patrick.net

Mr.UP, I agree with you about sounding right vs. being right. It does me little good to sound right. I make my money by being right. For three decades I have had the good fortune to be either very right or very lucky (or both).

There is always luck. In order to reduce the adverse luck factor I put a lot of effort into knowing as much as possible about the things that affect my investments. That way the luck mostly goes my way.

...and then you must have the discipline to follow a plan, and the guts to act on your beliefs.

I have also started a few businesses -- always for large corporations or investors. I once raised $100 million from VCs (they are bastards) to start a financial services company. While I do not work in real estate, it is more than a hobby. It has been the cornerstone of my investment portfolio for three decades. Although, I have actually invested more money into stocks, and into bonds but ended up with more money in real estate than both combined due to superior returns (on a leveraged basis).

Zephyr,

Ask any economist why his prediction didn't pan out, and he will probably say “trends changed”. This is why an economist’s qualitative predictions can never be precisely on target. Economists work within a framework of assumptions and when many of those assumptions turn out to be wrong, their predictions suffer. Inflationary bubbles are notoriously difficult to predict because bubble psychology causes illogical behavior in market participants. In trying to predict the end of the current housing bubble, assumptions have been incorrectly applied by many a good economist. Baker therefore is in good company. I value Baker (or anyone else for that matter) as an economist not for his predictions, but for his interpretation of available information in light of his assumptions. Looking at a macro economic prediction solely in a right or wrong, black or white manner is for gamblers – not people who desire an understanding of what is really going on.

Mr.UP, Nice chart. When you factor in rents and dividents the gap narrows. I once asked Jeremy Siegel (Economist and author of Stocks for the Long Run) how the total returns compared for stocks vs Real estate and he said roughly one percent over the long run.

I hate to breakup this love-fest between Zephyr, Mr. Up, ScottC & Bull$hitter, but Robert Shiller and Dean Baker have NOT been predicting a real estate market crash for the last 8-9 years.

Shiller's revised edition of Irrational Exuberance just came out this February, while Dean Baker, while admittedly sounding the alarm early (Aug 2002 is the earliest published work of his I could find of his on the subject --see cepr.net/pages/housing_bubble.htm), is not incorrect in calling a bubble a bubble. I'm not familiar with Rosenberg, so can't comment on him.

I don't agree that warning a young family against committing financial suicide by NAAVLP(tm) right now is "zero useful, actionable information". However, I do agree with being right vs. sounding right and having a plan, regardless of where the market goes.

Cheerio...

Frank, Even with great respect for economists I like this quote:

"An economist is an expert who will know tomorrow why the things he predicted yesterday didn't happen today." -- Dr. Laurence J. Peter, Author of The Peter Principle

HARM, Yes. Baker was about three years too early.

Also worth considering --Mr. Up's very cool graph includes all the recent RE price gains to the peak of the current bubble. As a result, the gap between stocks vs. RE will no doubt grow even larger in years to come.

Mr.Up, Yes. Total return without the use of debt. Stocks beat real estate by an average of one percent per year. These are based national averages.

Zephyr,

Nice quote --maybe I should add that one to the Quotes thread.
I don't live and die by the words of any economist, either --not even my hero, Shiller. ;-)

HARM, It pays to read the thought of many economists.

Ultimately we will all be wrong in our predictions. The trick is to be wrong by as little as possible.

One of my personal favorites

In all recorded history there has not been one economist who has had to worry about where the next meal would come from.
--Peter Drucker

Ultimately we will all be wrong in our predictions. The trick is to be wrong by as little as possible.

The trick is to not be wrong on the one investment that could ruin the rest of your natural life!

Out here in Calif., your game wouldn’t work. People are too smart and too educated.

Actually there are fools everywhere in this country as evidenced by the insane use of IO/NA loans. These people are dumb for using them, and while heading to foreclosure, they are even dumber to allow themselves to get screwed again.

oh great, so we are suppossed to admire two men that bordeline cheat the system? and we should admire that more of our wilderness is being eaten up by encroaching civilization, endangering the survival of many magnificant species, so more people feel enspired to move out and try to bring all the trappings of the modern world with them destroying precious habitats, building huge houses that sit vacant most of the time?

First time I saw Fannies stock go to high risk alert.

"I’ve been “lucky” enough to build successful businesses in three different and completely unrelated industries"

_smile_

To quote one of my favorite philosophers: "Well, let's not start sucking each other's d***s just yet."

I'm just a simple cave man, listening to "All Jacked Up". Your complex schemes confuse and scare me. On the upside, I've got a bottle of Scapa. So let it not be said that God is just.

Cheerio,
prat

I have been lurking on this blog for some time, which is very intresting,
and today saw this

http://www.craigslist.org/sby/rfs/113781652.html

figured people will get a kick out of it ;-)