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For one thing, it's always been right. In its early days, when we all started reading it, it was way ahead of the curve in terms of warning about the housing bubble, horrible bank lending practices, and generally the economic collapse.
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Sadly, a lot of people are ignoring them now that they're saying that things are getting better. Back when they were doom and gloom they were the darlings of the doom and gloom crowd.
The eternal optimists shit on them back in the day and now they think that they've "changed".
People arguing from real data are always better than people who just say the same thing over and over again.
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From the "The Scariest Jobs Chart Ever", the increase in employment on the 2007 red line might be a good sign but what could be more important is the wages now as compared to the peak. Lower wages= fewer consumer purchases?
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Los Angeles, CA
He might be right about some of that stuff.
People do read a little too much into the housing bottom though. He's talking a nationwide bottom which may be correct.
But massive portions of LA have to correct still. Thats no joke at all. People can't afford stuff as it is and well see that for certain in lower rents for 2013. Housing is still overpriced. I'd guess its the same thing for the Bay Area. However, people hoping for a huge crash in coveted micromarkets like South Pasadena in LA, and I'd guess places like Mountain View in SF, are going to be very disappointed. Its not going to work like that.
I'll also object to his comment on cars being replaced as well. Cars are made better, and that started in the mid 80's with Japanese cars, and in the mid to late 90's with domestics. I have a 2003 G35 Coupe with over 150,000 miles on it and it is amazing fantastic. I found a small shop where the owner used to be a Infiniti master mechanic and his pricing is 30-80% of what the dealership charges, largely dependant on if he can get a discount on OEM parts or get a very good third party part. His labor charge is the exact same, but he charges for the actual time spent doing the work whereas the stealership charges a set block of time depending on the type of job. Needless to say he has charged me $325 for a job that would have been over $1000 at the stealership.
Anyway, he says the car will do 300,000. I've been from to and from Vegas in the car twice in the past 3 months with zero issue, and in fact valets on both trips commenting on how "hot" the car is. I don't drive during the week at all...that cars gonna last me at least 5 more years if not ten.
So I really wouldn't count on an expanding auto industry. Todays cars run forever with minimal expense for repair.
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Bellingham, WA
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I've got 15,000 miles on my MY2000 car.
Well, the engine at least.
Long story, LOL.
As for "bottoms", it all depends on the House Republicans.
If they want to walk their talk about no-government conservatism, we'll be heading right towards 1933, since it's only government spending keeping things together now.
http://www.treasurydirect.gov/govt/charts/charts_debt.htm
$16.4T is an excellent line in the sand. As a renter, I call on the Republicans to stand their ground! Let the economy -- what's left of it -- bounce off that line and head back towards sanity.
Let's get the Clinton tax rates back on everyone. The 2% FICA cut reversed. Plus significant cuts to our parasite military sucking 10%+ out of everyone's wages.
http://research.stlouisfed.org/fred2/graph/?g=d2Q
After all, conservatives don't live in our world -- we live in theirs!
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Mountain View, CA
bmwman91's website
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Good article, sounds very level-headed and it seems like a reasonable extrapolation based on the data at-hand.
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Scottsdale, AZ
robertoaribas's website
hmmm, and oddly his observations have 100% agreed with mine throught the entire bubble.
I wrote that a crash was coming in 2004, and sold my investment homes then.
2 years ago, I saw the data changing, and began buying homes.... six months ago, it was obvious a big change was underway in Phoenix, inventory disappearing, the start of bidding wars, and I ramped up my buying into overdrive...
cautiously optimistic about the future... works for me!
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robertoaribas says
So you probably missed out on 15-20% equity gain if you had held on until 2007.
Timing is everything.
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Mountain View, CA
bmwman91's website
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roberto, what is your general feeling about the current recovery? Things are obviously turning around at the moment. Do you think that it is sustainable? Do you think that we can get back to an organic market where things are not being propped up by various Fed central planning measures? Do you think that we are in a genuine recovery, or in the early stages of what will become another bubble?
I'm genuinely curious. You seem to call things as you see them and are more of an industry insider than I am.
