patrick.net

I am not a Tea-Partier per se but I do agree with the "logic" that it is individual responsibility to understand what one is buying. Borrowers are at fault just like a drunk driver is at fault. That analogy is probably not far off. what the banks and government do to put polish on a turd does not make anyone buy anything. Only the borrower has that decision at the end of the day.

BOOHOO! I took out a loan for $500K when I make 50K and now I can't pay for it! It's the banks fault! It's the brokers fault!

Ignorance is not a valid excuse.

There are those on this board who violently disagree.

Their thinking is as follows:

1. The drunk driver is NOT the one at fault. The bar/bartender is.

2. The bar/bartender put his goods on display and made them available for purchase, "tricking" the drunk into buying them. They looked so tempting with the pretty lables on the outside of the bottle with an implied guarantee of happiness resulting from their use.

3. Thus, the bar/bartender should pay for any damages done by the drunk driver. The drunk driver should be completely exonerated and forgiven by the courts. He should not be held responsible one iota.

Now, under such a demented philosophy, what is society going to get more of, responsible drinkers or dangerous drunks?

Same goes for males who impregnate females and then skip town. They can't be blamed or held responsible either because she was wearing a really attractive outfit that evening. It's clearly her fault.

Eyes roll.

I'm not a teat party member, a conservative or Republican.
But it is damn hard, I mean really freaking hard, to take that rubbish seriously WHEN!!!!

It's been the GODDAMN Democrats in Washington signing the checks for the last "4" that's F-O-U-R, YEARS!

It's the Democrats screaming "Affordable Housing" and "Finance Reform" while making harder and harder for "Middle class families, with impeccable credit and solid proof of income with historical tax returns to back it up. But can't get loans because they don't work at the Slave Mill, on the Clock and get a W2 or computerized pay stub, that says you've been a good little Slaver Boy for the last two years.

SO please Comrade GaryA think before you get full your clever self next time.
It's shit like this that will make me vote, Tea Party over the Transparent lies and out and out, refractoring of the facts. Because frankly it's scarier than anything I've heard the Democrats say about the Tea Party.

And to be honest with you, the only thing I ever hear about the Tea Party or what they allegedly said, is coming from the Democrats. And they have a bigger track record of LIES and deceit than any Tea Partier I've heard from personally. Which I admit is limited. But it's hard to take your word for it, especially when I know good goddamn and well who is responsible for the last three year financial shell game.

I can give a crap about what Bush did, "THIS IS THIS" and this is where we are at. And the Democrats are not a shining example of TRUTH and CHANGE.

schmitz_kris says

There are those on this board who violently disagree.
Their thinking is as follows:
1. The drunk driver is NOT the one at fault. The bar/bartender is.
2. The bar/bartender put his goods on display and made them available for purchase, “tricking” the drunk into buying them. They looked so tempting with the pretty lables on the outside of the bottle with an implied guarantee of happiness resulting from their use.
3. Thus, the bar/bartender should pay for any damages done by the drunk driver. The drunk driver should be completely exonerated and forgiven by the courts. He should not be held responsible one iota.
Now, under such a demented philosophy, what is society going to get more of, responsible drinkers or dangerous drunks?
Same goes for males who impregnate females and then skip town. They can’t be blamed or held responsible either because she was wearing a really attractive outfit that evening. It’s clearly her fault.
Eyes roll.

Of course it's partially their fault. And they take the credit hit when the loan doesn't get paid back. That's how the game works. You default and you pay the price--in this case, it's a credit hit. Those were the rules then.

So, why are you complaining again?

Think, and you'll know why.

schmitz_kris says

3. Thus, the bar/bartender should pay for any damages done by the drunk driver. The drunk driver should be completely exonerated and forgiven by the courts. He should not be held responsible one iota.

every heard of credit jail.. i believe it's 7 years hard time!

Look, that's a misguided, stupid analogy... A bartender selling you alcohol isn't expecting you to come back and pay for that shot of patron you had last week with interest every month. They arent loaning you anything.. They are selling you a good and you are getting intoxicated on that good and killing someone.

