Here is why I think that we are only having a *shallow recession* and why things will NOT get very bad.
The world is a small place nowdays. Everyone is interconnected in a big way. So, the excesses that have been observed in the US, such as funky mortgages and spending without any savings etc.. are going to be spread/be shouldered by all of the economies around the world.
NOW, here is why that is not such a bad thing: The other economies, e.g. China etc... are BOOMING. SO if they take some of the strain, the overall effect will not be so bad.
The reason is: The USA has actually SOLD ALOT of the funky mortgages to buyers abroad. ie. the writedowns are not ONLY going to be felt her is the US, the load and pressure will be taken off our shoulders a little...
SO, NO major recession, just *everyone* helping to solve the BS that is going down at the moment...any views on this ???????
i'm very confused. what does yer "point" have to do with the recovery of HB share prices following the bursting of the housing bubble, which was the intent of the original post and my response to it?
My point is that if you own a house do not sell it and wait. If you have extra cash and you can afford to buy a second home then do it.
I just picked up a fixer for $65 per square foot. I will fix it in 3 months and put it in the market for $102 per square foot. The average house in that area goes for $120-130 per square foot. I bet you I can sell it in matter of weeks and pocket a nice profit.
i respectfully completely disagree on the grounds that just because the ITEM (whether it be a commodity, necessity, service, etc.) that's provided by a company goes up in value in no way means that the company's SHARE PRICE will return to the level of over-valuation it was at when it's industry bubble burst. yes, my home value will go up, but how does that mean BZHs (if they were the builder of my home) share price will go back to $82? i'm not saying HBs will not recoup lost market cap, they will. i just doubt they will recoup ALL that's been lost.
and as far as i know, the oil and dairy industries have NOT experienced a bubble where it's companies were significantly overvalued and then plummeted 80%, the great depression (affecting ALL companies) notwithstanding.....
Internet is considered as part of service sector. Housing is more like commodities and food.
Do you remember $12 oil in late 90's, or $1 a gallon milk in 80's?
BZH is may even go bankrupt tomorrow, but in time your house will go up in value no matter where you live in U.S.
If you can buy a house while the prices are low.
just my opinion, but:
1) while it is true that it's a global economy and that foreign countries have benefited tremendously from the decades-long over-spending of the american consumer, those foreign economies cannot significantly influence US un/employment rates (especially since the US is a net IMPORTER of goods), or inject US households with additional discretionary funds to offset any significant cutback in spending, two primary factors that would drive a recession. the other downside of this situation is that a cutback in US spending hurts other economies, potentially leading to recessionary conditions there as well....
2) and yes, while these economies have also purchased debt of questionable and deteriorating value (and therefore helped with credit liquidity), as you mention the write-downs will also be felt in other countries. i don't see how polluting other countries' economies with this junk debt will "help" the US economy, except again from the perspective that it possibly alleviates some of the credit crunch here ( i also think that if these foreign investors could've seen the asset deterioration ahead of time they would've entirely opted for the "cash infusion" route by purchasing stakes, not debt, of US companies)....
bottom line, i think US employment and spending will drive the significance of any recession, with the fed continuing to lower rates to help offset the mortgage reset problem in '08.....
interesting times, huh?
I see your your slant about the situation. I think that we probably also agree that noone seems to know for sure what will eventually transpire.
However, it also seems that the information out there, much of it from "reputable sources" suggests that recovery could take until 2010 OR that there is not going to be a recession. The difference for someone like me is: Do I convert everything to cash immidiately, or do I buy some XHB, since many underlying securities are at an 80% discount. The NEXT step, which could take a couple of hyears to resolve, could either make me broke, or very comfortable indeed.
Yes, interesting times. I guess the way to act has to be consistent with the advice: Risk only what you can affort to loose. Suxch a difficult decision, no wonder people stick their head in the sand and by CDs !!