In any falling market, there are always buyers who buy ONLY because it is cheaper now than it was. They are afraid of missing out.
When NASDAQ dropped from 5000, there were buyers and sellers all the way down to 1300.
Some individual stocks dropped 95% or more.
Some people forget OR don’t know the pain.
There are only 2 emotions in any market, which are FEAR & GREED.
Every market cycle brings a new group of people who have never experienced a cycle before.
Those who survived the 1930’s depression had a different perspective for the rest of their lives than any generation that came afterwards. It comes with experience.
Many people today didn’t experience the 1990’s correction of real estate. This is their first cycle.
Builders build. Lenders lend.
If regulations required a 10% down payment, there never would have been a bubble.
There are billions of dollars available. There is an unlimited desire for above market returns. The demand and availability of money won’t ever stop.
There are hundreds of millions of dollars being withheld from paychecks that are invested in retirement funds and pension plans.
These funds are fueling the stock market by people who don’t understand the risks that they are taking, The EXACT same risks that people didn’t understand when they were inflating the housing bubble.
It is a greater fool theory and legaliazed pyramid scheme, that will make some people rich and others poor.
People are in a trance looking at their statements, not realizing that paper profits disappear. Home equity disappears too, but many refuse to accept that.
As long as people blindly do what they are told is the “right thing to do” there will be potential to get rich for all.
The problem arises when a reality check kicks in, after irrational exuberance has taken place.
IF there is a stock market crash, which is possible at some point, the government will step in afterwards and spend hundreds of millions of dollars funding committees and waste 5 years to determine what caused it.
It’s what they are doing right now with the mortgage mess.
Completely common sense lending requiring down payments probably won’t happen. As long as there is willing exposure to risk, based on a higher return, insanity will reign.
Underwriting guidelines have already changed, based on government guidelines that should have been in place all the was along.
I’m in the lending industry. I deal with this every day.
