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Real Estate is dying? Investment-wise what is the next Asset Class Du Jour?
- Thread starter lrm21
- Start date
Also my experience from predictions and forecasts is that despite heavy instituitional money involvement markets are still inefficient. This means that analysts can still forecast various asset and their underlying cycles adn these predictions can be put to work unless you have several billions to manage. Try to get hold of various instituional research and make a good study of trends and finally take a CONSERVATIVE investment approach (if you are dealing with life stage investments not merely playing the market like a multimillionaire).
One asset class that is really dying is the US$ because US government which is upto to eye lids in debt is DEFINATELY GOING TO REPAY IN WEAKER DOLLARS AND THUS CHEAT ANYONE AND EVERYONE WHO BORROWED THEM FUNDS. EURO is a good alternative as cyclically speaking Europe is on the rise and US is stagnating at best.
One asset class that is really dying is the US$ because US government which is upto to eye lids in debt is DEFINATELY GOING TO REPAY IN WEAKER DOLLARS AND THUS CHEAT ANYONE AND EVERYONE WHO BORROWED THEM FUNDS. EURO is a good alternative as cyclically speaking Europe is on the rise and US is stagnating at best.
Quote from toc:
Buy the commodity stocks or index funds in commodites and hold for 10-15% returns a year. This do until 2008-2009. Best to do commodity index funds.
Also try to time the QQQ stock on long and short side, taking 10-15% is easy, but remember RESPECT THE MARKET, i.e. do not overtrade!
Any suggestions?
Quote from alfonso:
I'm not 100% sure, but I think every case of an inverted yield curve was followed by a recession.
Ding ding ding we have a winner.
Only problem with today's yield curve is that the 30 year is not issued anymore. There is no true yield curve.
And for more trivia, the Fed has cut rates 3 straight times which has resulted in a higher stock market within a year of the last of the 3 cuts every time except 2 periods. Name the 2 periods(years)?
Cache,
A good post. Those of us who make our money this way must know this cycle.
I think a RE sell trigger to watch, for novices in this field, is the issuance of Builder Bonds "supposedly" during peak selling periods. This is not necessary if Banks have confidence in the contiuation of the RE growth cycle. That is why I call this the trigger to sell. One has an early and very safe exit strategy at this point.
If one doesn't take some money off the table at the top, then there may be a case of limited investment funds available at the bottom when they are needed.
Entry, exit and capital are necessary tools one must know and have to profit from the cycles.
Remember to buy when none give RE a chance.
A good post. Those of us who make our money this way must know this cycle.
I think a RE sell trigger to watch, for novices in this field, is the issuance of Builder Bonds "supposedly" during peak selling periods. This is not necessary if Banks have confidence in the contiuation of the RE growth cycle. That is why I call this the trigger to sell. One has an early and very safe exit strategy at this point.
If one doesn't take some money off the table at the top, then there may be a case of limited investment funds available at the bottom when they are needed.
Entry, exit and capital are necessary tools one must know and have to profit from the cycles.
Remember to buy when none give RE a chance.
Today at http://piggington.com/ ...
10.17.04 - Mortgage Fraud: the Last Piece of the Puzzle
"I'd like to begin with a quote from Marc Faber, a world-renowned investment writer with an unparalleled knowledge of financial market history:
The "bubble" model always involves a "displacement," which leads to extraordinary profit opportunities, overtrading, overborrowing, speculative excesses, swindles and catchpenny schemes, followed by a crisis during which fraud on a massive scale comes to light, then by the closing act, during which the outraged public calls for the culprits to be taken to account. In each case, excessive monetary stimulus and the use of credit fuel the flames of irrational speculation and public participation, which involve a larger and larger group of people seeking to become rich without any understanding of the object of speculation.
While the above paragraph was taken from an article about the South Sea Bubble and the Mississippi Scheme (two speculative bubbles that took place in 18th century Europe), it could just as easily describe any given day in modern San Diego. The only thing that we appear to lack is the "fraud on a massive scale." But even of that I'm not so sure.
