The Housing Bubble

“the fact is that you only lose what you bought to the table.”

People have a tendency to forget this.

“the fact is that you only lose what you bought to the table.”

What if you borrowed/leveraged against this ‘paper’ wealth and actually pissed-away the implied value of those paper gains?

Then you lost what you borrowed from the “house”.

You never count your money,
While you’re sittin’ at the table,
There’ll be time enough for countin’
When the dealin’s done.

“it is like finding your bank accidentally deposited Microsofts money to your account one day, then corrected it the next”

More like deposited it, left it there for years, went so far as to suggest that it really was your money on multiple occasions. Here it is a few years later and MS accountants finally got around to submitting the paperwork to get it back and everyone is shocked (shocked!) that it’s not all there.

“More like deposited it, left it there for years, went so far as to suggest that it really was your money on multiple occasions…”

… and encouraged you to borrow it in order to treat yourself to new cars, expensive toys, vacations and lattes.

That’s the key part - the money doesn’t just vanish like play money in a stock account - a few thousand here, a few day, no big deal. Nope - this money allowed people to leverage themselves deeply into stupid-debt that they could barely hope to service if housing prices continued to climb. With prices falling, well… I think “toast” is an appropriate description.

As for Enron, think of the poor sods who had their retirement money in the company stock. And I STILL see people doing that today in the “Post-Enron” world! Argh!

It is like paying for something with a credit card. Are you truly telling me that people did not know they would have to pay back the money to the credit card company? Come on, that position is clearly inconsistent with “Americans aren’t -that- stupid”

Very true. I owe (x) on my house, but a friend Heloc’d his way to a mortgage (2.3x) for the same house. He’s screwed and is getting ready to mail in the keys. But he’s driving two new vehicles and has an in ground pool.

How many did use Heloc’s? The number or the % will be huge, especially here in AZ, CA, NV, and a few others.

FLA seems to stick out in my mind because they don’t just have the housing/credit bubble to deal with, they also have to deal with the cost of living in hurricane alley. Insurance companies aren’t in the business to give away their money and it costs a lot to do businss in FLA. IMO FLA will take longer to recover from this mess.

judging by the cars in my hood-lots of folks
many levered into stock in 06- as of tomorrow that will be gone too

I have a co-worker who is in process of buying (new wife etc…) I told him that he can increase his income by $10K per month this year without working a minute extra, simply by not buying a home right now. Given the old addage “a penny saved…”

Agreed! (though I accidently read that post as a “co-worker who is in the process of buying a new wife…”) Oops!

I’m looking at $550K condos right now. A 3%/year pricedrop rate means FREE RENT on my current 1B apartment.

“a penny saved…”

$10,000 saved, $10,000 earned…

GH,

You’re a good friend/co-worker.

Let us know if he listens.

With all the economic “bad news” coming out, I’d love to be a fly on the wall in the McCain war room, especially if he’s on the phone to shrub. “Listen, shrubby, you promised me if I kept my mouth shut and bent over for you in 2000, I’d get to be the king in 2008.”

This fits right in with the prediction, which I echo, that renewable/alternative/green energy is going to be the next bubble.

I wish we would get a renewable bubble, at least we would end up with something useful.

“This bailout money will flow to China and Wall Street. ”
I’ve suddenly developed a lot of respect for the Wall St types when I heard that a major bank in China has suffered losses due to US subprime. I thought the Chinese were smart, but we’ve managed to swindle them good. In Germany, netherlands, Ireland, France, Australia and UK etc. there have been massive losses due to US subprime. Anyone that created such a huge balckhole to suck in wealth from everywhere deserves to be admired. I tip my hat to Wall St.

In this month’s Harper’s is a most fascinating article -
http://www.harpers.org/archive/2008/02/0081908

I am not sure that is available to non-subscribers - but try it. The writer of that article is predicting as well that green renewable energy will be the next bubble. He also goes on to say that our economy is so screwed up that the only choices there are is depression or a journey through one bubble after the other. Very well written - and makes one think.

I think we’ve already had some bubbles in alt-en… ethanol first and last year solar stocks have gone nuts, all uber expensive, still trading at 150-300x earnings… though a few weeks ago those PEs were doubled. I wouldn’t be looking at alt-en stocks right now either.

My buddy is in the solar biz, and solar panels are made all over the 1st world and there isn’t much variance between them, aside from panels being made here, being cheaper than anywhere else, because of the greenback plunging…

Products quite naturally seek the highest profit potential, so many panels produced here are being exported, meaning that there are shortages starting to occur, in our country.

I think we’ve already had some bubbles in alt-en… ethanol first and last year solar stocks have gone nuts, all uber expensive, still trading at 150-300x earnings… though a few weeks ago those PEs were doubled. I wouldn’t be looking at alt-en stocks right now either.

I’m a big believer in solar grid-tie PV for certain areas. Use it to take the edge off the grid during peak air-conditioning hourse, etc.

