[powayseller]

Looks like over 10% reduction, and we haven’t even got in the 2007 major ARM resets yet!

Assuming the price peaked in Summer 05 for $990K, a 10% reduction would be $891K. We’re even below that.

Now who around here is predicting a 10-20% drop? With a 9month drop of 10%, and a rate of change which is increasing, we could be down 15% just this year alone.

[powayseller]

I posted the link without analyzing it thoroughly, or at all, and if the guy made some mistakes in his assumptions, I appreciate the time you took to figure it out.

As I said, my reason for a 50% correction is simple: all excesses correct and overshoot on the way to the mean. We are several standard deviations removed from the mean, when you compare housing prices to rents, or to incomes.

To return to the mean, as measured by rents or incomes, we need a 50% correction.

A great visual is the chart in the Bubble Primer. Some people think wages will come up to soften the lower home prices. This is a possibility,but based on global wage dependence, pretty unlikely at this point.

House prices are already down 10% in some areas, and we haven’t even got into the 2007 massive ARM resets yet.

Please don’t think that the article I posted was to prove any point. I found it interesting, and its lack of accuracy does not change my prediction.

I appreciate the dialogue on this very much.

[powayseller]

Pete, no need for you to try to douse any flames. I thought sduuude’s last posts were polite and fair. I disagree with your assumptions of his post, or mine. I find your tone unpleasant. Sorry…

[powayseller]

PD, I’ve been through the snide tones before. I also found that whenever a lady takes exception to the snide tone, the guys tell the lady to have thick skin or ignore the comment, etc., but no guy comes forward and tells the other guy to knock it off and act like a man. You saw this happen above as well. I ignored the tone, you noted it, and the guys chided you for not liking the tone, instead of addressing the person who offended you. A bunch of woosies (sp?), I tell ya. But that’s how this group operates. Just so you know….

I’ve been called names on this forum many times, just for stating an opinion. Reach my post Sell Now from a month or so ago. Within hours, the name calling against me started, but it was done on other threads active at that time. It was surprising, but I’ve figured out who the offenders were. The people who get mad and defensive are the homeowners who will not sell because they are counting on a small drop. Any post which suggests more than that is perceived as threatening and can result in a negative tone.

However, in defense of everyone, the tone around here has been more civil and professional in the last week.

[powayseller]

sduuude, from the previous page, I don’t follow the point you are making. I don’t see what any of this has to do with the value of the dollar, which is falling due to our huge budget and trade deficits. I also think gold will rise long term because our price inflation is 5-8% now.

What do you mean with he followed a 4 year line? His line goes back to 1986 to establish a trend.

Do you have any analysis of Shiller’s work? Just curious…

However wage inflation is much less. Adjusted for 2% inflation, wages are flat over that last few years.

I’m also not going to defend the article. It sounds like the author made some incorrect calculations, which offset his estimate by a few percent. I’m betting that he will appreciate you pointing this out, as I did as well.

Regardless of the article, by extrapolating Rich’s chart on income/median house price, I stand by my 50% fall prediction.

[powayseller]

I’ve noticed only a slight increase of Sale signs in Poway, and more Sold signs to match. From Dec – end Feb I saw 2 sold signs, and since then, many more. I think people still are buying houses in Poway. It’s a popular place for families who want the good schools but can’t afford the $1.5mil and up homes in the good school districts near the coast.

[powayseller]

I will e-mail your analysis to Mr. Smith.

However, I disagree with your assertion that inflation must show up in higher wages.

As I wrote before, historically, before the global labor market, price inflation led to wage inflation. People used to say that houses rose with inflation. Inflation has been higher than the gov’t statistics, so housing has been rising less than inflation for many years. People just said it rose with inflation, bec. they believed inflation was 2-3%, and housing rose 2-3%.

I would say that housing price increases have lagged inflation by 1-3%.

Wages are no longer rising as quickly as they did, in the global labor market.