A bank is selling someone something with a contract that states... You can live in this house as long as you continue to pay your rent.. (loan each month). If you can't they we get the house back along with any money you paid already.. you forfeit that.

Sounds 100% fair to me... Banks are not bartenders... dumb analogy.

By the way,
I consider "homeowners".. home renters with tax perks, until they pay off their loan.

schmitz_kris says

Think, and you’ll know why.

OK I did. again. You still look like a whiner to me.

If you guys read the entire article, you would have seen that there is a difference between a ponzi scamster and the "scammee" and the bartender/drunk analogies. First of all, we are taught as children the dangers of being drunk. There were phd's who had never seen a bubble before, and as I said, they wanted to get onto the escalator before they would be shut out of the market for good. In other words, they had no clue there would be a crash. This included some of the smartest people. They never learned in school that there were bubbles that could get you. Did any of you learn about bubbles in any class of any kind? I didn't.

As far as my being a "comrade", trout, I suggest you know that I am an independent. I have railed as much as the other guy about that big eared elf, Tim Geithner when I wrote about Japan R Us. http://bgamall.bravejournal.com/entry/64172

I don't have an agenda. I hate what they all have done. The repeal of Glass-Steagall was 90 to 8. The only thing I hate more about the Republicans is the neocon issue. I believe the neocons want ww3 so I won't vote for them. Even Eagleberger said that there would be an exchange of nukes between the US and Russia and he is a neocon. He said so on Larry Kudlow last week.

And Schmitz you got it wrong. The banks were engaged in widespread criminal activity. The borrower was trying to buy a house before the price went up. I suggest you are playing into the hands of the big banks that are laughing at our divisions. You have been had Schmitz.

GaryA says

As far as my being a “comrade”, trout, I suggest you know that I am an independent. I have railed as much as the other guy about that big eared elf, Tim Geithner when I wrote about Japan R Us.

You had me with your first paragraph in that post... ;-)
Glad somebody injected to reasoning.

Just trying to be balanced Trout. :)

So, you link us to a website (the dontpaycreditcards blog) that links us to another blog that links us to the non-blog version of the dontpaycreditcards site, which links us to a bunch of other blogs. From this we can infer that you very much like blogs that have a certain slant to them. We can also tell that you are very open-minded, not just from the one-sided links on the site you linked to, but also from your proclamation that the Tea Party is stupid. So now you have certainly predisposed all reasonable-minded people that you speak with the one true voice of reason on economic matters, and that any of us who disagree with you and your like-minded bloggers must be stupid. It is also very kind of you to decide for the Tea Party folks that they blame the borrowers for the bad loans (with no links to back up this proclamation), because I never would have known this otherwise, as I can't seem to find blaming borrowers to be a plank in any of the Tea Party mission statements or in the "Contract From America."

Thank you so much for reaching out to the internet community and sharing with us your wisdom, because without you, none of us ever would have realized that the housing bubble was not as simple as a bunch of people borrowing more money than they could pay back. None of us ever would have guessed that banks had a large part in the crisis, and that the Federal Reserve aided and abetted the banks the entire way. Please continue to share your wonderfully iconoclastic views, as I doubt there's anyone else on the internet ready to stand up and inform us all of the duplicity of the banks.

GaryA says

And Schmitz you got it wrong. The banks were engaged in widespread criminal activity. The borrower was trying to buy a house before the price went up. I suggest you are playing into the hands of the big banks that are laughing at our divisions. You have been had Schmitz.

No, no, no. The borrower was trying to buy a house SO THAT HE COULD ACCESS THE FREE MONEY/APPRECIATION/CAPITAL GAINS. He wanted to make money - HE ALREADY HAD SHELTER for himself and his family, of course. He wasn't trying to buy a house BEFORE prices went up (houses are not needed anyway - HE ALREADY HAD SHELTER) - He was trying to buy a house BECAUSE prices were going up.

