Real Estate Market / Inflation / Recession / Depression (mortgage, environment, credit)

[Bob from down south]

I think the consumer confidence numbers would suggest that most don't see some sort of peyote-induced illusion of a bright future. The masses are getting it...gas and food prices are kicking their asses, and no amount of Pollyanna denial changes that. Now add to that the coming winter with heating bills up 75-100%.

Falling housing prices are the natural result of unaffordability. The only people complaining about that are the ones who need to sell their overleveraged houses into the storm...and those smart enough to see the coming effort by the banking industry to pass the bill for all those failed mortgages on to the taxpayers.

Colorado exports are trivial, interest rates have nowhere to go but up, and the market is still more than 10% below its Oct 07 peak, with an annualized nominal 10-year rate of return in the low single digits, and a negative real 10-year rate of return.

The future's a blight.

[multitrak]

as the masses grumble and moan on the consumer CONfidence surveys, does helo ben fiddle while wall street burns? hell no, stocks rallied late cuz investors finally remembered that the great "unwashed filthy" public are about as right on market bottoms as economists, prairie dogs and surname alphabet soup! read it and weep...point of fact: since the october 2002 low, the nasdaq 100 has rallied 156% as of today's close for an impressive 28% per year rate of return. take that mister dollar devaluation and missy inflation! yes, the dollar has slipped a humbling 5.8% per year over the same period that the neglected, little ole nasdaq kicked the other stock indices. however, sterlinggirl's gold did well up 190% for a very impressive 35% annual ror since 2002. but crude oil wins the hard asset prize: up 376% for a hefty 68%/year ror during this same period.

and forget about higher natural gas prices for next winter...point of fact: large speculators and commercials are heavily short, prices have recently peaked, so gas prices next winter should be flat to a little lower because of increased supply. crude oil is also hitting heavy selling pressure now at $126-127, price is deccelerating, and it should fall to below $100 this year. so, yeah, gasoline prices will eventually fall too. truth be told, total energy supply is up while demand is lower, and eventually the biofuels impact will be felt and prices will decrease. and yeah, superspike oil is a myth created goldman smacks so they can unload long crude oil to the always wrong public, lemmings, and prairie dawgs.

but heh, the future is going to be alright!

[jazzlover]

So, I guess these headlines are just Coloradans bad dreams, and not reality?

Foreclosures climb, but at a slower pace - The Denver Post

Expect gas bills to rise 50 percent (broken link)

Oil sets record near $128; pump price at high, too - The Denver Post

Foreclosure filings up 65% in April - The Denver Post

Gas prices keep rising as drive time nears - The Denver Post

Inflation rise concerns Federal Reserve official - The Denver Post

PS--I hope your rosy predictions are better than your punctuation . . .

[Sockeye]

Not to mention W's recent visit to Saudi Arabia begging them to open the spigots a wee bit more. 2nd visit in a year's time. No dice.
Seems the world's swing producer has lost a step or two.

[Bob from down south]

Originally Posted by multitrak

as the masses grumble and moan on the consumer CONfidence surveys, does helo ben fiddle while wall street burns? hell no, stocks rallied late cuz investors finally remembered that the great "unwashed filthy" public are about as right on market bottoms as economists, prairie dogs and surname alphabet soup! read it and weep...point of fact: since the october 2002 low, the nasdaq 100 has rallied 156% as of today's close for an impressive 28% per year rate of return. take that mister dollar devaluation and missy inflation! yes, the dollar has slipped a humbling 5.8% per year over the same period that the neglected, little ole nasdaq kicked the other stock indices. however, sterlinggirl's gold did well up 190% for a very impressive 35% annual ror since 2002. but crude oil wins the hard asset prize: up 376% for a hefty 68%/year ror during this same period.

and forget about higher natural gas prices for next winter...point of fact: large speculators and commercials are heavily short, prices have recently peaked, so gas prices next winter should be flat to a little lower because of increased supply. crude oil is also hitting heavy selling pressure now at $126-127, price is deccelerating, and it should fall to below $100 this year. so, yeah, gasoline prices will eventually fall too. truth be told, total energy supply is up while demand is lower, and eventually the biofuels impact will be felt and prices will decrease. and yeah, superspike oil is a myth created goldman smacks so they can unload long crude oil to the always wrong public, lemmings, and prairie dawgs.

but heh, the future is going to be alright!

