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This, of course, is bad news for everyone intermediate term (except
astute traders, which I, personally, have yet to become).
It irritates me that wholesale economic foolishness, fostered (or at
least exploited) by political self serving, on the part of a majority
can be so detrimental to all of us (especially blue collar stiffs like
me). In other words, a bunch of short-sighted, ill conceived "fiscal"
scheming, both public and private, will, when its inevitable
comeuppance comes up, lower the tide for all.
One sign of a bubble is when landscapers start driving big, new,
Cummins-turbodiesel Dodge Ram pickups and have two or more cellphones.
(I still have my 1986 Ford -- 235,000 miles -- and just recently
broke down and bought a beeper).
I remember returning to Massachusetts one year (it was about 1985, I
think), amazed at how shiny and new everything in the run-down old
neighborhood looked. It seemed that my extended family, cursed for
generations into the roofing business, were all buying second homes
and sporting big new Ford diesels (the hot one at the time). I recall
that Wendy's was so short on labor that they would send buses to
surrounding towns to pick up the new employees they hired at $7 an
hour. Yes, I remember it as though it were yesterday. And then, of
course, about two years hence, burst a real estate bubble that hurt a
good many people a good bit.
I know one fellow who 'owned' numerous income properties until the
bank, Bank of Boston, I think, called the notes due. Three million in
real estate hit the market just like that (It was probably 4 mil a
month before). Eventually, the bank was bought for a few pence on the
pound, as well.
But what's really amazing is how fast some people recovered...
"The trouble with Prosperity," a book by James Grant, comes to mind.
Forgive me for rambling. There's just something about this
'correction' that is thought provoking to me. Maybe it's just because
I was enjoying paying my bills for a while.
---Felix TY <felixty@xxxxxxxxxxx> wrote:
>
> Yes, In China right now there are a lot of real estate developers
who are fly by
> night
> and johnny come lately. Their poor investors were paying monthly for
their
> residential
> and office units for many months then they found out the developer,
has so far
> just
> dig big holes and not even foundations yet. One reasons is the bank
financing of
>
> the developers didn't come though, so the speculators were left
holding the bag.
>
> Sometimes, me thinks its a good thing, they shoot criminals there
regularly even
>
> white collar crimes like massive frauds.
>
>
>
> Michael Paauwe wrote:
>
> > It is not a well known fact, but 1998 produced what is now
considered
> > possibly the most dramatic real estate bubble event noted in world
history.
> > It happened during 1997 and 1998 in Shanghai China, in the
commercial office
> > tower real estate sector.
> >
> > MASSIVE overbuilding of commercial real estate built during the
high growth,
> > over-inflated mainland China economy, resulted in hyper land
speculation in
> > Shanghai, which has ended in a commercial real estate CRASH of epic
> > proportions. As quickly as many of the enormous new commercial
office tower
> > complexes are being completed, they are being pad-locked shut,
sitting
> > completely empty, whole towers across the horizon, with hundreds of
> > thousands of square feet of high end commercial real estate
sitting empty.
> >
> > It is now estimated that without ANY new commercial construction,
it will
> > take fully FIFTEEN YEARS of normal economic activity to totally
occupy these
> > new office tower complexes in Shanghai. This has resulted in
spreading real
> > property deflation and contributed to general price deflation in
the area,
> > admitted officially by the Chinese government today.
> >
> > The earlier post made on the Hong Kong economy is a partial result
of the
> > classic unwinding of the SHANGHAI real estate BUBBLE.
> >
> > As was pointed out in another recent post here, there is no real
estate
> > bubble in the US. But there is a true BUBBLE in the stock market.
During the
> > recent price peak, at the July 1998 market high, the price
earnings ratio
> > for the S&P 500 hit 29 times earnings for the market as a whole.
This is BY
> > FAR the highest US market PE Ratio ever recorded, and by a wide
margin.
> >
> > What many analysts fail to mention is that it is not just the
reduced
> > earnings expectations that cause the stock prices to drop, it's
the 'reduced
> > price earnings ratios' that also result from reduced earnings
expectations,
> > that really start to kill inflated stock prices in a bear market.
This is
> > reflected in the recent S&P 500 futures prices, which have
corrected exactly
> > 10% from that July 20th high close, in only 11 trading days!
> >
> > On Acompora, he simply restated in plain language, based on market
tape
> > action, what Greenspan recently said about stock prices to
Congress on July
> > 10, 1998:
> >
> > "These rising expectations have, in turn, driven stock
prices
> > sharply higher and credit spreads lower, perhaps to levels
> > that will be difficult to sustain unless economic
conditions
> > remain exceptionally favorable -- more so than might be
> > anticipated from historical relationships."
> >
> > "Reduced prospects for the return to capital would not only
> > affect investment directly but could also affect
consumption
> > as stock prices adjusted to a less optimistic view of
> > earnings prospects."
> >
> > Michael Paauwe
> > mpaauwe@xxxxxxxxxx
>
>
>
>
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