Tuesday, April 23, 2013

Bubbles Bubbles In The Air, Bubbles, Bubbles Everywhere

Welcome to the New US Economy. Bubble in housing, bubble in bonds, bubble in treasuries and a bubble in the stock market. This is what happens when government and business work hand in hand to manipulate finances in a last ditch effort before an economy collapses. Every ancient empire in history has followed the same path,. What make us any different? Nothing. One precipitous event in any of these markets and you could see major declines.

I'm truly amazed that only 6 years ago, we had a bubble market in housing and people are buying again in fear of being "left out".  According to the government, inflation is mild ( have you been to the grocery store or tried to get gasoline lately?), so interest rates are being kept at record lows and it doesn't appear that the Fed wants to raise them anytime soon. Now that the banks aren't foreclosing (no mark to market), bidding wars have erupted over available inventory which has dropped some 80% over the last year. If you see a house you love, plan to live there and have a guarenteed reliable income stream for the next 10 years, go for it. It is a good time to buy, if you don't mind overpaying.

It saddens me to see Wall Street, who precipitated the financial crisis 5 years ago, is now in the driver seat again behind housing. They are pooling money, converting homes to rentals and hoping to securitze rental income streams. Wash, rinse and repeat, without any reprisal or risk involved. Once again, they are in unchartered territory by jumping into the rental market. If you take into consideration that few good jobs are being created, vacancy factors, maintenance and taxes, they could be in for a big suprise. If they are successful in becoming the new landbarrons, more and more people will be robbed of retirement, which in large has been equity in their homes. Great, now people can work into their seventies and eighties just trying to make ends meet.

Sure the media, government and all those who have purchased in this market will tell you the "recovery" is gaining traction. It's just too bad that the only recovery is on Wall Street and with the banks. They are taking more and more money from Uncle Ben and driving all the markets into bubbles. Unfortunately, the middle class has all but disappeared and the pool of consumers purchasing goods continues shrinking. Our 2 basic needs, food and shelter are getting harder and harder to come by. It's no wonder why close to 50 million Americans are now on food stamps. If it wasn't for food stamps, we would be seeing soup lines longer than in the Great Depression.

6 comments:

Anonymous said...

amen! The fleecing of the middle class continues unabated

Latesummer2009s@gmail.com said...

Yes it does. But people do have a choice whether they buy into the housing trap. Very few can actually afford the current prices. It's the incentives and the media hype that gets people sucked in.

Anonymous said...

very high paying jobs are in west los angeles. also, a lot of rich foreigners will not have a house anywhere else in the united states. those two things facts are setting a floor under rents that is very high already. it als puts a floor under prices. west LA is the enclave of the wealthy, or those wth very high current income. that is not changing but rather accelerating, as far as I can tell. What is your argument to the contrary / how am I wrong?

Latesummer2009s@gmail.com said...

My question is what happens once investors and all cash buyers don't support the market as prices increase to 2007 prices. West LA is big area with many neighborhoods that all those "rich foreigners/uber high income folks may not like. With the stalemate by banks and negative equity homeowners, we will stagnate at best for the next 10 years. Meanwhile, with QE 8,9,10 etc. real inflation eats up everything else in sight. Don't forget taxes maintenance and insurance. With our federal balance sheet swelling by trillions more, eventually interest rates will have to rise. Right about the time banks have trickled out the last of their properties.

Anonymous said...

LS2009 said...

"With the stalemate by banks and negative equity homeowners, we will stagnate at best for the next 10 years."

You just made his argument for him, as he was arguing simply for a floor, not rising prices.

Latesummer2009s@gmail.com said...

Prices appear to be stabilizing as there is no downward pressure due to the lack of inventory (banks,underwater owners etc.). That being said, prices will not rise much over the next 10 years, as investors leave the market. After buying and selling costs, taxes, maintenance and insurance, you'll be in the hole. Not to mention, high inflation on energy, food and other necessary household items.