But I wouldn’t touch any of those “solar stocks” Just look at the P/Es! (Of course, I don’t buy any stock with a P/E over 18, ever, and usually like them lower than that.)

P.S.: regarding the presumed bubble in alternative energy / solar stocks: anyone knows why they have plunged lately? many of them lost 30-40% over the last few months (or weeks), with the current high oil prices that seems a bit odd.

I’m interested in investing in solar (for the longer run, like 5 year horizon), but this is just as difficult as investing in gold(stocks) at the moment …

And what about new companies like nanosolar that claim to make solar (film) panels at 10% of the cost of others? Wouldn’t that hurt the existing companies, or are they all switching to cheaper technologies at the same pace, or is it mostly hype to pocket some more investor money?

One bit of climate change that doesn’t get talked about much, is the amazing wind damage, that is occurring in many places.

I wonder about the feasibility of flimsy film panels holding up, in such environments?

stay away nhz, look at what those same stocks gained over the past year. Just another bubble fueled by unrealistic expectations, absurd forecasts and price targets by the analysts and massive speculation.

Keep in mind solar (after 20+ years) is still inefficient, expensive and is currently losing some government subsidies. U.S. subsidies left out of the last energy bill, expire this year I believe, Germany passed legislation to start cutting subsidies 5% a year starting in 2009.

Now Nanosolar is really an interesting company and a possible investment if they do indeed come public, but until it’s something that we can put onto our homes and get immediate ROI (not 10, 15 years) it’s still too expensive compared to traditional energy.

Go Nuclear! Electric cars. 2.5 cents per KWH.

http://www.westinghousenuclear.com/AP1000/index.shtm

regarding the Go Nuclear:
I live close to the only big Dutch nuclear power plant (also most likely location for the next plant, if it is ever built). Before the reactor was built, government promised the citizens in my area that all electricity meters would be removed from homes because electricity would be SOO cheap that they would provide it for free. That was 35 years ago or so, the meters are still running and the cost is now 10-20x higher than before the construction of the reactor. And that is while most of the additional cost (like long term storage) is paid by the taxpayer and through the electricity bill. I won’t even start talking about the lies they keep telling us regarding environmental performance …

D’oh!

You live in Spliffield, Holland?

geeah - oil would be inefficient without the massive government subsidies. As far as solar power being inefficient that is just plain nuts. Once solar is in place on a roof it will deliver 100% of its power generated to the house or business. Any other power generation loses energy as it is transmitted over a distance. The greater the distance the larger drop off in power delivered. Coal power is only about 15% efficient when the power plant is far away. Not to mention all of the carbon dioxide released. Solar is more efficient than coal with the same subsidies that the fossil fuels get.

As far as a stimulus plan what could be better than having the government fund the construction of plants that would make solar power available to all! That could put construction workers back to work within weeks. Community colleges could start training laid off people how to install these products. Lastly have the government give consumer’s tax credits to install these solar products. I could be generating 4.5 kW by late summer from my roof!

“Keep in mind solar (after 20+ years) is still inefficient, expensive and is currently losing some government subsidies.”

I checked out solar energy and gave up on the idea when I saw it took something like 20-40 years to break even on the costs. I don’t even know if the equipment would last that long! The only way to use solar energy efficiently is to be a plant.

nhz if you think that is bad - here in Texas we built a nuclear power plant (Comanche Peak in Glen Rose) that originally was going to cost $800 million USD. The final cost was over $11 billion USD. This of course, was during the time when oil was $10/barrel.Texas consumers will be paying off the cost of this plant for 40 years. Then of course, there will be the cost of disposing of the radioactive building and spent fuel.

Kime:

We Heloced on our house for our array, and were paying so cal edison around $200 a month before, and now are paying $250 a month.

Our electrical grids are powered by oil, and somehow I get the sneaky feeling that oil will be priced at market value soon, not the faux under-pricing we’ve been seeing as of late.

Our net extra cost for going solar, is $600 a year.

(full disclosure: the energy to send this message comes from the Sun)

Skip: yeah, that sounds even worse, unbelievable …

We have something similar going on here with the cost of nuclear waste disposal. It is stored in a bunker at 6 meters below sea level (some 200 meters or so from the dikes that keep the North Sea out). The private company that arranges the storage says this facility is safe enough for semi-permanent storage. To pay for future maintenance, surveillance and processing of the waste, the power company has made a deposit of a few millions that is ‘enough to pay all storage cost for the next 300.000 years’. They do this by assuming a 14% ROI on the deposit for the indefinite future. The nuclear waste will be reprocessed and possibly moved elsewhere in 100 years or so when it is less hot. By that time the small deposit will have magically multiplied by a factor of 500.000 to cover all the costs. And if not, the taxpayer of the region have a small problem, who cares … none of the current politicians will be alive by then. My calculation is that if they cannot get this 14% ROI forever, every taxpayer in the region (just 350.000 citizens) will go bankrupt to pay for this stupid mistake. I wonder how many pension funds here assume 14% ROI forever, that would sure make all pension and government spending a lot easier.

nhz,

I’ve been following NanoSolar with some interest for a couple of years now. If they can deliver on their promises, it is an exciting company. At a consumer cost of $1 per watt (with still fat margins to NanoSolar), this is truly disruptive compared to current technology. So far, to my understanding though, they are producing primarly for power plants today, and have the first 12 months of production sold out.

