[powayseller]

PD, did I misunderstand your testosterone comment? I read this thread for the first time today… As far as the forums being quiet, that’s because frequent poster powayseller was asked to write less. According to some, it would make the forums a more diverse and interesting place. Now back to Iraq. The problem seems to be a lack of sufficient troops in the first place. We should not have gone in there, but since we did, we should have put in 5 – 10x the number of troops, so the job could be completed. With too few soldiers, the war was doomed from the start. I remember lots of debate early in the war about sufficient troops, and Rumsfeld was criticized for not bringing in more soldiers. Why hasn’t this been raised again as a problem?

[powayseller]

We also thought builders had learned their lesson, and would not overbuild, and would stop buying overpriced land at the top of the cycle. Once again, builders who’ve been through several downturns failed to see the slowdown. Why didn’t they see it coming? Don’t they have economists on their staff, are they in denial, what is the explanation? Why did Toll and two other groups buy remote Phoenix desert land for $56K/acre earlier this year? Sheer stupidity. You’d think Toll would have learned from the last cycle not to do such a stupid move.

[powayseller]

After revision, GDP growth is .9%. I smell a recession…

“An unexpected increase in auto production last quarter was a statistical fluke that will be reversed, making current U.S. economic growth even weaker, according to a former Commerce Department economist.

Last quarter’s annualized 26 percent increase in auto production shocked Joe Carson, now director of economic research at AllianceBernstein LP in New York. Without the gain, the economy would have grown at an annual rate of 0.9 percent, not the 1.6 percent the Commerce Department reported today. ”

Bloomberg

[powayseller]

Many investing professionals try to steer you into load mutual fund products, because they are paid a commission based on the amount of money you invest. They would do you an immense service if they suggested no-load index funds, but why would they – no commission there, so they fail to let you know you have only a 30% chance of beating the index . Index fund investing beats the pants off actively managed mutual funds. I’ve sure had my fill of bad self-serving investing professionals from our company’s 401(k) plan, life insurance salespeople, and dozens of popular Wall Street propaganda books.

cabinboy, where do you suggest people go for their investment advice? A thread recently where privatebanker argued for the services of a CFP seemed to go nowhere, as he never did give the proof I requested that CFPs know any more than the rest of us, or help their clients achieve any better returns.

cabinboy, how did the average American do following your 4-step plan when they were buying up homes to flip? Or just buying a house at the top of the market with an Option ARM because their tax guy said it would save them on their taxes? How well off is the average investor who followed this 4-step plan?

If someone asked me where to go for basic investment advice or help in setting up a lifetime financial plan, I would suggest Rich Toscano. I’d make sure I had a professional to assist me with my taxes (CPA) and trust (probate attorney). I’d make sure I had all my insurance needs covered (disability, life, health, perhaps long-term care), some cash in the bank and a line of credit for emergencies. Then I would go to piggington to exchange ideas with other smart folks about how to invest the money I’ve saved, because the stuff coming from Wall Street helps the mutual fund managers get rich, but is of little use to me.

[powayseller]

Well said, zk. “And people who get their guidance from god are, in my experience, no more likely to be “good” than those who don’t. In fact, in many cases, it gives them license to do bad things.” Don’t you think Bush is using his religion to kill, just as the terrorist are doing? Doesn’t he feel it is his mission, his calling from God, to liberate Iraq? He is misuing religion too… If he really cared about the plight of Iraqis, why isn’t he in Darfur or Sudan? If we only knew the real reason for the Iraq occupation… If Bushy boy only had the courage to admit he made a mistake… If he had not deliberately misled us about the WMDs (you know ,the lie he told so he could get Congress support for the war.)

The Iraq fiasco is making us weaker in the Middle East, as now Iran and North Korea are emboldened. They see that we have no ability to defeat the Iraqis. We proved to the rest of the world, via our mistake in Afghanistan and Iraq, that our military is not adept in these insurgent type of wars.