I would not expect housing prices to rise with inflation, whether the 2% CPI or the 5-8% actual figure which includes housing/food/energy/tuition/health care and all the other stuff which is either left out or minimized. (For example, while health care takes up about 5% of a family’s budget, it only makes up 1/10% of the CPI, or something like that…)

[powayseller]

Most new hiring, related to MEW, is retail and restaurants. These will be adversely affected first.

Then the cycle spreads to production/manufacturing. If Rubios orders fewer burrito wrappers, the paper production company has fewer sales.

Then the cycle spreads to capital spending.

Eventually, the stock market is down for retail, wholesale, producers. It’s a domino effect.

In difficult economic times, customers change where they shop – they trade down. The Rubios customer goes to McDonalds and the McD customer eats at home. So I sold my Rubio stocks. However, I may have made a mistake, because the restaurants have a way of overcoming this penny pinching: entice the customer with new menu items. Jack in the Box posted quarterly higher profit yesterday, despite higher gas prices, bec. of new menu items. Starbucks advertised its coconut beverage on the radio and the line was out ther door yesterday (this is according to my friend who is tracking Starbucks informally), after having been very slow for weeks. So while I thought the restaurants would go down, I do lack the knowledge of what can happen to delay the downturn.

Consider pawn shops (Cash America and others), consumer durables, but PEs are too high.

Has anyone checked the Rydex funds? They’ve got a bunch of inverse mutual funds.

[powayseller]

Trading in and out lowers your returns because people do it all wrong: they buy when stocks are going up, and sell when they are doing down.

If you do have some knowledge of recessions, and sit them out, you could double your returns, I think. It only makes sense. Financial advisors publish all sorts of charts trying to prove you’re better off staying in, because the mutual funds hate it when they get outflows of capital. Their marketing programs have worked well at convincing people of two stupid ideas: dollar cost averaging (yeah, just keep adding more overpriced stocks), and leaving your money in. I’ve read all those books, too. If anyone can convince me why I should stay in during the upcoming recession, I will consider the thought process. Until then, I’m out until I see the leading economic indicators turn around: wages and consumer spending.

[powayseller]

I would be surprised if you can do a carry trade like that at a profit. A mortgage rate is higher than a Tbill rate, I’m pretty sure of that. Why don’t you just call a mortgage broker, and get the info? Call any bank, or fill out an online loan ap. The rates really do depend on your FICO and loan/equity ratio.

[powayseller]

That’s what scares me. You can have a great idea, but be outwitted by the savvy pros, just on trading technicalities. Rydex inverse funds are a safe way to play the contrarian, right?

[powayseller]

Re: futures account: Will post after it’s done. Making calls tomorrow.

[powayseller]

I wasn’t suggesting in and out trading. I’ve been in Vanguard index funds since 1999, and just liquidated my positions. I did so in anticipation of slower consumer spending, and expected a stock market crash in early summer or fall. Little did I know that today a sell-off would occur due to inflation worries. I was just lucky there, as today’s decline was not for the reason I thought.

I did not recommend taking money out of retirement funds, only moving from equities to CDs. You can do this within your retirement account. I made the same move in my non-retirement accounts too.

I wouldn’t count on international funds to save me. The Asian economies are export dependent, and until they learn to stimualte internal demand, they will fare badly when the US consumer runs out of steam. Check Richard Duncan’s (Dollar Crisis) update.

[powayseller]

Homebuilder valuations are low, and they’re sitting on lots of cash. Value investor Bill Miller just loaded up on them. WIth shorts and puts, don’t you need precision on the timing and amount of the drop? I think they’re already discounted, and we don’t know how much they can improve their position by consolidating, share buybacks, land selloffs, and other gimmicks. Too risky for me, since I’m not a sophisticated trader, and I see what can go wrong with a trade like this, even though the idea is good.

[powayseller]

5’3″, yup. Dad is a doctor, doing research. Born in Germany…

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