[powayseller]

JES, I agree with you, but as you can see, even the progressive contrarians on piggington are siding with the bulls. For this reason, there is plenty of opportunity to make money, bec. we contrarians are in the minority. I made a recession call in 2/06, and the most contrarian economist, Dr. Roubini, didn’t make it until 6 months later!

[powayseller]

vrudny, your comments are surprising, esp. if you’ve been reading my posts. I am not a trader, but consider myself a knowledgeable long-term investor. You are new to the forums?

I’ve predicted the market would tank since last January at least, but was always afraid of shorting, bec. of the high risk. I’ve been writing on this forum that people should sell their stocks early 2006. At that time, I was afraid of shorting, because I had read how risky it is. You can read my previous posts from last winter to get all the details.

My prediction of the market tanking has not yet occured, but all the signs for it are getting stronger.

I see opportunities in many companies which have not yet been beaten down, like WaMu, furniture makers, retailers, computer manufacturers esp. since the bulls are expecting the computer sector to keep going up but in a recession they are going down too, as companies pull back on capital spending. So it is definitely not too late.

Did you short anything?

[powayseller]

Commentary:

Yes, Champion is on the move, good find anxvariety. It is because of one good contract, and I’m sure the opportunity is already priced into the stock by now:

“8/29/06: Genesis Homes, a member of the Champion family of homebuilders (NYSE:CHB – News), and the largest nationwide builder of modular homes, today announced it has been selected by NOLA to build a modular home for use in temporary housing proposals to FEMA. ”

Schahrzad Berkland

[powayseller]

vrudny, I don’t have the confidence in the renminbi that you have. China’s banks have hidden very effectively a huge amount of bad debt. They are overbuilt, and soon, their factories will sit idle. Then what happens to the banks? I am more worried about the yen than the US dollar. I do not want to buy yen, preferring the currency of a stable established economy, like swiss franc or euro.

Also, does anyone have any idea why Roubini would call gold a “barbaric relic”? I asked him, so maybe he will answer.

[powayseller]

Thanks for bringing this to our attention again. We’ve discussed this before. One thing I don’t know though is: does the borrower’s loan reach a cap, at which time the principal and unpaid interest is amortized? When does the borrower have to pay this money that is already recorded as income by WaMu, and as a mortgage interest deduction by the borrower?

What happens to the tax write-off when homeowner defaults?

I expect to sell large write-downs from WaMu. Maybe WaMu is the best lender to short, because the market has not yet priced in its high risk lending. After all, earnings are up, and the $203mil in Q1 earnings is hiding that his money will be mostly lost. When that becomes apparent, WaMu will go down the slippery slope of Countrywide.

WaMu has hovered around $45 for years, while the other lenders have been punished. So isn’t WaMu the ideal short play?

[powayseller]

Wiley, are you concerned about SWJ’s real estate holding company? I am looking for a pure water play without any real estate attached.

“SJW Land Company, a wholly owned subsidiary of SJW Corp., owns and operates parking facilities. SJW Land Company also owns commercial buildings and other undeveloped land primarily in the San Jose metropolitan area, certain properties in the states of Florida, Connecticut and Texas, and a 70% limited partnership interest in 444 West Santa Clara Street, L.P.”

[powayseller]

technovelist, you’ve got me on that one…. I got my info from some studies that Chris Johnston did, and he found gold rises in periods of high inflation. So when inflation is above a certain comfortable number, investors flock to gold pushing up its price.

[powayseller]

I’ve written before about the economic cycle, led by wages, then consumer spending, capital spending, manufacturing, and finally unemployment.

Office buildings and commercial buildings, industrial parks, are in the capital spending and manufacturing parts of the cycle, and thus lag the consumer spending cycle by 3-9 months.

This is because current construction was entered into by late spring, when retail was still hot. I am sure, although I don’t have data on this yet, that anybody who had planned to expand their furniture factory, build a bigger mortgage office building, develop a new strip mall, or expand their car dealership, will not do so from this point on. By mid 2000, REITs will be down, as the vacancy rate will increase in the business sector.

Whenever a question arises about a sector, think about the economic cycle, and the lags between them.

Also remember that by the time a recession is identified, the worst damage is behind us. That’s how you become ahead of the curve (as Joseph Ellis’ book is titled).

