It's too bad humans don't live forever, because I'd love to be around 50 years (knock on wood), 100 years or 200 years from now to see how history recorded this bubble period of 2000 - 2006, and the late Alan Greenspan.
My guess? We'll be the laughingstock of financial history books. Worse than the Dutch in 1623. More foolish than the English in 1720, if that's possible.
Here's some thoughts from HP favorite Fleckenstein:
As I viewed the landscape last week, it struck me that what we're seeing is one of the crazier moments in modern financial history. Obviously, the late 1999/early 2000 blowoff to the mania was, by definition, complete madness, as essentially worthless businesses commanded bigger valuations than worthwhile businesses do today.
If one makes a list of the problems versus the potential good news, it doesn't seem to be an even trade. First, we must deal with all the debt created in the housing mania (as prices have stalled and are headed down), as well as near-record home inventories
When 'Bubbleonians' roamed the Earth I suspect that when the history books are written on this particular moment in time -- and, for what it's worth, right now "feels" to me like a cross between September 1987/early 2000 -- people will look back and shake their heads in wonderment at how the market could have done what it did.
Just as anyone would think, looking back to the autumn of 1973 or any other inflection point: Wow, how could market operators have been so blind?
Well, that's what the madness of crowds is all about: always wrong at the inflection points but driving you nuts as you try to exploit the opportunity.
October 20, 2006
Bubbles, the madness of crowds, and how this will all look 50 years from now
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Total Fed Credit was up only $1.5 billion last week. The big action was in the banks, which were busily creating enough credit for themselves to use to choke down a whopping $42 billion in government debt. In one week! Loans and leases fell, but idiot Americans, at the apparent top of the housing bubble, racked up another hefty $21 billion in real estate loans last week, and the people that already had houses gorged themselves on another $16 billion in home equity loans! All in one week!
I gulp in amazement. This was all helped no doubt by the foreign central banks adding to the madness by soaking up another $12 billion in government securities last week, too, after gobbling up $13 billion the week before that, and stashing them all at the Federal Reserve.
As if to compound their calumny, the damned Federal Reserve also printed up another $3.98 billion in actual cash, enough for every man, woman and child ("Now at exactly 300 million, and growing!") in the USA to have another $13.27 in cash.
Money is literally pouring out of government and Fed orifices, and my fingers were actually shaking in fear as I slammed shut the door of the famed Mogambo Bunker Of Ultimate Retreat (MBOUR).
http://www.kitco.com/ind/Daughty/oct182006.html
this will all end badly
Eh - mania yes, seen as crazy, maybe.
But going manic over houses is not crazier than going manic over tulips. Flowers? I mean, really. People can make arguments about the intrinsic value of a home - it is after all, a place to live. But flowers? That die within a few days? And serve no other purpose but to look pretty.
There will be a collapse for the record books, no doubt. But will we be seen as stupider than the tulip folks? Doubt it.
Anonymous said...
this will all end badly
Friday, October 20, 2006 8:51:52 PM
Those are the exact words I uttered about 13 months ago to the day, upon visiting a friend in Palm Beach County Florida and being told about a real estate investor he knew who was buying 11 condo conversion units.
I can't say I was right yet, though, because we are nowhere near the end.
Hey all you smart people....sell stocks short.
If you have the cojones to do so.
KB Home gets letter purporting indenture default
late Friday said it has received a letter asserting that the company is in default under the indenture related to its 6-1/4% Senior Notes due 2015. The letter states that the home builder is in default because of the company's delayed filing of its Form 10-Q for the quarter ended Aug. 31 with the Securities and Exchange Commission. However, KB said the letter does not satisfy the indenture requirements for a notice of default because it fails to take into account the 15 day period following the SEC filing date.
crispy&cole
Sorry to break the news to you here, but we have reached what is known as "The Age of Infinite Fiat", whereby governments/GSEs banks, hedge funds, and other actors can continously create fiat money, then, using fractional reserve lending, securitization and derivatives, near-infinite asset bubbles can be blown, over and over.
And the sheeple are none the wiser, even as they are destroyed in the process.
Need proof?
