I'm really seeing erie similarities between the nasdaq bubble pop and our current housing bubble pop.
The Top 10 List:
1) "new economy" now "migration trends", "demographic demands" and "the country is filling up"
2) "day traders" now "speculators" or "real estate investors" or "flippers"
3) "pump and dump stock manipulators" now "realtors"
4) "margin accounts" and "leverage" now "mortgages"
5) "Henry Blodgett" now "National Association of Realtors"
6) "Worldcom" and "Enron" now "Toll Brothers" and "Fannie Mae"
7) "analysts" working for "investment houses" now "appraisers" working for "realtors"
8) "penny stock" now "Miami condo"
9) "the stock market will always be your best investment" now "housing never goes down historically"
10) "irrational exuberance" now "froth"
How's that?
A bubble is a bubble is a bubble - generation after generation after generation. It's just humans being humans. The surprising thing about this one is that it was just so damn soon after the last one. Are we that stupid that we don't learn or that we selectively forget - so soon?
November 22, 2005
Feeling a bit 2001 lately? The housing bubble = the NASDAQ bubble
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9 comments:
A generally good list but a few quibbles:
4) "Low margin trading" now "I/O mortgages"
6) "Worldcom & Enron" now "Countrywide & Fannie Mae"
I see no reason to bash Toll Brothers for any of their actions. They warn, they report their insider trading they build houses. http://insidercow.com/ and enter TOL (or LEN or KB) to see they aren't gaming the market or investors.
The above both are true LONG TERM.
If you buy in at the peak of a bubble, WRONG.
Antique Dealer:
devestment,
Yes, Yes, In 1991 I bought a California artist painting by Von Schneidow at auction (Butterfield and Butterfield) for $1500. Now worth $15,000.
In 1991 the homes in the area, Hancock Park, where I live in were selling $200,000 to $800,000. With exception of one estate which was $1,500,000.
Last Sunday I looked at an open house of a 3 bedroom bungalow for home for $1,285,000. If the estate was for sale I would guess is would be over $7,000,000 today. I look at open houses nearly every Sunday.
again, cash is king. the mother of all buying opportunities is just a couple of years away
just look at warren buffet - $41 Billion in cash, that he doesn't want to deploy until the crash is over and he can buy real estate at distressed prices.
One play that I do recommend is EBAY - why? Because the interest only crowd will be selling everything that's not bolted down to make their payments (until they're foreclosed) the next few years
But 2008 or so, when the bubble over-corrects, and we're below the mean, that's when cash will be king to buy up the HUD homes, and believe it or not you should see positive cash flow on the rental income side (vs. serious negative flow today)
cheers
You forgot "Roberert Shiller" now "Robert Shiller".
devestment:
I assume you are in Real Estate in Los Angeles. What is your current opinion of the prices and near future prices in LA?
The Dot Com bubble didn't really pop. The Fed just transferred it to housing, it's just a postponment of the inevitable deflation we're about to see. Deflation that didn't have to suck. (there was deflation from 1800 to 1900 and the world didn't end)
Panic:
If you think it will all be over by 2008 I think you're pretty optimistic. It took many markets 10 years to recover from the last bubble and that was during the hottest economic expansion in history.
With the coming retirement (and assumed divestiture of assets - including r/e) it wouldn't surprise me in the housing market was in the slums for 10-15 years.
Even very smart people were liquidation 401k plans worth hundreds of thousands of dollars in the stock meltdown without regards to the tax costs. These same people will liquidate housing just as quickly to cut losses.
EDIT: the coming baby-boomer retirement.
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