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gandalf
ParticipantPolitically, we’re off-track.
But I’m of the mindset that our country, our democracy and culture, will correct itself in time. I see signs of a turnaround. I’m concerned about our education system, about the character of our media and its infotainment culture and the terrible impact it’s having on ethics, the quality of our citizenry and the competence of our labor force.
Sheeple is being kind.
Also, I’m concerned about the quality of our politics, the breakdown in civility in public life. I don’t care for the partisanship, all the bumper sticker loyalists, and in particular, Republicans who put the welfare of their party before the interests of our country. They’ve lost their way, abandoned principles for power. It’s dishonorable.
The country will be alright though. Give it time.
Honestly, the economy is a bigger deal. The impacts of a bad business cycle, market failure and true scarcity, would overshadow the politics of today by a large measure. This is the greatest risk we face right now.
ParticipantPolitically, we’re off-track.
But I’m of the mindset that our country, our democracy and culture, will correct itself in time. I see signs of a turnaround. I’m concerned about our education system, about the character of our media and its infotainment culture and the terrible impact it’s having on ethics, the quality of our citizenry and the competence of our labor force.
Sheeple is being kind.
Also, I’m concerned about the quality of our politics, the breakdown in civility in public life. I don’t care for the partisanship, all the bumper sticker loyalists, and in particular, Republicans who put the welfare of their party before the interests of our country. They’ve lost their way, abandoned principles for power. It’s dishonorable.
The country will be alright though. Give it time.
Honestly, the economy is a bigger deal. The impacts of a bad business cycle, market failure and true scarcity, would overshadow the politics of today by a large measure. This is the greatest risk we face right now.
ParticipantPolitically, we’re off-track.
But I’m of the mindset that our country, our democracy and culture, will correct itself in time. I see signs of a turnaround. I’m concerned about our education system, about the character of our media and its infotainment culture and the terrible impact it’s having on ethics, the quality of our citizenry and the competence of our labor force.
Sheeple is being kind.
Also, I’m concerned about the quality of our politics, the breakdown in civility in public life. I don’t care for the partisanship, all the bumper sticker loyalists, and in particular, Republicans who put the welfare of their party before the interests of our country. They’ve lost their way, abandoned principles for power. It’s dishonorable.
The country will be alright though. Give it time.
Honestly, the economy is a bigger deal. The impacts of a bad business cycle, market failure and true scarcity, would overshadow the politics of today by a large measure. This is the greatest risk we face right now.
ParticipantPolitically, we’re off-track.
But I’m of the mindset that our country, our democracy and culture, will correct itself in time. I see signs of a turnaround. I’m concerned about our education system, about the character of our media and its infotainment culture and the terrible impact it’s having on ethics, the quality of our citizenry and the competence of our labor force.
Sheeple is being kind.
Also, I’m concerned about the quality of our politics, the breakdown in civility in public life. I don’t care for the partisanship, all the bumper sticker loyalists, and in particular, Republicans who put the welfare of their party before the interests of our country. They’ve lost their way, abandoned principles for power. It’s dishonorable.
The country will be alright though. Give it time.
Honestly, the economy is a bigger deal. The impacts of a bad business cycle, market failure and true scarcity, would overshadow the politics of today by a large measure. This is the greatest risk we face right now.
ParticipantI believe it’s quite a bit more than billions! The superfund is $100B alone. The drop is going to consist of depreciation of housing itself, plus markdown all of the structured and leveraged financial instruments that depend on housing assets and related revenue streams, plus a negative multiplier that retards wealth-creation in the greater US economy, as well as further impacts on the global economy.
My guess, The amount of unwinding is going to be on the order of tens of trillions of dollars when it’s all finished. Others have suggested hundreds of trillions. Not close enough to the details to know the answer. Definitely more than billions though.
To put these numbers in perspective, 2006 USA GDP was $13.3 trillion. The federal debt is $9 trillion, and that’s just the market for treasuries. There is so much paper out there, it makes your head swim. The puppet masters are doing their part to keep the show going, thus the ‘Greenspan Put’. Soft landing is really the best outcome we can hope for, with a gradual unwinding over the next decade.
ParticipantI believe it’s quite a bit more than billions! The superfund is $100B alone. The drop is going to consist of depreciation of housing itself, plus markdown all of the structured and leveraged financial instruments that depend on housing assets and related revenue streams, plus a negative multiplier that retards wealth-creation in the greater US economy, as well as further impacts on the global economy.
My guess, The amount of unwinding is going to be on the order of tens of trillions of dollars when it’s all finished. Others have suggested hundreds of trillions. Not close enough to the details to know the answer. Definitely more than billions though.
To put these numbers in perspective, 2006 USA GDP was $13.3 trillion. The federal debt is $9 trillion, and that’s just the market for treasuries. There is so much paper out there, it makes your head swim. The puppet masters are doing their part to keep the show going, thus the ‘Greenspan Put’. Soft landing is really the best outcome we can hope for, with a gradual unwinding over the next decade.