There WAS criminal activity within the banking/rating/securities system, but it was only possible because of THE USERS of that system, ie. the folks who eventually made the decision to take out the loans in the first place. It's their fault. Don't even get me started on those who took out HELOCs and then ran. Disgusting deadbeats. There are only drug dealers because there are individuals that wish to buy drugs. These folks should've done better research on the loans and, if they believed the loan did not seem reasonable, they should've either exited the market for RE or they should've continued looking around for a more reasonable loan. The borrower made the final decision and signed the papers - they're responsible. Case closed.

By forgiving the taxes that should have been due on all of this forgiven debt (underwater homes) we're basically telling the country to be irresponsible and careless in regards to financial decisions. We're telling them big government will take care of them and their idiocy.

Due to all of the irresponsibility, massive bailouts were needed which are being paid for by the entirety of society, including the responsible who did not take out loans they couldn't afford. This irresponsiblity also caused the banking sector to freeze which caused massive job loss, the lowering of interest rates down to 0 punishing further still savers as their interest income was slashed, etc. It also threatens the currency, our credit status internationally, etc.

The results of mass financial irresponsiblity are massive and system-wide - it's far bigger than just the individual contractual issues between a lender and a borrower.

GaryA says

. There were phd’s who had never seen a bubble before, and as I said, they wanted to get onto the escalator before they would be shut out of the market for good. In other words, they had no clue there would be a crash. This included some of the smartest people. They never learned in school that there were bubbles that could get you. Did any of you learn about bubbles in any class of any kind? I didn’t.

Sure you did! Think?

A house is worth X some guy takes a turn at a paint brush, and a month or to latter he sells it for X+XX, the next guy rips out the landscaping, and then puts it on the market for XX+XXX.
You and the Good Doctor were just seeing what you wanted to see, and nothing else.
Your case was so focused on the potential easy money Pet Rock Fad. It was the definition of smart money, and us savers were labled as clueless and bound to be priced out for ever. Actually it was expected we were for to be felt sorry for, because we were robbing our selves of the opportunity of the American dream or being priced out of it.
When the truth is we were already priced out from the get go. We never lost our sense of Value and Worth. And a single constant rang true through out the whole decade...

"If it sounds to good to be true, then it probably is..."

Making money is not a majical "System" it's hard work and risk. And for the first 7 years of Real Estate of this decade, RISK was never once considered.

I'd call them some god damn stupid assed Doctors if you asked me. And quite Frankly I wont feel so comfortable having the Government, make me pay to go see the Dumb Asses.

Puh Leeze, the buyers were just as Greedy as the Banks. If not then they were Money Foolish to the highest order.

schmitz_kris says

There WAS criminal activity within the banking/rating/securities system, but it was only possible because of THE USERS of that system, ie. the folks who eventually made the decision to take out the loans in the first place. It’s their fault.

I cannot adequately state how strongly I disagree with that statement. What you're saying is that people who buy a house once every 10 years maybe should know the real estate market better than someone who writes 10 loans/day.

Of course some people bought houses thinking they'd make money. Is that wrong? I thought that's how things worked in a free market.

In an economic democracy where THE MARKETPLACE determines what is bought and sold, THE BUYER is the determining factor. Fact.

Banks knew the repercussions of creating bad loans, they knew they were selling them in states with non recourse.

The people who took the loans knew they had to either pay back the loan or lose the house.

People had 0 to lose. They either made money with the house, or didn't.
Banks had everything to lose. They are the ones that should have taken far greater care to ensure they minimized their losses.

tatupu70 says

Of course some people bought houses thinking they’d make money. Is that wrong? I thought that’s how things worked in a free market.

Keep strongly in mind THOSE INDIVIDUALS ALREADY HAD SHELTER. They were not homeless. They were fine - probably had plumbling, electricity, all the essentials.

It's wrong to assume something that DEPRECIATES in quality, like a used house, ought to APPRECIATE in value. It's ridiculous, in fact. They buy no other consumer good with that notion.

pkennedy says

People had 0 to lose. They either made money with the house, or didn’t.
Banks had everything to lose. They are the ones that should have taken far greater care to ensure they minimized their losses.