The psychology of those masses, with incomes declining in real terms and heavy debt burdens, drives the consumption that is over 70% of the real economy. And most aren't concerned about stock market performance...they want their paychecks to cover the bills that they've, in many cases, unwisely strapped on.

It's easy to pick a holding period from a market low after-the-fact and then build a BS statistic that overstates the performance of an asset. There aren't too many people I know that are in positive territory w/r/t tech investments over the long term. That 90% hit they took from 2000-2002 kinda screws up the average returns. What you've done is like waiting until you're at the top of a very long hill, then filling up and driving to the bottom, and reporting 40 mpg mileage on your Hummer, ignoring the performance in the 1,000 miles before and after.

Natural gas, in Colorado, has been priced artificially low for a long time due to inability to get it to higher-priced markets. There may, indeed, be a beneficial effect to gas prices--outside of CO, that is. But prices on the front range have already spiked, and they're not going back down much, if at all. It's gonna get really expensive to heat a 4,000 sq ft house this winter.

Gold is also a long-term dog of an investment. Unless you're manufacturing circuit cards or jewelry, gold's not the place to be. It always gets a bump in periods of scary financial instability due to the mythical but ridiculous idea that we would or could go back to the gold standard. If things ever collapsed that bad, nickel, lead, and brass are the place to be...in the form of a nickel-plated .357 magnum loaded up with 158-grain jacketed hollow-points. You'll be able to get all the food you need if you can manage that investment well...

The comment on biofuels impact is laughable. The only impact that's making is on food prices, and it's not driving them lower. And if oil drops to the $100 point this year, the reason will be that the world economy can't afford fuel priced by $127/bbl oil any more and pulls back demand in a major way...not a spiffy indicator for those masses again.

Some of my friends ask me why I'm so pessimistic on the current state of things, given that I'm just a few weeks from retiring in my 40s. It's the same broad-brush macro feel for the economy that had the hair raised on the back of my neck in 1998 when I went seriously against the current and bailed out of stocks. One can't look at the hundreds of billions of dollars in losses in banking (assuming a real appreciation of how much money $1 Bn really is) and then justify what's happening in financials, for example. One can't look at the unfolding real estate train wreck and the underlying problems--with excessive debt, massively excessive overbuilding (in terms of both quantity and size), and a serious disconnect between incomes and prices--and then justify some of the runups in homebuilders or REITs of late. I'm no good at market timing, but I do know what a hook echo looks like when it shows up on the proverbial financial radar and I get the hell away from it, rather than waiting to see if the whiz-kid on the Channel 5 news is really right about how his new math makes this F-5E storm somehow less dangerous than the others that have marched through like Sherman's army before.

After having lived outside the US for the better part of a decade, I'm certain that the blighted future in the US will look very different than the status-quo. Given the degree of overconsumption I see baked into nearly every aspect of American life--oversized housing, transportation, energy usage, overeating/obesity, drug and alcohol overdependence/addiction, etc--that future is going to feel like stark deprivation for a spoiled, gluttonous horde that can't discipline themselves enough to spend within their means or save for a rainy day or retirement. The coming period of social adjustment is probably going to be pretty hairy...I'm really thinking about developing a couple options to sit that whole mess out somewhere else.

[jazzlover]

I am being pilloried over in some other threads because I basically am espousing an "anti-population growth" viewpoint towards Colorado's future. I'm fine with that.

I think the single-most important revelation of the 21st Century, and one that is going to finally hit the United States generally, and Colorado specifically right between the eyes is this:

In an environment without endless and seemingly inexhaustible natural resources, population growth and economic growth will no longer be joined at the hip. In fact, in an environment of growing resource scarcity, population growth will not lead to increased individual prosperity, it will destroy it. The US prospered for most of its history because it had the plentiful natural resources to allow economic expansion and population growth to occur concurrently. That era is over--for good--but most Americans just are not ready to see that reality. We are now entering the era when more population will only mean that diminishing resources will have to be divided among more people.

