October 20, 2007

Top 10 reasons why this housing and economic crash will be the biggest ever

1) Leverage on a level never before seen
2) Millions of unregulated enablers propagating The Great Housing Lie (for commissions of course)

3) Stability is in the end destabilizing (Minsky)

4) Financial innovation run amok (CDO's, SIV's, Option-ARMs, Negative-Am, Interest-Only)

5) Globalization of risk and information

6) REIC corruption (shout out to Angelo, Nicholas and Bob)

7) A corporate MSM who did not do their jobs

8) Stupid Fed policy

9) The unchecked greed and ignorance of the greediest and most ignorant generation ever (baby boomers)

10) Blogs

What'd I miss?

28 comments:

GreedKills said...

The Seven Deadly Sins...

Lust

Gluttony

Greed

Sloth

Wrath

Envy

Pride

Yup...sums it up pretty good.

Anonymous said...

0. Peak Oil

Anonymous said...

This is an unpopular opinion here but not everyone who bought at the top was greedy, although most were poorly informed.

Waay back in 1989, during the last bubble we bought our first home in Montgomery Village, MD at the top. We naively believed that it was a starter home, and in a few years we'd have paid down the equity sufficiently to buy a larger home. We took out a 30 year mortgage with 5% down on an FHA loan. An unexpected business transfer forced us to sell the house three years later. With commissions, lost actual value, and extortion from the only buyer who made an offer we had to borrow money to close.

We were back in that area in June 2001 and checked the prices of similar homes to the one we sold. Prices were the same, there had been no appreciation in nearly eight years. By 2008 the price had tripled, today they are asking more than double the 2001 price. The who made the same mistake we had in '89, will now need five times the cash we did to close.

We were transfered again in late 2005 and sold our house in a non peak area at a modest profit. We're tenants today in a mid bubble market, and sleep comfortably at night.

The real lesson learned is that if you aren't able for a 15 year conventional mortgage with 20% down, the costs and risks of ownership aren't wort taking. The Government does not help people with FHA. Oh yeah, even if you can finance that way, there is no point in buying when the P/E is so far out of whack.

stuckinthecity said...

11.) EVERYBODY being "all-in".

Noodles said...

Oh of course you forgot exploitation of illegal immigration.

Anonymous said...

#8--- hey the Fed itself is a stupid policy.

Natural Eyebrows said...

Keith, one item you didn't cite is something you talk about regularly: the huge size of the REIC. The REIC is being depopulated because there are so few transactions for it to feed on. The migration to unemployment and lower paying positions will reduce aggregate spending. Big multiplier effect.

BTW, I prefer "mortgage industrial complex" rather than REIC. It all starts with free money.

toys in the attic said...

11. Because Bush is in charge of this country. (everything he touches fails.)

12. Overkill of granite counter tops, lofted ceilings and multiple roof peaks.

Peter said...

Keith,
Your blog saved me from financial ruin, as I bought into this fake economy as a flipper. I got out alive 18 months ago. Thanks. Just one question: Don't you think peak oil is real? I have read extensively on the subject. Believe it... it is the downside of the oil production curve that graces even the MSM daily. They just call it other things. There is going to be a race to last of the sweet light crude. There is nothing to replace oil... people in high places know this.

christiangustafson said...

Keith, please promote "Baby Boomers" to the #1 reason. They are much worse than any kind of financial leverage, SIVs, CDOs, neg-am pay-option mortgages, or other boogaboo. This is all their fault.

Enjoy your retirement, Baby-the-world-began-in-1946-Boomers!

Anonymous said...

11) derivatives

Anonymous said...

Desperate Housewives

Anonymous said...

Goodbye middle class

Anonymous said...

Peak oil.

Paco Bell said...

A time-out for word of appreciation

Thank you for continuing this blog Keith. I visit at least a half-dozen times every day.

The wonderful web has given truth-tellers like you a voice, and readers hungry for truth a place of refuge from the daily twisting of reality.

The commenters here do a great service to furthering the reach of truth.

Even more so, the posters here who are generaly opposed to the purpose of this forum (you know who you are).

These are the Real Posters of Genius(tm)

Anonymous said...