Just look at recent examples of complete economic collapse in Russia, Asian countries, and Argentina over the previous fifteen-years or so. Do you see any change in their monetary system?
And these countries aren't ONE-TENTH as good at clipping the flocks as the U.S. system.
Nope, you will be sorely disappointed if you believe that we will have some catastrophic crash followed by even a short period of fiscal sobriety.
Instead, you will just see a "system reset", and the game will begin anew.
Instead, you will just see a "system reset", and the game will begin anew.
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I agree butch..but in the meantime I an buying some precious metals.
Also when it does come time to reset, you think the saudis or OPEC for that matter change the oil peg from the dollar to the Euro or some factsimaly there of?
When the crash comes it will be a biggie, as in the federal government will crash too.
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Lord I hope to live to see this day..especially to see the Fed Reserve abolished.
butch, you've presented sobering analysis, but no recommendations. What are you doing in the near term to prepare?
Keith, your post misses a huge point.
In 100 years, no one will remember. No one. And that's precisely the reason we're in the mess we're in now.
Because no one remembers the Great Depression.
In the Depression, the failure of the stock market led to the failure of the banks led to the failure of the real estate market, and on and on. Roosevelt signed into law a mass of well-crafted banking and securities legislation, designed as a massive levee to contain future crashes, and to prevent them from ever again swelling into another tsunami to sweep away every sector of the economy.
It worked. For fifty years, it worked.
But then a new generation of rentiers came along. They didn't like those restrictions, which stood in the way of more massive profits.
So, unthinkingly, and with neither foresight nor memory, they tore the levees down. Glass-Steagall fell. Hedge fund suitability rules fell. All of it fell.
And that's where we are now. We're watching a giant wave fall from its crest. Its crash will overwhelm everything. Stocks. Banks. Insurance. Businesses. Consumers. There are no levees left to protect us.
No one ever remembers, Keith. Not when there's good money to be made in not remembering.
Borkafatty, I can see you now with all those gold and silver coins in hiding. :)
To answer those questions regarding "What can we do?", the answer is simple.
Nothing.
For it is far too late in the game to change the system. As I pointed out in my previous post, the Gov't-Banking-Industiral-Complex (GBIC) is so entrenched, and the sheeple are so stupid, lazy and ignorant, that even WHEN, not if, the system implodes/explodes, we have a "system reset" and the whole thing just starts over.
This is why I specifically pointed out Russia, Asia, and Argentina.
Do you see a return to the gold standard in any of these countries?
The abolition of fiat/fractional reserve/central banking?
The elimation of government interference in markets?
No.
And don't think you're just gonna buy gold, silver, guns, food and come through just fine. First off, I admonish you to read the various Patriot Acts to see just how few economic freedoms you really have. Then proceed to look at all the laws regarding regulating how much of "your" money you can withdraw from the bank, or financial privacy in general. Then you may get an inkling of what I am speaking.
So, just sit back, relax and enjoy the ride into economic hell.
Yup you are right butch any withdrawl over $5000 is questioned..been there done that.
this is why i leave nothing but my monthly utility bill money in my checking account. Dont trust the Bastards..I try and help my friends..but I get that rolled eye look.
Borkafatty, Your a janitor! You only have enough money in your checking account for the utility bill!
Borkafatty, Your a janitor! You only have enough money in your checking account for the utility bill!
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No.1 I am not a janitor..
No.2 I keep my cash at home in a safe..that way there when they lock the doors I have mine...
ya ya I have a money Market account to..whatever.
Instead, you will just see a "system reset", and the game will begin anew.
A reset was possible because the US and other superpowers were stable.
If it's the US itself, I'm not sure we'll see the same reaction.
Hear me now and believe me later, you HP girlie men. The Fed and other central banks are PUMPED UP. And they can keep pumping long after you doomsayers give up and/or die. There is no limit to the amount of credit and liquidity they can create. What part of no limit don't you understand?
There is nothing sadder than to see grown men sitting around at their keyboards ignoring the obvious and predicting a cataclysm that cannot and will not happen. I don't know if I should pummel you or milk you.
"Hear me now and believe me later, you HP girlie men. The Fed and other central banks are PUMPED UP. And they can keep pumping long after you doomsayers give up and/or die. There is no limit to the amount of credit and liquidity they can create. What part of no limit don't you understand?"
