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Old 09-06-2008, 18:00   #46
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TaoJones,

What gold funds do you recommend?

Or is it mining companies or what.

PM is fine. I won't hold it against you but I see some serious problems and want to "get out tomorrow" and just watch. If I can.........

Thanks.
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Old 09-06-2008, 18:04   #47
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TaoJones,

What gold funds do you recommend?

Or is it mining companies or what.

PM is fine. I won't hold it against you but I see some serious problems and want to "get out tomorrow" and just watch. If I can.........

Thanks.
I'm sorry Therapy, and anyone else similarly curious, but I cannot and will not answer that question. I hope you understand.

TaoJones
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Old 09-06-2008, 18:08   #48
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I'm sorry Therapy, and anyone else similarly curious, but I cannot and will not answer that question. I hope you understand.

TaoJones
Yes dammit.
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Old 09-06-2008, 23:40   #49
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So... presumably, these investment entities are holding lots of debt that they will likely never recover. Aren't these the same investment entities who profited well enough when people were using their rising house prices as ATM's to buy manufactured goods? At the end of the day, don't they still have the widget factory built, and don't we still have the physical houses built, and a pile of widgets?

And isn't it also probable that there yet exists such enormous potential for growth (when do the Chinese get addicted to credit?) globally, that this speculation bust could be drowned out? Humbling to America, to be sure... but I wonder if America can still sink the global ship all on it's own.
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Old 10-06-2008, 08:09   #50
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Well, we had phenomenal price appreciation, for awhile, so the lenders (who should have known better) kept lending to anyone with the ability to fog a mirror.
As always TJ, I love your analyses.

I just want to poke a couple of things. While it seems a lot of your ire and the majority of the responsibility lies with those "greedy ol' banks", I have to say that we must lay much of the blame on the consumer in America.

American consumerism and selfishness is at the heart of the matter. Both corporate and individual selfishness - the me generation may be about to get their downcycle.

<snip>
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Well, any child could tell that this farcical concoction was bound to implode, eventually.
The "any child" quote gets me. Many hundreds of thousands of consumers did not see that it would implode. It was easy. Just refinance every 5 years as the value of your home increased on paper and buy a new SUV, a boat, an RV and a couple of dirt bikes.

We are going to have a cycle - I've been through them and I am not leveraged. Our parents went through the mother of all downcycles in the 30's. The last big downturn I remember was the 70's.

Think about that - There are a ton of people in the US in their mid 30's who have never seen a downcycle.

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What could go wrong? Didn't real estate always go up?
Well, yes, in fact, long term, it does. My Dad's house that he bought for $9,000 a couple of long cycles ago just resold in LA for over $400k. The only time you lose money in real estate is when you sell it. I just wish (somewhat) that I was geographically located to take advantage of the upcoming discount sales.

The thing about the US is that the individual and the government is over-leveraged. But instead of trimming back, deciding what to cut out of the monthly budget we will panic, we will sell stocks.

As my economics professor said, "It's all about animal spirits." When the market spooks, the consumer spooks, the balance of the world is upset and we spin off our axis.

Eventually we get over it. Put our nose to the grindstone and pile up all the rocks again.

I have long been the optimist to counter your (my perception) pessimism. However, I think I am losing the PR battle and we will have a pretty bad go of it soon.

The animal spirits are spooked and the result may be unavoidable.
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Old 10-06-2008, 10:09   #51
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if CPI is really closer to 10% then over 5 years, a house would have to appreciate 60% just to break even.
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Old 10-06-2008, 10:53   #52
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This isn't a cycle, a lot of people will be hurt if they think so. A "bubble" is a one way street. When the "Tech Bubble" burst in 2001 stock prices fell to 1/20th of their former value and are still at 1/20th of their former value in constant dollars. Real estate prices have moved way beyond their historic norms. Prices are now adjusting back down to where they traditionally have been from 1890 to 1998 and are becoming based on peoples ability to pay again. The real estate bubble started in about 1999 when people thought that they could pour anything into a house as they never lost value. Just as they thought they could pay anything for a stock with constantly growing earnings and never loose. After this real estate bubble bursts, houses will resume having a normal 4-5% growth, just as they have for 100 years. In inflation adjusted dollars, they will never hit their record prices they did in 2006. In inflation adjusted dollars, we're not even half way through the correction. Check back in 2011, we'll probably be through the worst of it by then. Just my opinion, but I've been of this same opinion since 2002.

'We are going to have a cycle - I've been through them and I am not leveraged. Our parents went through the mother of all downcycles in the 30's. The last big downturn I remember was the 70's."
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Old 11-06-2008, 06:22   #53
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This isn't a cycle, a lot of people will be hurt if they think so.
Time will tell of course.

Why does one get hurt in a cycle?

BTW - The context of this thread is obviously housing. My context is overall US economy. We aren't just leveraged into over-valued houses. We are leveraged with credit cards, overconsumption, a huge national debt, an unbalanced budget and foreign "commitments" we can't possibly afford.

The housing bubble will burst (has burst?) and the economy will recess.

$4 gas prices in today's context? Can anyone say 1976. Anyone remember Jimmy?

Get out of debt, if you can, immediately.
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Old 11-06-2008, 06:29   #54
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Anyone remember Jimmy?
I do, he was and still is a disgrace.
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Old 11-06-2008, 07:46   #55
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Time will tell of course.

Why does one get hurt in a cycle?

