American Farangs

[Owen` 2]

I just read an article that attributed the drop to the recent housing slump which many feel will become a crash. Because of this consumers will have less to spend and the economy will slow. Seems like we've been fighting off slipping into a recession for many years now.

 

Hey ginseng.

 

A few thoughts about US real estate.

 

First of all, the article you read could be old, but if not then the writer (no doubt trying to hit a deadline and get paid) is about a year out of date.

 

The primary mechanism for the anticipated drop in RE prices was increasing mortgage interest rates. For more than a year, the Fed has been raising rates on the short term end of the maturity spectrum and though the Fed has no control of the long term end (on which real estate mortgages are based), it is generally accepted that unless enormous yield curve inversions are to be accepted, long term rates will follow short term rates higher. Well, there has been inversion of the yield curve, but only mildly -- and mortgage rates have indeed followed those short term rates higher.

 

It's important to realize that at their low, mortgage rates were effectively offering real estate investors entirely free money. Those rates got down to 4ish%. Home mortgages are tax deductible, so that 4% is subsidized by the deduction and has an after tax value of perhaps 3%. Well, inflation was 3.5% for a while -- and yes, that means real interest rates were zero or negative. Negative means . . . the universe was paying people to buy houses.

 

But that's ended now. Mortgage rates have gone up. And real estate prices have been dropping -- with the drop concentrated in the top end geographic areas. This is about a year under way now.

 

The point of this is . . . it's already happened. It may be done with. Anticipation of further declines, as always, may or may not be correct. No one knows. No one ever knows. The Fed has more or less ended its raising of short term rates. They raise rates when they emerge from what is called the FOMC (Fed Open Market Committee) meeting. The last two meetings have had no increase in rates, after more than a year of such periodic meetings yielding such increases. So it is generally presumed now that the Fed is either done or almost done this cycle of increases. But no one ever knows what's going to happen in that area either.

 

As for waiting for recession for years, the Great Crash of 2000 that began March of 2000 and sliced over 50% off the NASDAQ and was then followed by 20+% hits on the Dow and S&P got aggravated by 9/11. A fairly short and sharp recession took place in 2002 as a result. The economy then reversed and 2003 was a booming year, with further solid years in 2004 and 2005 -- both with excellent real GDP growth in excess of 3%. Katrina couldn't stop the US economy. It was just too strong. GDP growth will probably finish this year at about 2.8-3.4% for the year -- down just a tiny amount from last year despite $70/barrel oil.

 

A recession is, by definition, 2 or more fiscal quarters in which GDP decreases. Growth last quarter was almost 2% and it was 3+% in quarters before that. I think 1st quarter was 4+%. Those numbers have to go completely negative for 2 or more quarters for a recession to be declared.

 

A recession mid to late next year is . . . some might say due, but there is no visible mechanism for it being sharp or devastating. The Democrat Congress won't be the cause of this, just as Bush's tax cuts were not the cause of the booming economy he's had for most of his presidency. Nor was anything Clinton did responsible for the Great Crash of 2000 and its tech bubble burst. The government generally doesn't have much impact on economic cycles.

Edited November 18, 2006 by Owen`

[ginseng 0]

I agree that this slump began a year ago, but I don't agree it will be over soon, I could see a multi year housing slump in many markets, as a rising tide lifts all boats even those which should be resting on the ocean floor. I think this housing bubble is unprecedented in American history so it's correction may be as well. Here is the original article.

 

Dollar Drop

[ginseng 0]

Will someone give the POS U$D some Viagra?

 

POS U$D

[eltib 54]

We periodically see posts that Pattaya or Thailand is changing for the worse, less fun, less P4P, westernization. There may be some truth to those things but I still think Thailand is distinctly Thai and every appealing. The only thing I'm worried about is the tanking USD, it just keeps falling and falling with no end in sight. It hasn't fallen enough to make me change my plans or the amount I can do during my trip but I wonder when if ever we'll see 40+ Baht to the dollar again. What if it falls another 12% in the coming year? Then I will be hurting and will have to cut back on the fun. I've read a lot of theories as to why it's falling but my guess is primarily the budget deficit. I don't know what it will take to curtail that but I hope it happens soon.

 

 

I read somewhere that they expect the Thai baht to continue gaining against the dollar for the early months of 2007, then it will start losing ground again in April or May. But that wait is to be seen.

 

My suggestion is to get rid of George Bush and his gang of pirates / thieves, cut the budget deficit, and as a nation become truely great by becoming a real world player instead of selling so called American democracy by being Israels lapdog and bombing the fuck out of the rest of the world. With its ability, weath and power America has the potential to do so much good ....its a pity Bush and his crew do so little and instead line their own pockets and at the personal cost of so many true American patriots who pay with their lives each day.

 

Pelosi said impeachment is off the table back in October, but as a IA, and she being the same, we tend to change our minds. Count on one thing, Bush isn't going to have his way for the next 2 years, for the remainder of his term.

Edited December 9, 2006 by eltib

[banjo 0]

My suggestion is to get rid of George Bush and his gang of pirates / thieves, cut the budget deficit, and as a nation become truely great by becoming a real world player instead of selling so called American democracy by being Israels lapdog and bombing the fuck out of the rest of the world. With its ability, weath and power America has the potential to do so much good ....its a pity Bush and his crew do so little and instead line their own pockets and at the personal cost of so many true American patriots who pay with their lives each day.

 

OH please, America becoming a real world player...they are the only real world player with the balls to stand up to islamic fanatics. You want a nuclear iran fucking up the entire middle east and the rest of the world? IT will be up to america to once again bomb the shit out Irans nuclear arsenal. As far as being Israels lap dog, Israel is the only true democracy in the damn middle east , guaranteeing rights to arabs and israelis. The 22 arab nations have used this 'excuse ' of Israel being the little satan to hide the despotic corruption of its own leaders. They dont give a shit about palestinians as shown by the laws forbidding them from owning land in lebanon, egypt and jordan. By the way, the religion of peace shot more teachers in southern thailand...but thats ok...they just want to be respected...sheeesh