OK, it's a stretch, but there is some good that came of the double bubbles:
1) Over-Capacity
All those fiber optic lines, all those routers, all those condos and houses - the infrastructure built during the double bubble will be utilized for years to come. People got cheap internet, cheap phone calls and cheap television with the dot-com bubble.
Now a generation ahead will have cheap (really, really cheap) housing. A reader posted recently the miles and miles of houses in West Phoenix heading to LA. Families 5 years from now will live in those houses for pennies on the dollar. Families that might not have been able to afford a house.
Young professionals will graduate from college and be able to get a nice pad in downtown San Diego, downtown Miami, for nothing.
Capacity is a great thing. Bad if you invested in the building of the over-capacity (Global Crossing, MCI, Cisco, The Flipper). Good if you came in later.
2) Trust in our leaders and system will be decimated
Now we look cautiously at business leaders, stock brokers and analysts who corruptly pumped their stocks while they were cooking the books or dumping. And the accountants who helped cook the books.
Same with the housing bubble - we'll never trust a realtor or mortgage broker again - and this bubble will actually hasten the collapse of the realtor profession.
We'll also lose trust in our politicians, the Fed, builders, the NAR, the media and get-rich-quick guys. This is a good thing.
3) America will learn about investing
Remember the "new economy" and "it's different this time" crowd pumping Dow 36,000 and NASDAQ 10,000? Remember "population trends, they're not making more land & housing never goes down" crowd this time?
Remember the "P/E doesn't matter" and "Ownership costs versus Rental Income" arguments being tossed to the wayside during the double bubble?
Well, PE does matter. Rent to ownership cost and cash flow does matter. And it NEVER is different this time. Americans who got kicked in the teeth both times for ignoring the fundamentals will learn (oh, god, let them learn) this time. And that's a good thing.
4) The "get rich quick" guy, the "flipper", the "day trader" will be seen as fools
Here's a unique and lost concept for Americans - Get a job. Work hard. Save. Make things. After this double bubble, the ponzi schemes, the get rich late night TV idiots, all will be discredited. At least for a generation. And Americans will need to to figure out how to make money in a global economy through intelligence and hard work, versus selling each other their dot-com stock or houses.
Or they'll wither away.
5) Any other ideas on how the double-bubble is a good thing?
April 20, 2006
Why the dot-com and housing bubbles were good for America
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16 comments:
No.
Not while there are ME nations left that we can target with our free market propaganda and advanced weaponry.
I do not agree Boobus Americanus will always look for a get rich quick scheme. Greed is human nature. I mean seriouily I know people who got blown up in the internut boom and walked, no ran into the real estate bubble in S. Florida. The way to wealth is to grind it out work, save, and invest. Notice I said invest not speculate.
The problem is that two generations (X&Y) have been conditioned that wealth is NOT derived from savings as a result of hard work; rather it's acquired from utilization of the "greater fool" theory in relation to asset bubbles.
Shows such as Mad Money & Flip this House bring in a whole group of wannabes that do not understand the difference between investing in a diversified portfolio and those who speculate and keep all the eggs in one basket.
Lessons are best learned through hard knocks. Maybe a double sucker punch of EXPENSIVE energy combined with a housing implosion will scar these two generations forever, just like my grandparents were scarred from the great depression.
I think you hit the nail right squre on the head Moman.
We have conditioned 2 generations to believe that money truly grows on trees.
Hiring the twenty something today is amazing. Some (not all) really do not grasp the concept that you must work your way toward success and gradually reap those benefits.Not get the whole package in your lap at once the day your hired. It's called proving yourself.
How about that a generation will re-learn the lost virtues of savings, managing money, and the dangers of debt.
I love bubbles! During the internet bubble I sold my AAPL stock for a 200% profit which enabled me to buy my house which I sold for a 350% profit after 4 years. Easy money when you follow the timeless principle of buy low-sell high.
The problem with bubbles is that most people ride them all the way to the bottom. Gambling and stock trading are very similar and now add house flipping.
Many people rode Yahoo to worthless expecting that every next day (each pull) would bring the big bucks back.
Sure I hear the stories of people at work who sold houses for $100k profit but for each story like that I hear 20 that are hanging on believing that 2007 will be even better.
And the slacker baby boomers are any better. No savings, only in it for themsevles, all divorced, waiting for the greatest generation to die so they can to their lifetime of savings and blow it on vacations and other bullshit. Baby boomer generation pure slackers.
What did realtors do to cause such outrage that I read on this site on a daily basis??
As a realtor myself, I'd like an explanation. See I never told anyone to buy a house to make money. I have helped people invest in homes and purchase homes to reside in. No other realtor that I know forcably coereced anyone into buying or selling their property.
Please clairfy for me. Thanks.
Was that a sputter?
We might have seen a hint of a slowdown on Tuesday, when the report on March housing starts came in. Starts declined 6.8 percent overall, and single-family-housing starts fell 12 percent. For the first time since December, housing starts were at an annual pace of less than 2 million.
It wasn't a surprise and is no big deal, says Jeff Lyons, president of RealEstate.com. "It's still going to be an incredibly strong year," he says, adding that housing starts were stronger in the first three months of this year than they were in the first quarter of 2005, the record year.
"It's going to take us a little time to work out of the heights of the last couple of years to a more sustainable level," Lyons says. Rising interest rates "make it a little tougher for people to buy homes, so things slow down a bit."
But he still expects 2006 to be the third-strongest year on record for housing starts, after 2005 and 2004
found this on bankrate.com...more wind from a windbag.
