September 28, 2006

We're going to have fun dragging "there is no housing bubble" articles and authors out for years to come

Sure, the corrupt David Lereah is an obvious one. The Henry Blodgett of the latest bubble. And the new town idiot from Harvard will be run out of town no doubt as well, and mocked for a generation.

Then you have other biased, corrupt members of the REIC like the Bloodhound Realty dolt, Bob Toll, etc. But I understand where their cheerleading came from - their livelihoods rested on the bubble going up and up.

But there are so many more lurking out there. Clueless "experts" who couldn't see the obvious writing on the wall. Nincompoops who never bothered to read about historical manias and crashes, and truly thought "it's different this time" and "the fundamentals don't matter anymore".

Here's just one of many "there is no housing bubble" articles from last year:

There is no housing bubble in the USA: housing activity will remain at high levels in 2005 and beyond by James F. Smith

There is no evidence of a housing "bubble" in the United States and housing demand should stay strong for years to come.

Three major factors lead to this conclusion.

First, the 77 million baby boomers are approaching the peak home ownership ages of 65-75 (over 83.0 percent versus a national average in 2004 of 69.0 percent).

Second, immigrants, a growing share of the U.S. population, tend to buy houses ten years later than people born in the United States of the same income group and family size.

Third, mortgage rates are not likely to go high enough (8.0 percent or more for 30-year fixed rate mortgages) to put a crimp in demand.

Despite some areas of concern, overall homeowners' equity is at record levels above $9 trillion. Delinquencies are still less than one percent of mortgages outstanding.

29 comments: said...

I just noticed something from that article. Notice how he says Americans have $9 trillion in equity in their homes.

Now, I remember seeing that over the past 5 years the value of real estate in the US has increased from $10 trillion to $20 trillion, that's a $10 trillion increase.

Is 90% of the equity people have in their homes about to be wiped out?!?

Bill said...

OT: But great points...flame away after you read Sheeple.

Wars and Debts and Taxes, Oh My!

Recently, an Associated Press report reaffirmed to me that the leadership of the two major political parties in America are totally in favor of continuing war in both Afghanistan and Iraq.

The Senate agreed to spend an additional $63 billion for military operations in Iraq and Afghanistan as lawmakers passed a massive bill that funds the Pentagon.

The bill sailed through by a vote of 98-0

I was immediately reminded of a common sense observation by Thomas Paine:

"In reviewing the history of the English Government, its wars and its taxes, a bystander, not blinded by prejudice nor warped by interest, would declare that taxes were not raised to carry on wars, but that wars were raised to carry on taxes."

Interestingly enough, that doesn't sound much different than what we experience today!


There are only a few politicians that are truly opposed to war. Some people are amazed or even angry when I state my position; that war is not the fault of just Bush and the Republican Party, but the Democratic Party as well; they are equally responsible for starting, fueling, and funding the war machine.

If my memory hasn't failed yet, it wasn't just the Republican Party that got us into this horrible mess. The Democrats voted for it as well, promoted it as a necessity, and even bombed Iraq on a regular basis throughout the 1990s; all the while aggressively supporting UN sanctions that resulted in over one million innocents dead.

Not only did both parties authorize the invasion en masse, they continue to join together to overwhelmingly approve billions more dollars to continue the killing.

So, even though Bush will someday leave office and cease being a "war president," we must start facing the fact that it's not just him or his neo-conned Republican party that are guilty of war crimes; it's the American political machine, fronted by both the Republicans and Democrats, that is completely addicted to the power and profits of warfare. It's the American political machine that we must resist.

The only way to improve America's image is to end our wars immediately. We must also bring home all our troops, not only from Iraq and Afghanistan, but also from the more than 100 other countries where the U.S. government interferes with its so-called military presence. Of course, once we achieve this, those Americans who would nonetheless wish to leave their families and jobs to help oppressed people overseas would still be free to do so.

But, such a "withdrawal" will never happen as long as the Republican and Democratic parties are ruling over us.