You're right - they should've considered the calibre of character now present in our population of deadbeat losers.

schmitz_kris says

In an economic democracy where THE MARKETPLACE determines what is bought and sold, THE BUYER is the determining factor. Fact

Huh? So what?

schmitz_kris says

Keep strongly in mind THOSE INDIVIDUALS ALREADY HAD SHELTER. They were not homeless. They were fine - probably had plumbling, electricity, all the essentials.
It’s wrong to assume something that DEPRECIATES in quality, like a used house, ought to APPRECIATE in value. It’s ridiculous, in fact. They buy no other consumer good with that notion.

I don't really agree with the premise, but it doesn't matter. The point is that whoever loaned out the money should have taken care to understand the risks. Clearly they didn't.

schmitz_kris says

You’re right - they should’ve considered the calibre of character now present in our population of deadbeat losers.

It has nothing to do with deadbeat losers. It's basic finance. Don't loan out money to someone without any skin in the game (down payment). Make sure they have the capacity to repay the loan. Make sure that the collateral for the loan is valuable enough to support it.

I mean--it wasn't rocket science.

ahasuerus99 says

So, you link us to a website (the dontpaycreditcards blog) that links us to another blog that links us to the non-blog version of the dontpaycreditcards site, which links us to a bunch of other blogs. From this we can infer that you very much like blogs that have a certain slant to them. We can also tell that you are very open-minded, not just from the one-sided links on the site you linked to, but also from your proclamation that the Tea Party is stupid. So now you have certainly predisposed all reasonable-minded people that you speak with the one true voice of reason on economic matters, and that any of us who disagree with you and your like-minded bloggers must be stupid. It is also very kind of you to decide for the Tea Party folks that they blame the borrowers for the bad loans (with no links to back up this proclamation), because I never would have known this otherwise, as I can’t seem to find blaming borrowers to be a plank in any of the Tea Party mission statements or in the “Contract From America.”
Thank you so much for reaching out to the internet community and sharing with us your wisdom, because without you, none of us ever would have realized that the housing bubble was not as simple as a bunch of people borrowing more money than they could pay back. None of us ever would have guessed that banks had a large part in the crisis, and that the Federal Reserve aided and abetted the banks the entire way. Please continue to share your wonderfully iconoclastic views, as I doubt there’s anyone else on the internet ready to stand up and inform us all of the duplicity of the banks.

Biting commentary indeed. However, what tipped my hand to the Tea Party dishonesty was first, that the rant came from a guy who is paid by Wall Street, Rick Santelli (the cme is part of Wall Street), and second, that the founder of the TP, Hennessey, was continually schmoozing with Larry Kudlow on CNBC. You see Ahas, the problem is that this is a Wall Street scam. We are getting scammed one more time. Wall Street, and the Tea Party all have a lot of wealth tied up there, want a rally, want the poor and middle classes to go away, and yet, cannot survive long term without us.

Hennessey never once, never once called out the banksters while on CNBC. It was at that point that I emailed him and he incoherantly answered me. He is a flake, and he is disingenuous to the core of his very being.

So you people who blame the borrowers in the main, just pack up because we understand the scam. One final joke on mainstreet is all you guys are about.

The banks and lenders were merely responding to buyer demand. BUYERS determine what is sold, not the sellers. Buyers were demanding home loans because they wanted to make free big money on housing, simple as that.

Buyers FLOCKED AND RAN to institutions that gave them easy money/no-money-down/no-doc loans, and the other banks that only had reasonable loans lost tons of business to the ones who caved in to buyer demand for joke/scam/really-easy-money loans.

Again, in an economic democracy where people are free to make their own purchasing decisions, it's THE BUYER who determines what is sold, not the other way around.

schmitz_kris says

In an economic democracy where THE MARKETPLACE determines what is bought and sold, THE BUYER is the determining factor. Fact.

That is why "regulation" is a MUST, because THE BUYER is no less gameable than the Balls in a Lottery machine. And the games the banks, cities, RE industry relevant people all conspiring and still continuing to do so, to make local markets what they want them to be. Must be regulated and stopped.

If all of those houses are on the TARP books, foreclosed and just sitting while the gaming principals wait for the straw men to get their cash together to STEAL them from the free market. While these interested parties in many towns across America are re-REDLINNING the communities.