The globilization of risk. Before - banks wanted to make good loans because they were stuck with them is they went bad. Now they sell them to the world, and could care less if they are good or bad loans...

Marky Mark

Anonymous said...

Most reporters have the lowest SAT scores in college. In other words, they're as dumb as rocks and can only parrot the garbage they hear.

Anonymous said...

I don't know if it fits in one of your senarios but what about "Get Rich off Real Estate" infomercials and Billy Bob thinking he was a real estate Jed Clampett. If I paid 2000 for those classes I'd be out trying to get my 2 grand back too. LOL

Anonymous said...

Peak oil is a hand waving maneuver. It's more political than anything else.

~35% of the foreign oil imported into the US is from Canada/Mexico, http://tinyurl.com/7ldt, right on the DOE site.

At the same time, Chevron's deep drilling units are finding that the Gulf of Mexico crude [ considered US territory, though a bit offshore ] isn't immediately running out when they dig further (http://tinyurl.com/lfe9x). In addition, the Alberta sands in Canada have barely scratched the surface of their total reserves and newer technologies will most definitely uncover the less accessible amounts down below.

All and all, it isn't the lack of oil that's the problem but perhaps the organic waste treatment of the output of chemical plants and refineries that are a greater concern for the ecology as a whole. If air/water/soil pollution (as oppose to the global warning hand waving) standards were addressed properly, then this might not be the problem as so many have envisioned.

abb said...

Peak Oil is largely a sales job to keep the price of oil up. For various reasons high oil prices masks the source of inflation. And we all know where inflation really originates (Greenspan, Bernanke, et al)

Energy is not the problem. There are MANY solutions to the energy "problem". The reason they never come to market is because there is too much profit to be made through controlling oil.

To take a simplistic example:
- build a bunch of nuclear power plants
- instead of spending a trillion dollars in Iraq, buy every working American an electric car

Problem solved.

But. The dollar instantly goes to $0. The Feds lose their tax revenue stream. The oil companies and banks disintegrate.

Good for us. Bad for a few thousand criminals who run this planet.

Anonymous said...

Peak oil!
Peak oil!
Peak oil!
Peak oil!
Peak oil!

Anonymous said...

Why do you consider blogs to increase the crash? I see blogs more as a stabilizing force in the face of monopolized opinion in the MSM. Without blogs, there would have been even fewer opinions to be found that were skeptical of the Realtors' propaganda. One blog (patrick.net) saved me from buying a house.

Peter T

consultant said...

Peak oil (PO) clarification.
PO is not about running out of oil soon (1 to 5 years), it's about running out of cheap oil.
An important related issue to PO is oil consumption rising past oil production. This is where we are at now.
Much of the third world is dropping out of oil purchases. Can't afford it. Many OPEC producers are keeping more of their production because of their developing economies. We all know about the rise of China and India.
Everybody, do the math.
By the way, we are one 'event' away from oil shooting way past $100 a barrel.
Talk about scary.

consultant said...

BTW,

Keith,

Keeping publishing this blog! It is funny, inventive, insightful and informative. It is a great example of what a blog should be. It also is a reminder of what much of the MSM is missing. And I'm not just talking about the part where we posters respond to your comments.
Keep up the good work.
BTW, I am a lifelong Democrat.

Anonymous said...

RE:
.......extortion from the only buyer who made an offer .......
----------------------------

That is not extortion. It is a business transaction.

It is paying the least you can for something, to someone whose desire (or need) to sell is their own choice (or a consequence of their own doing, e.g. buying something for too high of a price or buying something that they could not afford).

More importantly: you should not be referring to him as an extortionist -- au contraire, you should be reflectively kissing his ass for the fact that he existed and was willing to buy it at all; otherwise you would have had to sell it for even less to induce anyone else to buy it.

Extortion is different; extortion is when you threaten to do something damaging to someone else unless they comply with your demands.

Saying "I won't purchase your property unless it is at a price of $XXX or less" is hardly extortion.

k.w. - southern ca. said...

Goodbye nation.


Anonymous said...
Goodbye middle class


October 20, 2007 5:48 PM

APP Funds said...

You can`t predict a crash !

Ichiro said...

Because this world needs an enema.