Op-Ed Friday: Bye bye Goldilocks Home » Real Estate News » Blog Posts » Op-Ed Friday: Bye bye Goldilocks Many thanks to Oc-Ed, for his timely contribution: We’d love to have your contributions as well. Any links comments, thoughts ideas are always welcome around here. As always, this thread’s for you! 22 Responses to Op-Ed Friday: Bye bye Goldilocks nordag August 17, 2007 Yea, good one Twist. But why didn’t she just get in her leased Lexus and drive away instead of running? jan-martin feddersen August 17, 2007 Australian Central Bank Attempts to Prop Up Currency http://www.bloomberg.com/apps/news?pid=20601087&sid=aZ0Qm77Fj1pw&refer=home jan-martin feddersen August 17, 2007 Asian Stocks Drop, Capping Worst Week in 17 Years; Toyota Falls http://www.bloomberg.com/apps/news?pid=20601087&sid=ac4IaU1FuyGg&refer=home jan-martin feddersen August 17, 2007 One Family’s Journey Into a Subprime Trap now free WSJ story. Unfortuately the “blueprint” for too many families http://www.realestatejournal.com/buysell/mortgages/20070817-hagerty.html?mod=RSS_Real_Estate_Journal&rejrss=frontpage&rejpartner=wsj_hpp The Judge August 17, 2007 Run on the bank at Countrywide branch in SoCal. This is getting serious now: http://www.latimes.com/business/la-fi-countrywide17aug17,0,1835165.story?coll=la-home-center The Judge August 17, 2007 Oops. The above link is already on the sidebar list. Sorry. — Judge John M. August 17, 2007 Judge – No problem, with things this crazy the sidebar sees lots of duplicates — often twist and I are in a dead heat. NVmike August 17, 2007 Is that Suzanne from the Century 21 “Suzanne researched this!” commercial? Asset Hunter August 17, 2007 Rather than “Goldilocks” maybe we should now switch to “Mary Poppins,” who reminded us that “a spoonful of sugar makes the medicine go down!” What the Central Banks, Fed, etc… have been doing the last few days is like giving a big fluffy bag of cotton candy to a malnourished and starving crowd. No real value, other than to send the bodies into a blissful shock… but dang don’t it taste GOOD while it lasts!?!??!?!?! Now the question for next week is: take more sugar… or finally start to take the medicine? Asset Hunter August 17, 2007 NVMike – that could be Suzanne running, and I’ll bet I know where she’s running to! She’s running to collect her other Realtor buddies and get to the latest seminar on “The Secret” so they can call themselves gods and command the universe to manifest more sales to, and more financing for, the buyers that they are chanting for. Oh, the password phrase for access to the “secret” clubhouse? (You knock twice… pause 2 seconds… then knock once. When the the little window slides open, you whisper: “Now is a GREAT time to buy.”) The Judge August 17, 2007 Today was shaping up as Black Friday 2.0 until Benanke got his pen out. But he can’t make all the foreclosures, bad underwriting and the like go away that easily. The piper will be paid, and there’s no amount of jawboning or pseudo bailouts that can stop it now. BTW, I went to my mailbox today and what arrived? My Ebay-purchased, second-hand copy of Galbraith’s “The Great Crash of 1929.” Cost me $1.50 in like-new condition. Can’t wait to dig into it. Yes, I have turned into a total nerd in my middle age (44). — The Judge twist August 17, 2007 Judge- I agree with you- nothing fundamentally changed today. Excess inventory, falling prices, liquidity issues- none of it was solved by changing the discount rate. You can put off paying the piper only so long- he’s getting impatient and wants his money. The Judge August 18, 2007 Turns out, I agreed with Cramer. (Well, actually, he agreed with me). I was figuring Friday would be a 1,000-point loser for the Dow, if not worse. Instead, we got a dead-cat bounce courtesy of Bernanke. Looking back over the last several Fridays, it was obvious that no one wanted to hold long positions over this weekend, not with so much bad news developing by the hour. If not for Bernanke butting in, the market would have shaken itself out, probably by 500 or 600 points in the last couple of hours alone. It would have been true capitulation, which is precisely what the market needs. Instead, Bernanke props it up, and now Wall Street is going to get the bailout it cried for. It’s a disgrace. After the greatest transfer of wealth from the middle class to Wall Street in history, the Dow goes down 7 percent and suddenly the Fed has to step in and prevent everyone from learning a painful lesson. I’m angry today, but not worried. The crash is coming. It can’t be stopped now. — Judge Smales “You’ll get nothing and like it” John M. August 18, 2007 Judge – In the 3rd story of CBC’s 7AM Hourly News just now, reader Zintar Sehrs calmly explained how the Fed 50 basis point cut was a drug rapidly wearing off. The PPT has bought time until Monday with their move, but that’s about it. John M. August 18, 2007 Twist – I got a bit nostalgic reading the opening bits of John Mauldin’s newsletter this morning. Do you remember this comment from the dawn of Doom? Consider ten seventy year old widows in Osaka each