Perry:the new paradigm is to “increase standards of living by giving people what they need now.” So long as you can make the monthly payments, you can have what you want, now. Computer models allow the credit industry to “grow the pie.”
I agree that this is the intention, along with cheap baubles (sp?) from China to confuse the dum-masses into thinking things are great. I am sure the use of computers and models have streamlined business, but I don’t think that changes fundamentals.
Rustico:Sounds like debt slavery to me, not a better standard of living at all.I can see the younger guys feeling helpless if that truly is the new paradigm.
Again, I agree with you that people feel that this is a new paradigm, but I doubt it. Housing and credit have the heady/queezy fell of tech stocks around 1998-early1999. My bro-in-law was a bond trader back then and all these concepts were being thrown around–he would have none of it.
At the time Wallstreet was paying former aerospace workers to model the market, the internet was bringing a new paradigm, and there was nowhere to go but up. But even before the downturn, the bond traders were already pulling their own gains out of stocks. The ones I know bought vacation homes in resort locations–most have since sold then.
On these fancy models, they only work if you have control or visibility into the variables–and there are way more variables not modeled–AND models must have some second order or higher order terms to ever hope to catch quick changes in the market…etc. It is nearly as complicated as weather modeling, but with the added complications of human factors. Fundamentals will rule the day, long term, but the really smart money knows how to make money in the meantime. I think that time is well past.
Personally, I have little doubt the standard of living is droppping, but I think recent events, such as RE increases and even college tuition have far outpaced this trend. We see the RE trend turning around, and now we even see Politicians getting into the college costs act–great.