By now, it's become rather clear to those of us "not blinded by prejudice nor warped by interest" that even when the People want peace, the two major parties pursue war.

Another 98-0 vote should make that quite obvious.


The standard belief is that all American wars have been fought to "protect freedom." On the contrary, these wars have been the primary impetus for the growth of centralized power in the federal government. Wars have eaten away at our liberty, crippled our economy, intensified our national debt and shamed our image as the "land of the free." We have lost freedom because of these wars; not secured it as the politicians have told us.

Simply stated, the Constitution allows for the commencement of war only after a declaration of war from the Congress. By waging wars without the constitutionally required declaration of war, the president has blatantly violated the Constitution.

Some people have tried to tell me that a declaration of war wasn't necessary after Congress delegated this power to president in late 2002. They claim that this was a legal substitute for the Constitutionally-required Congressional declaration of war.

This is utter nonsense.

First of all, the power to "declare war" was given to Congress by the Framers so that the legislature - the branch most closely tied to the People, whose money and lives would be put at risk - would be making the decision of whether or not war would commence. The commander-in-chief only has the power to wage war once war has been declared. It's the representatives of the People who have the power to declare war. Such power is clearly enumerated in Article I, Section 8 of the Constitution, and I encourage you to read it for yourself.

Furthermore, in accordance with the Tenth Amendment, the Supreme Court has long held it to be illegal for any branch of the federal government to delegate or transfer its constitutional powers to any other person or branch of government.

Simply put, unless a direct attack is being repelled, Congress is where war starts. Period.

The Constitution is the supreme law of the land that We the People have instituted to limit the actions of federal officials. Like it or not, politicians must abide by its restrictions on power. If they don't like a particular part of the Constitution, or even if they think it's outdated, the only appropriate action is to call for a Constitutional Amendment, not just ignore the law.

By waging wars without a Congressional declaration, the Executive branch has repeatedly violated the Constitution. By delegating its power to declare war to the president, the Congress has repeatedly violated the Constitution as well.


Beginning with Harry Truman and the Korean War, Democrat and Republican presidents alike have taken the position that it's no longer necessary for Congress to declare war. Presidents send armed forces to fight wars all over the world without Congressional declarations.

The sad reality, though, is that Congress can stop or even prevent such foreign entanglements at any time by simply refusing to finance them. Such power is not insubstantial. The current war in Iraq has now been going on for over 15 years, has spanned the administration of three presidents, and multiple congresses under the control of both political parties. This proves that Congress is just as responsible as the Executive for this unconstitutional war.

So, in Iraq, we see yet another failure of our vaunted Constitutional Republic to maintain a peaceful America.

Thus, the Constitution has become little more than a glorified sham, as Congress and the Executive have habitually succeeded in using it as a cover to violate our inalienable rights. Since our current wars were started on unconstitutional grounds, any further funding and continuation of them is illegal and unconstitutional. In this sense, any funding bills approved by the Congress are illegitimate.

So, unfortunately, unless we do something ourselves, we're stuck waiting for an unconstitutional Congress to take the lead. With yet another war funding bill "sailing through the Senate," the prospects for peace don't look too good.

The painful truth is that Democrats and Republicans aren't going to end this war. We will, by refusing to play by their rules.


As the founders stated so often, the greatest threat to our liberty is our own government. This is the only reason we even have the Constitution and the Bill of Rights. If our government wasn't dangerous to freedom, these documents wouldn't even be necessary.

Historically, what is the number one way that governments take away freedoms from the People? The founders knew quite well; through its military. This is why many of the founders vehemently opposed a standing army; a professional military force. They knew that such an institution would grow into a beast, and be used to involve the country in dangerous, costly, destructive and foolish wars. Even more so, they warned that politicians would eventually use the troops to ensure a subservient citizenry at home.