For quite a while I've heard rumors that appraisers were constantly under pressure by mortgage brokers to over-appraise properties. Given the absurd valuations in San Diego this is not hard to believe. But yesterday I spoke to a San Diego appraiser who maintained that fraud is epidemic in the San Diego mortgage industry. Signatures are routinely forged, incomes faked, and, most damagingly, appraisers put under tremendous pressure to appraise properties not for what they are worth, but for the right amount to "close the deal." Apparently this appraiser has tried to alert the appraisal licensing association and other authorities but has been completely ignored, because nobody sees a problem: everyone's getting rich!
This fits right in with the pattern. At a certain point in a given bubble, assets are priced so far above their intrinsic values that the only thing that keeps people buying is the fact that prices keep going up. So, prices have to be made to keep going up, and eventually the only way to do this is to resort to outright fraud. For a while this works great, and because everyone is making a killing, people tend to downplay fraud and look the other way.
But eventually something always happens to end the upward price movement. Sometimes it's a rush to the exits by the "smart money." Sometimes the prices are so high that the market just starts to collapse under its own weight (in my opinion this is beginning to happen right now in San Diego). But many times, the revelation by the wider populace of rampant fraud is itself the needle that pops the bubble.
Such a revelation could soon take place. More and more media articles about mortgage fraud are showing up, and I hear (both from the articles and from the appraiser I talked to) that the FBI is starting to look into the issue. The accounting fraud at Fannie Mae can't help either. Maybe the mortgage fraud story will die on the vine, or maybe it will become a big deal and will start to deflate the bubble in earnest. I don't know. But I'll bet dollars to donuts that the authorities eventually uncover an astounding amount of mortgage fraud, and that (per Mr. Faber's script) the homeowners scream for blood.
I'll also bet that, after the dust settles, a huge amount of government regulation will be brought to bear on the mortgage and appraisal industries. At this time, nobody will seem to remember that it was government regulation (in the form of the GSEs and their disincentive for lenders to give shit whether they will ever be paid back) that engendered the problem in the first place."
10.17.04 - Mortgage Fraud: the Last Piece of the Puzzle
"I'd like to begin with a quote from Marc Faber, a world-renowned investment writer with an unparalleled knowledge of financial market history:
The "bubble" model always involves a "displacement," which leads to extraordinary profit opportunities, overtrading, overborrowing, speculative excesses, swindles and catchpenny schemes, followed by a crisis during which fraud on a massive scale comes to light, then by the closing act, during which the outraged public calls for the culprits to be taken to account. In each case, excessive monetary stimulus and the use of credit fuel the flames of irrational speculation and public participation, which involve a larger and larger group of people seeking to become rich without any understanding of the object of speculation.
While the above paragraph was taken from an article about the South Sea Bubble and the Mississippi Scheme (two speculative bubbles that took place in 18th century Europe), it could just as easily describe any given day in modern San Diego. The only thing that we appear to lack is the "fraud on a massive scale." But even of that I'm not so sure.
For quite a while I've heard rumors that appraisers were constantly under pressure by mortgage brokers to over-appraise properties. Given the absurd valuations in San Diego this is not hard to believe. But yesterday I spoke to a San Diego appraiser who maintained that fraud is epidemic in the San Diego mortgage industry. Signatures are routinely forged, incomes faked, and, most damagingly, appraisers put under tremendous pressure to appraise properties not for what they are worth, but for the right amount to "close the deal." Apparently this appraiser has tried to alert the appraisal licensing association and other authorities but has been completely ignored, because nobody sees a problem: everyone's getting rich!
This fits right in with the pattern. At a certain point in a given bubble, assets are priced so far above their intrinsic values that the only thing that keeps people buying is the fact that prices keep going up. So, prices have to be made to keep going up, and eventually the only way to do this is to resort to outright fraud. For a while this works great, and because everyone is making a killing, people tend to downplay fraud and look the other way.
