What is going to happen to all of us? where r we going?

I moved to LA. But I work in TV so this is an easy alternative for me.

Bought a gorgeous 1400 sf 2BR/2BA condo with 24 hour doorman for $541K.

Personally, I wouldn't consider buying anything until late 2010. However, the way things are going, that may be too early. I also think the proposed 28% mtg cap will depress prices.

IMO, in the interim, hold on to your cash, rent and just watch & wait.

I assumed you're a buyer, but maybe you're a seller?

Listen...We're in a whole new world now. Things that we once thought were impossible - Dow back below 7,000, unemployment nearing double digits, iconic financial institutions becoming effectively insolvent - are proof of that. This means that prices once thought unthinkable - let's say $600 psf in prime Manhattan, for instance - are now certainly within the realm of possibility. We all have to change our mindsets and forget what was considered "normal" back in early 2007. It seems like a lot of people are still in denial and are operating as if this financial crisis never happened. I wish I was as ignorant about finance/economics as the Average Joe on the street but unfortunately I know a little-bit about this stuff and I can tell you that it's VERY, VERY bad. In the last 2 weeks, the actions (or in-actions) of the administration and the Treasury have not helped. In fact, they have actually INCREASED the likelihood that we experience a protracted L-shaped recession or even enter into a mild depression. If that is the case, then in time $600 psf in prime Manhattan might even come to be considered expensive. I know some people might want to flame me for saying that but we're at a critical juncture with the economy might now and all I am saying is that anything can happen.

Well, I was always in a bit of denial about the rise in prices myself. Not that I didn't see them, I just didn't believe in them long term.

There are always some who are buying in Manhattan. Fewer, but some.

Being necessarily self-involved creatures, I guess how one views and copes largely has to do with one's own circumstances. To anyone this should be frightening, and sad. Far more so, obviously, if you are one of the people directly affected by unemployment, loss of home, loss of healthcare, etc. To the extent that one has decent employment and some available reserves, this debacle may very well be opportunity. Yes, people will buy. Some who have no recollection of $600 psf (in the not so distant past) may be happy to go in at $850 for a nice but standard 1/1 or 2/2. Others, myself included, are willing to stand by at $800 and see if it goes lower. I've been waiting since 2005, what's a few more years?

Some anecdotes as to who is buying. Late last year, post-Lehman, post-BS, pre-Madoff, there were a couple of apartments on the UWS that I was very interested in for what I thought were low prices at that time. Luckily, I didn't jump in but someone else did. I looked at the buyers' names on ACRIS and I had a quiet chuckle. The buyers were world-famous (fill in the blank) or deep family money who are recession-proof to some extent and it seemed to me that those were the only types brave enough to buy. Not enough of these people to support the Manhattan market, sorry.

Good point, nyc10023. But remember that even the 'family money types' have to keep their money somewhere. Many of those folks live off dividends and interest from stock portfolios they own outright or that are held in a family trust. Those portfolios have tanked, and with them the income.

As for the who's buying question, I think many, if not most, of us are practicing the same strategy--watch and wait. Personally, I am still actively looking, though not with at the fever pitch of '07 and early '08. We're looking to have a kid or two and would prefer to raise our family in a home we own.

One anecdote I can share is that we almost purchased a UWS classic 6 last summer. The deal fell through during the contract stage (not for financial reasons) and of course now we're extremely relieved to have dodged that bullet. All this said, the Wall Street downturn has affected our assets, though thankfully we converted a fair chunk into cash in late '07.

Bottom line--as is the case with countless others, we are simply not as 'rich' as we were at the peak. So the RE downturn, while psychologically exciting to see as a buyer, won't necessarily afford us a 'better' place than before, as our buying power has slid somewhat as well.

I have 2 friends who purchased recently, one on the UES, the other on the UWS. The first is a mid-career corporate attorney who works on restructurings so is doing fine, the other is a young pediatrician also doing fine. There are buyers out there. A lot of people have been waiting on the sidelines for years and see this as a decent opportunity to buy. And it's not just the trust fund crowd. Please don't jump on me about how it would be smarter to wait until 2010 or 2011 - I know all this, and I would probably keep renting if that was my current situation. But I have owned since 2000 so I'm holding my own.

I think the folks that are going to get hammered in this cycle are the first time buyers who closed b/w 2006 & 2008 and are either in houses they can no longer afford or that they have already outgrown. Everyone else will be OK.

OTNYC - no, everyone else won't be OK. My husband came home last night and told me his law firm anticipates profits being down about 30% this year, and his firm is not heavily corporate and has laid off very few (and actually had increased profits for 2008). Among other problems, clients don't seem to be willing or able to pay their bills. If you've been a partner for 15 years and you bought your lovely upper east side apartment for around $1M, even more, you're doing fine. But if you bought, even in 2000-03, and had a couple of kids, and haven't been really keeping up with the exploding cost of living enough to save, a 30% cut in pay could really hurt, especially as taxes and carrying costs goes up.

Squid, I very much agree with your point. But remember, those of us with less income/assets but who are not hugely reduced or unemployed are the ones doing quite well right now. And we still have to have a certain percentage to get a loan, with a certain amount in reserves on top of that amount. Which is why, among other reasons, I think prices will continue to fall, quite a bit.

sticky - L.A. is in far worse shape than NY by far. Of all the major cities that are losing population, combined they do not add up to the amount of people leaving L.A. I'm afraid your snap that you made a decision to leave NY and are safer in L.A. is in your mind only. California is the hardest hit state with the housing bubble and recession.

Good luck with your recently purchased apartment. My guess is it's depreciating about $350/day.

http://www.latimes.com/news/local/la-fi-leaving-california18-2008dec18,0,2777902.story

Aboutready, yes. You are absolutely correct that those with more of an average income who haven't been heavily invested (though, damn! Has anyone looked at their 401K recently??!) will definitely find opportunity during this downturn, provided they can keep their jobs and present salaries.

I think the demand for higher-end apartments will continue to dry up, but middle-market units will likely move as folks in the bracket you've described look for deals they can comfortably afford.

Here is an anecdote about a small new construction building. I have been in contract there since early 2008. A total of 5 out of 8 units were in contract. Closings were scheduled for December.