They need to be made to put those houses on the market and let people decide where they can afford to live based on real values of the demand of these properties, and not defaulting into the first thing available.

This manipulation will prove no less disastrous than making loans on amounts for people making money that just doesn't complete the math equation.

Mark my word.

I bet before this is really over, I'll be given money to stay in the home, I'm closing on in two weeks. I mean my 160K house I'm fine with, and the interest rates will help. But thousands that are buying the "B" and "C" stock that the Real estate industry is pulling from behind their banks, will be worth 79-90K before this over. And if we bail on these houses like people are bailing on the 06-07 houses. That will bring those average 150K-199K nice middle class neighborhoods with sidewalks and street lights, down even more.

See no body wins when parties with interest try to rig the system while talking about "Market Place and Buyer" because it's a "Market Game" and the "Mark", to hear you tell it.

schmitz_kris says

The banks and lenders were merely responding to buyer demand. BUYERS determine what is sold, not the sellers. Buyers were demanding home loans because they wanted to make free big money on housing, simple as that.
Buyers FLOCKED AND RAN to institutions that gave them easy money/no-money-down/no-doc loans, and the other banks that only had reasonable loans lost tons of business to the ones who caved in to buyer demand for joke/scam/really-easy-money loans.
Again, in an economic democracy where people are free to make their own purchasing decisions, it’s THE BUYER who determines what is sold, not the other way around.

Where have you been? They created the demand with their products. First, the central banks allowed off balance sheet banking at basel 2 in 1998, and one year later Glass-Steagall was repealed. All you needed for this scam to work were:

1. a place to hide the bad loans. Basel did that.

2. A way to insure the bad loans. Repeal of Glass did that.

3. The ability to package the loans into AAA bonds. The banksters leaned on the ratings agencies to do that.

That was how simple the conspiracy ponzi scam was. The higher the price, the greater it diverges from the mean, the looser the loans got.

That is why when I let a reporter in on all this in Australia, and about the ING plan to offer the perpetual loan, that he called ING and they backed off introducting the loan.

But the ING loan is a perfect scam for Australia, where the average home price is way more bubbly than the US ever got. And ING has roots in Rothschild through Lambert of Drexel Burnam Lambert shame as Lambert owned the bank before it changed names. Lambert was a great grandchild of Barron Rothschild!

So, don't give me a bunch of bull about how consumers created this bubble. There is massive proof they did not. Add in Alan Greenspan, part of the scam, saying in 2004 that the way to combat the affordability issue was to take out adjustable loans. Did you forget that?

Greenspan was the ING of the US. If they could have gotten away with the Chinese multigenerational loans they would try. But we are onto them so I think they are screwed. You are never sure though.

schmitz_kris says

The banks and lenders were merely responding to buyer demand. BUYERS determine what is sold, not the sellers. Buyers were demanding home loans because they wanted to make free big money on housing, simple as that.
Buyers FLOCKED AND RAN to institutions that gave them easy money/no-money-down/no-doc loans, and the other banks that only had reasonable loans lost tons of business to the ones who caved in to buyer demand for joke/scam/really-easy-money loans.
Again, in an economic democracy where people are free to make their own purchasing decisions, it’s THE BUYER who determines what is sold, not the other way around.

Really? So, if I offered to buy your BMW 5 series for $10, then you have to do it? I'm the BUYER, after all.

The marketplace is determined by BUYERS and SELLERS. You need both to make a transaction.

If there were no buyers for 5-series BMWs willing to pay above $10 those existing cars would have to be sold at a loss, yes, and after that BMW 5-series would NO LONGER BE SOLD DUE TO BUYER BEHAVIOR.

Buyers always determine what is sold, not the sellers.

Of course you need both buyers and sellers for a transaction to occur.

GaryA says

If you guys read the entire article, you would have seen that there is a difference between a ponzi scamster and the “scammee” and the bartender/drunk analogies. First of all, we are taught as children the dangers of being drunk. There were phd’s who had never seen a bubble before, and as I said, they wanted to get onto the escalator before they would be shut out of the market for good. In other words, they had no clue there would be a crash. This included some of the smartest people. They never learned in school that there were bubbles that could get you. Did any of you learn about bubbles in any class of any kind? I didn’t.

