January 28, 2008
– Comments (3)
Watched this last night on 60 minutes. A pretty good summary of what went wrong.
I was saying a 40-50% decline in housing. I was wrong, I might make it 60-70% from peak prices.
Disclosure: I own SKF and SRS
Best Financial Investment 2008: SKF
Best Real Estate Investment 2008: SRS
The story featured a comment on our broader society that may go unlooked otherwise: whereby lending for homes in particular was born from relationships (lender knew borrower from common ties in community, church, school, etc.). There was a safety net of sorts built into loans made this way. Borrowers were actually required to put a stake (deposit of 20% used to be required) and align their own financial success to the banks' in paying off the loan in a timely manner. There was a social stigma attached to being evicted or foreclosed on: a borrower would perhaps feel a sense of SHAME if they thought even for a moment they might not be able to repay their obligation, and the lender knew more of the character and circumstances of a borrower because of a more intimate and complete knowledge of him or her. It is the absence of this familiarity... of KNOWING who sits across from you at the deal table, that has resulted in a decline in social stigmas associated with just walking away from obligations. Shame and guilt has been absolved (rightly or wrongly) with the word "victim," and each side of the deal table has succeeded in inflicting unmeasurable amounts of pain on investors around the world. I wish I could say this situation is getting better, but I just don't see it without a change in social paradigms and everyone needing to feel more responsible for their actions, and less of a victim.
very interesting take. SRS is the best real estate investment in 2008. I am buying more and more calls on these bounces.Disclosure: Author is long calls on SRS and SKF.