NOBODY loves a party-pooper. When asset prices are going up, most people are inclined to celebrate. The bears who argue that asset prices are about to fall tend to get dismissed as out of touch (dotcom sceptics supposedly “just didn’t get it”) or are likened to stopped clocks: occasionally right, but mostly wrong. If they dare to make money out of their beliefs by selling short (betting on falling prices) when a crisis hits, bears are decried as economic vandals and politicians call for their activities to be banned. ...Don't buy gold. The dividend yield is too low.
The most excitable bears are not so much polar as bipolar. They dabble in conspiracy theories and talk of the collapse of civilisation and the need for investors to sell all paper assets, buy gold and retreat to Idaho. But bulls can be overenthusiastic too, talking of new eras in which asset prices will reach undreamed-of heights (remember the book “Dow 36,000”?). Over the past 20 years it has been the repeated interventions of central banks to rescue bulls, not bears, that have contributed to the current mess by encouraging too much risk-taking. ...
But the world needs to nourish its bears. They were right about most things in the past ten years: dotcoms and American houses were indeed overvalued, and rapid credit growth did make America’s financial system and the global economy vulnerable. ... This decade, investors have lost more money listening to the bulls than to the bears.
Friday, October 02, 2009
Grrrrr
The Economist says, "Feed the bears":
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"The most excitable bears are not so much polar as bipolar. They dabble in conspiracy theories and talk of the collapse of civilisation and the need for investors to sell all paper assets, buy gold and retreat to Idaho."
ReplyDeleteTherein lies the reason we are not taken seriously. As a former bear (04-09) I kept saying the simple message, home prices are way out of whack and (a) must come down or (b) incomes must rise or (c) a combination of both.
I do feel vindicated in that I was right. However, thanks to these asshats who were right there with me on this blog talking about how the dow was going to reach 400, unemployment would reach 25%, etc. etc. I was dismissed by the reasonable people out there who saw these clowns and figured we were all cut from the same cloth. Frustrating...
Crap, this is the same idiotic chant, with a different beat.
ReplyDelete"Bears" are only so when fundamentals were out of whack. To lump rational thinkers in with tin-foil-hat nutters is exactly what's wrong with the MSM (including, even, gasp, The Economist). Nobody wants to think for themselves, not the readers, and definitely not the journalists. This is the reason that bloggers have taken over the publishing world. You just get better information from them than you do someone trained how to write, not think.
Chuck
"Bears" are only so when fundamentals were out of whack."
ReplyDeleteNot necessarily true. There are some who argue the main fundamental is govt debt. If thats the standard of fundamentals, then its been out of whack since the 1940s.
These permabears argue this will lead to the downfall of the US itself. In the long term, they might be correct. However "long" is the operative word here - consider:
Brittian was able to play that game for 150 years (and they are still here)
The Ottoman Empire was able to play that game for 600 years (they imploded)
The US has been playing this game for 80 years, and no sign its all going to end anytimme soon.
In my mind, if it doesnt happen in your lifetime, then it isnt that relevant in your decisions on whether or not to purchase a house.
Chuck Ponzi said...
ReplyDelete"'Bears' are only so when fundamentals were out of whack. To lump rational thinkers in with tin-foil-hat nutters is exactly what's wrong with the MSM (including, even, gasp, The Economist)."
There are different species of bears, and some of them never hibernate.
The Economist itself is often bearish. They warned about the housing bubble as early as 2002.
"The US has been playing this game for 80 years, and no sign its all going to end anytimme soon.
ReplyDeleteIn my mind, if it doesnt happen in your lifetime, then it isnt that relevant in your decisions on whether or not to purchase a house."
The game has only been played by the US for about 40 years. Before that the US actually produced things that people (and other countries) want. Now we exist to borrow other countries money to buy other countries products. Its like buying everything in a store on store credit and not having a job....eventually the store will cut your line of credit and turn you in to a collection agency.
In my lifetime I have seen the biggest decline of housing prices in history and its still going strong.....so yeah that plays a partbig part on my decision to buy a house or not.
I dont care if someone who has lost 50% of the value of their house thinks Im nuts for renting. Call me a bear all you want, Im not bleeding cash and thats all I care about.
My house isn't bleeding cash. I own a small SFH in the immunozone.
ReplyDeleteNow renting, that's another matter.
Tell me again how much of your rent check you have after a year. How about 5 years.
Suppose rent is $1,500/month. That's $18,000/year, isn't it?
Five years is $60,000.
My place has never dropped in value, the immunozone thing. There were a few years when the value went up more than $50,000.
My mortgage? PITI is $1,800/month.
Basically, every cent I've paid in the down payment and PITI is available in my equity.
Yes, the taxes are going up. Look, I'm not bashing you but most home owners in the immunozone are doing just fine.
There are places that are underwater, Manassas is one. The immunozone isn't.
"There are places that are underwater, Manassas is one. The immunozone isn't."
ReplyDeleteLast time I checked there are places underwater....its called 95% of the US. You street isnt underwater.....
yet.
"My house isn't bleeding cash. I own a small SFH in the immunozone."
ReplyDeleteWell that depends on when you bought it, even in the immunozone. If you were lucky enough to buy BEFORE the bubble, sure...but even the "immunozone" isnt truly immune as it has dropped in value from the peak too.
I like the comments by the anonymous poster October 03, 2009 9:24 AM. 40 years ago we didn't bleed jobs to China, and Mexico. 40 years ago the ratio of debt to GDP was much lower. 40 years ago we didn't have major terrorism threats on our soil. 40 years ago the emphasis was on value and not growth stocks, therefore one could expect a 6 to 7% annual dividend yield.
ReplyDeleteLook at how things changed economically since the early 1980's. Examine government debt and spending. Examine how manufacturing has gradually declined due to free trade and excess regulation. Look at how China has grown.
Look at how white collar jobs are next in line for a major blood letting, as they are outsourced overseas.
If anything, I hope at worse that our standard of living remains the same while China continues to grow at 8% a year.
When you are talking about "immunozone" are you talking about the People's District of Greater Washington DC? Townhomes outside the beltway in Virginia had seen their values drop about 35% on average from the peak. There was a slight bump up this spring due to the $8000 tax credit for first time home buyers.
ReplyDelete