The nice thing about their technology is that it can be incorporated into other building materials. I’m excited to see what they produce next…perhaps consumer roofing that doubles as a gigantic solar panel? I’d buy that in a second if the price was $1 per watt. Correct me if my math is wrong, but 1 watt x 8 hours per day producing x 365 days per year = ~3 kilowatt hours per year produced for a $1 investment. What does a kilowatt hour cost in your neck of the woods? $0.10 (where I am, the number is much higher for the last marginal kilowatt)? Excluding the cost of converters, etc., this is a 30% return on investment. Let’s assume you only get 4 good hours per day. It’s still a 15% return.

Now if we just figure out a way to store excess power generation in homes during the day for use at night, and develop some electricity based cars, we’d be in pretty good shape…

FSLR’s ‘thin film’ solar technology and trade secret processes are revolutionary. Unfortunately, the investment world already knows this and had raised the price of their stock to dizzying heights.

Speaking of solar energy, yesterday I was watching some type of show on the Weathern Channel. The lady on the show said, “Even if we could extract 100% of the solar energy reaching the US, we would barely meet our energy needs.” Meanwhile, there was a graphic on the TV showing: Total US Sunlight in a Year: 10^25 joules. Total US Energy Use: 10^20 joules.

I suppose she thought that meant we would need to use 80% of the sunlight as useful energy! :))

You’d think someone on the Weather Channel would understand exponentials…

Rental Watch: thanks for the info. I think ROI for this thin film solar technology in Europe could be better despite less sun, because electricity is far more expensive here. Also, I keep hearing about people in Spain (farmers and other private persons) who invest in solar panels for electricity - probably because of subsidies, but the major factor is that they get a fixed price for returning excess electricity to the grid. Probably returns are even more favorable in very remote areas where hooking up to the grid (or having your own generator) is expensive.

Yes, we need some kind of cheap and reliable storage facility to balance day/night production and use, and hooking up to electric cars to that would be great.

Maybe you need to mellow out. As nobody can validate your bona fides (which you manage to mention on almost all of your posts) maybe you could lighten up with the anti-Limbaugh rhetoric and simply state your case.

The wonderful thing about this blog is that most people check their atttitudes at the door and keep it civil. Regardless of our opinions, the ad hominem attacks are kept at bay. Maybe you should be over at daily koz?

“The neo-cons with their mindless chants of untruths get so-o-o-o-o boring. They make up list and keep repeating them - trying to rewrite history if it does not conform to what they want to have happen rather than what did happen.”

It’s better known as a game called Wheeling Out The Boogeyman. Bill Maher said it best and I qoute: “If you’re sinking or even barely treading water and you think our biggest threats are ’socialized’ medicine, dem dar turrrrists or the gays, then it isn’t the system that keeps you down….. it is YOU that keeps you down.”

That’ s funny, nobody here gets asked to check their attitudes towards people like Mozillo, Greenspan, Lereah, Yun, etc.

Is there something special about Rush the Junkie that people aren’t allowed to knock him?

“datadoes” in the headlights?

I’m not so sure, AnnScott. Many policies of FDR IMO were extremely ill-advised, and probably led to the Depression being much worse than it need have been. Just as one for instance, the Agricultural Adjustment Act of 1934 had to have been one of the most foolish acts of governmental idiocy an economy in deep recession could encounter. Paying farmers not to produce food was not smart - and even going so far as to plow under fertile fields in order to prevent cheating, and all this while people were hungry. This was done in the name of protecting farmers’ income. The corollary today (which I fully expect, BTW) will be to pay homebuilders to raze their developments in order to keep equilibrium housing prices from falling too rapidly, thereby keeping people employed in the building trades.

You might find Amity Shlaes’ “The Forgotten Man: A New History of the Great Depression” an interesting read.

Putting aside whether FDR’s policies actually extended (or worsened) the Depression, many people (wrongly) credit FDR’s policies for pulling us OUT of the Great Depression. I strongly believe that it was the exogenous demand shock of WWII that did it. First, through the increased orders from Britain (and related shipping) flowing from the “Lend-Lease” programs from around 1938/39, then through the changeover to massive war production within the US, and finally through the removal of 10 MILLION men (at the peak) from the civilian workforce in the US to build our overseas armies, raising equilibrium wage prices for those men (and women - who entered the workforce in size for the first time) left behind.

As I am sure you know, wage pressure became so intense that FDR institited wage controls, another foolish attempt to get in the way of market forces (that attempt led to the beginning of the mess we now have in health care, where employers who were unable to raise wages to attract workers, instead offered “free” health insurance benefits).