PD, what is it exactly that you want to fight for? The fight in Iraq is being lost. Is that because the soldiers lack testosterone so they don’t have the fortitude to kill enough Iraqis and torture them sufficiently? What would satisfy you?

Is this war in Iraq really about our freedom, or is it about Bush’s delusion of doing God’s will by overthrowing Middle East governments or his wish to give contracts to his buddies at Halliburton?

What is really interesting, is why I even have to ask about his motives. I’m just a regular person who counts the minutes to Sunday night at 9pm for the latest fiascos on Desperate Housewives, and believes most things people tell me, if they make sense. Why do I mistrust our reasons for being in Iraq? Simply, it’s because the story we’ve been given doesn’t make sense!

[powayseller]

The proper speed limit is 80 – 85 mph on the freeway, my preferred speed. Am I crazed?

[powayseller]

GDP is down because of a 17% drop in residential investment. Consumer spending is up 3.1%, “and the value of imported goods accelerated sharply to a 7.8 percent annual rate of increase in the third quarter, more than three times the second quarter’s 1.4 percent increase.”

“Nonresidential investment, which measures business spending, rose at an 8.6 percent annual rate in the third quarter, close to double the second quarter’s 4.4 percent. Consumer spending, which accounts for roughly two-thirds of national economic activity, increased at a 3.1 percent rate, up from 2.6 percent in the second quarter.” This makes sense, since business spending is a recipient of consumer spending at the front end of the chain. It also explains why we’ve had so many good earnings reports.

This raises a few questions. If residential construction is down 17%, why haven’t we heard of more layoffs and lower profits among companies which make copper, pipes, windows, carpet, and retailers which sell this stuff? How long can the consumer uise debt from credit cards and homes, to buy imported goods, in the face of declining home prices? Since consumers are buying mainly goods from Asia, who is benefitting from the purchases of these products? Asian manufacturers and US retailers, or US companies overseas?

Did our past recession happen in this split way too? Durable goods like autos and houses are declining (signaling a recession) yet consumer spending via debt is increasing?

[powayseller]

Those people heavy in cash in anticipation of a recession will look brilliant in a few months, just as Roubini looks brilliant today while for months he was called a doom and gloomer, an Eyeore, etc. I am done following the Wall Street dogma; blindly following the idea of dollar cost averaging is a sure way to underperform. So is buying and holding real estate.

If you are suggesting that people should stay invested in stocks and bonds for the long run and dollar cost average, then I heartily disagree with you.

Anyone who is in cash when the stock markets nosedive going into the recession will be very happy. If the dollar loses more value, those in euros and gold will be happy too.

Also, I wouldn’t guarantee the average investor successful if he’s got his money in the stock market right now. THe stock market is going down as we head into the recession. Being in cash earning 5% is the best place to be.

Anybody who is in the stock market needs to have a darn good reason for it. If you are on this forum, you understand the housing bubble,a nd that every housing decline has led to a recession. GDP is slowing, and the recession is imminent.

Now the question is the same as I asked people in 1999: how will you know when to get out of the market? If you can ride it to the top and then get out before it drops, you will have done better than I. (“I” is correct grammar here)

[powayseller]

I caught the last minute of the story too. Shorts are causing the Dow to go higher, according to the NPR story. They also talked about the high auto inventory, something like 80,000 vehicles.

[powayseller]

The investment newsletter forgot that the US is 40% of China’s exports. McDonald’s is going to get hammered when the global engine of consumption, the US, slows down, because the rest of the world will slow down as well, at least temporarily.

The consumer is still resilient. I had expected the spending to slow down by this time, but the loose lending is still going, and credit card debt is rising as well. I think it will take 1-2 quarters more to slow down the consumer. Catalysts could be more mortgage resets, dropping house prices making it harder to refinance since the equity is not there, the non-traditional mortgage lending guidelines, and massive layoffs beginning soon in construction and real estate and lending.