There is only one solution to these threats to our liberty and safety. We must finally act on the warnings of the Founders against standing armies. If we would have dismantled the massive American military empire years ago, the federal government wouldn't have had the power to create the catastrophe we face today. They wouldn't have had the ability to set up a massive military presence throughout the Middle East. Thus, they would never have been able to kill over a million in Iraq with unconstitutional wars, sanctions, and invasions. Without all this death, we wouldn't have had terrorist attacks on our country, and therefore, we wouldn't have had a "war on terrorism." Without the war on terror, we never would have experienced the Patriot Act, warrantless spying, secret courts, military tribunals, rendition flights, and other attacks on our rights.

None of this would have been surprising to the founders. James Madison gave us ample warning, "Of all the enemies to public liberty, war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other. War is the parent of armies; from these proceed debts and taxes; and armies, and debts, and taxes are the known instruments for bringing the many under the domination of the few."


As stated so clearly in the Declaration of Independence, the American people have every right to write a new declaration of independence from the illegitimate, unlawful, and unconstitutional acts of their rulers. Such rights are inalienable and absolute in all people. Rights cannot be altered or abolished; governments can.

In fact, Thomas Jefferson, the author of the Declaration, felt that governments should be abolished periodically just to keep political leaders in check. Shortly before the Constitution was ratified, he wrote to Abigail Adams, "The spirit of resistance to government is so valuable on certain occasions that I wish it to be always kept alive."

My hope is that such a spirit of resistance will rise once again before too many more innocent lives are lost.

Anonymous said...

Borkafatty the janitor, All us HP'ers read three comments from every post, All from Borkafatty the "JANITOR"
Do you really think all us HP'ers need all your input??
I wouldnt ask a janitor what time it was let alone what should I do with my finances.
Borka the janitor, Borka the janitor, Borka the part time janitor.

Anonymous said...

"First, the 77 million baby boomers are approaching the peak home ownership ages of 65-75 (over 83.0 percent versus a national average in 2004 of 69.0 percent)."

::: Irrelevant. It doesn't matter how many "Baby Boomers" there are to purchase houses. What matters is how many of them can afford to purchase houses and can find someone to buy their current house.

"Second, immigrants, a growing share of the U.S. population, tend to buy houses ten years later than people born in the United States of the same income group and family size."

::: Irrelevant. What matters is how many of these immigrants can afford to buy a house. How many immigrants do you know who make 60K-80K per year? Exactly.

"Third, mortgage rates are not likely to go high enough (8.0 percent or more for 30-year fixed rate mortgages) to put a crimp in demand."

::: Mostly Irrelevant. Given how many houses have been built and how many ARM loans there are out there, mortgage rates don't have to go that high in absolute terms to cause damage - a loan that goes from 3.5 percent to 7 percent loan on a $500K house will double the payment and most likely sink the borrower.

Anonymous said...

I'm a theoretical physicist. I have a PhD and an ivy league degree. I have no job. Janitors have jobs. They won't be going to India and & China. Janitors have unions. I have nothing.

Who's the stupid one?

Anonymous said...

In the 1980's the joke I heard as an undergraduate in physics was:

What do you do with Ph.D. degree in theoretical physics?

Answer: Drive a cab!

I guess you are a theoretical physicist, since theoretically, you could be a physicist...if you had a job in physics! LOL!

Anonymous said...

Now go drive a cab!

Anonymous said...

"Despite some areas of concern, overall homeowners' equity is at record levels above $9 trillion. Delinquencies are still less than one percent of mortgages outstanding..."

(Reply) That "$9 trillion" is NOT "equity". It is nothing more than an accounting fiction used to placate the sheeple and to give the banksters/mortgage monsters something else to use to help the sheeps bury themselves further in debt.

Indeed, one of the greatest scams ever perpetrated on the hapless, gullible masses has been the notion of "borrow against your home equity" fraud.

As I have pointed out before on this blog, offer your "friendly banker" to actually share in the equity gain or loss with you (he ONLY gets paid when you sell the house and IF there is any "euqity left over, you will split it with him) and see his reaction.

Bill said...
This comment has been removed by a blog administrator.
autofx in Phx said...

Keith will love this.

autofx in Phx said...

borkafatty's inability to correctly spell d@ucheb@g confirms his occupational identity as an engineer.