"There is nothing sadder than to see grown men sitting around at their keyboards ignoring the obvious and predicting a cataclysm that cannot and will not happen. I don't know if I should pummel you or milk you."
The central bank of Weimar Germany was also able to print unlimited quantities of money. How did that work out?
There is nothing sadder than to see grown men sitting around at their keyboards ignoring the obvious and predicting a cataclysm that cannot and will not happen. I don't know if I should pummel you or milk you.
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Milk us so what your saying you want to suck on our nipples..hmm who is the girle man here? You couldn't pummel a blowup doll.
If the central banks print too much, you'll be amazed how cheap houses get -- in terms of gold and/or silver.
The central bank of Weimar Germany was also able to print unlimited quantities of money. How did that work out?
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True story anonymous..these jokers think because they have the Fed on Ye Old Printing press that they are
untouchable I laugh, The Roman Republic started out as what historians call a 'Hegemonic Empire'. such as the United States, and it will fall the same way.
Maybe not in my life time..but our grandchildren are going to hate us for sure..or at least say WTF?>
"The central bank of Weimar Germany was also able to print unlimited quantities of money. How did that work out?"
Look girlie man stooge, I was talking about central banks, plural, not one lonely bank with a puny printing press. They are working as a TEAM, somethhing your four-eyes don't seem to understand. They are trying to keep you fat cows pumped up with all the cash you need, and instead of thanking them, you sit here and cry like little girls.
Oh my, the HP girlie men are agry that I called them on their latest hissy fit of doom and gloom. Real men like Bernanke don't care if bread costs $5 because they can just PUMP UP wages to let sissy boys like you buy a loaf and make your marshmallow sandwiches. Maybe your Mom will even cut the crusts off for you. You would like that wouldn't you?
When Joe at the 7-11 makes $75 an hour, nobody will care that a 600SF condo costs $500K. See how that works girlie man?
Oh my, the HP girlie men are agry that I called them on their latest hissy fit of doom and gloom. Real men like Bernanke don't care if bread costs $5 because they can just PUMP UP wages to let sissy boys like you buy a loaf and make your marshmallow sandwiches. Maybe your Mom will even cut the crusts off for you. You would like that wouldn't you?
When Joe at the 7-11 makes $75 an hour, nobody will care that a 600SF condo costs $500K. See how that works girlie man?
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Bartender can you give me what that guy at the end of the bar is drinking..i need to get drunk to.
The guy in the Pink shirt?
No!
The Guy with the Bernanke for president button.
Happy Zimbabwe day.
"When Joe at the 7-11 makes $75 an hour..."
High inflation does not mean high WAGE inflation. That's the magic of globalization. The high-skill high paying jobs are getting offshored, and there are milions of illegal immigrants to depress pay scales at the lower end. Maybe Joe will make $75 an hour, but he'll be spending it on $100 sixpacks of Coors and $80 a gallon gasoline. Wage increases will lag cost of living increases this time around. By a lot.
Wage increases will lag cost of living increases this time around.
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here in lies a big part of the big picture problem.
stagnet wage growth, really since the mid 80's.
This will end badly- for everyone. I used to drive by these McMansion's when they first started going up like wildfire, and think "how can anyone afford the mortagage on one of these things??" I would think to myself-where do these people work? I make a pretty good living, and I can't afford one of these things....That was before I heard of all the wierd loans that were being used. Gut instinct should have told most people that an ARM loan is not a good thing. Gut instinct told ME that, and I am no financial wizard. I guess people forget the saying that there is no free lunch. Ditto for a HELOC.
I truly am just a "janitor", and even I can see that something is rotten in Denmark (or in the stock market numbers...).what I mean is this- given the current financal state of the country-you would THINK that the stock market would be going DOWN not UP to record highs?? Granted, I don't play that stock market, and am not in the financial industry.....
This is a great blog. I have sent links to "sheeple" that I like and want to be informed.
Carlsbad auction flops...
No homes sold and prices reduced 100s of K...
http://www.signonsandiego.com/news/northcounty/20061022-9999-1mi22auction.html
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