Only 2 of the 5 actually closed. One was purchased for nearly all-cash, using their parents' money. Another was purchased by a successful musician (like medicine, a field probably less affected by the financial crash). These are the people for whom this downturn is probably not a big deal, and could even present opportunities. For the rest of us -- to the extent our financial resources were in the stock market (or in other real estate), we are a lot less "rich" than a year ago. Meanwhile, lenders have tighter lending standards, requiring us to be more "rich", not less.

End result - a 20% decline in prices does not keep pace with the decline in our buying power. Unless rich kids, doctors, and successful artists are going to stabilize NYC real estate prices all by themselves, prices will need to continue to fall to match the fall in everything else.

kingdeka, "Of all the major cities that are losing population, combined they do not add up to the amount of people leaving L.A." where are they going?

"But if you bought, even in 2000-03, and had a couple of kids, and haven't been really keeping up with the exploding cost of living enough to save"

there has to be people like me that prefer to cut back so that saving is still possible. i hear this over and over again as if there is no choice but to keep it up in terms of consumption but savings are the only discretionary variable.

> This means that prices once thought unthinkable - let's say $600 psf in prime Manhattan, for
> instance - are now certainly within the realm of possibility.

There are already listings under $500 psf. LOTS in teh $600s on the upper east side. That isn't realm of possibility, its here.

$300-400 psf is starting to look like the realm of possibility.

Here is the under $500 psf. Even without the size inflation, its under $600psf.

http://www.prudentialelliman.com/Listings.aspx?ListingID=995801&utm_source=StreetEasy&utm_campaign=Agent&utm_medium=listings

admin, there are plenty of people who saved, plenty who didn't really overspend and didn't save, plenty who didn't really spend that much but found themselves going negative over time, and plenty of people who seemed to spend freely without regards to anything rational. The spectrum is huge, and people were not always profligate if they didn't wind up on the savings side. Some very rational people made decisions that they thought were based on correct assumptions that may be shot all to hell (or have been already.)

I'm not talking about "keeping up in consumption." I know plenty of people who are not overconsumers, conspicuous or otherwise, who've been barely able to keep afloat recently. I'm just truly glad we decided on one child, or we would have been there too.

"I'm not talking about "keeping up in consumption." I know plenty of people who are not overconsumers, conspicuous or otherwise, who've been barely able to keep afloat recently. I'm just truly glad we decided on one child, or we would have been there too."

same here, with 2 i would not had been able to work. nyc is impossible with 1 normal salary for a family of 4.

That is a hilarious posting!!!....they say if it does not sell this week they are going to raise the price back up 25% (back up to $499K). Why do brokers actively trash their own credibili.....eh, oh wait it's Elliman, nevermind.

Pretty soon the Mexican government will have to build a fence to stop the influx of Americans sneeking over the boarder for health care and affordable retirement. HA HA! We sure fooled them. I knew our government could solve the illegal immigrant problem without building a fence. Kudos to the American way!
Say, I'm typing on my break at Community College where I'm studying to do Customer service in a passable Hindi.

Hindi. Is that easier than Mandarin, 'cause I'm having a hell of a time with the characters and all.

Fear begets more fear. Years ago greed begat more greed and that persisted far longer than any of us expected. The point is that no one can tell you how long this crisis will last, but of this I am certain - human behavior and psychology are most influenced by recent events. It is very fashionable to predict doomsday at this tenuous time, especially if you are overextended or lacking liquidity. It is even more fashionable to suggest NYC RE prices will collapse particularly if you have an interest in that happening.

Yes, we all anecdotally know about Wall St layoffs, the fact that NYC's deficit is rising, banks won't lend the way they used to, and Obama is a socialist who wants to tax the hell out of the rich, etc., etc. etc.

But no one here offers any data or facts. Everyone's forecast seems to me like emotional conjecture based on a primal human emotion - FEAR! Haven't we all learned that rampant fear has prompted some of the worst economic disasters and human tragedies in history? In this new internet/blog era I am simply amazed by the depths of that fear factor!

Facts vs Fear:

Consumers can turn from spenders to savers in the span of six months (fact: US savings rate now at 5% from 0% a yr ago, each 1% = $1 Trillion), businesses can quickly turn from hiring to firing (unemployment up 1-2% and rising from 1 yr ago across the US) and banks can turn from irresponsible speculative lenders to hoarders of cash (bank lending down 40-60% depending on sector). What's the point here? This unprecendented shock in the span of less than six months is driven by two very fundamental causes:

- a collapse in asset values (home prices primarily)
- a massive contraction in credit

This is the source of our collective fear. That fear has decimated business and consumer confidence. The question is what will restore confidence and how quickly can and will confidence return?

I submit to you all that the only solution is what we seeing the government doing right before our very eyes - overwhelm the US economy with liquidity.

Yes we may argue the merits of whether or not this interest rate cut or that bailout/stimulus is working. You may as I do object to the massive deficit we are about to inherit. But the truth be told - our policy makers have no choice. Inflating asset prices (include housing in that) is the only solution. Deflating asset prices will cause more banks, consumers and companies to go bankrupt. Why? Because your debt burden is fixed while the asset you levered up to buy deflates. Simply put, persistent deflation is not an option as it will bankrupt everyone - including the US govt.

Now for a few bright spots - the consumer is still spending though his confidence is at all time lows (see Jan Consumer spending up 1.6%), credit is starting to thaw and will continue to thaw despite the absence of bank lending (corp debt and high yield issuance back up to 2007 levels). When banks start lending again, when the toxic assets are dealt with we will see some very interesting things. Once again I submit that the US economy is incredibly resilient and will see its way through this as the $9-10 Trillion in fiscal stimulus/bailout from the federal govt makes its way into the system.

Survive and, above all things, don't submit to fear.

> Haven't we all learned that rampant fear has prompted some of the worst economic disasters and human
> tragedies in history?

So has the lack of it...

A little more fear (or at least a little less ignorance) would have been very helpful in the RE market a year ago.

It's down to the axiom, "Whatever a market will bear." But, why focus on a year ago? It's the present that matters 10022. Simply put if we act and speak like we're in a depression, then we will have one.