Wow, thanks! You've elevated me above Economics PhDs. Any idiot could see it was a bubble, and many of us did. I took a few Economics classes, but I didn't need a class, I have the powers of observation and common sense. I know that "paying" $ million for a house on a $100k income and by putting nothing down, and getting a loan that explodes after 1, 3, 5 or whatever years is not sustainable. No, we didn't predict the exact moment of the crash, and still debate how far it has/will go, but you've convinced me that a PhD in economics or finance is essentially worthless.

pkowen says

GaryA says

If you guys read the entire article, you would have seen that there is a difference between a ponzi scamster and the “scammee” and the bartender/drunk analogies. First of all, we are taught as children the dangers of being drunk. There were phd’s who had never seen a bubble before, and as I said, they wanted to get onto the escalator before they would be shut out of the market for good. In other words, they had no clue there would be a crash. This included some of the smartest people. They never learned in school that there were bubbles that could get you. Did any of you learn about bubbles in any class of any kind? I didn’t.

Wow, thanks! You’ve elevated me above Economics PhDs. Any idiot could see it was a bubble, and many of us did. I took a few Economics classes, but I didn’t need a class, I have the powers of observation and common sense. I know that “paying” $ million for a house on a $100k income and by putting nothing down, and getting a loan that explodes after 1, 3, 5 or whatever years is not sustainable. No, we didn’t predict the exact moment of the crash, and still debate how far it has/will go, but you’ve convinced me that a PhD in economics or finance is essentially worthless.

Pcowen, I never said they had PHD's in economics. Sheesh. I said they were smart people. And if you knew it was a bubble prior to early 2005 I would be surprised, as few but the insiders knew before that. I knew in late 2005 only because inventory started to shoot up massively in Reno.

OCExRenter says

BOOHOO! I took out a loan for $500K when I make 50K and now I can’t pay for it! It’s the banks fault! It’s the brokers fault!
Ignorance is not a valid excuse.

The gov. and banks and credit agencies do bear some responsibility in these situations. As has been already said, they were supposed to be making sure that the loans were actually practical and affordable to the buyer and met ratings standards. You also can't forget that the bubble went on for a long time and people were bombarded daily by the news and their friends/family about buying homes.

People bear some fault for just blindly trusting what they were told, but the key point is that THEY WERE TOLD IT WAS OK BY PEOPLE IN AUTHORITY!!

**WARNING** CAR ANALOGY AHEAD:

I don't know crap about cars, sure I drive one everyday, but I don't know the first thing about fixing it. If it breaks and I take it to a repair man who says x,y, and z are broken on it, but they really aren't but he charges me to fix them anyways.

Now maybe I'm interpreting/projecting here but it sounds like you'd blame me for being stupid/naive enough to trust the 1st repair man I went to and got my "just desserts" or "learned my lesson", etc. And maybe it'd be true enough about me being naive/stupid, but that doesn't excuse the repair man's actions.

The repair man knew exactly what he was doing when he lied and ripped me off, and that is a crime. By blaming only the victim you allow the one who instigated the crime to walk away scott free, with the money too boot.

GaryA says

pkowen says

GaryA says

If you guys read the entire article, you would have seen that there is a difference between a ponzi scamster and the “scammee” and the bartender/drunk analogies. First of all, we are taught as children the dangers of being drunk. There were phd’s who had never seen a bubble before, and as I said, they wanted to get onto the escalator before they would be shut out of the market for good.

Wow, thanks! You’ve elevated me above Economics PhDs.

Pcowen, I never said they had PHD’s in economics. Sheesh. I said they were smart people. And if you knew it was a bubble prior to early 2005 I would be surprised, as few but the insiders knew before that. I knew in late 2005 only because inventory started to shoot up massively in Reno.

