[capeman]

You folks are putting too much emphasis on the wrong axis. Plotting Comps. vs. price is what most every market permabull is using as a lame argument. What will define market direction and the extent of the drop is Time vs. Price. That is how the market play will be plotted in the economic history books when this has all played out. People making arguments based on Comps. in a defined short time period are usually just those who are trying to reaffirm themselves that they did not make a bad investment. Remember this expected correction will take time and just like the trough to peak looked on the way up one can expect something similar for the way down.

[capeman]

Born and raised 4th generation here. I would have to say that most all of the market bulls I have met in San Diego are not native and usually are <10 year residents. Being one to have seen what housing costs have been in the past and what they are now I am a big bear…. probably as big as that kodiak that tried to eat Anthony Hopkins in that one movie. I should probably go on a diet and lay off the financial and homebuilder bear blogs….

[capeman]

Born and raised 4th generation here. I would have to say that most all of the market bulls I have met in San Diego are not native and usually are <10 year residents. Being one to have seen what housing costs have been in the past and what they are now I am a big bear…. probably as big as that kodiak that tried to eat Anthony Hopkins in that one movie. I should probably go on a diet and lay off the financial and homebuilder bear blogs….

[capeman]

Most of the increase will be priced in. You can trade calls to play spreads on expected increases. Since you seem new to it you should keep it small and only play with the lunch money to get an idea of the game. It is something that takes a while to get used to and just learning the subtleties could put you in a position to be taken by the sharks.

I personally will be shorting the hell out of it. That company as well as other PEs will be tied to the rising rates and be priced out of a lot of deals soon. On top of that if the tax rates increase on them by the hands of Congress then their bottom line moves even closer to 0.

cheers,

chris

[capeman]

Most of the increase will be priced in. You can trade calls to play spreads on expected increases. Since you seem new to it you should keep it small and only play with the lunch money to get an idea of the game. It is something that takes a while to get used to and just learning the subtleties could put you in a position to be taken by the sharks.

I personally will be shorting the hell out of it. That company as well as other PEs will be tied to the rising rates and be priced out of a lot of deals soon. On top of that if the tax rates increase on them by the hands of Congress then their bottom line moves even closer to 0.

cheers,

chris

[capeman]

That’s why they say there’s lies, dirty lies and then statistics.

[capeman]

That’s why they say there’s lies, dirty lies and then statistics.

[capeman]

If that is correct then mass adoption of the 50 year could raise the overall price of housing by 13% at current interest rates and become scalable to increased/decreased rates. That is the kind of thing I fear and that is what can make housing prices stay fundamentally higher than what people should believe they are worth. If you think back to the 50’s when car loans were pretty scarce the price of a car was really low compared to todays standards. Now that most everyone finances purchases and interest rates are low it allows manufacturers to charge more for cars and keep sales up. Nice cars (SUVs now) are a sign of status and the industry has been milking that to no end. Housing has been the same and if the 50 becomes a preferred product based on better affordability then that will absorb some of the declines we expect to see in the near term. I don’t want a 50 and I don’t want my kids to be paying off my house when I’m dead. That kind of sucks.

Thoughts?

cheers,

chris

[capeman]

If that is correct then mass adoption of the 50 year could raise the overall price of housing by 13% at current interest rates and become scalable to increased/decreased rates. That is the kind of thing I fear and that is what can make housing prices stay fundamentally higher than what people should believe they are worth. If you think back to the 50’s when car loans were pretty scarce the price of a car was really low compared to todays standards. Now that most everyone finances purchases and interest rates are low it allows manufacturers to charge more for cars and keep sales up. Nice cars (SUVs now) are a sign of status and the industry has been milking that to no end. Housing has been the same and if the 50 becomes a preferred product based on better affordability then that will absorb some of the declines we expect to see in the near term. I don’t want a 50 and I don’t want my kids to be paying off my house when I’m dead. That kind of sucks.

Thoughts?

cheers,

chris

[capeman]

Kind of along the lines of what DaCounselor and Drunkle are saying I agree that there will be some serious loan modification going on. What I fear is that this could bring about the new dominance of a 50 year mortgage. If that type of instrument becomes commonplace then the affordability of homes will not likely revert back to what it normally is during 30 year fixed dominance with fundamentally based rate. It could in the end become the most common instrument causing less affordability and more people becoming commonly enslaved to a home. Who would have thought 10-20 years ago that there would be a 7 or 8 year auto loan term and the ability to roll old loans into new ones? That kind of stuff freaks me out but it is extremely common and doesn’t help to bring auto prices down.

cheers,

chris

[capeman]

Kind of along the lines of what DaCounselor and Drunkle are saying I agree that there will be some serious loan modification going on. What I fear is that this could bring about the new dominance of a 50 year mortgage. If that type of instrument becomes commonplace then the affordability of homes will not likely revert back to what it normally is during 30 year fixed dominance with fundamentally based rate. It could in the end become the most common instrument causing less affordability and more people becoming commonly enslaved to a home. Who would have thought 10-20 years ago that there would be a 7 or 8 year auto loan term and the ability to roll old loans into new ones? That kind of stuff freaks me out but it is extremely common and doesn’t help to bring auto prices down.