Janitors know how to spell that.

Anonymous said...

gummint hi-jacked.
housing price collapse...


(Check out the very funny movie "A Mighty Wind" for the source of this ideal FB 'catch phrase' - Keith, please save it up 'til next year)

Bill said...

Oh and i prefer Maintenance Engineer

get it right asswhole..

Did i spell that correct Autofx. __!__

Anonymous said...

The problem with the immigrant story is that 8 families only buy 1 house. Then they park 6 cars on the lawn. The golden state is broken.

Anonymous said...

I'm sorry borkafatty, I did'nt mean to call you a janitor. anyway, What should I do with all my money? I suppose invest it in urinal cakes or something? floor wax? Swiffers? gum remover?

Anonymous said...

Mop handles? Flourescent lightbulbs? Maybe we could start our own business together? we could call it "Janitors r us" or "kentucky fried janitors" or "Dairy janitors" that DJ for short.

Bill said...
This comment has been removed by a blog administrator.
Bill said...

Mop handles!

Dude I am sure you have had enough experience with Mop Handles,
you know they are made to sweep floors right? not to go up your ass...But you knew that I am sure.

Anonymous said...

That makes 5 comments on one post bork.

Anonymous said...


Disgorge! said...

From Hays Advisory, a respected financial letter:

"Hays says boldly, interest rates, currency, and commodities, which it calls the "three vigilantes" are "coming home, i.e. stabilizing.
This enables Hays to return to its triumphalist tale, with upper case emphasis: "The next few decades are going to witness this massive and wonderful build-out phase of the Technology Revolution, which means heightened Productivity and spreading Democracy. "We are entering this stage with massive negativity ... of course. With the S&P 500 the most under-valued of any time in the last 30 years.
"No one ever believes as new powerful trends are just beginning. But we are now about to reap the rewards of 32 years of massive reform since 1974 in this country. We've whipped inflation. We've whipped Communism and Socialism. They are not dead, but obviously on the run. We've whipped myriad legions of productivity destroyers, and now to the victor go the spoils."

Anonymous said...

Let's all wait to see what our fearless leader (borkafatty) has to say about this topic before we make any rash decisions!

Speaking of rash's, Hey borka, how's your crotch rot?

Anonymous said...

Ooohhh, looks like i'm being called out by dorkafaggy!

Man, i'm gonna get my cyber ass beat by a engineer with two jobs!

Anonymous said...

Hey borka......
i gotta job for ya!

Anonymous said...

Oh No, borks taking this site with a grain of salt!!

What'll we do?

blogger said...

borka I just wasted 30 seconds of my life deleting posts of yours. if you feel you must swear to make a point, at least spell F*ck right

got it? good.

Bill said...

Keith bite me! BITE ME~! did i spell that correct.

7, Homo!

Anonymous said...

Housing Headed to the Woodshed
By Doug Kass
Street Insight Contributor
9/29/2006 10:14 AM EDT


Editor's note: This column by Doug Kass is a special bonus for and RealMoney readers. It first appeared on Street Insight on Sept. 28 at 8:29 a.m. EDT. To sign up for Street Insight, where you can read Kass' commentary in real time, please click here.

"We do expect an adjustment in home prices to last several months, as we work through a buildup in the inventory of homes on the market. ...This is the price correction we've been expecting -- with sales stabilizing, we should go back to positive price growth early next year."
-- David Lereah, economist, National Association of Realtors

The New York Times, September 2006


Lereah, whom I debated on CNBC's "Town Hall Special: The Real Estate Boom," in April 2005, is a very nice man and a capable economist. I recently had a most pleasant conversation with him at CNBC studios two months ago prior to a CNBC Survival special on housing hosted by Bill Griffeth.

Lereah is also the author of the book Are You Missing the Real Estate Boom? Why Home Values and Other Real Estate Investment Will Climb Through The End of the Decade -- And How to Profit From Them.