So, those people who think that population growth is good, or even a "necessary evil" for economic growth are in for a big surprise. It shouldn't be a surprise at all--after all, the countries worldwide that generally have the highest per capita standard of living are not the ones with the highest population growth rates, they are the ones with the lowest. If Colorado's population growth rate went to zero, or even negative, it would be--in the long run--a positive development, both economically and environmentally.

[multitrak]

Originally Posted by Bob from down south

The psychology of those masses, with incomes declining in real terms and heavy debt burdens, drives the consumption that is over 70% of the real economy. And most aren't concerned about stock market performance...they want their paychecks to cover the bills that they've, in many cases, unwisely strapped on.

the masses do care about the stock market. the stock market represents a psychological oasis when times are good and a harbringer of destruction when times are tough. the stock market is their psychological thermometer, with their ira's, pensions, 401k's, and retirement hopes and dreams hanging in the balance. given the recent dollar decline, their consumption not only drove the economy, but acted as a personal goods inflation hedge.

It's easy to pick a holding period from a market low after-the-fact and then build a BS statistic that overstates the performance of an asset. There aren't too many people I know that are in positive territory w/r/t tech investments over the long term. That 90% hit they took from 2000-2002 kinda screws up the average returns. What you've done is like waiting until you're at the top of a very long hill, then filling up and driving to the bottom, and reporting 40 mpg mileage on your Hummer, ignoring the performance in the 1,000 miles before and after.

may be they're just plain stupid because they bought enron and worldcom or because they forget how how to sell? beats me. what is bs is your one-sided analysis and one size fits all argument. i know many regular folks that hedged that decline (by selling calls and buying puts) just fine. so, yeah, stock market life after 2002 is valid starting point because that's when the market bottomed after the high tech bust. and we are talking about the new cycle that we are in NOW and not the decline then...

Natural gas, in Colorado, has been priced artificially low for a long time due to inability to get it to higher-priced markets. There may, indeed, be a beneficial effect to gas prices--outside of CO, that is. But prices on the front range have already spiked, and they're not going back down much, if at all. It's gonna get really expensive to heat a 4,000 sq ft house this winter.

natural gas supply is increasing in colorado as a result of exploration and exploitation of tight gas sands, coal bed methane, and conventional gas reservoirs to such a degree that even with the pipelines going out of state, next winter's heating bills won't be affected to any significant degree. actually, the supply and demand situation will be healthy overall for colorado's natural gas industry and the state's production tax coffers.

Gold is also a long-term dog of an investment. Unless you're manufacturing circuit cards or jewelry, gold's not the place to be. It always gets a bump in periods of scary financial instability due to the mythical but ridiculous idea that we would or could go back to the gold standard. If things ever collapsed that bad, nickel, lead, and brass are the place to be...in the form of a nickel-plated .357 magnum loaded up with 158-grain jacketed hollow-points. You'll be able to get all the food you need if you can manage that investment well...

i agree and disagree, but for different reasons. i agree that gold is important in electronics and jewelry trade (jewelry stock sector is bearish). but i disagree about the gold standard, sort of...historically, gold really is money. note the historic strength in the swiss franc and it's tie to gold. but, no, ron paul will not get his u.s. back on the gold standard wish. however, if your inflationary scenario or jl's hyperinflationary scenario ever pans out, then even a 10% physical gold holding would be sufficient insurance for preserving some wealth. forget about illiquid i-bonds in that scenario, the only use they might have is for insulation in a coat or starting a fire. whether an asset is a dog or not depends upon when one buys or sells it. nothing is forever, not even diamonds, but gold is pretty damn close.

you mentioned some other formerly known as "strategic" metals that are important in modern industry, other significant ones include rare earths (steel and ceramic additives), indium and gallium (pv collectors), tin, molybdenum, beryllium, uranium, vanadium, cesium, tantalum, etc. colorado currently mines some of these metals, especially moly, beryllium, uranium and vanadium.