P.S. - I do have a degree in US history (But it was from one of the Ivies, so beware - LOL! - maybe I am still rebelling against the liberal orthodoxy of the institution even now!)

Is there something special about Rush the Junkie that people aren’t allowed to knock him?

I thought that most liberals considered addiction a “disease” and its “victims” worthy of pity, understanding and government support? Is that only true of Democratic addicts?

Actually BCGuy, PEOPLE consider addiction an illness of the spiritual variety. You know…. one that requires compassion so clearly absent from Rash Limbaughs character…….. But that same compassion mysteriously emerged when he himself turned out to be a junkie in trouble with the law. He begged for the very mercy and compassion that he suggested should be withheld from others.

Isn’t live strange.

What did Rush himself say we should do with junkies (before he joined their ranks, that is)?

Professor Bear - He wanted to “send them down the river”. Also, he fought the release of his medical records (which I happen to agree with) when they were going after him for doctor shopping. At the same time, he said he didn’t believe Jessica Lynch’s claim that she wasn’t raped, and they should release her medical records to prove it.

Hypocrite.

You might find Amity Shlaes’ “The Forgotten Man: A New History of the Great Depression” an interesting read.

I read this book a couple of months ago, and can highly recommend it! It’ll prepare you for the “Greater Depression” that’s just around the corner.

I’m a huge Rush fan and listener since the early 1990s. I don’t agree with a lot of what he says but it is entertaining and thought provoking.

Satchel,
informative post, many thanks. Also, thanks for the Shales rec…I’m looking for Depression studies to read. OT, but I wish Molly Ivins and Mike Royko were around and writing today, how I miss them both.

Rush can be entertaining and thought provoking, but he’s also a Judas Goat for the “monied interests” and corporatists who have co-opted both political parties and are destroying the productive middle and working classes in this country.

Despite the fact that I find Rush revolting on a personal level, I applaud his (and other shock jocks’) collective efforts to exercise their First Amendment rights. A lack of exercise leads to flab.

Wait a minute - I thought the First Ammendment only applied to porn.

exeter,

“He begged for the very mercy and compassion that he suggested should be withheld from others.”

Exactly. And now there are people who profess to embrace “mercy and compassion” withholding those same things from him? There seems to be a lack of consistancy in a lot of people’s ideologies, including Limbaugh and liberals. Life is strange, isn’t it?

We like to roadtrip, and driving across middle America, quite often the only radio reception one can receive, is that of rush, sean and others of their ilk.

And their whole game plan is lifted from little Joe Goebbels:

“If you tell a lie big enough and keep repeating it, people will eventually come to believe it. The lie can be maintained only for such time as the State can shield the people from the political, economic and/or military consequences of the lie. It thus becomes vitally important for the State to use all of its powers to repress dissent, for the truth is the mortal enemy of the lie, and thus by extension, the truth is the greatest enemy of the State.”

I would highly recommend Dependent on D.C. by Twight, for anyone who wants to see how these programs were passed and what the people actually wanted at the time. Most of the gov’t giveaway programs were not wanted by the population, they were forced down the peoples throat by FDR in order to grab more power for the govt.

Oh how this country has change in just 60 years. Go watch “Cinderella man” and then compare and contrast that to the way people live in the inner cities today. Any economic shock on par with the depression will lead to total dictatorship in this country. The people can no longer handle hardship, they have become infants their entire lives.

“And now there are people who profess to embrace “mercy and compassion” withholding those same things from him? There seems to be a lack of consistancy in a lot of people’s ideologies, including Limbaugh and liberals. Life is strange, isn’t it?”

Did he not go to rehab? Did he not get off the criminal charges without jailtime? Did he not return to his old stock in trade?

Who withheld the compassion and mercy from old RottenRush? The boogeyman librullls?

“Who withheld the compassion and mercy from old RottenRush? The boogeyman librullls?”

It looks like you did, for one. Or are your comments consistent with your definition ‘compassionate and merciful’? When it comes to venom and intolerance, it looks like you could sell Rush some of your excess inventory. Remember, “we become what we loathe”.

You appear to be confusing compassion and mercy with forgiveness. Further to the point, I had nothing to do with his crimes or his recovery. I wasn’t the judge, prosecutor or rehab caseworker. So now you reserve Rush-type judgement for me because I point out his hypocrisy? My observation of his clear cut case of extreme hypocrisy has little to do with venom and intolerance but your veiled effort to defend Rush is quite obvious and rather humorous.

Rush is a masterful entertainer. He’s also an outrageous liar. He kissed the Blarney Stone (just like Bill Clinton).

I can enjoy Rush for about 5 minutes. By this time he’s usually said something so mendacious that my (normally very low) blood pressure skyrockets and I have to change the channel.

Air America was an attempt to do liberal radio, Rush style. The problem is, a lot of liberals–or those who had called themselves that until Air America convinced them otherwise–are disgusted by partisanship, mendacity, and bullying. What worked so well for the Angry White Male was an utter flop for the intelligentsia and the Grand Coalition. I grew up on boring, wonky, CIVIL policy debates … the tiger doesn’t change its stripes.