But eventually something always happens to end the upward price movement. Sometimes it's a rush to the exits by the "smart money." Sometimes the prices are so high that the market just starts to collapse under its own weight (in my opinion this is beginning to happen right now in San Diego). But many times, the revelation by the wider populace of rampant fraud is itself the needle that pops the bubble.
Such a revelation could soon take place. More and more media articles about mortgage fraud are showing up, and I hear (both from the articles and from the appraiser I talked to) that the FBI is starting to look into the issue. The accounting fraud at Fannie Mae can't help either. Maybe the mortgage fraud story will die on the vine, or maybe it will become a big deal and will start to deflate the bubble in earnest. I don't know. But I'll bet dollars to donuts that the authorities eventually uncover an astounding amount of mortgage fraud, and that (per Mr. Faber's script) the homeowners scream for blood.
I'll also bet that, after the dust settles, a huge amount of government regulation will be brought to bear on the mortgage and appraisal industries. At this time, nobody will seem to remember that it was government regulation (in the form of the GSEs and their disincentive for lenders to give shit whether they will ever be paid back) that engendered the problem in the first place."
Please excuse the redundancy as I posted this on another thread.
The Fed walks precariously balanced on the fence while talking like white man with forked tongue.
The bottom line is that dollar devaluation equals inflation, ie things costing more next year than last year. This is particularly hard on retirees and holders of cash and bonds, because they are the ones that pick up the tab due to the hidden inflationary taxation. This is an obvious easier way (ie taxation by inflation) for government not to have to deal directly with the problems by having to raise taxes or to curb deficit spending.
What is perplexing to me, is why current interest rates on long term bonds and cap rates on real estate investments are at an all time low, when at the same time the consensus in the financial industry is, all things remaining the same, that the dollar will eventually have to devalue and prices and interest rates will inflate.
The dilemma for investors is, what investment vehicle should you be gravitating to? The only clear direction IMO is to be a borrower of long term debt on cash flow income real estate thereby betting on inflation buying you out of debt over the long term. And while real estate prices are high, converting non income producing vacant real estate into income producing property. Going into long term bonds does not feel at all comfortable. Or maybe short term bonds or cash parked on the sidelines waiting for higher interest rates and lowering real estate prices to develop.
Does anyone else have any suggestions/observations?
Thanks
The Fed walks precariously balanced on the fence while talking like white man with forked tongue.
The bottom line is that dollar devaluation equals inflation, ie things costing more next year than last year. This is particularly hard on retirees and holders of cash and bonds, because they are the ones that pick up the tab due to the hidden inflationary taxation. This is an obvious easier way (ie taxation by inflation) for government not to have to deal directly with the problems by having to raise taxes or to curb deficit spending.
What is perplexing to me, is why current interest rates on long term bonds and cap rates on real estate investments are at an all time low, when at the same time the consensus in the financial industry is, all things remaining the same, that the dollar will eventually have to devalue and prices and interest rates will inflate.
The dilemma for investors is, what investment vehicle should you be gravitating to? The only clear direction IMO is to be a borrower of long term debt on cash flow income real estate thereby betting on inflation buying you out of debt over the long term. And while real estate prices are high, converting non income producing vacant real estate into income producing property. Going into long term bonds does not feel at all comfortable. Or maybe short term bonds or cash parked on the sidelines waiting for higher interest rates and lowering real estate prices to develop.
Does anyone else have any suggestions/observations?
Thanks
Gosh, you don't mean to buy RE now do you? Costs to landlords are increasing while the public's spendable income is decreasing (per the IRS).
Reminds me of sailing out of a choppy bay directly into a storm. IMO, you just need a bigger anchor and stay in the bay. Add some gold and silver to that anchor to combat inflation which eventually leads to rapid deflation.
Reminds me of sailing out of a choppy bay directly into a storm. IMO, you just need a bigger anchor and stay in the bay. Add some gold and silver to that anchor to combat inflation which eventually leads to rapid deflation.