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It's Not 2004 Anymore, Dorothy; and Your Little IB Shack Ain't Worth a Plug Nickel

Reading James Boyce this morning on the Huffington Post got me to thinking about an exchange I had with a real estate bloviator at a local coffee shop a few years ago.

I remember his gleeful smirk most of all. It was 2003 or 2004, and homes--let's be honest, shacks--were going for three quarters of a million bucks and more. It was hard for the man to keep from salivating all over himself. But he stopped when I said:

"No worries, my good man. In less than a decade, those homes won't be worth half what they're selling for now. Possibly less."

"Do you own a home?" he asked, his smirk gone.

"No. I rent."

The smirk came back.

"A money hole," he dismissively pronounced. I was ready for it: it's a mantra with most people. (Not anymore, I must add.) "What would you know of the real estate market?"

"I know it's incredibly corrupt," I replied immediately, "and it feeds off herd instincts. I also know that what Lao-tse said two-and-a-half millennia is also true: that 'return is the way of the Tao'. The market will die--as it must. And I will celebrate it."

He stared at me as if I were some sort of monster. He grabbed his tall latte and left without another word.

Looks like I not only won the argument, I won the game, period.

I tried warning many not to buy back then. I told them it was an act of insanity, of glaring stupidity. That the mind-boggling debt The Worst President In History was racking up (more than all other presidents combined) was going to come crashing down on the housing bubble like a ton of overpriced bricks. No one listened to me; many castigated me. Hmm.

What most are calling a depression I like to call "a return to sanity."

Let's hope that Americans heed that call.

Wonder how that real estate bloviator is doing today.

~~*~~

James Boyce's article: http://www.huffingtonpost.com/james-boyce/the-darwin-depression-tim_b_151336.html

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Reading James Boyce this morning on the Huffington Post got me to thinking about an exchange I had with a real estate bloviator at a local coffee shop a few years ago.

I remember his gleeful smirk most of all. It was 2003 or 2004, and homes--let's be honest, shacks--were going for three quarters of a million bucks and more. It was hard for the man to keep from salivating all over himself. But he stopped when I said:

"No worries, my good man. In less than a decade, those homes won't be worth half what they're selling for now. Possibly less."

"Do you own a home?" he asked, his smirk gone.

"No. I rent."

The smirk came back.

"A money hole," he dismissively pronounced. I was ready for it: it's a mantra with most people. (Not anymore, I must add.) "What would you know of the real estate market?"

"I know it's incredibly corrupt," I replied immediately, "and it feeds off herd instincts. I also know that what Lao-tse said two-and-a-half millennia is also true: that 'return is the way of the Tao'. The market will die--as it must. And I will celebrate it."

He stared at me as if I were some sort of monster. He grabbed his tall latte and left without another word.

Looks like I not only won the argument, I won the game, period.

I tried warning many not to buy back then. I told them it was an act of insanity, of glaring stupidity. That the mind-boggling debt The Worst President In History was racking up (more than all other presidents combined) was going to come crashing down on the housing bubble like a ton of overpriced bricks. No one listened to me; many castigated me. Hmm.

What most are calling a depression I like to call "a return to sanity."

Let's hope that Americans heed that call.

Wonder how that real estate bloviator is doing today.

~~*~~

James Boyce's article: http://www.huffingtonpost.com/james-boyce/the-darwin-depression-tim_b_151336.html

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Comments
1

I always just figured purchasing something you don't value is a stupid decision. Most people who invest in real estate do so with the intent of reselling--not with any satisfaction with what they'd do with the item if they couldn't. They go "well, I'd still have the house, which is worth something", but they've traded in years of their life in that house for, well, more years in the future of their life in that house--which they only bought so they could sell it back.

Likewise, buying stocks in companies you don't believe in = stupid.

Surely it seems kinda crazy to buy something on the basis that -other- people would value it. You can never know what other people will or won't value tomorrow. People aren't random, but they're reasonably chaotic, and it just isn't intelligent to use their present attitudes as future indicators. Not about stocks, not about houses.

They're all free to unload their investment--just at a loss (or breakeven or a small win; a lot of people -could- make money on their house at this point, just not "enough"). So they'll hold onto the home and pray the price swings up again--the entire time wishing they lived in another city or another home. It's this idea "I've invested so much in this, it'd be insane not to follow through on it". Somehow it is a frequent mistake to look at past losses with horror and ignore present losses; some things -won't- swing up again though, and some losses just need to be cut.

Dec. 16, 2008

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