Wednesday, August 22, 2012

Housing Bubble

We appear to be heading for another housing BUBBLE in this country, although probablyl not as bad as the last one because loan standards are tighter and crazy mortgages not so common (interest only, adjustable rate, negative amortizatiln, etc.).

Amazingly, this new housing "bubble' (really a return to the old cyclical pattern in housing)  is developing because the worldwide economy is so BAD.  This has driven U.S. mortgage interest rates to about as LOW as they can possibly go.  A LOT more people can afford a 30-year mortgage at a 4% interest rate, and a HIGHER home lprice, than at a 6^ interest rate.  Yet, there is a STEALTH inflation out there--for example in ENERY and FOOD--that shows that any hint of a REAL "recovery" will cause long-term interest rates to explode. Thus, you have people rushing to buy a house because they now CAN, before they lose the opportunity because of rising house prices and higher interst rates.  Totally rational, and the usual kind of boom-bust cycle in housing (exacerbated by the precarious state our economy s in, and teh fact we have made a real "recovery" IMPOSSIBLE).

Thus yu have Wall Street (and CNBC), The Stupidest People on Earth, talking about the sudden prosperity of the home builders as though it is a surprise, AND as if (the really stupid part) it somehow means a long-term boom in housing.  Toll Brothers, for example, came out with "double" their expected earnings, and a 57% rise in orders, as well as higher selling prices.

Whyu is this a "bubble", especially with an ailing worldwide economy?  Look at what happens.  A LOT of people, even in a down economy, are suddenly abble to afford a home (because of lower COST.  We are not even talking about the price of the HOME.  We are talking about the price of the MORTGAGE.  Thus, demand rises and prices go up (some, as there is still that "overhang" of foreclosures).  The overhang of foreclosures will also keep the bubble somewhat in check.  But what happens if interst rates RIS and/or the demand for houses is satisfied as everyone rushing to get a "bargain house" gets one?  Right . Economics 101 again.  Suddenly, even though there is a bigger supply on the market (as optimism picked up), there are suddenly FEWER BUYERS.  This means that peole who buy during this "mini-bubble" may have a home they can afford (unlieke the last bubble), so long as nothing goes terribly wrong, but they do not have a home they can SELL.  People who want to sell become more numerous than people who want to buy, and the "bubble' bursts again. 

It is much WORSE if we have a rREAL "recovery", and/or inflation rears its ugly head .  Then banks are WHIPSAWED. They have all of these ong-germ mortgages at LOW interest rates, but their COST OF MONEY rises dramatically.  And look at thosepoor potential home buyers!  Most long-term mortgages now are NOT ASSUMABLE at the same interest rate.  Thus, a seller with a LOW interest rate is trying to sell to a buyer who must quali=fy at a MUCH HIGHER interest rate.  Again, buyers dry up . This is one of the reasons that we have ut ourselves in a positin that we CANNOT have a real recovery.  We have set ourselves up for inflatin, and higher interst rates, at the slightest hint that we are entering into a strong economic recovery.  And we are STARTING with high energy and food prices.  That means that if we really didd beging a strong recovery, it will SHUT DOWN almost immediately, because both prices and interest rates will EXPLODE. What has actually happened, n fact, is that the terrible worldwide economy has kept interst rates from exploding, as they otherwise would with al of this printing of money, but has NOT kept food, commodity and energy prices from EXPLODING becalsue of the deliberate inflation.  In oour fragile economy, combined with total government domination and suppressin of the economy, this keeps SHUTTING DOWN any small recovery BEFORE interest rates ev ven have a chance to rise.  Make no mistake, however, IF we could get past that hurdle to a real recovery, interest rates would EXPLODE, and THAT would immediately shut down any recovery.

Remember I said the people on Wall Street are The Stupidest People on Earth?  Well, in the economic doldrums of this summer, those stupid peopole (as reflected on CNBC AND the business network of the unfair and unbalanced network) weer talking aobut how lower oil and gasoline prices created by the slowing economy would act like a TAX CUT, and that there were lots of reasons to believe that the economy would qickly bounce back from the slowdown.  This was in those alternate days when these stupid people were not taling about the 1,000th "deal" in Europe, or the way Bailout Ben Bernanke would "save" us if we got in any real trouble with QE3. 

Problem:  Waht about the TAX INCREASE we are not suffering?  The price of oil l, and gasoline, is back toward earlier highs:  oil now above 97 a barrel for U.S. crude, which is HIGHER than last year at this time and not far from approaching the $105 a barrel that SHUT DOWN the economy this spring.  FOOD prices have become ridiculous high, and not just because of the drought--as we continue to put FOOD in our gasoline tanks for POLITICAL reasons ("green energy and the VOTE of farm states). 

Then you have ObamaCare, and higher taxes (inlucing some 20 taxes within ObmaCare) on the near horizon.  This is all a recipe for DISASTER, and for the present blip in housing to be a bubble. 