I respect Rush for being a radio genius. Few personalities on the air really understand how to entertain and delight on the radio any more. Even if he is a lying pig.

PS: Al Franken, go home. You aren’t funny … and nobody likes you … you are a loser … just suck it up.

The fact that he’s a masterful distortionist but mostly just a plain old lying blowhard should be enough to air a disclaimer at the beginning of his show. Much of what people take as news is merely commentary without any hard evidence to support their wild claims.

I think Al Franken is hilarious very much in the same way Bill Maher is.

RE: Oh how this country has change in just 60 years. Go watch “Cinderella man” and then compare and contrast that to the way people live in the inner cities today. Any economic shock on par with the depression will lead to total dictatorship in this country. The people can no longer handle hardship, they have become infants their entire lives.

TESTIFY, BROTHER!

I know its only anecdotal and not the result of any degree but the stories I’ve heard from my older relatives is that they knew people who wouldn’t have had an income if it weren’t for these programs. I guess those stories left a deep impression on me.

That probably depends on perspective.

Exactly, What good is a “good economy” when you’ve been laid off and your job has, e.g., reassigned to some foreign country? And how bad is a “bad economy” when you have a job and are able to pay your bills? What good is a prosperous nation when its people are living in poverty?

Paying your bills is one thing. Watching your essentials like food, energy, and medical inflate to barely getting by eventually is another. Salaries aren’t keeping up. Welcome to the NAU (i.e. all these God awful trade agreements), the gateway to the NWO.

THANK YOU, Carrie Ann!

My dad grew up during the GD, as did a number of other relatives and family friends.

I’ve never heard any of them put down these programs. Quite the contrary, they were **extremely grateful** that these programs existed and those who did not live on farms said they would not have been able to make it without those “socialist” programs.

Ours was not to re-fi

Ours was but to shop or die

oh thats good aladinsane. very wity.

I think they are hoping to make a spike bottom in Europe today and then continue with the bull like nothing happened; but I don’t think it is going to be as easy as it was over the last six years, even the small investors (that are still very bullish over here) could get a bit scared after todays plunge.

These speculations don’t make any sense. The Federal Reserve has always encouraged savings. There is a lot of information provided by the Fed about why saving is a positive thing. It is also the case that some of the strongest regulations and insurance available are for savings accounts. The dollar is falling for many reasons, but there is no plot involving the Fed to punish savers.

you’re wrong….it’s called inflation

“The Federal Reserve has always encouraged savings.”

The Fed apparently accepts no culpability for discouraging savings. If they go so far as to claim they encourage savings, then I would suggest they go back to the drawing board.

business
K.C. Fed head puts happy spin on tornado
By Al Lewis
The Denver Post
Article Last Updated: 01/18/2008 02:44:59 AM MST
…
“Consumer debt as a percent of (the nation’s gross domestic product) . . . and as a percent of income for the consumer . . . is as high as it’s been,” he said.

We also have a negative personal-savings rate. In other words, Americans are mostly just saving credit-card statements.

This is perhaps the most dismal sign of all since consumers are responsible for more than 70 percent of the nation’s economic activity. And what began as a rash of subprime- mortgage defaults is swiftly expanding into rising credit-card and auto-loan delinquencies.

“The debt that the consumer is carrying right now can be serviced,” said Hoenig. “But there is still an absence of savings. Therefore, the cost of capital . . . will increase . . . over time. And as the cost of capital increases, our ability to bring investment forward is decreased.”

http://www.denverpost.com/business/ci_8002827

Will Economy Lose Support From Abroad?
By Scott Patterson
Word Count: 523

As the economy reels from the busted housing bubble, questions loom about whether overseas investors’ hunger for U.S. assets will weaken.

For years, the U.S. has run a steep trade deficit with the rest of the world. The so-called current-account balance, broadly speaking, measures the difference between goods and services imported and exported.

The scale has lurched toward the import side of the equation for the U.S., which means the country has been consuming more than it has been saving. Foreign purchases of U.S. assets such as Treasurys have helped finance that spending.

http://online.wsj.com/article/SB120096799510205443.html?mod=todays_us_nonsub_money_and_investing

TxChick — I am counting on you to let us know when a market bottom is in

I’d say 9 a.m. before 4 but if you’re buying mutual funds, you get the closing price anyway.

Don’t you guys think a lot of “dry powder” is waiting on the sidelines to buoy the U.S. stock market? Why do you think this time is different? I frankly would be surprised, though not shocked, if the stock market has another down day tomorrow.

No, I think cash levels are pretty low and short intensity is also low (Erlanger) which has probably exacerbated this decline. Still, I’d also be surprised if the markets don’t gap down and recover tomorrow.

This is no time to play around in the market. Stocks will be going much, much lower. The bottom will not be reached until company earnings have stopped falling and start rising again. I think we will see Dow 10,000 before Dow 13,000.

