn’t mean a large-scale FDIC bailout wouldn’t cause the dollar to fall, it would. That’s the difference between banks and S&Ls; FDIC backing.
Ever hear of the FSLIC??
No, I haven’t. When was that established, after the S&L crisis?
“we (the homeowners) are the ones calling and asking our Realtors for updated comparative market analysis, price reductions, etc.”
What kind of comp do you want? Last year’s or current? Since the market in Florida has been at dead stop for nearly a year the current comp is going to be what you sell for. Do you feel lucky?
I’ve been watching a couple of areas herein Florida. New Smyrna Beach on the East Coast where I used to have a house seems to have almost every single property for sale, and yet sellers are still asking insane prices. Something that was $200,000 in 1998, $400,000 in 2002-2003, they are asking $1.05M for. Taxes on that might run $35-40k which, along with insurance are why people are selling. I don’t see prices breaking yet, but with everything for sale and nobody buying, how long can it be? Years? Or will there be a panic drop at some point?
I guess it has to be a massive sweep of foreclosures, like the 1930s.
I came across an ad on Ebay where the lister stated in BIg letters that the buyer will receive a $50,000 check at closing. I wonder how that can be; 1. legal, 2. possible. So, you buy a house for $400,000 and get $50,000 back? Doesn’t that mean the house is “theoretically ” only worth $ 350,000. Sounds like a scam to me.
Mortgage fraud can work that way, I believe.
Anybody can write a check for $50,000. Don’t try cashing it, though.