UW1313 - I don't know, sometimes I think we're swimming in facts and data. We're not all unable to consider various disparate elements of an economic situation and come to some reasonable conclusions, or at least potentials.

The data and facts that we have are quite bad, and what is worse is that the trajectory is distinctly downward.

That consumer spending number, for example, a monthly figure largely reflecting excessive discounting by desperate retailers and possibly skewed by early redemption of gift cards this year. That's one month, look at the trends. Pending home sales up for one month, SHARPLY down the next.

UWS1313, bravo for your passionate and upbeat perspective.

I'll be sure to acknowledge your positive influence when I see you in the bread lines.

Agree that fear is driving this economy almost as much as the crappy fundamentals.

My greatest fear is that Washington (Dem & Rep) does not know what to do. We are depending on government to create a policy to stop further deterioration & I think none of them (right, left & center) knows what to do. To me, that is the most frightening & is my biggest fear.

Great post, UWS1313 and very true. Remember, some people have an agenda and interest in driving down our economy, stock market and real estate values. I posted a similar post (not to your level of intelligence) when another fear mongering poster started the discussion "Long Period of Hard Times".

Remember the old saying, "When there's blood on the streets, buy."

Some people are taking the literal interpretation of that, or at least attempting to.

"It's down to the axiom, "Whatever a market will bear." But, why focus on a year ago? It's the present that matters 10022. Simply put if we act and speak like we're in a depression, then we will have one."

I agree with you there....

"Remember the old saying, "When there's blood on the streets, buy."
Some people are taking the literal interpretation of that, or at least attempting to."

I see blood... but who is actually buying?

Plenty are buying, but it depends on what.
Stocks are at all time lows and many are seeing long term payoff for getting in the action now. The stock market has been driven down by fear (and of course current actual conditions) to lows that are too tempting not to buy.

Car dealers are giving incentives to buy that were once unheard of.

Unfortunately, many real estate owners have not seen the writing on the walls and are not enticing enough to illicit responses. Some have caught on and drastically lowered prices to attract buyers. Others, who knows their agenda. Maybe they are not desperate to sell, maybe there under bad advice, maybe they're holding out for that unrealistic offer. Remember, brokers love to tell sellers "It only takes 1 buyer."

But remember, as bad as things are here, they're much worse off everywhere else in the U.S.

As someone who travels extensively throughout the U.S., I can attest things are terrible in a lot of the country. Restaurants, streets, malls, stores, empty. Little economic activity. In many cities (LA, Miami, Chicago, Detroit, NO, Phoenix, Denver) you can feel how bad the economy is. Things are not just a little bit off there.

"Remember, some people have an agenda and interest in driving down our economy, stock market and real estate values."

What planet are you on? The stock market is down 50% from its peak in late 2007. GM car sales in February were off 50% accelerating a nearly year long trend. No one is going to have to "drive down" real estate values in this economy.

Bear Stearns gone Lehman Bros gone Merrill Lynch gone. AIG $200 billion bailout, equity gone, Fannie Mae, Freddie Mac government implied guarantees made explicit, Citibank and Bank of America effectively nationalized. GE has lost more value than almost any other Dow stock

Where exactly is the good news?

There will be plenty of buyers once prices make sense relative to incomes and rents. There is never a lack of buyers at the right price, as evidence by tremendous stock market liquidity on any given day despite the panic. If I bought a stock a year ago and want to sell it down 20% I have no liquidity. If I want to sell it at the market price that isn't a problem. Real estate is no different.

real estate used to be considered an illiquid investment. just ask the upstate homeowners who had houses "for sale" for over 15 years, as a friend of mine's family did. Is NYC illiquid? probably not, but in the 70s co-ops traded so cheap because people wanted to be relieved of the maintenance expense. The same could happen again if rents drop far enough.

amateur, would it be unfair to call you a fear monger?

i am not suggesting that there is ANY good news. it is all bad. asset prices will continue to decline. we have not yet hit bottom - duh!!!

but, step back and think about what is happening. i encourage you all to analyze the data just a little bit. banks are OVER-capitalized (not lending but making sure they survive), consumers are saving not spending (repairing their balance sheets), and the govt and the fed are pumping money into the system at an unprecedented rate (and they are not done yet). soon, and i hope sooner rather than later, the treasury and private sector will clear some of the toxic assets off of banks' balance sheets. geithner just needs to get hi sh_t together. however, when this absolutely monumental shift occurs from saving and hoarding of cash to actually putting it back into the real economy asset prices of everything from homes to wages to oil and gold will re-inflate. that eventual outcome is clear to me. that's why i think the soup line crowd has it all wrong. money will make its way into the system. it's a question of when, not if, asset prices will re-inflate.

that's what the govt and the fed want. that's what we, loosely speaking, voted for. that's what we will see in due time.

Call me a fear monger, if you will. I consider myself a realist and pragmatic. Did you generate a positive return on your investments last year as I did, UWS1313?

Banks are way UNDER capitalized--I wish they would just haircut the bank bonds and preferred stock of the insolvent ones and be done with it. NYC property prices will reflate eventually, probably hyper-inflate like Germany in the 20s, but not before collapsing first.

I encourage you to peruse. It'll help separate the facts from the noise.

http://www.zealllc.com/2009/biginf.htm

http://www.freeliberal.com/archives/003649.html

LOL
The Free Liberal , and ZEAL Speculation & Investment are really good sources for investment advice.
Thank you, UWS1313, so with the benefit of your sources, how did you do on your investments last year?

And my sources for information on "deflation" tell me that it is not caused by a contraction of money supply (that is the result). Rather it is caused from excess credit that need to be liquidated. Debt liquidation is happening now in the US, and it may soon pick up speed. As debt is liquidated, asset prices decline, which results in less money in the economy. The government is fighting these contractions by borrowing and spending in an attempt to balance the contracting consumer & corporate budgets and balance sheets. But with companies and consumers suffering massive income and job losses, stimulus spending is going to be insufficient IMO. When substantial debt has been liquidated, we will be poised for recovery. With the printing presses running, and less interest in holding US treasuries by foreigners, we run the risk of heavy inflation, eventually, I agree.

since when does resorting to sophomoric fraternity show me yours comparisons validate opinions? have you figured out a way to short nyc real estate as well???

your points are well taken in the short term - NO DOUBT. the inflationists will be proven right in the medium term.