WAman, I generally agree. I moved to cash over the past several months, and as of today (other than a single, small 401k (representing less than 0.5% of my NW), I am in cash, and cash-flow producing real estate. Until the next housing related impact begins to be felt from Option ARM adjustments (later this year), I will stay in cash.

Consumer spending is going to bring down corporate earnings, which will bring down public stocks pretty much everywhere. Not to be a doom-and-gloomer, but as I think Mish said, my goal is to lose as little as possible as this mess unravels. While I could speculate on gold, keeping my money in cash seems safest to me.

WAman,

Yes, they’ll go lower, but they *never* go in a straight line.

That sounds about right. My flight was boarding at A10. You and I are very observant of beutiful young things wearing Ron Paul t-shirts!

Nono.. We’re all just slow readers.. hehe

Not all lawyers are litigators. My husband does patents and trademarks.

Not all lawyers are bad news, just most of them.

I have the utmost respect for lawyers who conscientiously use their legal training and knowledge of the law to protect wronged clients - especially those who lack the means to pay. I have total contempt for lawyers who scheme to get the most possible billable hours out of clients who are already in distress, and craft their defense strategy based on profit, not justice.

Our last visit to New Zealand, we para-sailed, climbed glaciers, rode jetboats up and down class 3-4 rivers, dove off of diving boards into swimming pools @ motels, and some of the pools had slides as well.

And never once signed a waiver of any sort.

Lawyers are lonely, there.

unfortunately it already happened al’…his name is john mccain

i can’t remember. i just know i have heard him before and he is not that bad.

Brinker was good back in the dot com bubble (he called it right,we got out with profit) but he sure back tracks and mis-informs. He pumped the housing bubble, belittles smart informed callers, and loves Wall St. He could care less about Main St. I can’t stand him.

I think Peter Schiff and Jim Puplava are on the right track.

They want to be us, circa 1962.

Leave it to Beijing, not starring Jerry Mathers.

I don’t have your stock acumen, but I am expecting THIS is be even worse than it looks so far.

Could be a lot bigger… give it a few weeks.

well, gold does not make anything and it is a terrible investment if you can even call it that. But when everyone else is losing money and you are getting richer compared to others because of your gold, then maybe it is worth it…
Come on people, a fancy suite is worth an ounze of gold. Can’t you see that it is the only asset that seems like it is underpriced…

Here, here. Who eats rectangular paper?

Hey, no argument here. In fact, “money” is nothing but a web of illusion designed to control us, and sap our energy, a la the Matrix.
Gold is not a panacea. But it is what it is. An ounce of gold is an ounce of gold. Nothing more, nothing less.
What is a dollar?

Somehow…

Cultures all across this orb, all gravitated towards Gold as being the ne plus ultra financially.

The ones that didn’t, used Tally Sticks, Yap Stones, Wampum and other odd and curious forms of money.

Got Wampum?

No, cultures in the trading sphere (of the ancient world) all gravitated towards gold because a natural currency always arises when entities trade with each other.

You can still hear periodically of ancient Greek Roman coins being found in India, and ancient Indian coins being found in Java. The point is that they all traded with each other, and gold has nothing to do with it.

In jails, and various concentration camps, it is observed that cigarettes emerged as the tradeable currency.

The important point is you may not be able to predict what will emerge but that the market will provide a mechanism to trade.

However, none is “superior”, and a good trader will allow you to trade in any (naturally for a premium, of course.)

Do not confuse the medium of exchange, and the convenience of the medium of exchange (”you can’t eat gold”) with the store of wealth.

These are two utterly different concepts.

The fact that you refer to them both as the “dollar” is part of the problem. You might want to try “current dollars” and “future dollars” and you will rapidly realize that it is no different from “current gold” and “future gold”.

Man, and I thought this was a smart bunch!

Sorry - got to disagree with you FPSS (and PB) - when you say “nothing is superior”.

It’s true the virtually anything *can* be used as currency. Even the spoken word can and is used frequently for currency - e.g. if my neighbor agrees to give me his used car, and I promise to do a year’s worth of yard work for him, then my promise to him is currency.

However all currency has risk. My promise has risk - I might decide not to keep it, or I might move away, or I might die - etc. Cigarettes have risk - ala your example - when the war ended all of the sudden it was much easier to get cigarettes, and thus they became essentially worthless. Or someone could bring in a whole case of cigarettes to the camp, reducing the value of the existing ones.

Paper dollars as currency have risk - inflation may reduce their worth, government turnover may make them worthless, they can be counterfitted, lost in a fire, stolen from my wallet, etc.

Even gold has risk - it’s price is subject to supply and demand pressures as well, including artificially-introduced pressures like government action (e.g. 1933). It can be stolen, etc.

I would submit however, that when the SHTF - e.g. times of significant war and/or financial crisis - gold (and other PM) inherently are the lowest-risk form of currency, and therefore *is* superior to other forms of currency.

