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Minyan Mailbag: Living the Housing Bubble

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We're interwoven. Housing. Debt. The Consumer. The Market. The Dollar. Societal Acrimony. Risk Aversion. One big bag.

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Toddo,

Here's a data point:

I live in a gated 40 home community in
Las Vegas. They are all custom homes and 5-10 years old on average (yes, National Registrar of Historic Places). All have grass and nice grown trees and are in the $950,000 to $1.7 million range, which is the upper tier for Vegas, but one down from the REALLY nice homes of $3 million or so.

Two months ago: One house for sale in the neighborhood. One month ago: Two homes for sale. Today: Seven homes for sale. There are no speculators in the neighborhood, mainly doctors, lawyers and the occasional Addidas clad Day Trader.

While I have no clue what that means for the stocks or the market, it's this little man on my shoulder saying I should start writing a screenplay called "Never Leaving Las Vegas." I'll be documenting the progress of our little neighborhood if you ever want to hear the update(s).

Hope all is well,
Minyan Jamie


MJ,

Thanks brother---I've gotten about six or seven anecdotal notes like this in the last few weeks---keep 'em coming.

Writing about the housing bubble is one thing--we've been doing it for the last few years--and many times, even still, it's met with "incredulous eyes" when I mention it in some circles. Living it, however, is an entirely different experience and sets in motion a series of actions and reactions that cannot be viewed in a vacuum.

We're interwoven. Housing. Debt. The Consumer. The Market. The Dollar. Societal Acrimony. Risk Aversion. One big bag.

It's critical that we employ the proper context when discussing "housing." There are the homebuilders, toxic (and crowded) vehicles that have already reflected a massive slowdown. There's real estate, which is a lagging indicator as a function of disposable income in the context of a negative real savings rate. And there's land, which some will properly argue will retain its value as a finite commodity.

I connected with one of the bigger players in the commercial real estate realm recently and had this very discussion. Given the relative performance of this complex, he was understandably sanguine. "You don't get it Todd," he said with a smile, "these are people's homes. It's psychic income. You can't put a price on that." I agreed that money can't buy happiness. But in this particular case I believe that, in time, you'll be able to strike a better deal.

I've been on Wall Street sixteen years and while I've never claimed to be a "smart guy," I pride myself on the reflection that is the company we keep. There are some seriously savvy cookies in the 'Ville and, as my dad once told me, "if enough people tell you you're drunk, you'd better go lay down." There's a reason we pound home the virtues of risk management and the perils unspoken in most media circles. You can take me at my word that our collective motivation is entirely benevolent.

While we strive to prosper during the journey--a task we take up each day on the Buzz--the primary mission of Minyanville is financial literacy. In that vein, I can say with confidence that a mindset focused on capital preservation and disciplined debt management will serve us all in good stead. That's hard to do while keeping up with the Dow Joneses but worthy of a mention while we find our way.

Good luck today.

R.P.

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