Sorry, "smart people" with random PhDs. Yes, I knew (and predicted it here repeatedly) from the day I set foot in CA in 2005 (May) and started looking for houses. Abundantly clear. I was one of the early adopters of this site (patrick.net) and posted regularly. I knew that even while making over $100k, having realtors tell me I could "buy" a $ 1 million dollar house was simply ridiculous. I can do basic math. Fixed rate @ 6% against $800,000 loan on $100 k income. Simple. I was told to get an ARM and flip. I was told to get a second loan for the down. I was told to "buy anything, it will never go down". All B.S. that any idiot could see.

Ok, maybe I am smart. I have the benefit of experience in that I bought 2 houses previously (in other states). But I maintain that those who DIDN'T see the bubble in SF bay area where a) in denial b) stupid c) hoping to ride the gravy train and profit d) all of the above.

pkowen says

Ok, maybe I am smart. I have the benefit of experience in that I bought 2 houses previously (in other states). But I maintain that those who DIDN’T see the bubble in SF bay area where a) in denial b) stupid c) hoping to ride the gravy train and profit d) all of the above.

Nope you're probably dumb as board, trust me, because I'm dimmer than a burnt out roasted marshmallow, and I saw it was all B.S. But that doesn't make me smart... I don't think.
But I really do wonder what our "Economists" were thinking... Or would that be "Conspiring"?
"Phuckstick Number 1" Greenspan said in Retrospect... "Who Knew?" Bull Shit!!!

pkowen says

GaryA says

pkowen says

GaryA says

If you guys read the entire article, you would have seen that there is a difference between a ponzi scamster and the “scammee” and the bartender/drunk analogies. First of all, we are taught as children the dangers of being drunk. There were phd’s who had never seen a bubble before, and as I said, they wanted to get onto the escalator before they would be shut out of the market for good.

Wow, thanks! You’ve elevated me above Economics PhDs.

Pcowen, I never said they had PHD’s in economics. Sheesh. I said they were smart people. And if you knew it was a bubble prior to early 2005 I would be surprised, as few but the insiders knew before that. I knew in late 2005 only because inventory started to shoot up massively in Reno.

Sorry, “smart people” with random PhDs. Yes, I knew (and predicted it here repeatedly) from the day I set foot in CA in 2005 (May) and started looking for houses. Abundantly clear. I was one of the early adopters of this site (patrick.net) and posted regularly. I knew that even while making over $100k, having realtors tell me I could “buy” a $ 1 million dollar house was simply ridiculous. I can do basic math. Fixed rate @ 6% against $800,000 loan on $100 k income. Simple. I was told to get an ARM and flip. I was told to get a second loan for the down. I was told to “buy anything, it will never go down”. All B.S. that any idiot could see.
Ok, maybe I am smart. I have the benefit of experience in that I bought 2 houses previously (in other states). But I maintain that those who DIDN’T see the bubble in SF bay area where a) in denial b) stupid c) hoping to ride the gravy train and profit d) all of the above.

I don't buy it Pcowen. How did you know it would not continue to go up? You obviously have a stronger math or economics background or a friendly realtor let you in on the scam. I doubt if a regular guy with no background could have seen this. After all, house prices had historically been high in Cali and still are. Perhaps if you didn't know that it shocked you into thinking outside the box. I don't buy that a regular guy could see that it was a bubble prior to the inventory build. However, I did have an uneasy feeling when Greenspan said that it was ok to buy using adjustable loans. I say that you had to have had some experience with the concept of bubbles previously.

Gary are you that Rich or that Sheltered that everyone you know is Millionaires?

because in the real world the average American income, i.e. the people "Flippers" hope to sell to. Only makes 35-45K on average, perhaps, 70K combined house hold income. How can you not see the possibility of running out suckers, or funds to finance the party. Which ever comes fist, but both were destined to happened.

If nothing else consider in 2007 taking on a 400K to 500K house in neighborhoods that sold 350 the year before, and 250 the year before that, and started at 120 in 1999. Meanwhile these people were ignoring the fact that the last sell in that neighborhood was in 2006, when it sold for 350K, and not a single sell since. Yet these people wanted to believe that just because they bought it to flip it, then there would automatically be someone there to catch it on the other side.

If you are in denial and would rather not face reality because you were such a person, then I can understand that. Stop justifying your lack of judgment by trying to get others to accept the Greenspan defense.

