San Diego Housing Bubble News and Analysis

At this point, the recession portion is obvious. Whats not so obvious is the commodities portion. This has actually been the only bone of contention between the inflation and deflation camp. Inflationists think the govt plan to bailout the markets will work, through monetizing. Deflationists think that the gov will try and fail. A bet on gold is a bet on the govt successfully monetizing our debts without the treasury market taking a dump. In the short term most people that I've read, if bearish on gold are so because good assets and bad get sold off to pay back debt.
Josh

so...if we are going into a recession...how best to we prepare for it? I noted on other sites that people were recommending stocking up on food; do you make a major purchase...say a new dishwasher or car now...or wait.

What are you folks doing to prepare for a bad economic time?

Make sure you don't get laid off during this recession. That you have cash reserves to pay rent/utilities/grocery bills for 6 to 12 months if necessary. Avoid luxury purchases.

This too shall pass.

I have been researching this issue quite a bit lately. The last 3 recession have seen gold go down in price for the duration of the recession. 1972, 1980 and 1990. So Roubini has recent history on his side for this call.
However, economic historians with strong forecasting skills like Bob Hoye and Marc Faber say that gold increases in price after a large credit bust like what we're having right now. (This is a far more rare event than the more typical recessions we've seen in the past 30 years.) Both the ElliotWave and Candle Stick charts are extremely bullish for gold right now as well.

I've put my bet on the historians for this one, eventhough I agree that Roubini has been pretty good lately as well. It looks like gold's a good bet in a 5 year time frame regardless, but it's always nice to time these things closer to the mark than not.

so...if we are going into a recession...how best to we prepare for it?

This very weekend my wife and I are going through ALL our expenses. We are not rich people.

We are starting with the prudent assumption that at least one of us probably could lose our job during next eighteen months due to lay offs.

We are cutting out every non-essential housing expense from Sat TV, to expensive foods, to not using the AC. I'm embarrassed to write that it took fear of recession for me to finally this weekend replace every incandescent light in the house with low-power compact florescent bulbs. I should have done that years ago!

I'm starting to ride bike to the snail rail (Silicon Valley's lame mass transit) then ride that to work each day instead of drive. It was costing me $350/month to drive to work.

Fortunately we are NONtypical Americans in that we: 1) have NO DEBT load, except for a $800/mnth mortgage payment for our China home. 2) Don't have a big fat USA mortgage payment; we rent. 3) Dual-income earning family.

Our personal challenge is that we have only some cash easily accessible in our bank accounts; the rest is locked in ROTH and 401K.

I believe CA max unemployment payment is about $1800/month, assuming your salary prior to lay off was high enough.

I've never seen anything like this in my 50 years on this planet. I hear a lot people talking about buying a house right now because it's PITI costs are equal to rental costs, or it's down 40% from it's peak, etc.... All these ASSUMPTIONs about this market are that it will be static are dangerous at this time, IMO. This aint your 1990 recession. The odds of job loss in the next 2 years should be carefully considered by everyone. And that rents could decrease as well. The odds of a true 0% CPI in the next 6 months are now very good due to the huge commodities price drop in the prior 6 months.

Stay liquid and lower expenses to the bare minimum. I dont even know that debt is such a big deal since one could not pay it off and all that happens is that you lost your credit rating. Oh well, how's that going to matter when there's no money available anyway or your unemployed. If I had a HELOC, I'd think about draining out the cash and then wait to see how things go. At least you'd have the money if things really went sour. Credits going away. Might as well get what you can if things look really bad in the near future.

I know this sounds pretty tin-foil-hat in nature. But if you look at the magnitude of the problem, I dont see how payback will not be a beotch for the immense credit abuse of the last 10 years or more.

peterb

What you are saying does not sound too tin-foil-hat to me. Now I would have probably thought so last year. But in light of what we are seeing unfold before us I don't think so now. It's this statement that stands out

"But if you look at the magnitude of the problem, I dont see how payback will not be a beotch for the immense credit abuse of the last 10 years or more."

Now look at this chart that was posted on BigPicture concerning the tally of Federal Rescues.

http://bigpicture.typepad.com/comments/f...

Lets all sit down and think about this for a minute............we are witnessing an unprecedented shock to the global financial system....Period. Wo do not yet know the ramifications of this event on the real economy bailout or no bailout. Everyone of us from the posters on this board to halls of congress, to the federal reserve and the treasury dept are sailing in totally uncharted waters. Please do not underestimate the gravity of the situation we face. This is not the time to make rosy assumptions about ones prospects for current or future income. My advice is to let the dust settle.

Peter:
While you may make sense in the long term, currently, the foreclosure boom (I need to copyright that term) is driving many rental markets north.

Essentially, until economic failure leads to local deflation (like if there is mass unemployment), those prices are not going down. It is the opposite of the purchase market. There are just slightly too few rental units for the renters looking.

Prices move through the RE market slowly compared to most other markets. Foreclosures will turn into rentals as more investors purchase them and knife-catchers move into the market to own at these new and appealing prices. This should drive down rental prices as historically happens in most recessions and all depressions.

