Expect a new “Gary Watts will Burn in Hell” series installment in a day or so.
In the meantime, I like to take a walk back down memory lane with what people were saying before we had our mortgage implosion kicked off by the past 3 years of excess. Our entry today seems like it was the talking points of the Gary Watts 2007 “Little bit of Heaven” predictions. It seems that Gary is not only a scammer, he has pretty much plagarized every idea in his book. (BTW, he claims to have predicted the 1990′s crash, but we have yet to find any published credible evidence that he ever made that call; if you ever find some, please post it so we can independently verify it!)
This particular writer made a contribution to Realty Times, one of my favorite denial rags. It’s not just the quantity of denial, after all, but the quality and precision of the denial. The author was Blanche Evans titled “Housing Bubble T-shirts indicate Market Confusion“, published August 11th, 2005; virtually the exact month of the bubble top for all of Southern California. This particular writer latches on to the theory of “bad news affecting the housing market” theory. Here are some choice quotes.
If people can grab some real estate, make more money than they ever dreamed of in the stock market with less risk, is it any wonder housing has been on an 8-year streak? And why would consumers who are having homebuying made so easy for them assume that they are making a mistake?
Luckily for them, there are plenty of pundits out there who are trying to slow what Greenspan and company didn’t accomplish — a housing market that has absorbed one-third of the nation’s investment wealth.
The housing bubble is so pervasive that new products released by T-ShirtHumor.com make fun of the phrase. More ominous, T-ShirtHumor.com believes it is doing a public service with its “funny but serious warning to investors on the future of the real estate market.”
This, of course, is prescient considering the present state of much of California’s real estate bubble. Had you bought in August 2005, you would likely be at least $100K in the hole, and have made single-handedly the worst investment of your life to date. This was the same month that my now-facing-foreclosure mortgage banking friend purchased an expensive home that has already shed as much as 200-300K in value.
The problems with bubbles is that they produce malinvestment that can never support itself long-term. Players concede time-tested investment strategies just to “get in” and in so doing, violate the fundamental values of investing in that asset class. Keep in mind, real estate investment can be a very lucrative asset class; just not in today’s environment of super low returns. There might well be returns to be had, just low and speculative. You’re hoping for something that has never happened before; the repeal of basic economics laws; or at the very best, worse returns than what you can get in a risk-free environment for a period longer than many people will live.
Her argument stems from this then-popular (but baseless) argument:
Constant talk about a housing bubble could single-handedly cause housing prices to moderate or dip, as the financial press attempts to worry the nation into shifting its money from real estate back into stocks.
Consider this for a moment: the financial press was exactly the group that pushed real estate investment to the brink that it went to, although in most cases belatedly. It reports facts, not conjecture or emotional pleadings (something that cannot be said about Realty Times, which is a real-estate-as-investment pimp) in the context of its importance. The very fact that an investment that generally provides single-digit returns and has done so consistently for the past 100+ years garners as much as 30% of the investment community should already explain how we stumbled upon a property bubble.
In the present, we haven’t moved much, even with all of the losses. We are still just apes banging bones on each other… the laws of economics haven’t changed and a few bloggers notwithstanding, have not risen our collective intelligence to keep from hurting ourselves even when we’re told we will. Therefore, I dedicate this special video clip to Blanche:
That thinking is terrifying and just around the time, I decided to not even consider buying a house.
Excellent analysis.
The video is very funny when applied to the bubble deniers!
Ha! The Cavemen had it so much easier!