with a small 5,500,000 yen savings account at their local post office. Then consider forty year old Joe Sixpack in Ocean Beach with a new $500,000 conventional 2-28 year ARM on a modest condo. If a fairy were to materialize to Joe tonight during the hockey game and tell him he is fated to stay in that condo paying 28 years of inflated mortgage payments until he turns seventy years old, he would protest that that would mean spending a third of his life as a slave, and he would be right. But the ten widows are depending on him doing just that so that they can buy rice and perhaps a bit of fish every week for the next 1,520 weeks until they all turn a hundred years old. Joe and the ten widows are sitting on opposite ends of the same pipe. It doesnt matter how complicated or leaky it is (how many arbitragers have their buckets collecting money from under the leaky bits, how many economists tell us the various parts are sound), the massive disconnect in expectations between Joe and the widows is something that must be addressed. Of course we first have to deal with twenty-nine year old Jane Hairdresser from Ocean Beach and her three $300,000 condos in Port St. Lucie, Florida. I only hope her name isnt Legion. Real estate has been a pyramid scheme the last few years, but it sure has been fun. … Well, turns out it was not nearly that simple, but I still thought this bit from the newsletter was pretty cool. “The Panic of 2007”, by John Mauldin, Millenium Wave / FXStreet, August 18, 2007. End of the World or Muddle Through? This week I try to explain in simple terms the very complicated story of how we went from some bad mortgage loan practices in the US to the point of world credit markets freezing up. There is a connection between the retirement plans of Mr. and Mrs. Watanabe in Japan and the subprime problems of Mr. and Mrs. Smith in California. We find the relationship between European banks and problematic hedge funds. And finally, we try and see how we get out of this mess. Oddly, I think it is hedge funds (and maybe Warren Buffett) to the rescue, but not in the way you would think. It is a lot to cover, so let’s jump right in. (And there are a lot of charts, so while this will print out long, it is only a little longer than the usual in word length.) twist August 18, 2007 John- With Mr. Twist being an import manager, pretty much the last thing we do before heading off to bed is to check the Asian markets and where the dollar is in relation to other currencies. You are correct as to how tight the relationship is- I don’t have much hope that the strength of the economies of the rest of the world are liable to prop us up, I think it more likely that we drag our friends down with us. twist August 18, 2007 Mr. Twist just turned on Fox this morning, where they had some analyst saying “Thank goodness it looks like the irrational trading of the past couple of weeks is about to come to an end.” Unbelievable. twist August 18, 2007 John- I see our Admin’s been having fun with captchas again! John M. August 18, 2007 Doomers (comment #18) – captchas is the technical name for Igor’s anti-spam code words [e.g. “atomic” for this comment, don’t think I saw that one before] Richcinaz August 18, 2007 I keep wondering why on Thursday the dow was down almost 300 points only to close at right around negative 5. Kept hearing it was because of the shorts but still makes me wonder if someone had the inside scoop on Fridays rate cut by the FED. The tidal wave is still coming so please move to higher ground or be swept out to sea. The Judge August 18, 2007 Richinaz — No doubt, word leaked out about the Fed meeting on Thursday. There were nebulous “rumors” that afternoon that something was cooking, and then — voila! — the financials start being bought up like crazy, and a 300-point drop turns into a flat session. Then in the morning, just five minutes after CNBC is taking about how great it would be if the Fed cut the discount rate, they come back from a commercial and — voila! — report that the Fed met Thursday p.m. and decided to cut the discount rate. The stock market is a rigged game. Oh, sure, many of us can make relatively small sums on a usual trading day — a couple bucks here, a couple there. But when the big boys — PPT — decide to move the market, you and I are not privy to those machinations. But you can bet most of the insiders got the word and started piling into the financial stocks on Thursday, when such a move appeared to make no sense whatsoever. It sure made sense on Friday morning, though. Hmmm. I guess my email notification about the Fed meeting must’ve got lost in cyberspace. Your’s too? — The Judge Richcinaz August 18, 2007 Judge you crack me up. I think we all missed that e-mail. I have to believe this may happen a few more times and would love to figure out a method to capture it. Of course if this thing is rigged all the way out they got in about a minute before the market closed. It was just too obvious something was up. The train is still rolling and putting logs on the track in it’s way might slow it down a little.