The comment on biofuels impact is laughable. The only impact that's making is on food prices, and it's not driving them lower. And if oil drops to the $100 point this year, the reason will be that the world economy can't afford fuel priced by $127/bbl oil any more and pulls back demand in a major way...not a spiffy indicator for those masses again.

i read somewhere that only 3% of american land is currently devoted to growing corn for ethanol. and many 100's of millions of u.s. acreage remain unplanted because of the government's stupid policy of planting nothing for cash. if worldwide ag techniques improved to the same degree as here in the u.s., then the scourge of hunger would disappear in our lifetime. so your "biofuels is starving the world" argument is not only wrong, but just plain silly. take a look at wheat and rice charts...both have topped out and are heading down, especially wheat, which is down almost 40% from it's peak, and rice down 20%. food commodities are getting cheaper, not more expensive, and that downward trend will accelerate when crude oil moves lower.

now about my forecast that crude oil is topping out now...sorry to burst your bubble, but crude oil is about to head down, and in a major way. technically, it's overbought. fundamentally, nothing more fancy than good ole supply and demand. when crude price can't manage to break out more than a half a buck a bbl above a recent high with all the negative news out there that should be positive for crude (nigerian woes, chinese earthquake), then something is rotten (bearish) in west texas and seminole.

Some of my friends ask me why I'm so pessimistic on the current state of things, given that I'm just a few weeks from retiring in my 40s. It's the same broad-brush macro feel for the economy that had the hair raised on the back of my neck in 1998 when I went seriously against the current and bailed out of stocks. One can't look at the hundreds of billions of dollars in losses in banking (assuming a real appreciation of how much money $1 Bn really is) and then justify what's happening in financials, for example. One can't look at the unfolding real estate train wreck and the underlying problems--with excessive debt, massively excessive overbuilding (in terms of both quantity and size), and a serious disconnect between incomes and prices--and then justify some of the runups in homebuilders or REITs of late. I'm no good at market timing, but I do know what a hook echo looks like when it shows up on the proverbial financial radar and I get the hell away from it, rather than waiting to see if the whiz-kid on the Channel 5 news is really right about how his new math makes this F-5E storm somehow less dangerous than the others that have marched through like Sherman's army before.

After having lived outside the US for the better part of a decade, I'm certain that the blighted future in the US will look very different than the status-quo. Given the degree of overconsumption I see baked into nearly every aspect of American life--oversized housing, transportation, energy usage, overeating/obesity, drug and alcohol overdependence/addiction, etc--that future is going to feel like stark deprivation for a spoiled, gluttonous horde that can't discipline themselves enough to spend within their means or save for a rainy day or retirement. The coming period of social adjustment is probably going to be pretty hairy...I'm really thinking about developing a couple options to sit that whole mess out somewhere else.

i know that we disagree fundamentally on the state of the economy, but i've been down that road many times before. just add another zero every decade or two and things seem to work out over time. one thing that i've learned is that everything cycles, nothing valuable ever goes straight up or down in price forever. i almost retired when i turned 30 and thought about moving to durango with a pile of cash. but heh, i was young, having a blast, and the 80's oil collapse and potential multi-decade bull stock market represented just too much of a challenge and opportunity to pass up! so here i am, still having fun, and still outting the same ole doom and gloomers since the 70's. like i've said, nothing ever changes except for the people who are fearmongering...

one last question: what happened to spending retirement shooting varmints off the back porch in the shadow of pikes peak?

the future will be alright!

[multitrak]

Originally Posted by jazzlover

So, I guess these headlines are just Coloradans bad dreams, and not reality?

PS--I hope your rosy predictions are better than your punctuation . . .

yep. news is marketed to be psychologically predisposed toward pessimism at market bottoms and optimism at market tops. if most people feel bad, then they want their news to agree or reinforce with how they feel. and vice-versa when they're happy. unfortunately, bad news and fear sells better than good news and happy thoughts. hence the slanted headlines emphasizing a fearful future.

re the ps what can i say im just an e e cummings sort of guy

[multitrak]

for the thinking person who might want to evaluate stock market strength and weakness for themselves using real data and some common sense metrics, then take a look at this free site. i stumbled upon by accident while looking for something else. i'm outta here...

MarketGauge by DataView, LLC

[Bob from down south]

Originally Posted by multitrak

the masses do care about the stock market. the stock market represents a psychological oasis when times are good and a harbringer of destruction when times are tough. the stock market is their psychological thermometer, with their ira's, pensions, 401k's, and retirement hopes and dreams hanging in the balance. given the recent dollar decline, their consumption not only drove the economy, but acted as a personal goods inflation hedge.

