-- Posted Thursday, 13 April 2006 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Thursday, April 13, 2006
For investors who’d rather be smart than lucky
Fed chairman Bernanke and his cronies are said to be “confident” that the statistically compelling slowdown under way in the housing sector won’t much affect the U.S. economy. He evidently sees it as a case of a hot market cooling down to a more normal temperature. Thus would the world’s top spinmeister trot out the old Soft Landing hypothesis to describe the endgame of the most spectacular, broad-based mania in U.S. history – one that is destined to dwarf the dot-com collapse in its impact on America’s prosperity.
Of course, it is Bernanke’s job to underplay the threat of a housing bust, even if it means being audaciously optimistic in his public pronouncements until the day the first soup kitchens open in Miami and Los Altos. But we have our doubts that the broad economy will remain unscathed when the softening of residential prices begins to accelerate. At the margin is where the trouble will begin, in such erstwhile redoubts of speculative fever as South Florida and Southern California.
Coastal Florida’s mounting worries were fleshed out convincingly in a prominently featured story in Wednesday’s Wall Street Journal. The reporter defers to the protocols of responsible journalism by quoting some Realtors and speculators who think they’ll come out just fine. But the story leaves little doubt that many who have scored big in the real estate game are seriously overextended and headed for a fall.
Some insiders who see trouble brewing apparently don’t realize how close to ground zero they are. Mike Morgan, for instance. The Stuart, Florida, broker had this to say: “It’s really no different from the dot-com [bust]. The people who bought [the low-quality homes] got clobbered. He said he refused to sell poor-quality homes to his clients. “If I didn’t have any ethics, I could have made a million dollars last year.”
Which dot-com bust is this guy talking about? Certainly not the one that mauled millions of investors just a few short years ago. Memorably, it was the pricey “quality” stocks that fell the hardest. Why should we expect spectacularly overpriced homes to escape the same end, even if it takes a fews years longer? Granted, there will always be demand for houses along the inland waterway that have docks, pagodas and other high-end amenities. But more of them than one could count have attained values exceeding $10 million in recent years. This seems a bit rich, if you ask us – like Cisco, Qualcomm, Amazon, Netscape and other stars of the dot-com era, just before the air went out of the balloon.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2006, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Thursday, 13 April 2006 | Digg This Article | Source: GoldSeek.com
