[(former)FormerSanDiegan]

The day of the original post, the S&P 500 closed at 1301.78.

The actual call was S&P to hit 600 by Spring ’07, not a percentage drop from some future peak. It’s right there in the title. After yesterday’s bloodbath, the S&P 500 was up 7.5% from the date of the original post.

I still think there is plenty of downside risk in stocks. However, the notion that an 50%+ drop in the HMI equals a 50%+ drop in stocks based on a correlation study is both mathematically incorrect and naive.

[(former)FormerSanDiegan]

My personal list of professions from which I would never take investment advice in order of increasing confidence …

1. Real Estate Agents
2. CPAs
3. Dentists
4. Professional Football Players
5. Lenders

[(former)FormerSanDiegan]

S&P dropped 50 points today.

There are 16 trading days until Spring.

If we extrapolate that the S&P will drop by the same number of points each and every trading day ’til Spring guess where it will be ?

600

Spoooky.

[(former)FormerSanDiegan]

davelj –

The fact that we are continually in a bubble somewhere in the world cheapens the term. But, I guess it’s just semantics.

There is no bubble in the definition of bubble – two standard deviations is two standard deviations; it’s math.

The computation is math. The selection of the threshold at 2 standard deviations is arbitrary.

[(former)FormerSanDiegan]

I’m an optimist:
Bonds had a pretty nice rally today !

[(former)FormerSanDiegan]

Yes, let’s have the state legislature that brought us electricity market deregulation (by unanimous vote, by the way) fix the problems with the housing market and mortgage lending criteria. If you think we have problems now, enlist our state lawmakers to fix it.

While we are at it, why don’t we ask the legislature to pass a law that all housing be priced at a fixed multiple of median salary. And to make things fair, they should also install the maximum wage at 2x the minimum wage, to level the playing field.

[/sarcasm off]

I disagree. As painful as it may be sometimes, I believe in free markets.

[(former)FormerSanDiegan]

I think it’s funny how many people incorrectly blamed the press for creating the bubble. Others will be equally wrong when the “new press” in the blogosphere is blamed for the correction.

[(former)FormerSanDiegan]

If it’s truly 30% below today’s market value ?
Absolutely.
In that case I would also borrow 80%, so that when my house tracks CPI my equity grows by 4 or 5 times the CPI in the first few years.

Problem is who is stupid enough to get rid of an asset that is worth say half-a-million bucks for 350K ?

[(former)FormerSanDiegan]

davelj –

Although I agree with your primary points, I think there is a bubble in the definition of asset bubbles. If the criteria Jerry Grantham uses demonstrates that there have been 28 asset bubbles in 70 years, then we should expect an asset bubble every 2.5 years. That means that we have on average two asset bubbles about every business cycle. This cheapens the definition, IMO.

[(former)FormerSanDiegan]

I’ve heard of the “Second Great Depression coming” about every 5-7 years since the mid 70’s. First it was going to be caused by spiking oil and runaway inflation, then it was going to be caused by fiscal overtightening, then it was going to be caused by the Japanese eating our lunch and overtaking the US, then it was going to be caused by the massive amounts of wealth destroyed in the dot-com bubble bust and now it is going to happen because of excessive-liquidity fueled housing boom.

All these things in the past caused recessions, and the economy suffered, as I think it will this time. But predictions of a once-per-century calamity happen way too often. Eventually this will be right, but from my perspective, the prediction has been repeated the past 30 years and will eventually be right.

[(former)FormerSanDiegan]

PC –

What do you mean by “stagnate” ? Do you mean they will increase at inflation or stay flat in nominal prices. Over 10 years there is a huge difference.

[(former)FormerSanDiegan]

I think it’s called coyote wash because it’s where people who smuggle illegal aliens launder their money.

[(former)FormerSanDiegan]

Why would anyone want to buy an over priced piece of property in the middle of the Yuma desert?

“Boasting more than 325 days of sunshine each year, water sports on the Colorado River, desert sports atop world-famous sand dunes, and a collection of wonderful golf courses, it is one of the nation’s fastest growing areas.”

http://www.glencurtisinc.com/CoyoteWash/index.html

[(former)FormerSanDiegan]

Arny –

What I meant by “sellers who need to compete with the short sales and REOs” is that at some point in this cycle, there will be enough foreclosures that REOs and short sales will make up a significant percentage of the market. ALL sellers will have to compete with these properties to sell in that market. That’s when you want to buy. It’s more the “when” then the “who” that matters.

[(former)FormerSanDiegan]

If the owner is selling you the house, they are required by law to disclose all known defects, plus a bunch of other crap like seismic zone, proximity to nuclear reactors and even sometimes the habitat zones of the red-legged frog.

If an agent is reluctant to show the house, it could be by the sellers’ choosing, or it could be that several offers are already on the table and you are coming in as a potential buyer without an agent. This is perceived by the seller/sellers’ agent as low-probability of making a deal/closing. Either way, if someone is reluctant to show me their property I am reluctant to show them my checkbook.

I think for future bargain hunting you are better off with sellers who need to compete with the short sales and REOs rather than the short-sales and REOs themselves. Because you can expect them to meet your demands, such as seller credits, inspection contingencies, etc. rather than them expecting you to jump through some hoops.

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