It's really simple, how we got here and how we get out.
1. HOUSING.....Prices went up, far in excess on the average of the growth in the
American or world economy. Let's not cloud the basics with ya buts.
2. Housing prices started to decline. Thus in the end eventually making housing affordable to average incomes. This process is continuing.
3. The plan: Force money into the economy and continue doing so until housing prices stabilize. The housing price will stabilize because there will be more money created to buy houses.
4. Instead of deflation with housing prices going down faster then the economy causing an acceleration to the downside, we will force an inflation, due to money creation and an increase in housing prices. Non the less the increase in housing will not be as great as the percent increase in monies created in the beginning. Note if these two examples were a rubber band, the band is being stretched equally. It does not matter if the band is above or below "0", only the amount of stretch counts. At some juncture(no the band does not snap), it pulls closer together. This happens when the pricing of houses reaches historical norms for income verses home price. I hate to sound like those who preach reversion to the mean but that's the way it is.
OK, that was really simplistic, I apologize. Sometimes getting rid of the noise helps.
How am i going to profit:
1. I am not the only one to see the obvious.
2. Being a hero and investing early is for the bold and has been a virtue of the dying.
3. This time following trends will be correct. The wealth of the world will buy all I want to do is be part of it.
4. In fairness, I do make speculative bets. I guess, I love the action.
Hope you enjoyed my thoughts.
Tuesday, December 2, 2008
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