.... And Two Years Later The Bubble Has Busted

<< Back Home                                         Created : Mar 23, 2007
                                                 *** Last Updated : Mar 23, 2007

       It is exactly two years ago I registered this web site. It came as a surprise
   to me that it was not already taken. Anyway, I got it and have it.

       What started as an experiment in leisure, very soon snow balled into a full
   scale investigation into the Biggest Asset Bubble mankind has ever witnessed.
       The readers who have been here since the early days of the website can testify
   how the content of this website has matured. I have learnt a lot during the last 
   two years, and I hope readers too have.

       This self education in economics and market manias is something no school could
   have trained me in. What I thought initially was a post 2002 bubble in housing, my
   investigations very quickly showed me a much bigger picture, a truly scary scenario.

       Understanding the Gold Standard, Money & Fiat Currency, Inflation and Deflation,
   Debt and Credit, Assets and Wealth, and finally the role of the Federal Reserve in 
   creating this Asset Bubble of Gigantic Proportions.

       The post 2002 run up in home prices was not a bubble in itself. It turns out to 
   be the blow off top of a 40 year bubble which has been expanding since 1965. The very
   time since the US started printing more dollars than it had the gold to back them up.

      The summer of the 2005 was when the psychological mania ended. Sales started to
   drop, for new and exisiting homes alike.
      As is human nature to avoid thinking about unfavorable outcomes, which is termed as
   denial. After the initial slow down several calls have been made for a bottom in the 
   housing market. 

      Denial is giving way to panic. As the much hoped for (false) bottom is falling off.
      Today, I am calling The Housing Bubble to now have Busted.

      The fundamentals which had started deteriorating in mid 2005, never improved. It is 
   the wishful thinking of investors which was prolly the last domino to fall in this game.

      It was in early Feb when Toll Brother's posted a loss and provided less than rosy
   outlook for the rest of the year. Markets began to reprice the Builder Stocks. The 
   Philadelphia Housing Index which had been rallying since July 2006, has decisively 
   turned directions since then, and is headed south for good.

      The sub prime meltdown will lead to a severe credit crunch in the housing market. It
   will reduce sales, and put further downward pressure on prices, creating a death spiral.

      So when do we know we have reached a bottom? When a few these Builders have filed for
   bankrupcy, which may happen as early as late 2008. 

      A recession this year is inevitable. Which will soon turn into a depression.
   Top Ten Housing Fundamentals In A Free Fall :   

   1. New Housing Starts - The annual patterns created during the boom years of 2000-2005 
         had eroded significantly during 2006. It will completely disintegrate in 2007.

   2. Housing Permits - The annual pattern of boom years will be wiped out in 2007.

   3. New Home Sales - Same fate as Starts & Permits.

   5. The Housing Market Index - In a free fall. The dead cat bounce is over. 

   6. New Homes For Sale - Completed New homes standing empty as buyers vanish. Builders 
          and their creditors left holding the bag.
   7. Existing Homes For Sale - Resale inventory already up 27% in Jan.  

   8. Existing Homes Sold - Continue to drop as buyers of the boom years become sellers.
   9. Vacant Homes For Sale - In a near vertical rise, clear result of oversupply.

  10. Rising Foreclosures - Have risen sharply and projected to rise even further.


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