Quote from Smart Money: . . . Even if you believe we are in for a severe retracement comparing these borders on the ridiculous and robs you of your credibility. Some of what you say has merit, but the world economy is strong, U.S. consumer sentiment is up, interest rates are down, the dollar is cheap, home ownership is near an all time high and foreclosures are *still* historically low. These are facts, and they are not the key ingredients of the disasters you mention.[/B]
SM, for me the key is the trend, which still appears to be down. The stats you cited in your post, which, along with good olâ demographics, have been used by optimists for months (years?) in an attempt to support their hope that everythingâs gonna be alright. The problem is that the stats you cite are:
1. Distorted in order to make the government look good either by misinterpreting data (e.g., the birth/death model in employment reports); disregarding data (people who have supposedly âleft the workforceâ - employment stats again) or by simply ignoring or improperly weighting components (CPI).
2. Are probably irrelevant. What does consumer confidence mean when it comes to housing? Are people saying to themselves, âI feel confident, letâs go buy an overpriced house!â No, theyâre starting to express classic deflationary psychology, which is, âIf we wait, the price will be lower six months from now.â
3. So the dollar is weak? How does that translate into buyers for housing? Doesnât a weak dollar mean the rest of the world thinks our economy sucks because our politicians are funding a war and buying the votes of morons with borrowed money?
4. Youâre equating what I believe was the largest debt fueled buying binge in history with a strong world economy. Theyâre not the same thing, but I suppose some economic data might imply it is. Ooops, well, see #1.
5. In the past and do not reflect current conditions. What economists NEVER anticipate are dramatic changes in peopleâs behavior to compensate for new economic realities. The fools simply look back at the last few months of data and project it into the immediate future. SM, show me just one time a consensus of economists actually forecast a change in trend early enough for it to be useful? Name just ONE! What youâll discover is they havenât, but theyâre very good at saying, âNo one could have seen THIS coming!â The bastards are worse than preachers. At least we already know religious âleadersâ have no better freakinâ idea than we do what theyâre talking about.
SM, more and more houses are coming on the market for sale almost everywhere in the country. They are competing with reduced pricing from builders, who in many markets are STILL building out their âpipelineâ (more supply). No one will loan to marginal buyers, so theyâre out (less demand). Banks are trying to liquidate REO for what they can get (more supply). Buyers are starting to wait for lower prices (less demand). Pretty much everyone who wanted a house, bought a house in the last couple years (less demand).
Interest rates are low? Sure, but here's the thing. Most everyone is in debt so far they can't afford to make another monthy payment on a new truck, boat, or plane. You can lower their interest rate to zero (and automakers have) but they still can't force people to buy. There goes the last prop under the economy. (Funny, no economists are forecasting this one, either.)
Finally, just because a forecast appears radical doesnât mean it isnât correct.