cheers,

chris

[capeman]

Your right. There are always people throwing their arms up in the air waiting for the apocalypse to throw things their way. You also have the defensives claiming bottom to protect their investments. I am not one to want to see hardship for anyone but I am very interested in the economic teachings that will be made from all of this. It is all very interesting to watch and although I’ve stayed out of the cycle I have also tried my best to steer others into observing rather than jumping into the endlessly deep pool. Rational thought and arguments have been the most useful in convincing the few folks I have. It is also the only argument winner when most people always throw books of emotional based retorts back at you. One thing is for sure they will teach entire classes on the economics of the last 10-12 years. It will make a great story with some winners and unfortunately too many losers.

cheers,

chris

[capeman]

Your right. There are always people throwing their arms up in the air waiting for the apocalypse to throw things their way. You also have the defensives claiming bottom to protect their investments. I am not one to want to see hardship for anyone but I am very interested in the economic teachings that will be made from all of this. It is all very interesting to watch and although I’ve stayed out of the cycle I have also tried my best to steer others into observing rather than jumping into the endlessly deep pool. Rational thought and arguments have been the most useful in convincing the few folks I have. It is also the only argument winner when most people always throw books of emotional based retorts back at you. One thing is for sure they will teach entire classes on the economics of the last 10-12 years. It will make a great story with some winners and unfortunately too many losers.

cheers,

chris

[capeman]

I am glad you would love that capeman. By the way… gather a couple of friends then pick one of them. Because that friend would be the one losing his job. Also find a couple more friends who want to borrow some money to start a small business. The tell them that they most likely will pay interest rates that will crush their business plan.

So once again, what you may wish for may happen… just make sure you have an understanding about the basic economic engine of how things work because alot more things get affected in an interest rate environment hovering in this double digit strata other then housing.

The amount of contraction is something people who were not around in the late 70s or early 80s just do not think about.

SD Realtor

 

I can understand your argument and I can tell you I know more about the economics of a high interest rate economy than you think. My home in the 80s included a single mom working in the SD defense industry where she married my stepfather who also worked in defense. She was laid off no less than 30% of that decade with at least 8 jobs. Luckily my stepfather was only hit once or twice with the unemployment. What the environment did do is challenge them to advance their working skills to become more flexible to the economic environment and in the end made them more successful. I would say through the process our family felt a lot of hardship.

I'm not one to gloat over others financial hardships but the effect of a high interest economy does put people into check on what they should have as working skills and would put a stop to the unnecessary wastefulness in business and personal lives. I wouldn't blame the interest rates for what happened to areas such as Flint, MI in the auto industry. That was the fault of poor business models and the workers got caught in it. That is the same for the defense industry in the 80s. In the end those poor workers laid off needed to adapt and embolden themselves to not be reliant on only one employable skillset. High interest environments keep the people honest and flexible and do away with unneeded business models. Working in one of the most volatile industries there is (biotech) I am well aware that my value is created by having diverse skillsets and being flexible to change my working environment. That is something through adversity that has made me strong like my parents and able to capitalize on adverse environments.

cheers,

 

chris

[capeman]

I am glad you would love that capeman. By the way… gather a couple of friends then pick one of them. Because that friend would be the one losing his job. Also find a couple more friends who want to borrow some money to start a small business. The tell them that they most likely will pay interest rates that will crush their business plan.

So once again, what you may wish for may happen… just make sure you have an understanding about the basic economic engine of how things work because alot more things get affected in an interest rate environment hovering in this double digit strata other then housing.

The amount of contraction is something people who were not around in the late 70s or early 80s just do not think about.

SD Realtor

 

I can understand your argument and I can tell you I know more about the economics of a high interest rate economy than you think. My home in the 80s included a single mom working in the SD defense industry where she married my stepfather who also worked in defense. She was laid off no less than 30% of that decade with at least 8 jobs. Luckily my stepfather was only hit once or twice with the unemployment. What the environment did do is challenge them to advance their working skills to become more flexible to the economic environment and in the end made them more successful. I would say through the process our family felt a lot of hardship.

I'm not one to gloat over others financial hardships but the effect of a high interest economy does put people into check on what they should have as working skills and would put a stop to the unnecessary wastefulness in business and personal lives. I wouldn't blame the interest rates for what happened to areas such as Flint, MI in the auto industry. That was the fault of poor business models and the workers got caught in it. That is the same for the defense industry in the 80s. In the end those poor workers laid off needed to adapt and embolden themselves to not be reliant on only one employable skillset. High interest environments keep the people honest and flexible and do away with unneeded business models. Working in one of the most volatile industries there is (biotech) I am well aware that my value is created by having diverse skillsets and being flexible to change my working environment. That is something through adversity that has made me strong like my parents and able to capitalize on adverse environments.

cheers,

 

chris

[Author]

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