BTW - The context of this thread is obviously housing. My context is overall US economy. We aren't just leveraged into over-valued houses. We are leveraged with credit cards, overconsumption, a huge national debt, an unbalanced budget and foreign "commitments" we can't possibly afford.

The housing bubble will burst (has burst?) and the economy will recess.

$4 gas prices in today's context? Can anyone say 1976. Anyone remember Jimmy?

Get out of debt, if you can, immediately.
From what I understand (via The Economist) the US economy is significantly less dependent on manufacturing (having largely turned to services) than it was in the 70's. High gas prices hurt Americans today principally because they made foolish car purchases when gas was cheap.

And why go through heroic efforts to get out of debt before a period of inflation? Why not refinance to some fixed rate, then let the balance rot away? I have a fairly large tally of student loan debt, that's sitting at 2% fixed (consolidated in '01 I think). I don't think I'd mind a wee bout of inflation right now...
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Old 11-06-2008, 10:04   #56
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<snip>
$4 gas prices in today's context? Can anyone say 1976. Anyone remember Jimmy?
<snip>
For the record, Carter wasn't elected until November 1976, and didn't move into the White House until January 1977. There was an energy crisis in 1979, however, precipitated by the Iranian Revolution, but most refer to that as the Energy Crisis, or the Second Oil Crisis.

1979 energy crisis - Wikipedia, the free encyclopedia

The first oil crisis occurred in October 1973, during Richard Nixon's administration, and came about as a result of the use of the "Oil Weapon" following the Yom Kippur War as punishment for US support of Israel. Nixon, of course, was otherwise occupied - by the Watergate scandal.

1973 oil crisis - Wikipedia, the free encyclopedia

While I remember the shock of long lines to get gas, and fights at gas stations, I don't associate any of that with a particular administration, but I understand that a president gets the blame, or takes the credit, for whatever happens while he's in office. It's a human characteristic that we project our day-to-day dramas onto those we mistakenly believe to be omnipotent.

"Why doesn't _______ (fill in the blank) do something!?" is the usual refrain.

Also, while people are crying about $4/gallon gas, it's actually cheaper at that price than it was in either 1979 (more than $1.35/gallon) or 1973 (more than $.83/gallon) after adjusting for inflation - and that's if you accept the BLS inflation calculator. Inflation is most likely much higher than government admits, so $4/gallon today is still a relative bargain compared to those earlier crises.

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And why go through heroic efforts to get out of debt before a period of inflation? Why not refinance to some fixed rate, then let the balance rot away? I have a fairly large tally of student loan debt, that's sitting at 2% fixed (consolidated in '01 I think). I don't think I'd mind a wee bout of inflation right now...
If it were possible to get back to ". . . a wee bout of inflation . . . " we'd all be better off. What we are in, presently, is a severe inflationary period of at least 10-15%.

While I don't disagree with your idea in principle, keep in mind that one must earn the money first, before it can be used to service one's debt. To be free of debt is to be free of one of life's most onerous burdens.

TaoJones
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Old 11-06-2008, 10:17   #57
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Yes,
I would begin low-balling if the wife would get on board.
She says, "It is not the right time yet."
She is right about selling the house now. When I said we needed to sell it two years ago she said "NO".

My plan is to see what happens between now and Dec, or maybe Dec of 09. If I do not like what is happening then, I will do something pretty crazy. Everyone that might need to know has been warned.

Therapy,
I'm right there with you. I'm a young guy who had about $300,000 in equity a few years ago. I wanted to cash out, look for a boat, and move the family aboard. Today, we are in the house. If we sold today this is how much i would receive....$0....Amazing.....I feel like doing something pretty crazy too!!!
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Old 11-06-2008, 10:24   #58
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The indeterminate direction of the economy has made people cautious in buying toys and large capital expenditures. That's not good for the realestate or boat market.

Anyone want a cute house in one of the best neighborhoods in Kalamazoo, MI??

Aloha
Peter O.[/quote]

IF and that is a LARGE IF we where thinking of moving back to the US K'zoo would be a nice place to live only it is a College town for the most part last I knew and opening a practice in a down-turned economy in a heavily hit state (have lot's of family and friends in Michigan) is not on the plans. I wish you the best and will let a few friends who are in the house market know about your offer and who knows.

Michael
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Old 11-06-2008, 14:59   #59
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Therapy,
I'm right there with you. I'm a young guy who had about $300,000 in equity a few years ago. I wanted to cash out, look for a boat, and move the family aboard. Today, we are in the house. If we sold today this is how much i would receive....$0....Amazing.....I feel like doing something pretty crazy too!!!
Too bad.
Misery loves company - welcome aboard.

Keep your nose to the grindstone for X years and you can be an old guy like me with a little more than zero in the bank.
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Old 11-06-2008, 15:48   #60
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The answer is simple...Northern Rock Bank... ...and that is just one of them and yes it is and will as the Global banking and industry market thought you could keep rolling credit and it wouldn't catch up. But the re introduction of some very shady lending practices by different levels of banking and business and the publics willingness to believe what a salesperson tells them has us where we are toady though the bureaucrat is also a big part of the problem in that they keep playing with the numbers to make their bosses look good and therefore keep their jobs.

Than again what is that quote? "What a tangled web we weave....

This one will take a good number of years to correct and might go the way a lot of people are expecting. We will see. We have plans that we are putting into action and hopefully the fruits will bear well.

Michael
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