San Diego Housing Bubble News and Analysis

Yes, we are screwed.

But that is the case whether or not the Fed cuts rates this week.

The Fed cut rates during the 90s bust as well. We are screwed not because the Fed will cut rates, it is because the immense excesses of the last 5 years is coming to a sudden stop!

why screwed?

not if you own gold or gold miners...!!
might as well profit from the irresponsibility of our gov.

What do you mean we? I'm doing ok. Good wine and toys are getting cheaper, at least used ones are. Houses too, though not nearly fast enough to avoid the freight train wreck that is coming.

Josh

The train has already left the station, regardless of interest rates. Changes to rates now, really start showing up in measures of the economy 6-12 months from now.

While good wine, expensive toys, and overpriced houses are getting cheaper, lots of other essentials get more expensive as the Fed prints money. These items might include food, clothing, energy ... everyday stuff.

Meanwhile, prudent savers have seen the interest on their savings drop from over 5% to 3-4% and declining.

Meanwhile, prudent savers have seen the interest on their savings drop from over 5% to 3-4% and declining.

Not if they got short. The fundamental lesson that should be developed from this whole crisis, is that the meaning of savings is changing. The rate at which things are considered investments is changing and that is not likely to slow down.

The only reason any investment isn't a liability is that someone will give you something you want for it. Now sure, from time to time specific investments go out of favor, pets.com anyone? Whats changing now though are perceptions of whole classes of investment, to liability. To me, govt debt, which most people consider prudent savings is the worst "investment" after real estate. The govt has a vested interest in making sure it doesn't pay those dollars back, in real terms, plus the ability to make it happen.

Prudent savers are those who see whats happening and adjust their outlook accordingly. I'm a prudent saver. I live below my modest means, and invest according to a belief that the fundamental nature of what is an investment is changing, hence the being short.

Josh

i am a prudent saver too. if inflation hits 10% i lose 10% of my savings unless the interest rates compensate for it

"What do you mean we? I'm doing ok."

Of course, what else really matters?

Unfortunately, I think the term prudent saver now means someone who is willing to take some risk to beat inflation. While that kind of goes against being prudent, getting 4% while the dollar drops 10% is a guaranteed loss.

Of course, what else really matters?

Not sure if that was an attack or not, if so its pretty weak. As someone who was an admitted enabler of the fiasco we are now living through you hardly get to point the finger.

Just because I was too morally weak too lever up to the hilt last go-round, doesn't mean I didn't learn my lesson.

Josh

Did anyone else see this?

http://globaleconomicanalysis.blogspot.c...

I would think the banks having no cash might be a bit of a problem?

Why is a banks problem, my problem, when 'I'm doing ok'?

What is this 'we' business you guys keep prattling about, I am an island unto myself.

My favorite quote from Warren Buffet (perfectly applies to what happened to our housing market)

"The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities -- that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to generate in the future -- will eventually bring on pumpkins and mice. But they nevertheless hate to miss a single minute of what is one helluva party. Therefore, the giddy participants all plan to leave just seconds before midnight. There’s a problem, though: They are dancing in a room in which the clocks have no hands."

Berkshire Hathaway 2000 Chairman's Letter

JWM in SD

"Why is a banks problem, my problem, when 'I'm doing ok'?

What is this 'we' business you guys keep prattling about, I am an island unto myself."

So I guess you keep all of your money in your mattress right?

So PB, do you work for one of those fourteen organizations that the FBI will be looking into shortly? Who knows, you might have an orange jumpsuit in your future.....

Br. Buffet had another good one in 2002 as well.

Following are edited excerpts from the Berkshire Hathaway annual report for 2002.

The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.

This was quoted as recently as Jan 2008 with respect to credit default swaps in a LA times article on the economy.

Bank of Sealy doesn't provide enough of a return but is sounding pretty attractive with what I see coming down the pike.

Nope, not associated with any of the 14, and my personal hope is they bust all the thieving, lying bastards that are destroying communities and families.

Orange doesn't bring out the color in my eyes