Listen and learn.

http://www.econtalk.org/archives/2009/02/meltzer_on_infl.html

"real estate used to be considered an illiquid investment. just ask the upstate homeowners who had houses "for sale" for over 15 years, as a friend of mine's family did. Is NYC illiquid?"

sellers in denial about pricing doesn't mean it's illiquid. sellers asking price is not the clearing price, that's all.

By definition, any real estate is considered a fixed asset and not liquid. You should never list your home as one of your liquid assets and anyone who depends on their home as a liquid asset can get seriously screwed. That said, as far as real estate goes, the NY market is probably as close to liquid as it gets.

One of the problems with NYC real estate is that very few of us (who may want children) can afford to buy the largest apartment we'll need in the next five to ten years. So many of us buy smaller, thinking we'll move when it's necessary. That won't be so popular in the future, obviously, but for many people, even with lower prices, the down payments and the reserve requirements make it very difficult to settle initially into where we need to be. Which is why you see so many cribs in so many places in apartments that immediately scream to the potential buyer "if these people don't move soon they may all kill each other." Liquidity isn't just an end-of-the-day asset price issue.

Pretty good bear article:

http://www.prudentbear.com/index.php/commentary/bearslair?art_id=10164

Listen folks, about prices at $600 sq ft. I bought as well as others at Rockefeller Apts 55th near 5th in 1994 at just less than $200 per sq. ft. recently renovated and fully furnished. I have seen prices at that level at least twice in the past 25 years and the state of the economy looks worse today. So don't be fooled, wait.

Glimmer of hope? My wife and I both work in finance - she on the sell side at a large bank that did not take govt bailout money, and I on the buy side (I know we sound super interesting right now). Both of our groups have started the year with good results. Most of the people we know in the business are still employed and say the same thing about a good start to the year. I won't claim to know whether this lasts for 12 months, or how much it ultimately matters to real estate prices, but it does seem like nobody is talking about Wall Street having a potentially good year in 2009.

sickofbs, I'm with you. I bought a slightly-less-than-1000sf 2/1 for $105K (distressed seller/building had had some issues but didn't affect me) in 1995-6 (contract/purchase). Someone on another blog told me I got the "deal of the century." I remember thinking at the time that it was a stunning deal, that I wasn't paying around $150-200K for the properties I had been looking at but couldn't quite afford (which were, admittedly, a bit larger).

aboutready, Next to my 830 sq ft one bedroom was a 650 sq ft studio where I could have connected the two apts into nearly 1500 sq. The studio was offered to me by its owner with seller finance for $75,000. I turned it down, did not need the extra space/cost at the time. Final selling price of the studio in 1996 was $65,000. $100 a sq ft, Rockefeller apts, landmark building, just off 5th! People just wait 3-4 years and rent in the meantime and save your money.

I have a similar story. Right next to our small two bedroom was a large (600 sf) studio, that sold in 1996-7 or so for about $80K. The sponsor sold it without contacting us, we would have been happy to buy it and would have had a 1550 sf three bedroom, two bath for $200K. Sometimes I have regrets.

I have always told myself that 2012 will be my year to get back in, but hell, I really would like it to be earlier.

sickofBS - what do you base your comment "the economy looks worse today?" any data???

imho, you are so wrong and most importantly so dangerously wrong. $200/sq ft will destroy NYC, your livelihood whatever it may be, and every damn person who reads your nonsense. be responsible.

SickofBS, where exactly are these Rockefeller apts? I work just a block away, didn't realize there was any residential on that block (assume you mean btwn 5th and 6th). I know the various lunch places - Lyn's/Certe, Pump, etc. Somewhere in that vicinity on the south side?

I thought we were going to Disneyland?

No UWS1313, what will destroy everything is the fact that prices ROSE to the levels that they did. F'ng irresponsible, on so many levels. Going back down will seem so much more painful, and ideed it will be, but it wouldn't have been necessary if the crap hadn't been forced up.

BTW, I'm not talking about the $200 psf levels, although unfortunately under a worst case scenario I don't find them impossible, I'm talking the $600 psf. But we really need to get over ourselves in NYC, because what will destroy us is what is destroying everyone, including those poor joes in Kansas who never saw a bubble in real estate prices.

sickofbs, let's just comare all prices to 1960' and get it over with. or the 1890'. Also, ;et's compare priced of EVERYTHING to 1960' Movie tickets, cars, plane tickets, icecream you name it.
Actually, I'm going to start a thread on that.!

thedeuce, the address is 24 W55, south side. Michaels restaurant is a tenant of the coop. Building runs thru to its 54 St. twin building with a garden and seating area in the middle, address on 54th is 17 W54. Great buildings.

Stakan, I'm referring to the 1990's specifically to 1994 to 1996. You can remember WAY BACK then can't you. You know when the S&P was 600.

Then let's do it for the 1994.
Movie tickets - $7?

HOLLYWOOD (NBC NEWS) - Thanks in part to an out of control canine, Hollywood squeaked out a two percent increase in ticket sales for 2008 compared to 2007.

Fewer people actually went to the movies, but higher ticket prices led to the sales boost.

We forget that people actually still want to be entertained, own a cool computer, and above all carry a cool cell phone. Affordable discretionary spending seems to be doing quite well, not in a depression or anything close.

Furthermore, people will eventually want to buy nice apts, and go on vacations and drive cool cars once confidence and credit returns. Maybe if we stop predicting a depression they'll even find good jobs!

1994 doesn't really work. As my broker said in 2000, things have gotten pretty expensive recently. As he said when I relisted a unit in 2004, I think you'll be happy with the increase in price. As he said to me a little over two years later, we've relisted your unit with the new owner at 40% higher than you sold it for, I think he'll be happy.

