Back in August of 1979, BusinessWeek ran a cover story proclaiming The Death of Equities, suggesting that the stock market was dead, and only a fool or old, out-of-touch person would invest there. Needless to say, that article could not have been more wrong, and the bull market that began three years later was the longest in history.
Now, the good folks at BusinessWeek are back nearly 30 years later to declare that "the treat of a free fall is growing" for the housing market. There are some similarities. Like stocks in 1979, real estate has been a poor performer of late and it's hard to find anyone, except realtors of course, who is bullish.
But the question is whether sentiment has shifted too far to the negative side, versus the optimist of a few years ago. As Benjamin Graham wrote, the secret to successful investing is to be "greedy when others are fearful and fearful when others are greedy."
The BusinessWeek article is well-researched and has some valid points. But to the contrarian, it's hard to think of a better buy signal based on BusinessWeek's less than stellar track record with Chicken Little headlines.
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Reader Comments (Page 1 of 1)
7-02-2008 @ 9:14PM
william lindblad said...
Hmm?
Amid the first national home price decline since the Great Depression, an estimated 2 million to 3 million homes are expected to go into foreclosure this year. Big institutions are buying them in bulk. Blackstone Group has raised $11 billion to buy distressed property. A separate private equity consortium bought 8,500 properties in April from builder Centex Homes for $161 million, which was a mere 30% of their book value.
The above is an excerpt from a recent AOL business news article. This was about a fellow who is buying up properties on the court house steps and making out quite well. The article smells like someone would like many others to take part and is promoting a scenario that makes it appear that large investment groups are jumping on the "new" gold rush. Beware. Read the last sentence and than do the math. The 8,500 properties have to (1) be bare ground. (2) 30% of what "book" value? - I bet it is not the "tax" book. (3) I would like to know where the "private" consortium obtained financing.
I also notice Blackstone group, which really raises some eyebrows.
UBS just did a write down and sale of properties (paper) recently. Now, just who did they sell too?
Golly, I don't remember. Merrill is talking about selling off some assets, who was that again?
These are not the only ones participating and it sure looks like something between a shell game and a ponzi scheme. Write down, sell, change values, remove a bad loan and replace with what looks like a good one and finance the whole thing.
Put the dog at bay for another year or so and hope things turn around.
Interesting. Maybe we get an RTC in the meantime.
7-02-2008 @ 11:02PM
dick brooks said...
i've been in the mortgage industry since 2000 as a loss mitigation field agent in real estate recovery and collections..i travel the U.S. locating and contacting mortgage holders who are delinquent on their mortgages. this situation isn't getting better, in fact it's getting worse so don't believe all these analyst and gov't puppets stating we've bottomed out...wrong..it's amazing what people don't understand or do about their situation..the media and gov't need to stay out of this..i deal with mgtr. holders that are 15 days delinquent to 18 months, from 176.00 delinq. to 148,000.00 delinq...people know they can stay in a home for a very long time without making a payment..lenders don't want these properties back and are willing to do many options....but so many people just don't have the income to keep their homes..it's a real scary situation...i traveled for 4 years on the native-american reservations in the manufactured housing industry doing collections-evictions-repossessions-remarketing and watched that industry fail...bad loans-greed main reason..monies just evaporated...
so this downturn is good for another 18 months..
7-04-2008 @ 10:33PM
Jt said...
As Century 21's CEO said recently, 'All real estate is local - You don't read USA Today to find out what the local wether today is going to be like. As a REALTOR - have to say - if it bleeds it leads. No matter how good things are or are not we are not going to find out the real deal through the media. My office is up over last year - wow - People where I live are buying houses - and..... there is LOT'S of financing available, hmmm even for no money down- let's get real and get to work, if you can't find a job, change what you do - This is America - Independence Day - Freedom - you know what’s really amazing, while people are boo hoooing here, people from other countries are glad to come and do what ever it takes to make a living, and you know what happens, they do - and they sometimes do it really well - could that mean this is still the land of opportunity??? Yeah - I think so!