Housing bear: betting against Uncle Sam
Spitting against the wind is seldom prudent. It is surprising that so many investors are willing to bet on a certain outcome when they know that the US government is doing its best to make sure that it never happens.
Take housing, for instance. Let's say, you want to bet on a housing crash. Have you taken the position of the government into account? Do you really picture George W. sitting next to Bernanke, saying to him, "Look, Ben, here's your chance. If you could only take liquidity away from these mortgage parasites, then we could cause a spike in mortgage rates, force prices to crash and make housing finally affordable to the masses" and Bernake answering, "Sure, George, it has always been my dream to destroy the value of our real estate assets. I will do my best to poke that bubble. And while we're at it, let's also remove zoning restrictions to put more new houses on the market"? If you find such a scene overly optimistic, you may want to reconsider your investment thesis.
And yet people keep making the same mistake, and then express their disappointment that the government wouldn't let things develop their way. Read the comments from visitors to Nouriel Roubini's blog on http://www.rgemonitor.com/content/view/209779/85/. (A necessary explanation for the uninitiated: this economic guru has been telling his followers to stay out of the housing market and they to stay out of the stock market, on the grounds that they both are just about to collapse. The faithful who heeded his advice missed out on either of these two bull runs). Seeing their hopes dashed by Bernanke, who is injecting new liquidity into the system to support the prices, they come up with the following pathetic complaints:
"The Fed is certainly justified in providing short-term liquidity to keep banks operating. But the real essence of economic freedom (and strength) is not in how high the Dow may become. It is in having fair trading practices, and lack of corruption, in the markets. Otherwise the proper mechanisms of price discovery are destroyed.
It is remarkable how many current leaders in Wall St and the US administation have lost sight of this fundamental principle. " Written by Guest on 2007-08-10 14:00:48
"have to say i'm not too sympathetic to any homeowner bailout either . . . but it is depressingly symbolic of our times that the i-banks are basically getting the bailout that the homeowners will be denied..the gov.'s main interest is in protecting share price & profits & market shares, even if it takes bailouts and the gutting of antitrust laws -- when what capitalism and our markets require is that some of these banks go down" Written by Guest on 2007-08-10 14:36:45
"Unbelievable! That is all yo ucan say about the criminal element involved with wall street and the govt. I need a beer, have a good weekend all...Written by Guest on 2007-08-10 14:39:35"
"I AM FURIOUS AT THIS BLATANT MARKET MANIPULATION (and, yes, I am long - in my retirement accounts) - what the goddam hell have those of us who have been suspicious of this artificial equity bubble recieved for being cautious during the last so obviously speculative years ? " Written by load of BS on 2007-08-10 14:41:26
A blatant nonsense from the losers who simply failed to include this factor into their models.