Actually, the latter is only factually truthful, as a story it's not. My broker is a great guy, but the fact of the matter is that that unit, on a busy street with no doorman (great monthlies, though) almost doubled in price b/t 2000-06. Movie tickets, did they double b/t 2000-07?

movie ticket is $11.50 now.

clever. you picked an example that's generally recession proof. but I'm still pretty sure they were at 7 or so in 2000, and possibly higher.

March 4 (Bloomberg) -- Steve Leuthold, whose Grizzly Short Fund returned 74 percent last year betting against U.S. stocks, said now is the time to purchase equities because the economy isn’t headed for a major contraction.

“These comparisons people make with the Great Depression are totally out of touch with reality, and pretty stupid,” Leuthold told Bloomberg Television in an interview today. “We’ve been in much worse, much more panicked and more scary situations in the U.S.”

The economy isn’t as bad as it was in 1974, when stocks began rebounding, he added. The Standard & Poor’s 500 Index will surge to at least 1,000 in 2009, Leuthold said. That would represent a gain of 44 percent from yesterday’s 12-year low of 696.33.

Because a rally is likely, investors shouldn’t buy his Grizzly Short Fund, Leuthold said. It has returned 26 percent in 2009.

All these idiots on here that are saying the same doomsday rhetoric,
"Brace yourself and get ready"
"life as we know it has changed"
"learn a trade, farming, carpentry, it's your only chance of survival"
"stock up on your shotguns and ammo, cuz it's coming"

I suspect strongly that they are the unproductive masses in real estate, finance or other careers that were the first wave to get pink slis. Now they have that angry at the world and I want the world to fail mentality going on.

That, or they're holed up in their darkened apartments watching too much CNBC with no real world exposure.

I see, so your performance doesn't matter, but when a Bloomberg reporter quotes someone else's opinion, it's their past performance that counts. Good example. With all the stimulus spending, there is bound to be a "recovery" that stocks will anticipate about six months before... I'd say later this year or 2010. But stocks have already lost 50%. We are overdue for a bear market rally as well. Not so with NYC real estate which is a less liquid asset that is only just catching the collapse. Property values track personal income, which in new york has only recently taken a body blow with major job losses. With all of the stimulus money going to the banking sector, banking may have a powerful recovery, but there will be fewer employees who benefit.

"We've been in much worse, much more panicked and more scary situations in the US"

Tell that to the business people I know whose revenue is down 60%. It dawned on me that Steve Leuthold's rosy view might be explained by his flush experience in the past year. Any chance this guy is out of touch?

Last point, if we escape disaster in this crisis, lord help us in the next one, because our accelerating national debt is not being well received by our trading partners, which will inevitably lead to a currency crisis, and we import virtually everything we consume. What does Steve Leuthold have to say about the US dollar?

http://247wallstreet.com/2009/03/04/can-the-us-economy-eat-eight-million-jobs-this-year/

The author doesn't claim the economy will, but says it's not that improbable. I'm not at all angry at the world (there is anger, but not at the world in general), but I am very saddened by the immense damage this is doing to our people, and to people worldwide. This sucks.

As we sit upon cork
floating on the sea of time
We rise and fall upon the ripples
pondering forever why

amateur, even if I told you how well i did last year, it's meaningless in this forum. in order to preserve my privacy, i'm not going to show you nor the discussion board my audited tax statements, so any bravado that you or i may represent as to how one "performed" last year is meaningless and tasteless. this is a discussion room, nothing more. i believe in facts and data.

furthermore, i am not alleging that leuthold is credible because he performed well. implicitly, i cite the recent bloomberg article as an alternate point of view to the gloom and doom many of you now have accepted as our collective destiny from someone who profits from doom and gloom!!

For anyone that thinks it can't happen in a modern society, I ask them to read Charles Macay's Extraordinary Popular Delusions and the Madness of Crowds.

http://en.wikipedia.org/wiki/Extraordinary_Popular_Delusions_and_the_Madness_of_Crowds

It's surprising to see how these countries, mainly France and Britain, that were both at the zenith of their empires and on top of the world, handled these crises in a remarkably similar way to what we have decided to do now (and decided to do in the Depression).

Sure, it's about 300 years ago, but does it really matter? The basic principles are the exact same. There have been societies throughout history, just about every major empire, actually, that believed themselves to be the best that has ever been and that they're smarter, stronger, and unable to fail.

What do you think the Romans talked about as their empire began to crumble? Or do you think the same folks who said "the sun never sets on the British Empire" believed that it would become what it is now?

My point is this: We like to think we're the best and no one could be better. We've had, what, about 100 years on top, and instantly believe we cannot be overtaken. Don't get me wrong, I love this country (although not the direction it is being led by ANYONE in political office), but I think our hubris will be our downfall...

I reported the same as TheDeuce a couple of weeks ago and people were all over me. I repeat that both my husband and I (both in banking) are seeing better revenues at our respective firms. Are we out of the woods yet? Of course not but this is a first sign of hope.

"are seeing better revenues at our respective firms"

which biz lines are giving you sign of hope?

SickofBS - thanks for your perspective

InvestorMan - I too have thought about the collapse of Rome, fall of the Spanish empire, etc and thought about a few disturbing "what ifs" in the context of our country. Who says it can't happen? Who thought the dow would ever see 7000 again....

i love the ability of people to compare things to societies 1000-2000 years ago when the world's financial system was just a little different. in fact such comparisons are great intellectual folly. need i remind some of you that rome and spain did not have central banks that can print money like the Fed, the BofE, the ECB, the Bank of China, etc. modern central banks have the ability to print infinite money, and they will when if necessary. PERIOD. why? let's be real people. politicians and govt regimes get voted and kicked out if they allow a society to collapse. they may gripe and groan about deficits, bailouts, blah, blah. but they know what has to be done.

i sum up again:

this is the WORST credit crisis, the worst loss of business, consumer, and market confidence, the most precipitous drop in asset prices across the board in our lifetime.... news will get worse before it gets better. we all know that already.

the massive, globally coordinated policy response of printing money, lowering of interbank lending rates to zero, and bailouts will take effect some time between 3Q 2009 and 2Q 2010. it will be massively inflationary. instead of suggesting that the the us and every other capitalist society is about to collapse because rome, spain and the birtish empire looked strikingly similar, study the effects of loose monetary policy over the past 70 years. then multiply that by 100!!! i exaggerate slightly, but after you've done that, we can discuss some more likely outcomes.

inflation and big govt deficits are our next problem, not an economic collapse.