Durable goods sales are already falling: the consumer has money to buy sweaters and china, but not enough now for cars and houses and furniture. So we are seeing the slowdown start with the big ticket items. Home Depot is clearly worried; why else would they be selling groceries??? What do you all think about that move?

[powayseller]

Bugs is right. The composition of homes sold changes every month, so the median is more of a reflection of the change in the mix of homes sold.

I don’t know why there is such volatility in the new home sales. The resale market median varied only $5K – $10K from month to month.

From the U-T: ” Statistics from the National Association of Home Builders showed a similar slide. Builders reported cutting prices in Septemberby 5%, according to the association’s most recent data”.

A 5% cut in September is a 60% annualized slide! If we assume the rate of decrease continues picking up, it can get much worse. And this doesn’t include builder incentives…

[powayseller]

We’ve got $9 trillion in outstanding residential mortgage debt, and $1 trillion of that amount resetting next year.

A lot of people have refinanced out their equity. The 70% figure includes refinancing. We’ve been on a refinancing spree in this country, and we’ve “liberated” $700 billion of debt from our homes in the last few years. Homeowners consolidate their auto, credit card, and HELOC debt by refinancing, and many long-time homeowners are now facing foreclosure.

The baby boomer retirement wave will be accompanied by downsizing, so I expect to see a demographic shift into smaller homes. Unfortunately, many will be disappointed that they have less equity than they thought, making for a less pleasant retirement.

[powayseller]

Have you talked with any lenders about the type of service they need? I heard today that the lenders are really backed up with short sales. Seems like they’d want to contract out some of that work?

[powayseller]

Good post, cabinboy.

Do you think anybody would take investment advice from an internet discussion group? I think the piggington group is above average intelligence and income and education, so we are using this economics and investing discussion as one more input in our existing portfolio plan. I hope it is not the sole investment input for anybody.

Any internet discussion on investing is just food for thought. For me, it has been very productive to exchange ideas. Where else would I have learned about bear funds, buying gold (which I used to think of as a worthless metal), or selling my house? Bloggers have enriched my investing experience, but the foundation was laid before I came here. People need a foundation and then the blogs are just additional food for thought. If I were younger and didn’t have my roadmap already, I would be in Rich’s office to get myself all set up for asset allocation, insurance, trust, etc. Those are the foundation. Good point, cabinboy.

[powayseller]

Steve, the housing market is slowing nationwide due to the high liquidity and investors chasing MBS yields, which caused the housing market to take off nationwide. The supply-demand imbalance is nationwide, even in Omaha, NE, and that is the reason the median price is falling nationwide.

This is no longer a bubble-city problem. The housing market price drops are now a national problem.

Lower housing prices are not bad? That’s like saying when your stock portfolio drops 5%, that’s not bad either because now you can pick up stocks much cheaper. I think most people who own homes think it’s really bad.

Dropping prices are a result of the supply demand imbalance. The only time dropping prices are good is if they result from an easing of a supply shortage. But now we are seeing a glut of homes, coupled with lower demand, and the result is that prices must fall. This will ultimately be good for new buyers, but is very bad for boomers who are counting on their home for their retirement. Homes are Americans’ biggest asset. Lower prices are bad for people with mortgages resetting too, as they won’t be able to refinance if they lack equity.

I met a mortgage broker this morning, and he knows nothing about the new mortgage guidelines. He thinks the state regulators cannot regulate what investors want to buy, but he seemed a bit concerned. His view is that borrowing is the American way, and a downturn in housing will be the downturn of our economy. He said a typical deal is a refinance, where the borrower uses home equity to pay off credit cards. Americans shop up a storm on credit cards, then when the credit card minimum payments come to $2,000/month it’s time to refinance the house. I asked what happens when they can’t refinance anymore. His answer: “that’s why you’re seeing more foreclosures now”.

So foreclosures result not only from resetting mortgages, but also from inability to refinance debt. Now I understand why Countrywide runs all those consolidation loan ads: they are a huge business.

He also said that short sales used to take the lender 1 month to process, but now they are so inundated it is taking 3-4 months.

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