That plot is a bit silly. The corrleation may exist from ’96 on, but what did it look like in the last downturn? I suspect there won’t be nearly the correlation. Also, just because the S&P is dipping, that does not mean there’s no money to be made in the stock market.
Powayseller, I like your posts, but you may have reached the point where you’re a bit too in love with the outcomes you’re predicting. Your posts are packed with prediction upon prediction, each being less substantiated than the next. Most on this board agree that the the coming drops in RE prices will meet or exceed what happened in ’89-’95. This prediction comes primarily from the facts that our deviation from historic price appreciation is greater this time than the last, and the affordablity index is even lower. All reasonable. Now, opinions on this board begin to diverge as we discuss the impact that this RE drop will have on the overall economy, and most important to the individual investor, the future prices of stocks and commodities. Your doom and gloom predictions for the economy and stock prices as a whole are very aggressive, and represent a minority position even among bears (Roubini aside).
If I take Lereah’s advice and buy a home right now, I’m sure to realize a loss. If I get too influenced by your position, I’ll be 95% in cash (foreign currency, of course), and I’ll no doubt miss out on some nice gains (many mutual funds performed very well in 92-96, despite RE’s troubles). Granted, a loss is more of a bitch than an unrealized gain, but both will affect one’s living standard and retirement over time.
Be careful of falling into the same trap as the RE speculators. This board is highly populated with folks who sold RE in 2005, some by chance and some by foresight. Those that did are no more a financial genius than those that haven’t sold (though they likely do have an edge on the small % of folks who recently bought). If your portfolio of cash is not significantly larger in 2010 than it is now in 2006, you’ll have lost ground to a lot of moderates who are skilled at making money in a variety of markets outside of RE.