"What is going to happen to all of us?"

depends on how old you are, how much you saved, whether you are in debt or not. "to all of us" sounds to me like "we are all in this together" which is sth i don't buy but i hear a lot. for ex, when listening the old talk about social security. it really sounds like an argument pro "pay as you go" system of asking the next generation for the benefits the current is giving to itself.

anyway, my point is that we are under a process of massive redistribution of wealth. not in the obama sense but in the "winner takes all" sense. the people that saw this coming get a bounty like john paulson and the common guy that bought puts on banks and home builders. those that didn't see it coming end up paying dearly, seeing their 401(k) becoming a 200.5(k) and realizing that their house is a money pit. for those that are young, just start out and were priced out of the housing mkt this crisis is a blessing in disguise.

i agree that only printing and inflation will make paying debt and entitlements within the next 10 years. so get ready for that! that will be yet another massive redistribution process.

i agree that only printing and inflation will make paying debt and entitlements within the next 10 years POSSIBLE (i forgot about that word)

universal collective meditation produces a transandetal joy uniting the atman and brahman of every living thing, producing Nirvana.
On that day...Manhattan RE bottoms...still got the flip tax.

so...what does huge inflation look like starting late this year, early next? big spike in interest rates...national debt through the ceiling due to giant interest rate. break for those few with fixed low interest mortgages but they can't sell because no one can afford new mortgage?

Columbia,
Lets not forget that while you were sleeping the Fed doubled the money supply. I think that makes your dollar worth 50cents.

"this is the WORST credit crisis, the worst loss of business, consumer, and market confidence, the most precipitous drop in asset prices across the board in our lifetime.... news will get worse before it gets better. we all know that already."

Just for some perspective.... this is not the biggest stock drop of all time, and I believe we're right in the range of where 2-3 others were in the last 50 years (dot com, 70s oil shock).

Per today's news:
Unemployment is still significantly lower than 80s recession.
Job losses are still significantly lower than 80s recession.
and while losses will continue, they are getting smaller in terms of monthly numbers.

In terms of the claim that this is "the worst loss of business, consumer, and market confidence".... there is no stat that shows that, and consumer confidence is actually moving up. And if you're claiming that confidence is less than it was in the depression, or even the 70s... then I'm not sure what factual basis you are working off of.

Yes, its bad. Pretty damn bad. It will take time to get out of the muck. But some of the hyperbole is just off.

i repeat, for those that are young this crisis is a blessing provided that they have a stable job. it's not all doom and gloom. some people are happy!

nyc10022, I'm no historian, but this Floyd Norris blog suggests that what's going on now ranks up there with some of the bleakest moments in the modern history of the U.S. economy, no?

http://norris.blogs.nytimes.com/

UWS1313 - I like how you cherry picked my post for what worked for you. Your pompous statement would be rebutted if you read the book, the link I posted, or, perhaps, just some history.

" need i remind some of you that rome and spain did not have central banks that can print money like the Fed, the BofE, the ECB, the Bank of China, etc. modern central banks have the ability to print infinite money, and they will when if necessary. PERIOD. "

First off, I didn't say Rome and Spain; I said France and Britain. Secondly and, perhaps, most importantly, THEY DID print money like crazy. They took their countries off a metals-based system and printed bank notes. On top of that, in France, they collected metal-based currency (specie) and SHAVED IT DOWN, then returned it and deemed it the same value. The "shavings" were used to create more money for the government. More money instantly...

Then, to top things off, they offered rewards to anyone that turned in a friend or neighbor that hoarded their specie so the government couldn't shave it down. They promised them 1/5 of whatever was recovered to entice rats to turn in others.

Lastly, you make it seem like worlds were so different 1000 years ago. The same basic principles that got us here were in force then; greed, overspending, debt, expansion, and unsavory characters are absolutely nothing new.

Sure, they didn't have credit default swaps, CDOs, or subprime (in the sense we have now). But, do you think they didn't have loans? What about mortgages? (FYI, "mortgage" is a word derived from Latin...ya know, the languages the Romans spoke...that means "death pledge.") How about home construction? Maybe they had people that were lent money that couldn't repay? I bet so.

Read the book, or even just the link I posted, and tell me it's so very different now than it was then. Sure, the characters might be different (spendthrift monarch vs. spendthrift President/Congress, John Law vs. Ben Bernanke, etc.), but the principles don't change. People are still people and, regardless of how civilized we like to think we are, we've not altered our ways so very much.

I'll give you time to get all of that foot out of your mouth.

nyc10022, the unemployment rate is not significantly better than the 1981 figure, even with the removal of all those pesky people who make things look so bad (u3 v. u6).

Actually, calculatedrisk has this great chart that comes up regularly, called the four big bears. The stock drop is worse percentage wise than anything since the GD.

Ritholtz, I believe, had something up in the last couple of days that showed that the stock market, adjusted for inflation, was at 1966 levels.

Consumer confidence this month went back down.

I like optimism, when it is justified, in the slightest.

investor man - did these british and french monetary policies produce inflation? if so, you are agreeing with me. why do you and so many other liberal intellectuals obsess with the fall of the "US empire" and the cliche comparisons to rome, britain, etc?

again i ask what happens in a MODERN OPEN economy when you have an unprecedented expansionary monetary policy? does it produce inflation?

here's my retort to your comment:

Henry Thornton (1760-1815), in his classic The Paper Credit of Great Britain (1802), provided the first description of the indirect mechanism by observing that new money created by banks enters the financial markets initially via an expansion of bank loans, through increasing the supply of lendable funds, temporarily reducing the loan rate of interest below the rate of return on new capital, thus stimulating additional investment and loan demand. This in turn pushes prices up, including capital good prices, drives up loan demands and eventually interest rates, bringing the system back into equilibrium indirectly.

does everyone understand that that is what we need desperately? and btw it's happening with ever greater velocity. TALF $1 TRILLION. US stimulus $787 BILLION. FED BALANCE sheet 2x in 12 mos to $2 trillion and growing, etc.

yet you and others focus on whether the us empire is crumbling?! call me pompous if you will, but my main concern is to direct the readers of this discussion on what is likely to happen over the next 6-12 months given the unprecedented velocity of asset price declines and the unprecedented response in monetary policy. will employment recover? will asset prices recover? will we avert a TRUE depression? will the US stage a recovery? the odds in my view are yes given the desperate condition of the economy and an inflationary biased, expansive FED and Administration.

