Chuck Ponzi July 17th, 2007
Do you ever get tired of doing something? I know I do. And, frankly, this was it.
I hated writing growing up. Whether it was for a writing class, business paper, work plan, or even my Master’s Thesis. It was mostly plain drudgery. Mostly because I wasn’t interested in the topic. Nothing felt natural, nothing came from a desire to say something or be heard. All of that changed when I began my blog in April 2005.
But, enough about history, what’s really going on now? Are we going to all continue to hear from Chuck? Is he throwing in the towel in ignominious defeat? No. I’m just taking some well-deserved time off from writing. If I lost a few readers, I apologize, please come back, but if you don’t, we’ll manage.
I think back to when I started the blog. No one, and I mean no one believed there was a bubble. Only a few crackpots starting blogs on the internet even dared mention the word for fear of igniting a flame-fest of near biblical proportions. We’re talking fiery serpents, here, people. There were even bloggers publishing under pseudonyms for fear of retaliating friends, or worse. Even truly inspirational nerds were publishing under names such as “Professor Piggington” and “Calculated Risk”. Others cleverly disguised their names like Mish or Patrick. No amount of right, history, data, or conviction was sufficient to convince.
I still remember a particularly poignant comment left by a reader that basically said that the housing market was a non issue. Hardly a blip in the screen for the overall economy; a non-story of the 21st century. I mean, honestly, who ever heard of a housing-based economy? How would that have happened in the largest economy in the world? Absurd, I tell you. At the time, it seemed, the question was worse than being wrong, it was about relevancy. I can handle being wrong on a point, but to have it be irrelevant was that worst.
All the while, prophets promising 15% to 17% per year gains into infinity were held up like gods by the financial media. However, the traditional print media likes a story, and a story it got. No graphs, no data, no reason, just a boatload of Gary Watts. And I mean a boatload. His speaking agenda made it so he no longer needed to sell houses. He was getting rich telling everyone else how to get rich.
To me it was the largest story in the economy since the dot-com bubble. And, it seemed the more I researched, the more I realized that the scope was much broader with participation never seen before. Everyone, it seemed, was hoarding real estate. Even stuff they couldn’t afford. All seemed to take out loans that they could never repay in their lifetimes, but properly bet, could make them stinking rich in a few years. If it all worked out as planned. All they had to do was hold out for a few years and then sell.
And then it ended. With a whimper, not a bang.
The merry-go-round just stopped spinning.
Now, as it slows, all of the riders look around and realize that they’re maybe a little sick from the ride. And, it wasn’t that much fun anyway. Now comes the headaches and sickness.
The big news today was big. Bigger than it’s been in many, many years.
1. Two Bear Stearns’ Subprime Hedge funds were obliterated. (1 lost 100% of capital, the other 91% loss of capital). Yes, leverage is a female dog.
2. Foreclosures in our favorite dead canary (San Diego) increased 566% over last year. No decimal places missed there.
This, if anything, is the credit event that I have warned about.
I was skeptical when New bit the dust.
I was skeptical when Subprime was “contained”
I was skeptical, even when ML-implode.com reported a fascinating number of failing lenders.
I am skeptical no more. This, it seems to me, is the real deal.
As Peter Plaut put it
There’s going to be more risk aversion.
So, is this housing story still just some backwater discsussion to our economy? I still don’t think so. Never did.
I hope to be posting on it as it develops even more over the coming years. I still believe strongly that we will see our real estate prices bottom not in 2007 or 2008 as some inexperienced (or wolves in sheeps’ clothing) pumpers in the real estate world would have you believe, but in 2010 or 2011. With the caveat that the banking systems’s ability to produce as many zeros behind our dollars as they wish while doctoring official measures of inflation can shorten even that likely date.
I’ll leave you with this moment of Zen:
“This is a watershed,” said Sean Egan, managing director of Egan-Jones Ratings Co. in Haverford, Pennsylvania. “A leading player, which has honed a reputation as a sage investor in mortgage securities, has faltered. It begs the question of how other market participants have fared.”