Anonymous realtor,I can give you a few reasons why your "profession" (shyeah, right) is so hated. This is going to get long.
1) In my experience, R.E. agents push people to buy more than they want or need. When I was looking at condos in VA years ago, I told the realtor I did not want to look at anything over $80k, because I was only making $30k a year; I believe in living within my means, and I plan for bad things like job loss. She insisted on pulling listings on places that were over $100k. I fired her. Why do realtors do this? Do they think we are lying? Do they think we are too stupid to know what we can afford (or, more appropriately in my case, how much we want to pay)? Or are they just greedy assholes? BTW, I was able to find a very nice place for $76k.
2) When prices are high, which they have been recently, you get paid a lot for doing practically nothing. You sell a house for $500k; your brokerage gets 3% of that ($15k), and the individual agent gets a percentage of that. The agent's cut is based on things like past sales and time with the broker. Let's say it's 50%. So you get $7000 for doing what? Driving people around in your leased BMW, pushing them to buy more than they want, pulling listings from a computer, and babysitting your clients at closing. You sell one $500k house a month (which in the past several years was cake in a lot of markets), and you're making gross income of $84k. Not bad for doing limited "work." And many agents make more than a 50% cut, so that gross income can go higher and higher. And if you are both the listing and selling agent, fuggidabouddit.
3) Most agents are morons. I'm not saying YOU are, because I don't know you, but I've met my share of idiot agents. Prime example: the agent I used to buy in NM. I told her that I have a 50-lb dog, so a "no pets" or "small pets" condo association rule would NOT be acceptable. She pulls several listings, I fly out from VA to look at them over a weekend, only to find out, WHEN WE PHYSICALLY VISIT the complexes, they are "no pets." She obvy didn't listen, ya think? She finally finds me a condo at an acceptable price (after trying to talk me higher, of course), tells me "pets ok", so I buy the condo. After closing, I get the condo handbook, which tells me "dogs under 30 lbs only." I worked it out with the association, BUT the agent did not do her JOB. She was supposed to work in my best interests, and in this case that meant finding a place where I could have my dog. To top it off, she mailed me the set of keys I would need to get into the place--I requested this, because I wasn't moving until a couple of months later. I get the keys fine, drive across the country, get into ABQ around 8pm, and one of the keys DOES NOT WORK. I couldn't get into my condo! I had to pay a locksmith after-hours rates to get me in. I bet she still wonders why I don't answer her emails or phone calls. Ditzy bitch. So is she stupid, or just malicious?
Anyone have anything else to add?
How about those greedy selfish baby boomer pigs that are in charge during these bubbles? It's not Gen X&Y that are in power.
realtors - don't take it personally. it doesn't matter that most of your profession are clueless high school grads with no direction in life
the reason we're against realtors is the system - you should not make a commission percentage for what you do - an hourly rate, sure. a set amount, sure. but commission biases you to sell at any price, buy at any price and not work for the buyer or seller. you work for your commission.
that means too that you pay off mortgage brokers to "make the numbers work". you pay off appraisers to "make the numbers work"
commissions make you a whore.
so it's the profession that needs to be fixed.
and the internet will do that for you.
Thanks for the response. Let me ask all of you, whatever it is that you do, whatever field you are in... are there idiots among you?? Or is your profession perfect in every way??
In my practice, last year I offered listing clients a flat rate fee to handle all of the doc's, all of the inspection appointments, and some of the liability in the deal for a flat rate of $3500. I asked no money up front for advertising (but not many ads were needed last year) and that I would add the advertising bill to the listing agreement. I also asked the client to pay the buyers agent between 2.5% and 3%.
I thought this was a great program. However when I offered it, all of the clients chose to simply list the home and pay a commission percentage rate. I even stressed to them that my plan would save them perhaps a few thousand dollars to many thousands of dollars. No one took me up on the offer.
Also last year it was so competive for listings that fellow realtors severely cut commission rates to clients. Maybe not in every market I realize, but it's what happened in many cases.
Now though because of the slow market and the need to advertise is back with full vengeance, I see the the commission rates are going back up.
Now I'm a good listener, I don't do the things that were given as examples here. Lately some folks say they can only qualify for homes around $120,000, but I don't have any homes on the market that would fulfill their needs nor a quality product for them at that price threshold. Do I try to sell them a higher priced home?? Nope. Too much trouble.
Yes, I do know realtors who are motivated to sell a higher priced home, sometimes push harder on a client to do so. I also serve on the professional standards committee in my state and hear cases from the general public that make complaints against such realtors. Those realtors who get complaints lodged against them by the general public often don't make it out of those hearings unscathed.
I actually wish more folks would file complaints against such realtors.
Anyway, thanks again for the response. Oh, and please tell more people to rent rent rent. Affect that market as much as you can.
While I am a realtor, its not all I do. And while I'm not stuggling nor in a position to struggle (because I'm not leveraged to the hilt), I'd still like to raise the rents. More passive income please.
too bad you blew it said...
"Whoah...sounds like maybe we've got a "bitter realtor" here.
Too bad, entertained, you were redeeming your profession up til that last nasty comment.
I guess it's true, ALL realtors are jerks. Sheesh. "
Then I guess the blog's author is also a jerk for wanting people to invest in gold, since it would help him make money too.
What I do as an investor has nothing to do with my real estate practice. All I am saying is all this talk of how renting will be better than owning is going to help me in the same manner as people buying gold is going to help Keith.
It's alright for Keith to tell us about his investments and offer his opinion on things one should buy... because he trashes on realtors.
Okay I get it, I know the rules now.
didja have any problems with the rest of my post?? Nope.
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