Their new slogan should be - "PRINT baby PRINT"

finally, nyc 10022. my comments were meant to be hyperbolic to reflect the incendiary fear tactics of so many poster here.

I - N - F - L - A - T - I - O - N. study it and get to know it better 'cause that's where we are going.

D-E-B-T L-I-Q-U-I-D-A-T-I-O-N
something even Central Bankers running printing presses lose sleep over. UWS1313 I think you need to spend a little time on it as well.

a classic and titanic struggle amateur.

but here is where you live up to your name.

what's your worst case analysis of how much toxic debt still needs to be liquidated? $3 trillion - $5 trillion. and what do you guess, we're half way done?? all of that is commonly held knowledge.

what is not commonly adhered to is that for better or worse the fed has the power to print infinite paper. we're only seeing the beginning of the biggest printing of fed and federal dollars in the history of the human race. just look at M0, M1 and M2 and the delta of the money supply. compare that to the debt liquidation trend lines you so fervently refer to.

what happens next is what this is about, not what is happening now, or even for the next 6 months!

when credit starts to function normally again all that excess cash currently going into treasuries will be inflationary.

think it through. it is a slow and bureaucratic process, but it will happen.

http://remington-work.blogspot.com/2009/02/investment-outlook-william-h-gross.html -- couldn't have said it better myself bill!!

We had nasty inflation in the 70s (remember price controls?) and yet asset prices, like stocks and real estate, stagnated. Why are you so confident we won't have a collapse before all that credit inspired inflation? After all it is the consumer that has more debt than he can manage, and last I checked a $600 stimulus payment doesn't make a dent in that 90% LTV mortgage.

If we continue to spend and print money, why would our foreign creditors continue to buy our treasuries? If we cannot sell treasuries, then foreign investors who used to accept paltry interest on their US dollar investments will either invest in riskier US assets or dump their US currency altogether. Our interest rates will rise. This may lead to inflation, but not the kind that raises the debt capacity of US consumers. If the debt capacity of US consumers has reached a peak because interest rates have reached their limit and income in declining, then the capacity for US consumers to pay more for real estate has ended. The music has stopped, you just don't realize it yet. And you think the Fed writing checks to bail out banks and certain creditors and debasing our currency is going to save property prices. I may be an amateur, but so far my predictions have panned out as expected and I am sticking by my outlook.

i'm not disagreeing with you re: the current situation. but analyze what bernanke, geithner, summers, volker, and even obama are saying in coded msgs. we have to produce inflation to get out of this unbelievable mess. consumers?? check out how fast us savings are rising and household debt is declining.

re: the dollar a weakening dollar is, guess what, massive inflationary. all of the world's commodities are priced in us$. a weaker dollar by default pushes up commodities.

banks have no choice but to restructure mtges to stem the rising wave of foreclosures. and to my earlier point the federal govt will start to buy houses out of foreclosure if need be. they did once before.

re: foreign creditors, where are they going to hide at present. the us$ is still and will remain the world's reserve currency. sorry china, sorry japan you still need the us$. by next year though when inflation returns they'll want 5%+ on long term govt debt. for now they (proxy for everyone) are still buying treasuries, the "riskless" asset. when risk appetite returns, and it will, that trade will unwind with unbelievable violence and volatility. for now the lemmings are still swimming to the safety of the next big bubble.

capital will seek a return again, and then what? oops i keep getting back to my central thesis - inflation.

deflation for now, but it's coming amateur. nobody knows exactly when, but it's like a levee that has a massive rising tide behind it. if you live beyond the levee you don't realize the danger until the water breaks.

ok, that's all!!!

"banks have no choice but to restructure mtges to stem the rising wave of foreclosures. and to my earlier point the federal govt will start to buy houses out of foreclosure if need be. they did once before."

when?

i 100% agree on the need for high inflation. not only to ease the pain of the over-indebted households but also to make it possible to pay for social security and public pensions, the COLAs that are going to be used for SS will be around a third of the real inflation, which wipes out the burden within a couple of decades. it's not a new scheme, it's been going on for a while but really does the trick with higher inflation levels.

Where does inflaiton end? Honestly, I think it's ridiculous to think it can continue. I know bringing up the Nazis is the end to any argument, but does anyone remember their history of the Wiemar Republic and how the Nazis came to power?

Inflation is a joke. To continue this ridiculous rise in home values, debt, and BS is NOT going to fix our system.

And, UWS; yes, they did produce inflation...of epic proportions. Did you read about it? It is NOT what we need, whether I agree with you or not. Read the history.

without inflation we all are on the soup line or are growing our own chickens. the debt burden we currently carry as a free market capitalist economy will crush our society as we know it.

inflation is a tax on the thrifty and those who cannot accumulate assets or SPEND. it is inherently bad. however, without it in this environment millions more lose their homes as they watch deflation continue to devalue their homes and their financial assets. their negative equity value skyrockets, their jobs disappear and society decays as the govt's tax base slowly withers away. meanwhile corporates lose confidence as they watch sales decline, their inventory and tangible assets continue to drop in value whilst they choke on the debt burden they carry. sound familiar?

in this case the medicine (inflation) for the sick patient (the us economy) is like chemo, it will kill some good cells but the patient will hopefully survive.

btw, inflation has been under control as we've had 25 years of price stability since volcker. if all you focus on is home values then you are being a bit myopic.

i don't think inflation is good, but unfortunately it is what we need and it's the plan that the fed and the G-20 are carrying out.

here's a bold prediction. at the G-20 in london in less than a month's time you'll read the following:

- more central banks print more money
- interest rates stay low or are cut further
- more stimulus for those govt's that cann afford to do so (US, China, etc.)
- low, targeted mortgage rates to encourage re-fi's and home buying
- govts finance each other's trade and exports, esp foreign govts financing us bi-lateral trade
- and a general tone of we need to stabilize (de-coded inflate) home prices and get spending to increase

alot of rhetoric that should tell you inflation is coming!

when? by 2Q 2010.

an issue with inflation is that once the money is printed, the FED has absolutely no control where it will go, same with velocity, it cannot be controlled.

so don't rule out an environment with consumer price inflation, higher wages to catch up but NO asset price inflation (specially those assets that are bought with debt). that's very possible given the demographics we will have for the next decade. so it's not necessarily bad for those that had been savers and invest in a smart way. it's more of a "winners take it all" scenario, not a "savers get burned".