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Scottsdale, AZ
robertoaribas's website
Kevin says
I actually wrote a post about precisely that subject, here:
http://patrick.net/forum/?p=1216058
easier to read on my blog: http://robertoaribas.wordpress.com/2012/09/03/when-to-sell-a-home-especially-in-a-bubble/
bmwman91 says
we have two big dark spots (down from 3, now that Mitt lost)
1. fiscal cliff. the correct thing to do is a mix of increased revenue, with spending cuts, and a credible plan to balance the budget in say five years. immediate austerity today would be the path of greece and italy, which is not working out well, and the economy will most likely grow substantially in five years, for many reasons I won't elaborate here.
2. European collapse and contagion. Hopefully, this won't happen, but all we can do is watch and wait.
That being said, the bias of the US economy is growth. Period. Always. If you look at a graph from the great depression, the us economy rejoined the original growth curve after the depression, though it took some time. the same will happen again.
What the doom and gloomers on here don't understand, is the dynamic response an economy can have. look at Japan or Germany 10 to 15 years after world war 2. This crash has been serious, but isn't even a wart on the butt compared to what world war 2 did to those two countries in terms of infrastructure and human capital, and those economies were embarked on generational growth 10 years later.
I believe we now have five years of technology and efficiency improvements that have yet to fully unroll, due to the recession, and that increases each year. Add to that, we are on our way to possible energy independence a few years from now, due to new extraction technology and more efficient usage, and ending both of these stupid costly wars...
In the nearer term, we are at the end of state budget tightening, which has been a serious negative to the economy. We are at the end of local government tightening. So, going forward, private hiring is not being offset by government firing, which was a major factor during the months of negative employment growth.
The next big growth of the US economy won't look like the last one, so we won't see it coming. But, lets examine a few emerging technologies:
1. self driving cars. yes, today they are just a novelty, but I'd estimate that in 10 to 20 years, they will be the norm. Imagine the efficiency when trucking, bus driving, etc are automated. 2 million people make a living driving things today.
2. robotics generally. What happens to all that job outsourcing when a robot will sew jeans, or pick tomatoes in the US, cheaper than slave labor wages in Asia. Will it still be cost efficient to move those jobs to China and Vietnam?
I'm pretty full of my tofurkey thanksgiving dinner, to think this much! And I'm being summoned to get the Christmas tree out of the attic! gotta run!
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bmwman91's website
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Thanks Roberto! I'm with you on the self-driving car thing. The improvements in efficiency are staggering, if we had a system where vehicular movement was managed and automated by set algorithms. When cars were invented there was no way to automate anything, but we easily have the technology now. A lot of people have sort of a negative reaction to the idea, but it is really not much different than stepping onto an airplane where you have no control over anything.
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The practical benefits of autonomous cars are very far in the future.
The most likely short term benefits will be reducing the cost of transportation of goods (this will most likely also be a hit to employment for truck drivers).
Eventually the technology will be cheap / reliable enough to include as an upgrade feature in luxury cars. It will be fairly gimmicky.
Once the price comes down further, fewer and fewer people will see the need for cars at all, instead opting for some sort of rental / on demand service. That's when we'll see real change. Many fewer cars will be sold, but that won't matter much because the auto industry has had a long decline in employment anyway. Average people will have more money in their pockets because they won't need to have so many cars.
But that's 20-30 years off, minimum. It might never happen.
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Scottsdale, AZ
robertoaribas's website
Kevin says
that's a good point. driverless taxis would be much more efficient than everyone owning a car sitting at their home.
This was meant merely as one example; A robot that looks at tomatoes, and picks the ripe ones is not far away, and if it crashes you lose a tomato plant, not a million dollar lawsuit.... Lots and lots of jobs can and will be automated in the near future. Even though you may hire someone to pick tomatoes for $10 a day in latin america, over the lifetime of a robot picking 24 hours a day 365 days a week... at a quarter million dollars it might be a good deal!
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Kevin says
Could it be he sold for other reasons than he though a crash was coming? One of the 5 D's perhaps? Where's the cash from those homes? Why did you need to finance your present investments? Is it all a house of cards?
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Scottsdale, AZ
robertoaribas's website
ELC says
nope... I put all the cash into 2 year cd's, thinking that would be long enough for the crash to happen... In reality of course it took many more years...
I had 400K, and bought over a million dollars of homes at reduced prices over the past 2 years... why do you think I needed financing?