[powayseller]

ljr, I have to agree with your comments. If gold were a true safe haven, it wouldn’t fluctuate so wildly. How safe is my “safe haven” when its value could be down 15% tomorrow? I’ve asked all these questions about gold. For that reason, I would be reluctant to put more than 5% of my money into gold.

I’m also concerned with ETFs; if the sort of economic collapse that necessitates gold comes to pass, perhaps ETFs would be unredeemable, due to cash flow problems, computer glitches, anything. But keeping it at home seems risky too, and I wouldn’t want to store it somewhere else. It’s funny, but when I had a mortgage and more debt than assets, I had fewer worries about money; it’s true that the more money you have, the more you worry about losing it all.

Short term gov’t bonds sound good for now, but if the dollar starts plummeting, I wouldn’t like the bonds too much either.

Before anyone says I’m all doom and gloom, I am constantly on the look-out for a ray of sunshine on our economic horizon,because one day it will come, and I want to be one of the first to spot it.

[powayseller]

I agree w/ you about water. That is the most precious commodity, and I’ve been looking for a good water play.

I hate owning dollars; it makes me very nervous. I really think this banking collapse and govt’ bailout will require so much printing of money, that the dollar will be seriously devalued. With a slowing economy, and the other central banks raising interest rates, the US Treasury will be less competitive. The 5% earned on US Treasuries doesn’t look so good when the ECB is paying 4%. Frankly, I see no hope for the dollar.

If the Fed lowers interest rates, inflation will really get going, and the Treasuries will sell off, as the main reason we’ve had buyers is that the US offers the highest interest rates. Due to our large debt, we’ve got to offer a higher interest rate than the ECB.

BTW, the piggington server problems are really starting to get annoying. Timing out, trouble saving comments due to some unknown character in the post, unable to access, etc. I hope Rich will be able to resolve this.

[powayseller]

Ford just said they think oil will stay between $3 and $4, and I agree. This is a temporary blip.

Also, a courtesy request: put your URLs in links, and use the proper forum. This needs to into “economy and investing”.

[powayseller]

Just because a dividend increases, doesn’t mean your investment is any better. On the Prudent Investment thread, malfred wrote that he likes Southern Copper, bec. of its 9% dividend yield. History is full of companies which paid a high dividend despite their depreciating values; ponzi schemes also pay dividends; so a dividend doesn’t mean anything if my principal is eroding. Copper is in a huge bubble; I wouldn’t touch it with a 10foot pole.

Be careful of anything paying more than risk free (Treasury bills). The more it pays, the higher the risk.

Some investors are earning 10% on second deed trusts, not realizing that by next year, their principal will have evaporated. So just be careful out there with high paying dividend yields. They could very well be taking the dividend out of your principal.

[powayseller]

Gold is linked to inflation, and is bought as a store of value, as investors buy it when they fear inflation rises. Central banks store gold too. But copper, nickel, lead, lumber, are in demand when the economy is heated, to make houses, cars, computers, batteries for cars; during recessions, as demand cools, their prices will drop.I never heard that gold is a proxy for commodities.

[powayseller]

davelj, thanks for your comments. My commentary on news, analysis of other economists, and my projections for SD job growth and its effect on housing, both posted here, will continue, as will some charting, such as months inventory that I’ve been discussing (have been saving it for my own site). I will also continue the “regurgitating” of the excellent work done by others.

That said, is there anything about San Diego’s economy that people here are interested in?

[powayseller]

Delusional Deep-Slumbering Dreamer sdr wrote “in real time the biggest drops are occuring right now and will continue through the end of 2007.” Keep dreaming…..don’t let me disturb your sleep… it’s nice and warm and cozy in that bed and dreamworld now….but in 2008 a bucket of cold water will splash on you and jar you to ARM-Reset Reality.

That’s the land of $2 trillion of nationwide ARMs resetting, biggest rise in NODs and foreclosures, 10% unemployment, tough lending guidelines, and buyer fear, i.e. nobody wants to buy.

Remember how the bottom of asset bubbles end: nobody wants to buy. Fear reigns. Baby, we’ve got a loooooong way to go to asset bottom.

Signed, Arrogant Powayseller

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