San Diego Housing Bubble News and Analysis

Georgian Roulette?????

Dan: Abkhazian Roulette? Ossetian Roulette?

If the outcome isn't matching the model based on your assumptions, you might want to check your assumptions.

I don't understand the oil market, I'll just get that right out to start. I do think based on the reading I've done that the price of oil is declining based on demand destruction brought about by, the high price of oil. Its not just us, its Chindia as well. Is the price of oil going to decline significantly from here, I'll leave that up to better informed commentators.

As to the dollar, deflation strengthens it. You gotta pay off your debts with suddenly harder to get a hold of green peso like things. Either that or you default. If enough people default then credit creation is halted. Note thats what the fed is fighting and failing to stop, with 2% interest rates. If your economy is dependent on ever increasing credit, merely slowing its growth rate causes the contraction to strengthen which becomes a viscious circle.

If you look at fundamentals you would assume that the demand for oil hasn't dropped overnight, but yet the price of oil seems to have lost its' luster.

From today's LA Times ...
"The Chinese government reported that oil imports to the fast-growing country had fallen 7% in July to a seven-month low."

So, maybe fundamentals of supply and demand do matter.

My feeling is that there's a massive currency intervention going on, although I'm not sure which bank is behind it. May be coordinated between the Fed and the ECB. The ECB needs stronger dollar, because their exports suffer, and the Fed needs stronger dollar, because it allows them to continue lowering the rate.

Also maybe China is involved somehow because of the olympics.

Major papers (LA Times, WSJ) report that dollar went up recently because the market predicts that Europe will also enter a slowdown/recession. As a result European central banks will have to lower interest rates to encourage growth. Both makes European currency less attractive against the dollar.

There was a bubble in commodities. Part of it was speculation (prices keep going up, so people put more money in expecting it to go up, sounds familiar?), part of it was investors running from the stock market and the dollar, they have to park their investments in something. There have been knowledgeable people writing about commodities bubble (gold, not oil) since 2006.

I remember in 2001 that investors ran away from the stock market (tech bubble) and a lot of people decide to put money in a safe investment (housing). In my uneducated opinion that was the start of the housing bubble that got further exacerbated with more easy credit.

It is easy in hindsight to determine when the top and bottom was, much harder to predict the future. Attempting to time the top or bottom are extremely difficult, specially when the market can't decide and swings on a daily/weekly/monthly basis. If you are betting on currency/commodities, you have to realize that you are competing with professionals, who have more time, background and understanding than you do, not that they don't panic and act like sheep as well.

If your are confident of your model, then I would to make it applicable over a longer horizon, over a year or two years certainly, and stick with it.

Personally, I take Warren Buffet's advice, who councils individuals and trust funds (including those of institutions like Harvard) to put their money in index funds. Mr. Buffet points out that most professional managers trail the market, and that is before their management fees. You will never get super rich this way, but you will sleep better at night. I have more confidence in the U.S. stock market than any other capitalist system. With all the problems, we have more transparency (hopefully this is not misguided myopia) than anywhere else in the world. I figure that if the stock market does not go up over a 10-15 year period, then I have more important things to worry about than my nest eggs (like finding food to feed the family and beating the roaming bandits at the door with a shot gun).

Slight political tangent, if you want the dollar to go down long term, vote McCain, otherwise vote Obama. (no-tax and spend is worse for the dollar and our deficit than tax and spend) Sorry, could not resist that.

MadeInTaiwan

My feeling is that there's a massive currency intervention going on

Or maybe it's because the weakness first felt in the US has now caught up with Europe and the change in momentum of the currencies reflects the market's assessment that Europe's economy will continue to slow and result in flat or lower interest rates in the future.

I don't think that's the case. The rest of the world's economies are slowing down, so money is moving into the dollar because it's safer. On top of that, the ECB's next move will be to lower interest rates and the Fed's next move will be to raise interest rates; the dollar will be more attractive vs the Euro. In addition, the U.S. experienced the slow down first and will be the first to rebound.

The Fed's next move will be to raise interest rates; the dollar will be more attractive vs the Euro. In addition, the U.S. experienced the slow down first and will be the first to rebound.

The Fed is not going to raise interest rates. They may have been thinking about doing that with oil at $140, because rising oil and food prices were translating into inflation. Today, oil is below 115 and the threat of inflation seems to be over.
On the other hand, weak dollar is the reason why we had positive GDP growth these last two quarters. We were saved by exports. This latest move is very bad for exports.
1.75% in September is likely.