Monday, May 09, 2005

We're Screwed

I know an asset bubble when I see one (nothing that happened to the stock market after 1999 has been much of a surprise to me). Right now we're in a collossal mortgage finance bubble in which all caution has been thrown to the wind. It is exactly analogous to the dot-com frenzy, which no one remembers the lessons of, since, hey, that was five years ago. Although I'm appalled at the inflation of the last two years, I think our future is one of deflation and depression (as this article describes).

Here's what's unfortunate. When everything goes to hell, the Democrats will get back into power. And then it's scorched earth and revenge time against the McChimpler theocrats (I mean look at the insane fever these people have worked themselves into. What happens if they get the keys back?). So enjoy the quasi peace, normality, and "red-state" ascendance of today. It ain't going to last.

Heck, I don't know what the future holds, but I'm just sayin'. I don't know why I'm posting this, other than that this is what my intuition is telling me. But don't worry, I'm not going to wear this blog like a "The End Is Near" sandwich board. Maybe down the road if things play out this way, I'll occasionally link back to this post and say, "Huh?!? Huh?!? Who's your daddy?"

Okay. Now, where did I put my meds...

2 comments:

Amber said...

Why anyone would be buying a house these days is completely beyond me - especially in places like the bay area. And all those people buying with zero down ARMs? Absolutely insane.

It is going to get ugly... and it is only a matter of when. I hadn't thought much about the political consequences of such a fall out, but I think you're right.

Matteo said...

Yes, zero down, negative amortization, interest only loans, with potential rents amounting to only about half of carrying costs. Add to this widespread appraisal fraud connected to cash-out refi's. No questions asked, folks can rebuy their own houses at higher than the current market price, and finance 3-year depreciating consumer goods with 30 year money! The LA Times had an article a few days ago that shrouded in euphemism the fact that mortgage originators are now going after the no W-2, no bank account illegal alien market. Super.

The mortgage originators are chasing their own tails. They lower lending standards, fork over bigger bags of money, and watch prices explode. Hey presto, all the collateral is increasing in value! That means we can lower lending standards even more, and fork over even bigger bags of money! It's a can't lose proposition! A veritable brave new era...

Meanwhile, sane, rational, and thrifty folks who actually do a little thing called saving money and staying out of debt, are shafted with 0.9% interest (lately boosted up to a whopping 3%), killing their income, even as the dumb money pushes up the price of just about everything. Punish the sane. Reward the insane.

Ah, well, what are you gonna do?

"Do not store up your treasure on earth, where thieves break in and moths destroy".