ParticipantOn-topic here and I’m actually keeping it fairly civil. This notion that massive amounts of wealth can be created and destroyed simply through changes in perceptions is central to the concept of economic bubbles, the current housing bubble, this website, these forums, etc. Wealth was created during the housing run-up, now it is being destroyed.
Countrywide is currently running an ad campaign that illustrates this perfectly. I was in Oakland the other day and saw one of their mini-billboards in the lobby of a downtown office building. I’m paraphrasing here, but it goes along the lines of “In times of great change, wealth doesn’t simply disappear. It changes hands. The key is to understand where the transfers are occurring and to be a part of it.”
Think CW has an interest in shaping perceptions?
You bet. The perma-bulls and bubble players would have us believe that changes in perceptions about housing value and unsustainable expectations related to residential property appreciation have resulted in real gains in wealth this past decade. To be sure, some of these gains were real. But we’re now entering into a phase where much of these gains will be erased as perceptions adjust to reality.
And true, there are some, particularly on Wall Street, who will ‘make a killing’ on the ride down. But the impacts of this phase are going to be overwhelmingly negative on balance, for Main Street as well as Wall Street. I think it’s going to be a very challenging time.
Am I critical? Hell yes! I’m a business owner who values economic stability and sound fiscal and monetary policy. The last ten years have been shamefully irresponsible. It’s a disgusting mess we’re inheriting. No amount of ‘shorting’ the property market can mask this larger truth.
ParticipantOn-topic here and I’m actually keeping it fairly civil. This notion that massive amounts of wealth can be created and destroyed simply through changes in perceptions is central to the concept of economic bubbles, the current housing bubble, this website, these forums, etc. Wealth was created during the housing run-up, now it is being destroyed.
Countrywide is currently running an ad campaign that illustrates this perfectly. I was in Oakland the other day and saw one of their mini-billboards in the lobby of a downtown office building. I’m paraphrasing here, but it goes along the lines of “In times of great change, wealth doesn’t simply disappear. It changes hands. The key is to understand where the transfers are occurring and to be a part of it.”
Think CW has an interest in shaping perceptions?
You bet. The perma-bulls and bubble players would have us believe that changes in perceptions about housing value and unsustainable expectations related to residential property appreciation have resulted in real gains in wealth this past decade. To be sure, some of these gains were real. But we’re now entering into a phase where much of these gains will be erased as perceptions adjust to reality.
And true, there are some, particularly on Wall Street, who will ‘make a killing’ on the ride down. But the impacts of this phase are going to be overwhelmingly negative on balance, for Main Street as well as Wall Street. I think it’s going to be a very challenging time.
Am I critical? Hell yes! I’m a business owner who values economic stability and sound fiscal and monetary policy. The last ten years have been shamefully irresponsible. It’s a disgusting mess we’re inheriting. No amount of ‘shorting’ the property market can mask this larger truth.
ParticipantWealth is created and destroyed all the time without transactions or exchanges occurring to mark the value of every asset. The value in a market is set by its most recent transactions, and it is usually a small percentage of an asset or commodity class that trades hands that marks the changes in price.
Consider the home-equity refinance picture these past few years. A long-time homeowner, for example, might find they have additional equity in their home to borrow against. They have not bought or sold. There was no exchange between buyer and seller marking the appreciation. Their asset ownership occurs against a backdrop of appreciating housing prices. Voila, wealth creation. If prices decline, wealth is destroyed.
Again, if a large percentage of an available commodity in a given market exchanges hands on a given day, then pricing might approach perfect efficiency and wealth would generally be transferred not lost. Yet that is not what occurs, even in relatively liquid markets such as stock. The effects are amplified in markets such as housing.
Some additional aspects to consider are (a) on the finance side, the impact of leverage on asset values, revenue streams and nominal wealth creation, and (b) the impact of the cost of borrowing and monetary policy these past few years, the net effect of which has been to increase nominal wealth at the expense of the currency itself.
ParticipantWealth is created and destroyed all the time without transactions or exchanges occurring to mark the value of every asset. The value in a market is set by its most recent transactions, and it is usually a small percentage of an asset or commodity class that trades hands that marks the changes in price.
Consider the home-equity refinance picture these past few years. A long-time homeowner, for example, might find they have additional equity in their home to borrow against. They have not bought or sold. There was no exchange between buyer and seller marking the appreciation. Their asset ownership occurs against a backdrop of appreciating housing prices. Voila, wealth creation. If prices decline, wealth is destroyed.
Again, if a large percentage of an available commodity in a given market exchanges hands on a given day, then pricing might approach perfect efficiency and wealth would generally be transferred not lost. Yet that is not what occurs, even in relatively liquid markets such as stock. The effects are amplified in markets such as housing.
Some additional aspects to consider are (a) on the finance side, the impact of leverage on asset values, revenue streams and nominal wealth creation, and (b) the impact of the cost of borrowing and monetary policy these past few years, the net effect of which has been to increase nominal wealth at the expense of the currency itself.