I don't think we have the will or the mechanism to inflate wages along with prices. I can still vaguely remember the late 70's, early 80's when workers routinely got 15-20% annual raises which in the real dollars of the time actually meant you went down but at least it sounded good.

Without a way to inflate wages, inflation will kill all of us.

admin, what happens to the value of a nominal dollar earning 1% when inflation is running at 3-5%? you lose the value of your savings. REAL return, not nominal returns in an inflationary world.

columbiacounty has it right. inflation pushes up the value of goods as more money chases fewer goods. that is precisely is what is BEGINNING to happen TODAY. more money i hope we can agree on. less goods - check out corporate inventories - http://www.nytimes.com/2009/02/11/business/economy/11econ.html?fta=y

as corporates begin to see pricing power they will need to hire and pay more for labor. this is setting up as a classic scenario.

i feel like i'm teaching again. what is different now is that everyone is so gripped by fear that it palpably affects our mood and our judgments each day. it's hard to see what is coming next.

admin, i agree. there is a distinct possibility that printing money will create commodity inflation. i think the mechanism is via government stimulus, which shifts the marginal dollar into physical goods vs investment goods. in this scenario commodity inflation pushes up interest rates and absolutely crushes the lower 10% of the population, which absolutely cannot afford higher food or fuel bills right now. the response at that point would be massive wealth redistribution, possibly via a wealth tax.

UWS1313 - Asking for inflation is one of the most dangerous things you can do in history.

Let's take your statement "as corporates begin to see pricing power they will need to hire and pay more for labor. this is setting up as a classic scenario": Companies are not hiring. As unemployment rises the labor pool gets better and cheaper. I know because I work at a company that is hiring and we can get talent that was undreamed of a couple of years ago and at low wages.

Real inflation in a deflating economy means a lot of harm to the average person. It is the way to give everyone a defacto pay cut as the economy slides. In the meantime, the other inputs of production will be going up in price as the $ deflates. Also, inflation never hits the whole economy evenly. It is a force that once you unleash you can't control it. COLA's in contracts or benefits will only act to increase the effect and make it much harder to reign in.

mbz and AvUWS you are both right, but consider the alternative. we have before us a choice between 2 distinctly bad economic outcomes.

alternative one:

allow the deflationary cycle to persist effectively wiping out the banking sector, consumer, corporates and govts. alike why? while debt service costs are still modest in terms of historical levels (36% of income), the absolute levels of debt in the economy are at all time highs (3.5x GDP!!) this debt will continue to get marked down as the underlying assets to deflate, which it is what is happening with greater velocity at present. as banks watch their asset base deteriorate they don't lend. when banks stop functioning the credit markets which are so vital to the global economy effectively shut down. this deflationary, negative feedback loop lays the entire global economy to waste. NOT GOING TO BE ALLOWED to HAPPEN!!!

alternative two:

open the printing presses and don't stop until asset prices (i mean everything now) reinflate. unfortunately you cannot isolate inflation as some have noted. the real asset we need to reinfalte is housing and nobody in washington has enough political will or brains to create the largest rtc/bad bank in history. run the risk of overpaying a bit so that we can stop the incremental nonsense. they'll get it right but it will take time. in the meantime, loose monetary policy, zero interest rates, fed purchases of privately issued debt, stimulus I, followed by stimulus II, etc. are the tools being used. why all of this? we need our banks to lend and the credit markets to be restored. despite all of the capital injections and bailouts, bankers will not lend until asset prices stop falling. when asset prices start to rise again, bankers gain confidence that the loans they make today won't be marked down in a nanosecond. so, our policy makers have to shore up the banks, step in as lender and buyer of last resort and then watch the money they've printed fly back into the system.

i am NOT pro-inflation. it is bad. but a depression, which is the where the trend line is going, is not an option.

"admin, what happens to the value of a nominal dollar earning 1% when inflation is running at 3-5%? you lose the value of your savings. REAL return, not nominal returns in an inflationary world. ... i feel like i'm teaching again. "

here you are "teaching" us nothing useful, but spreading misinformation. you are assuming that a CD is the only form of investment that's available to those that save and know how to invest. that's simply not true (thanks god). it's the lazy way to go. it's true that those with savings and no ability/willingness to invest them well will lose purchasing power. no doubt about it.

i was talking about those that have the ability and will to figure out the optimal thing to do. those are the winners. anybody that lived a process of hyperinflation (of course the 70s don't count, that was just high inflation) could tell you that what i'm saying is right. it's the ultimate "winners take all" scenario (high inflation like the 70s less so but it is still that type of scenario).

a great little book available online (google books) explaining the basics of how to invest when prices are rising by irving fisher and other guys back in the day "how to invest when prices are rising". very simple and fast read. you have to adjust for the difference with money supply when you are not under the gold standard, but still most of what they teach you there is true. it's a great introduction of how to work towards positioning yourself the right way. another plus of this is that inflation/deflation and business cycles are a fact of life. the more we learn towards trying to position our families in the best way, the more we can teach your kids about it. this is very important now that retirement, college savings, ... are up to us. i mean, none of this knowledge goes wasted.

admin anecdotal info and amazon books is not what determines macro-economic policy unfortunately. money market mutual funds currently have $4 trillion in AUM, or 50% the us equity market cap. you call it lazy savings i call it savings.

sure that money can and will shift, but if you are 65 and living off of soc security i doubt any book you read will influence your savings pattern.