Economic Meltdown Imminent
By Ryan Healy | March 31, 2008
More reports are predicting the total collapse the U.S. economy in September 2008. For instance…
Those who say that the current “dip” is temporary, and that another bull market is right around the corner, are (I believe) sadly mistaken.
Recently, I’ve seen RE/MAX ads on Realtor.com that say, “When the market recovers, somebody stands to make a lot of money.”
The assumption in this ad is built into the word “when.” The ad implies a recovery will be happening soon, and that if you don’t buy now, you’ll miss out on appreciation when the market starts going up again.
But will the market go up again? If so, how soon? Months, years, or decades?
When Japan suffered a similar economic meltdown nearly two decades ago, some properties lost more than half their value. They still haven’t recovered. (For more details about the parallels between Japan and the U.S., read Financial Reckoning Day by Bonner & Wiggin.)
Other ads for individual homes are advertising “Built-in equity!”
I’m sorry. This concept is really silly.
Whatever you pay for a home is generally what the home is worth. If you pay $200,000 for a home, you usually cannot turn around and sell it for profit the next day, the next week, or even the next month–at least not without making improvements.
But if you make improvements, you’re not profiting from “built-in equity,” are you? You’re profiting from “sweat equity.”
A realtor I know called me recently. He said, “You know prices are going to go back up again within 12 months, don’t you? Maybe 18 months, or 24 months on the outside, but the market will definitely recover by then.”
Apparently, he and I are not reading the same things. Or if we are, we’re interpreting the data very differently.
Dennis Kranyak left a comment on A.J.’s Option Trading Blog. With regard to problems in the banking industry, he says, “When all the details become known, it will make 1929 look like the ‘good old days’.”
Observation: if an economic meltdown is imminent, then it is certainly not a good time to be an owner of homes or cars or anything else that costs a lot of money. (Except perhaps gold and silver–they usually increase in value during times of recession.)
I may have more to say about this in a future post.
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October 10th, 2008 at 11:03 am
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