December 28, 2005

How could it end?

In simple terms, the bond market dwarfs the size of all other markets in the United States. It makes senses than that financial decisions at the government level, take on more importance when they are dealing with bond market issues.

As a middle class American, one which has capitalized on the 15 year housing boom to buy three homes, than sell at higher prices, the bond market has been very important. it has been - "vedy vedy gooood to me"

I have simply assumed that demand for our bonds and mortgages has remained strong, so rates have remained low. Last year, when our Paradise Valley Home sold for double it's value, I knew it was time to downsize. We were extremely stretched to take on the home in the year 2000. We made money for all the wrong reasons. We thought we were paying top dollar at the time. We almost walked away from the house when the square footage appraisal came in 100 feet lower that the number we made a decison on. Our agent, a most successful one still today, said that tyou can't measure a home like this by square footage, you need to consider the lot size and location.

We wanted the house and we paid. Bad decision, unbelievavble gain. Best we will ever make. Now that we have moved that gain into other investments by downsizing, I feel like the luckiest person alive. We thought we were buying the home of our dreams so we stretched. That's what "they" (haven't tracked "they" down) say. By the middle of last year, I couldn't believe how much my dream house and monthly income become so entwined, hence the main reason to sell.

I feel lucky, because the house sold the first day and although prices continue to rise, we profited from an out of character investment that was supposed to be our dream house even though it never would have been a dream house.

I don't feel the country or all the new home buyers and speculators can possibly remain so lucky. Part of Mark Cuban's legend is that he sold to Yahoo for an ungodly amount. The genius is that he took control of the situation and created immediate liquidity for himself. There is no one dream house, or one perfect business, the key is to capitalize on that one dream business that comes along, because you only need one in your lifetime.

All these perfect dream house buyers and sellers and STRETCHERS (like me) will be caught. They always are. I firmly believe the reason is unknown, It is never one textbook reason. If it was, I would be practicing economics, because I was good at understatnding the textbooks.

The facts are - we have inflation, people are stretched, the dollar is manipulated (big time) in the short-term, political and economic decisions have never been so closely tied, Asian and Indian economies (not just Japan) offer exciting growth opportunities for Americans, Asians and Europeans to move their capital, and the good times have really been going on a long-time in this housing cycle. To me, with our stock markets still well off their 1999 highs, we have had two phenomenon working in our favor - the US Dollar and our Culture.

In the beginning of the US dollar decline the last 4 years (not including 2005 as it was a strong one for the US dollar), the combination of cool culture, weak dollar has proven to be a big boom, sort of a phenomenon. For Europeans and Asians, it was like - "Cool. Look how cheap it has become to see the monkeys in their own environment" Than, - "Cool Hans, you mean with the Euro so strong, I get get a condo, on a golf course on the beach, near a PF Changs and a Domino's and play with the monkeys whenever I want. That would cost me one bazillion euros and 2 bazillion yen and three bazillion fleegn floggns. Who cares about the sqaure footage, this is cheap in US Dollars! I willl take three. Next christmas, Mama and Papa and yound ismael can come."

I think 2006 is when we see the risk of losing our dollar. I think only the sense of risk would be all that matters, but that we could really lose control of the value. I am a little lazy to write about all the scenarios, so I will search for them and refer them here . Stay Tuned

Simply, I would conclude that with places like Macau, and the Mediterranean and all the other resort opportunities for newly Global rich, a sense of boredom will settle in for having four homes in the US for the Europeans and Asians. The Global airlines are in an upgrade cycle as well that won't be so kind just to America.

Culture will be neatly packaged and exported to these great new places. We are good at that. Once the combination of our culture packaging (Apple - taking the first big step), and weak dollar take firm hold, look out below. Interesting times ahead indeed!

Comments: Post a Comment

Links to this post:

Create a Link



<< Home