ParticipantI don’t know, golfgal, I have to politely disagree. The notion that there are two sides, that positives offset the negatives, a buyer for every seller — I think this is a little bit of a misguided understanding of what’s occurring right now.
It’s not balanced. If a large enough amount of an available commodity in a given market were to exchange hands on a given day, then it’s arguable that pricing would be perfectly efficient and wealth would be transferred not lost. It doesn’t happen that way. Prices decrease in low transaction environments. Asset values are falling, revenue streams are diminishing, securities aren’t performing, and wealth is disappearing — in the absence of transactions.
This is especially true for market positions based on leverage and restructuring. The gains were amplified through financial engineering, the losses are so on the downside. Funds that were valuable yesterday are worth pennies on the dollar today, not because of transactions in the main, but because market performance and investor perceptions have changed. A tremendous amount of wealth created in the past few years is going away in the near-term future. There is no getting around this.
Meantime, significant aspects of the ‘real’ economy have been marked to market against unsustainably high real estate prices and secondary finance instruments. ‘Real-world’ pain is going to occur as the economy adjusts. Pension funds, University endowments, Joe and Jane Homeowner, Main Street Bank, Mortgage Brokers, Home/Furniture/Retail, etc. The impacts of the changes ahead are overwhelmingly negative. Why else would banks be setting up a $100B ‘superfund’ to plug the leaks?
My view, they’ll continue to work the margins, looking to stretch the ‘cycle’, monetize the bad paper, deflating existing obligations, etc. and otherwise defer needed market adjustments — until after the elections I would assume, as Raybyrnes suggested. I agree with him, it’s a ‘Greenspan Put’ for the rest of 2007-08, otherwise known as stick it to the Dems. (Notions of civic responsibility, as well as a healthy fear of risk, do seem lost on the baby boomer set.)
ParticipantI don’t know, golfgal, I have to politely disagree. The notion that there are two sides, that positives offset the negatives, a buyer for every seller — I think this is a little bit of a misguided understanding of what’s occurring right now.
It’s not balanced. If a large enough amount of an available commodity in a given market were to exchange hands on a given day, then it’s arguable that pricing would be perfectly efficient and wealth would be transferred not lost. It doesn’t happen that way. Prices decrease in low transaction environments. Asset values are falling, revenue streams are diminishing, securities aren’t performing, and wealth is disappearing — in the absence of transactions.
This is especially true for market positions based on leverage and restructuring. The gains were amplified through financial engineering, the losses are so on the downside. Funds that were valuable yesterday are worth pennies on the dollar today, not because of transactions in the main, but because market performance and investor perceptions have changed. A tremendous amount of wealth created in the past few years is going away in the near-term future. There is no getting around this.
Meantime, significant aspects of the ‘real’ economy have been marked to market against unsustainably high real estate prices and secondary finance instruments. ‘Real-world’ pain is going to occur as the economy adjusts. Pension funds, University endowments, Joe and Jane Homeowner, Main Street Bank, Mortgage Brokers, Home/Furniture/Retail, etc. The impacts of the changes ahead are overwhelmingly negative. Why else would banks be setting up a $100B ‘superfund’ to plug the leaks?
My view, they’ll continue to work the margins, looking to stretch the ‘cycle’, monetize the bad paper, deflating existing obligations, etc. and otherwise defer needed market adjustments — until after the elections I would assume, as Raybyrnes suggested. I agree with him, it’s a ‘Greenspan Put’ for the rest of 2007-08, otherwise known as stick it to the Dems. (Notions of civic responsibility, as well as a healthy fear of risk, do seem lost on the baby boomer set.)
ParticipantGreat observation. Here are my thoughts:
Housing, as an asset class, saw tremendous appreciation from 1998-2005. The appreciation was quite frothy. It was enabled by excess liquidity in our monetary system, loose practices in the lending industry and unrealistic expectations for long-term growth in real property markets.
Other classes of assets, cars, credit cards, etc., I don’t think we saw these kinds of conditions, growth expectations, behavior, etc. I can’t be sure if this is the explanation because I don’t work in the industry anymore, but this would be my outsider’s guess.
Curious, what’s your POV?
What’s your POV on the impacts of all this? In particular, how about the larger question of what happens to leveraged positions when asset values fall and revenue streams are diminished?
ParticipantGreat observation. Here are my thoughts:
Housing, as an asset class, saw tremendous appreciation from 1998-2005. The appreciation was quite frothy. It was enabled by excess liquidity in our monetary system, loose practices in the lending industry and unrealistic expectations for long-term growth in real property markets.
Other classes of assets, cars, credit cards, etc., I don’t think we saw these kinds of conditions, growth expectations, behavior, etc. I can’t be sure if this is the explanation because I don’t work in the industry anymore, but this would be my outsider’s guess.
Curious, what’s your POV?
What’s your POV on the impacts of all this? In particular, how about the larger question of what happens to leveraged positions when asset values fall and revenue streams are diminished?
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