Tuesday, May 16, 2017

I don't know where demand is going to come from.

I'm more freaked out about the market than ever, while the media tells me there is no systemic market correction on the horizon. They say the system isn't as leveraged as it was in 2007 - which technically is true. That isn't to say - there isn't a ton of leverage out there.

But the best explanation of why the housing crash went on for so long is because low credit standards brought housing demand forward. And really - isn't that what we have in cars right now?  They tried to fix recession by getting people to buy cars with no money down for at least six years now right?  And all those cars are underwater.

I'm even embarrassed to admit that I bought a ridiculously expensive sports car when it seemed like we might go into negative interest rates. (I didn't do no money down though) And I only bring this up because it shows the sort of distortion in the market. If someone else told me they had done this - I would laugh and laugh and laugh. However - when people start talking about "bail - ins" and negative interest rates - you will make stupid decisions because you'd rather burn your money in the driveway than have the banks forcibly "bail themselves in",  or you lose it drip by drip with negative interest rates. I still don't regret it, because I'm aware how insane that sounds. Yet - that was the market at the time. And I fail to believe that I am the only one who made those types of trade offs.

I know a guy who traded in his paid off truck for a new truck. Decided to lease the new truck for some reason. But he didn't actually have to start making payments for 5 years. And I thought the whole thing was crazy because he wasn't able to make it out of the housing crisis. Even though he was at the tail end of it, his place still hadn't appreciated enough to get him out and this was last year! You car loses a ton of value in five years.

If people gave up their houses so easy - they will default on cars in a nanosecond. People are inherently geared towards rejecting pain. And since cars don't appreciate like houses - why would they put up with any of it?

So, with cars - we are at 90 day supply right now. Retail is in a recession. Restaurants are in a recession. And houses have hit a wall because there isn't enough land to build on. I don't see anywhere the government can juice this economy.

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