But you no longer  hear much from Wall Street, at least as reported in our financial media, about the TAX INCRFEASE represented by higher gasoline and food prices. That is because these people are not only stupid; they are dishoenst. 

Letist Democrats, incuding the media, are pushing this hysteria and propaganda on Todd Akin to suggest that Obama can count on WOMEN to vote based on an entirely HYPOTHETICAL argument on abortin and rape.  There is no present prospect of abortin being illegal, much less illegal in cases of rape.  It is entirely HYPOTHETICAL.  Women hae been, in the past, intensely prctical creatrues, rather than people who (taken generally) "stand on princiiple".  I hestitate only because women have shown an increasing tendency to be swayed by the MEDIA, and by these vocal leftist women (in the media, and elsewhere).  Men (generally again) are not.  But I have confidence taht women will not be so blind as to actually vote based on what is really a meaningless (tot heir lives) "insult" by a single gOP Senate cnadidate.  Will women really support Obama jsut because he is pro-abrotin, even though the economy is FAILING and even though his conntued policies will continue to make recovery IMPOSSIBLE.  I don't think so.

That is why I maintain my PREDICTINO that Obama LOSES this electin, unless the economy is PERCEIVED to be substantially improvving on electin day  You jsut can't convince me that a totally hypothetical "debate" on abortin is going to cause peole to SELL OUT what they perceive as their economic interest.

Me/  I am neutral.  I agre that Obama will be a disaster, as he has already been  I jsut can't stomach votng for Romney, and do not think--IN PRACTICE--he will be any different than Obama as far as the economic future o this country is concerned.  3 of my brothers beleive that Romney can't be WORSE than Obama, and that there is at least a chance he will do better.  Better a mnan of no principle, who at least knows how to manage and does not have a leftist ideology that a man who is a leftist ideologue at heart (even though he will SAY anything).  I see my brothers' argument.  I jsut can't stomach it.  What happens if Roney wins and FAILS, as I expect?  Do we finally go comopletely to the left?  But, my brothers would argue, if Romney fails we are doomed anyway, and you can't wait for some Nirvana when another Ronald Reagan will finaly appear to save us.  Mabye so. I jsut can't stomach voting for Romney, and the way he has "handled' this Aking matter is yeat another reason  No, I did not exxpect hi sto actaullyl support Akin, who shot himself in the foot (albbeit in a way that has NO IMPACT on either the lives of women or the real issues in this electin).  But Romney again gave every indicatin of being a man of NO principle, just trying to say those things that will get him into the CEO job of this country.  I jsut can't take that.  I won't.

Thus, on Twitter ("mavconservative") I have changed my mind on Romney and Obama.  I have previusly told you that I would support Romney only if Hell freezes over, whole I wouild not support Obama until BOTH Hel freezes over AND the sun burns out (or becomes a black hole) . My changed position is the SAME for Romney and Obama:  I will support NEITHER until Hell freezes over AND the sun burns out (or becomes a black hole).

P.S.  No proofreading or spell checkng (bad eyesight).  I did, by the way, realize lthat I made a meaningless mistakein my correct article on the St. Louis Cardinals and teir performance this baseball season.  I said Tony LaRussa had the Cardinals at 78-74 before the late run.  That was actually the PRIOR YEAR, as LaRussa recently had a pattern of maknig late runs that were tOO LATE. The Atlanta Braves helped him out last year to make the run that turned out not be be too late (as it really should have been).  Thus, it is true that on about August 24 of last year, the Cardinals were onlyl abut 4 games over .5000, but the numbers were not 78-74. And yes, Mahtney is actually doing BETTER this year, at this pint, than LaRussa did last year at this ponit.  But Matheny has not shown he can do what LaRussa did, and until he proves  himself as a new manager the jury will be out.  The jury is NOT out as to his performance up until now.  As stated int he previuos article, it ha been unsuccessful, as indicated by the performance in one-run games, two-run games, AND extra inning games.  In the games where the manager woulld be expected to make a difference, Matheny has fialed.  He may well be LEARNING, and improve the rest of this year and/or next year.  Cardinal fans had btter hope so  As yet, he is not getting it done.  The Cardinals ar now plahing the Astros, at home, and MIGHT look good against them (as almost everybody but the Cardinals has).  They won 7-0 last night (tkhe blow-out kiknd of game where they pad their statistics, only to fail in competitive games).  The test will bbe (assuming the Cardinals can really handle the Astros and sweep, which they NEED to do) how the Cardinals do when thye again have to play a decent team.  The Cardinals have already LOST the Central Divison (projectin that inspired LaRussa last year).  But they are in the thick of the wild card race, even as being a wild card team is much more daunting this year than last because of the one-game "playoff' between the two wild card teams.  You have the rather funny possibility of TWO one-game playoffs if there is a TIE for the last wild card spot (unless they have worked out a tie-breaker for that situation which does not invovlve pllaying a game, as they really should). 

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