Not the most timely publication, Lereah's book was published within four months of the statistical peak in housing activity and prices in 2005. In fact, the paperback version came out in February 2006, when the down cycle was beginning to escalate.

I am in no way trying to embarrass Lereah. I am just stating the facts and my opinions, like I try to do when I admit my (many) views and mistakes on Street Insight. Don't think for a minute that the National Association of Realtors' Lereah was expecting a price correction last year, as stated in this month's New York Times interview above.

Back in April 2005 (on the CNBC special), Lereah and the managements of Hovnavian (HOV) , Prudential Realty and LendingTree were fully convinced (you might say glib) that the housing market was destined for a long boom. They saw a new paradigm of uninterrupted, noncyclical growth. One month later, Lereah was quoted as saying, "We simply don't have enough homes on the market to meet demand."

That was then, and it doesn't pay to dwell on the past. So let's look into the future. Unfortunately, many within the homebuilding business continue to talk their book despite clear trends that do not support their bullish view.

Forgive my preoccupation with the housing markets, but it has had a disproportionate role in economic growth since 2000 (and maybe before). This merits a continued discussion as to the possible slope of the decline, and the nature of the inevitable recovery. The housing cycle, among other variables, is a key influence on aggregate economic activity.

I expect a hard landing, and I have roughly quantified my expectations as to when the housing market will bottom (2009). It is folly to think that an unprecedented rise in home prices (in real and nominal terms) will be over in relatively short order. Yet this has been suggested by Lereah and others.

Housing cycles are long, and they play out over many years. We have learned that the peaks are surprisingly high and the up cycles unexpectedly long. Unfortunately, so too are the depth and duration of the down cycles.

Days/months inventory have only begun to rise as the glut of homes will be exacerbated by continued overbuilding, disposition of land, and the selloff of homes by flippers. And, as discussed previously, the consumer enters the current downturn in a weak position. Consumers are highly leveraged after the overconsumption binge of the last decade and after massive cashouts of home equity.

Consider the dramatic sale of D.R. Horton (DHI) homes in the Daytona Beach market in Florida. Please note the message at the bottom of this advertisement: "Realtors Warmly Welcomed!" That's never a good sign.

These discounts include up to $90,000 a unit or as much as 30% (plus a free washer/dryer and refrigerator). This is not unusual: Most homebuilders have offered large price discounts and/or large incentives (vacations, car leases, reduced mortgage rates, etc.) for several months.

For a moment, let's suppose that you were a flipper in the Daytona Beach D.R. Horton community who owned and speculated on a few homes without the intention of moving in. You just took a 30% haircut on your inventory, not to mention carrying costs of a mortgage, real estate taxes and expenses to keep up the property (landscaping, utilities, etc.).

And when the unit is finally sold, you have to pay a real estate agent a 6% commission. That speculator likely put up less than 20% up front (probably far less), and is now out, by my calculation about 50%. But making the situation worse is this: Who wants to buy a used home when you can get a new one like one in the advertisement above?

The ramifications of an extended housing downturn are broad -- far broader than many realize. For example, the apartment REITS, a sector I am short, argue that there has been no new construction, so supply/demand favors an escalation in rents. But just wait until speculators, unable to sell their condominiums and homes, resort to renting the units.

Or consider the implications for building materials companies like Eagle Materials (EXP) , which warned on Tuesday. What about the sale of pickup trucks, which are often used on the construction trade? What does an extended downturn portend for carpet, gypsum, lumber and appliance manufacturers? Or for subprime and some prime lenders? And what do you suppose happens to the plethora of real estate agents and mortgage brokers? (Do they become daytraders again?)

You get the point: The housing decline is just beginning to be felt. The fixed-income market recognizes this. But for now, equity market participants don't. Common sense has taken a sabbatical.

Don't believe the housing soft-landing advocates, and do recognize the broad economic impact that a protracted downturn will have on our economy.

The worst is yet to come.


At time of publication, Kass and/or his funds had no positons in stocks mentioned.

Anonymous said...

three monkeys up front, one in the back!

..... sounds like borkafatt on a date