You're talking about those that are actually saving for retirement. For the millions living in debt, just a few missed paychecks from bankruptcy, the DJIA might just as well be the latest Cricket scores from Wimbley.

Originally Posted by multitrak

may be they're just plain stupid because they bought enron and worldcom or because they forget how how to sell? beats me. what is bs is your one-sided analysis and one size fits all argument. i know many regular folks that hedged that decline (by selling calls and buying puts) just fine. so, yeah, stock market life after 2002 is valid starting point because that's when the market bottomed after the high tech bust. and we are talking about the new cycle that we are in NOW and not the decline then...

Ah, so you're telling me that the average investor can manage derivative bracketing to hedge their stock positions? That's pretty out of touch. Time to visit your local Walmart or Super-K...crap, most of those folks couldn't tell you what continent Chile is in, much less what a put or call is.

It is BS to pick a market low as a starting point and then trumpet the gains, without recognizing that people generally don't time markets right at peaks and troughs. Most investors were hurt...many were hurt badly in the dot.bomb collapse. It didn't take owning large long positions in Enron or Worldcom to be part of the train wreck, but then you know that.

Originally Posted by multitrak

however, if your inflationary scenario or jl's hyperinflationary scenario ever pans out, then even a 10% physical gold holding would be sufficient insurance for preserving some wealth. forget about illiquid i-bonds in that scenario, the only use they might have is for insulation in a coat or starting a fire. whether an asset is a dog or not depends upon when one buys or sells it. nothing is forever, not even diamonds, but gold is pretty damn close.

In the 1930s, FDR banned private ownership of gold. People were not allowed to open their safety deposit boxes without a revenue agent present. If a hyperinflationary collapse were to occur, a 10% physical gold holding likely would not preserve wealth any better than government securities. Again, there's this throwback to the past, where gold was the medium of choice for money. There's no logical reason to go back to gold...a future currency could just as easily be something like commodities certificates.

Originally Posted by multitrak

read somewhere that only 3% of american land is currently devoted to growing corn for ethanol. and many 100's of millions of u.s. acreage remain unplanted because of the government's stupid policy of planting nothing for cash. if worldwide ag techniques improved to the same degree as here in the u.s., then the scourge of hunger would disappear in our lifetime. so your "biofuels is starving the world" argument is not only wrong, but just plain silly.

Although I agree that subsidy policy is poor, the EROEI (energy returned for energy invested) on corn-based ethanol is pretty low. Corn production uses ammonia fertilizer produced from natural gas, petroleum-based insecticides, diesel-powered heavy equipment for plowing, planting, and harvesting, and a lot more energy still for processing and transportation of the final product. And most analyses don't include the energy used to produce the large quantities of water needed for the crop and the processing plants.

The facts, though, are that in the short term, crop conversion has followed the money to corn for ethanol production, and there are impacts to food pricing and availability.

Originally Posted by multitrak

i know that we disagree fundamentally on the state of the economy, but i've been down that road many times before. just add another zero every decade or two and things seem to work out over time. one thing that i've learned is that everything cycles, nothing valuable ever goes straight up or down in price forever. i almost retired when i turned 30 and thought about moving to durango with a pile of cash. but heh, i was young, having a blast, and the 80's oil collapse and potential multi-decade bull stock market represented just too much of a challenge and opportunity to pass up! so here i am, still having fun, and still outting the same ole doom and gloomers since the 70's. like i've said, nothing ever changes except for the people who are fearmongering...

Is it "fearmongering" to issue a hurricane advisory for an area that only has a 5% probability of getting hit 5 days from now? Is it "fearmongering" to have a "critical" fire alert level posted at the entrance to the National Park campgrounds?

The rosy-glasses fanboys don't want to hear or remember that there are documented episodes of financial catastrophe in the last century, or that today there are striking similarities to the events that caused those catastrophes. They don't want to talk about the $52 trillion bill that comes with social security for the baby boom generation. They don't want to talk about the uncharted territory we're now in with exploding government, corporate, and personal debt. Any suggestion that we look to be headed for big trouble is "fearmongering." There's a Cat 5 financial storm just offshore, and all they have to say is "Dude! Surf's up!"