Mainly this is due to these things:

- Virtually impossible to counterfeit
- Virtually indestructible
- Limited supply

Note the qualification though - “when the SHTF”. During normal economic times, gold is not superior any more since other methods have emerged as more efficient means of currency exchange. Heck even paper cash has been knocked down a few notches recently on the currency totem pole by credit/debit cards (debt component of those aside), and online transactions (paypal etc.).

Just to be clear this is not a “should I store my money in dollars or should I store it in gold” argument?

Do what you think is best.

This is a clear rebuttal to “you can’t eat gold” which is true but irrelevant.

But what you can do is buy “current gold” which will then become “future gold”, and in that “future”, you will be able to pay the market price of that “future gold” and will be able to convert it into to the future trading currency, and buy your food or pay your surgeon.

Do not confuse “storage of wealth” with “medium of exchange”.

now I can buy one fancy suit with one ounze of gold, say in the future I can buy 4-5 fancy suits with one ounze…. Clearly my future gold is “worth more”… But if I want to buy one ounze of gold, it is all the same.. true… What is the argument here? I thought I was smart…

Gold has magical properties in times of crisis…

My father was a displaced person (dp), in Europe after World War 2.

The difference being, that his family had Gold and he was able to go to University in Switzerland and get a degree in economics and go skiing on the weekend, while 10’s of millions of other dp’s were wondering where the next meal was coming from…

Agreed about the risk with the posters above.

The point is money has three uses — as a yardstick (like “inches” or “kilometers” measure distance everything is measured in the local money); as a “medium of exchange”, and as a “store of wealth”.

Do not confuse the three; they are separate and distinct (although 1 and 2 are linked at the hip.)

The point was a clear rebuttal of “you can’t eat gold” — well “stock certificates can’t perform surgery”.

See the point?

How you “store your wealth” is different from “how to can exchange it for anything”.

That having been said, I am mostly in agreement with the risk component, etc.

Got to disagree that gold can only be used as “storage of wealth”. It can very easily be used as a medium of exchange as well - and was for thousands of years. Not all gold is stored in huge bars. $20, $10, $5, $2.50, and $1 gold pieces were very often used as medium of exchange right up through the early 1900’s.

Aside from that - the same principle applies to silver, which was used as a common medium of exchange up until 1964, all the way down to 25-cent pieces. So if the granularity of gold isn’t good enough (smallest feasible exchangeable coin these days would probably be about $20), silver can be used. Then copper for even finer granularity. It’s not until you get into your zinc and nickel that we’re talking essentially worthless metals.

You guys can keep convincing yourselves that gold is the be-all, end-all currency, but at the end of the day, until Uncle Sam goes out of business, U.S. fiat currency will hold the upper hand on gold because of fiat, period. Please refer to U.S. govt gold confiscation in the 1930s for Exhibit A. And for the change in the price of gold in the early 1980s for Exhibit B. Like other bubbles, the X bubble will pop around the very time there is a ubiquitous belief that X is a superior asset class. (X = gold at the moment.)

Does anybody notice 10 buyers for every seller of stocks, currently?

“Australian investors who bought early and often have done well. The yellow metal went through the local $1000 mark on January 9 and the Perth Mint has been finding no buyer resistance at that level. In fact, business is up this week, with gold buyers outnumbering sellers by 10 to one in Perth.”

http://www.theaustralian.news.com.au/story/0,25197,23073640-5001942,00.html

People who endanger public safety and private individuals through stealing things like manhole covers, telephone cables, copper pipes, etc., should be summarily hanged, in public.

Heinleinian Equalization: You drive drunk and a kid loses a leg, they lay you down and drive over your leg a few times.

Well Tresho, like I said, ” all in my opinion. However, I follow an analyst that likes to keep an eye on GS and noticed a common theme has emerged, GS and JPM both seem to be carrying out gov’t policy for this administration and perhaps previous admins as well. No conclusive evidence of course because that would be submitted to authorities, oh wait, that wouldn’t work either.
At any rate, here (links) are just a few of the questions that have arisen in the blogging community from the actions of GS. Naturally the fact that so many GS alums have ended up in powerful positions also raises eyebrows out here in “tin foil” land.
JPM is another issue altogether. Check out their derivative position/exposure. What sane institution would/could grow derivatives at this rate? It has been suggested (without proof, of course) that this derivative position serves to allow the FED to act as counterparty to the losing position (JPM doesn’t just collect a fee but actually acts as counterparty to both sides of the derivative). Some analysts have also posited that the derivatives are being used to support/control the bond market. Who knows?

Regardless, I can’t prove anything since I have no firsthand knowledge. Of course in hindsight it would have been prudent to take a large hedge position against a subprime contagion. It is odd that no other IB’s found it compelling to do so, just GS.

http://www.financialsense.com/Market/kirby/2007/0507.html

http://www.financialsense.com/Market/kirby/2006/0313.html

http://www.financialsense.com/Market/kirby/2006/0925.html

Hey, thanks for the link, Bluprint. I’ll check it out.