CA real unemployment is probably around 10% and rising. There already is deflation in most every asset class.

The only caveat on rentals I would have is that there may be more pressure on areas that are highly desirable for a while, as renting has more options than purchasing.

Forecasting involves identifying trends that are not reversing and following them to their conclusion or reversal. Just looking at today's environment for rentals and not following out the progression of all these events is rather foolish and typically how we get into the problems like we are now seeing.

Again, I think we are talking past each other on this. I agree with you long term. But economic strategy (fiscal, monetary, or investment) is all about timing. I don't mean trying to time the bottom but in being able to accurately say where one is at now. Right now, we are in situation where we have noticeably fewer buyers than properties. However, we have (in some micromarkets) more people than available space.
In those areas, it seems unlikely that buying with lower carrying costs than rent (for owner occupied) is particularly suicidal. Housing has an intrinsic value that other measures of wealth (even commodities) do not. Would you disagree?

http://www.signonsandiego.com/uniontrib/...

Just wanted to comment that after thinking my post over, I now agree with peterb.

So I no longer agree with the part of my original thread suggesting BUYING A HOUSE NOW. I agree with peterb that it is much smarter to HOLD on any major financial decisions and watch to see which direction this financial meltdown goes.

The odds of a true 0% CPI in the next 6 months are now very good due to the huge commodities price drop in the prior 6 months.

I also COMPLETELY agree with that. The more I read this peterb, the more I respect his opinions

[quote=peterb]I have been researching this issue quite a bit lately. The last 3 recession have seen gold go down in price for the duration of the recession. 1972, 1980 and 1990. So Roubini has recent history on his side for this call.
However, economic historians with strong forecasting skills like Bob Hoye and Marc Faber say that gold increases in price after a large credit bust like what we're having right now. (This is a far more rare event than the more typical recessions we've seen in the past 30 years.) Both the ElliotWave and Candle Stick charts are extremely bullish for gold right now as well.

peterb...what do you think about having cash available? Do you think we will have limited access to cash/atm withdrawls?

I guess we are all just trying to make sense of what could happen. There are so many rumors; I just want to be as best prepared as I can.

UrbanRealtor, yes, I agree. The statistics dont lie and over the last 40 years more people have become wealthy in RE than any other asset or financial vehicle in the USA. It has certainly worked for me. Shelter is a pretty basic need.

However, in this economic situation we're now in, I would caution anyone at this time to remain as liquid as possible. And the US$ may end-up surprising us all given the world economic conditions we're now facing. Believe me, I'm not a big fan of the US$ for the last 9 years, but now most all currencies are looking fairly flawed. Which is why I'm becoming a gold bug of sorts lately. It's real hard for central banks to screw with gold. And history has shown that central banks can get really stupid with their currency when they are scared....like now. It's important to remember that most paper money is "currency" and not a store of value since it's not tied to anything very tangible.
As far as having cash on hand...seems like cash is almost not used in our society much anymore. What with credit card, debit/ATM cards, check and wire payments, I almost dont need to have a greenback on me to get anything I want these days. It's all a digital transfer of some kind. Most banks dont even have more than $10K or $20K on any given day. So if money networks broke down, yes, having cash would count for a lot. Otherwise, we're a wired, digital world nowadays. If you're alluding to govt control...if they rationed our access to our own money, welcome to the USSR of USA. All bets are off at that point. Private property right are the cornerstone of free enterprise and libery in general. Take away my access to my money and I'm leaving your country.(Yet another reason to have some of the yellow metal on hand.)

But none of these thoughts are my own. I got this from researching the subject lately. It occured to me a few months ago that this beast is different and demands new respect. So I checked into forecasters by going back over their old records and predictions. Bob Hoye and Marc Faber were two that seemed to really stand out in their accuracy and timing. Of course, they're both old enough to have seen a lot, but they are both good students of economic history. Steven Keen in Australia seems pretty sharp as well. Check into these guys and see what you think.

No one can predict the future 100%, but I think the one most predictable variable through out the history of markets is human behavior. I think Mark Twain said,"Although history may not repeat itself exactly,it sure does seem to rhyme."

Stock market trading is something that can be very exciting as well as nerve racking and stressful. The reason that online stock market trading is so appealing to beginners is because of the possibility of making hundreds or even thousands of dollars in a matter of hours. Though these greatly successful trades do come, they do not happen as often as many people wish. Knowledge is the key to being successful on online stock trading.
Stock Market basics

Stock market trading is something that can be very exciting as well as nerve racking and stressful. The reason that online stock market trading is so appealing to beginners is because of the possibility of making hundreds or even thousands of dollars in a matter of hours. Though these greatly successful trades do come, they do not happen as often as many people wish. Knowledge is the key to being successful on online stock trading.
Stock Market basics

Stocks- is it possible to upload the mp3 file on these forums?

Stocks- is it possible to upload the mp3 file on these forums?

Not possible, sorry. That MP3 file is 16 MB, and it is licensed property of Roubini Global Economics.

I think you'll find it easy to register for temporary access to RGE, then download that file