GaryA says

I doubt if a regular guy with no background could have seen this.

ROTFLOL! TONS of people knew it was a bubble. Peter Schiff, for instance, called that one in public (on TV) perfectly years before it happened. Go and look up his old videos on Youtube where he was literally being laughed at by realtors. Well, he was right. I found out about Patrick.net from contacts at the Daily Reckoning (message board). Those contrarians over there were talking about a housing bubble in 2004-05. Ditto for the people that would post articles on financialsense.com. Talk of the housing bubble was widespread years before it popped.

Hell, I live in MINNESOTA, and I knew it was a bubble HERE, and we didn't have but a fraction of the ridiculous "apprecation" you guys in California did. It was an obvious bubble. There was no real wage growth so there shouldn't have been any RE appreciation either - it was all pure low interest-debt-based ponzi joking.

Random people on Youtube called things pretty darn well too. Look up VISIONVICTORY. Find the oldest video of his you can. He called the housing bubble busting, he called the DOW and economy busting after the bubble burst, etc. This stuff is all over.

The LAZY people didn't look for any contrarian views because they wanted their free money and dream kept alive. Morons.

schmitz_kris says

If there were no buyers for 5-series BMWs willing to pay above $10 those existing cars would have to be sold at a loss, yes, and after that BMW 5-series would NO LONGER BE SOLD DUE TO BUYER BEHAVIOR.
Buyers always determine what is sold, not the sellers.
Of course you need both buyers and sellers for a transaction to occur.

Again--I disagree. Sellers can choose whether or not they want to sell. If a seller chooses not to sell, then nothing is sold. Regardless of what a buyer wants.

Anyway--that example has no relation to the housing market. Buyers didn't create the mess--banks did.

Yes Trout, I don't disagree with you. But hear me out. I saw it in late 2005 because a realtor told me that inventory was building in Reno. I knew at that point that something was not right and started looking for real estate blogs. I don't believe the Greenspan defense.

However, unless you were somehow familiar with some bubbles or as you say, knew the income levels fo the people who were buying, as to the sustainability of it, then a person couldn't know without being in the business. I thought in the beginning that the people were making a lot of money. Then, I looked at some statistics showing that incomes were not rising and at that point, taking what I knew about inventory, I knew a crash could come.

But, if you remember correctly, Wachovia purchased World savings in early, 2006. I thought that was the dumbest thing a bank could ever do. But I was following this at that point like you were. Many who were buying had no clue because the news of the bubble had not hit the mainstream. The info was only on the real estate bubble blogs. Remember?

FOUND ONE VIDEO:

Peter Schiff was arguing how the US economy was a complete joke funded by asset bubbles that were going to pop. He also correctly predicted that once they popped the general economy would nosedive. He was on CNBC, and probably MILLIONS of people saw this very heated exchange between him and that bonehead Laffer. Peter's hair was even still brown when he made the prediction (now he's completely gray).

http://www.youtube.com/watch?v=9BND3F1KfZ0

I never even heard of a "Bubble" before and pissed my pants laughing when I first heard the "Tulip Bubble", which wasn't until 2006 or 2007 the first time I heard it.

Further more I've always had a problem with people calling it a bubble. A bubble is something that people take part in using their own private money. Never in the history in finances have the banks been the sucker holding the shitty end of the stick at the end of musical chairs.

I've just always admired the Great generations logic and wisdom, more than was impressed by the spoils of the eighties Yuppie business titans.

I mean you have two schools really, in one school you have Ben Franklin with Poor Richards almanac and in the other school you have Get rich quick pamphlets written by fly by night self proclaimed economists.

Every thing in Poor Richards still rings true today, I've never seen a get rich scheme that had practical advice. Now if you want to be a thrill seeker and wish to take part in mad fad money, there's a great risk you'll lose every single dime. Yes there's a slim chance you could make money at it as well. But from what the school of hard knocks has taught me, by the time a new way of non earning money is published in a publication and is water cooler fodder, all of the smart money has already been squeezed out of that scheme. The dumb money is all that is left to be squeezed out of that scheme, it requires suckers and lots of them to be successful.