Just another history book! That many sheeple read daily.

Geez WAman, and people say Christians are closed minded….too funny!!!

Just another history book!

I’m agnostic and proud of it, but I have to agree with Sammy regarding the wisdom and beauty of Proverbs.

I don’t pretend to know if the Proverbs, or the rest of the Bible, are divinely inspired or not. I do know there is some very sound wisdom contained therein.

I used to laugh out loud reading Eccliastes - basically it’s a preacher saying everything sucks and it’s all a waste of time..

Proverbial Wife of Noble Character:

“She sees that her trading is profitable, and her lamp does not go out at night.”

An ancient Txchick.

“I like what is happening. I am sure many cash-horders like me don’t mind becoming buyers when others flee from the housing market and the stock market.”

As much as I’d like to see the “cleansing” of the U.S.,
it won’t be a Depression until many in this forum (the best of us) will be affected by job loss and hardship. That’s when we know the worst is here. Just because mainstream is now starting to be doom & gloom, is it the right contrarian indicator? I think this could get much worse….more than can be imagined. Cash is good, but if you don’t have religion, life would be difficult.

Agree, Chicago.

Hate to admit it, but when I saw the overseas markets, I started to cry. Not because we’re losing money (we’ve made more money than ever being 100% short in our “trading” money), but because our being right means there will be a lot of suffering.

This could have been largely avoided if someone (Greenspan) had the balls to do the right thing in 2002/2003 (and before!).

I’ve been one of the most extreme bears, but this is scaring me.

Yes, during my visit to Portland I was caught in a weather pattern with offshore winds blowing terrific heat into Portland. Average temperatures are one thing & extremes are another.
If it had been 90 degrees at the Pacific shore, I could have relieved the heat fairly quickly by wading in the water for a few minutes.
I camped on the shores of Lake Superior in the summer of 1987 or ‘88 at Porcupine Mountain State Park. It has a ridgeline with a terrific view of the lake. I was hoping to take a hike to enjoy the view. Unfortunately it was 98 degrees, humid and calm that afternoon, most unusual for that area & definitely a bad time to hike a mountain, no matter how small. I went down to the beach. It was even hotter down there with the sun reflecting off the sand. People are seldom able to swim in Lake Superior at any time of the year, it’s usually too cold. The water temp near the shore was 68 degrees (I measured it), a most pleasant change from the air. I had a delightful swim. No one else at the campground joined me.
Yesterday 25 miles from my house they had 22 inches of snow fall the other day, called “lake effect.” Zero snow fell in my town.

I used to work 6am to 2:30pm in Seattle to get an hour of sunlight in during the winter. Traffic was better too.

As Yogi Berra put so eloquently, “nobody goes there anymore; it’s too crowded.”

You’re right. Commodities shouldn’t fall any farther than say, houses or stocks, and we can expect a continuing expansion of economic activity into the foreseeable future.

If underinvestment in productive capacity kept commodities abnormally low, then the future overinvestment cycle will boost commodities, right? Based on our high rate of savings, right? We do have a shortage of productive capacity (and offices and houses) in the world, right?

it’s interesting because people have been on this blog saying oil or gold or (fill in commodity) was in a bubble getting ready to pop for at least a couple of years.

maybe.

staying away from something you see as overvalued might be smart. i just hope none of the more vocal detractors were top calling or trying to time a reversal. In a macro trend like we’ve seen you can enter a trade with the trend 1000 times and be right. you’ll only be right on the reversal once.

did gold see another multi-decade high? i would be shocked, quite frankly.

i also think it’s a big mistake to lump all commodities into one group and think they will all move together forever. they might get liquidated by weak hands and people needing to raise cash during a total market route….but then what? 3% 10 year notes when we’re dropping money from helicopters?

Beta. It’s been beaten with an ugly stick but stocks like AAPL and BIDU were up on Friday.

yep. gotta alleviate the itch somehow and make enough for the daily pizza

Pizza? LOL.

I gotta cover the loss I’m gonna take on some SPY calls when the market opens on Tuesday. So far I got net 22 pts. which is pretty good for me.

uh, yeah, that’s a good day for anyone.

LOL!

Wonder what happened to our DCA acolyte in Phoenix (?) . . .

When all else fails, blame BC. lmao.

Methinks it was more for high crimes, than misdemeanors.

sorry i should say “quasi-governmental quasi-private” central planners, rather than “govt” above.

Definitely agree with that!

Today’s Britney won’t do it. Our only hope for the sheeple is a video of Paris and Britney together. Otherwise, I think this drop will be enough to start a stampede unless we get a video or a speech letting us know that the fundamentals are strong and we have a healthy economy - wait that didn’t work last week - That leaves the lesbian video of the 2 as the only option that can work.

just wonder what will happen then with all those who purchased US Treasury Bonds for safety. Time for a big meltdown in the bondmarket?