A conversation relating to the housing/debt bubble at reason reminded me again of sir john templeton's famous 2003 interview with equities magazine. the interview itself is proprietary, but the direction of templeton's comments as summarized by bill fleckenstein is crystalline.
Moving on to housing prices, Sir John comments: "Every previous major bear market has been accompanied by a bear market in home prices. . . . This time, home prices have gone up 20%, and this represents a very dangerous situation. When home prices do start down, they will fall remarkably far. In Japan, home prices are down to less than half what they were at the stock market peak." Sir John adds, "A home price decline of as little as 20% would put a lot of people in bankruptcy."More Here..
Sir John also had a few words about debt -- a four-letter word that folks seem not to care about: "Emphasize in your magazine how big the debt is. . . . The total debt of America is now $31 trillion. That is three times the GNP of the U.S. That is unprecedented in a major nation. No nation has ever had such a big debt as America has, and it's bigger than it was at the peak of the stock market boom. Think of the dangers involved. Almost everyone has a home mortgage, and some are 89% of the value of the home (and yes, some are more). If home prices start down, there will be bankruptcies, and in bankruptcy, houses are sold at lower prices, pushing home prices down further." On that note, he has a word of advice: " After home prices go down to one-tenth of the highest price homeowners paid, then buy."
Enjoy paying for the bankster and bondholder/mortgage holders past losses + future profits and bonuses .
ReplyDeleteTrillions more to pay off the banksters yet.
Expect no recovery for decades.See;
"Can the US economy really return to “business as usual” when it has 4 million houses surplus to requirement, when 1 out of 4 mortgages are in negative equity, and when by our calculation, it is burdened with $4 trillion of excess mortgage debt, equivalent to 30% of GDP?
… Hence, expect US interest rates to stay ultra low for an ultra long time….”
http://www.ritholtz.com/blog/2010/07/the-4-trillion-dollar-question-2/?source=patrick.net
Therefore expect bank interest returns for savers “to stay ultra low for an ultra long time” too?
Of course the banks will claim their “spread” for their profits over the low interest rate they pay.
That’s what financial coups and bailouts and coming 'austerity' are for .
Then,those 'homeowners " who become unemployed and cannot keep up their mortgage payment will lose their houses.
Trillions of dollars worth of the "American dream" is owned by capital and the fruit is ready for the taking!
Save the american usury debt system ?
enjoy!