Podcast

Second Leg of the Housing Decline Set To Begin (or Why Economists Are Dangerous To Your Wealth)

Monday, June 28, 2010

Executive Summary

• Housing data is weak and just took a turn for the worse
• Stimulus efforts were essential to keep housing propped up
• The stimulus has ended
• QE and stock market prices are correlated
• What’s coming next
• What you should do

We bought our house in November of 2009.  This will turn out to have been a very bad financial decision.  We’ll be underwater on that purchase for a very long time; maybe forever (or until Bernanke’s great experiment takes the final turn towards massive currency destruction and inflation; whichever comes first).   

Of course, we bought it knowing that.  Our decision to buy centered on our valuing time more than money.  What I mean by this is that all of the changes that we are now fully engaged in around our house, ranging from insulating to installing solar panels to putting in a fruit orchard, all take time.  Time became more important to us than money, and so we bought.

But for every nation dealing with the after-effects of a housing bubble, what matters is that house prices start to climb again.  Of course, the housing bubble was just a symptom of the larger and far more damaging credit bubble, but housing is a useful indicator for where we are in the larger credit-bubble story.

Because of its importance to both the bubble’s bursting and its eventual repair, I track housing for signs of true recovery.

Back in May, I was struggling with whether or not to send out an Alert.  For those new to the site, an Alert is an extremely rare thing for me to send, and I do not do it lightly.  There must be compelling evidence that something extraordinary is afoot that would personally cause me to take specific actions or kick my current rate of activity into a higher gear.

Well the InnoTown innovation conference was certainly a very good experience and a real eye-opener.  On the ‘great experience’ side of the ledger, this is as close to the ‘home country’ as I’ve ever been – my grandfather and grandmother (father’s side) were Swedish and Finnish, respectively.  Norway, being one country over from each, is pretty close.

Close enough heritage-wise that the main problem for myself and my daughter Erica, who accompanied me, was that everyone began talking to us in Norwegian.  It seems that we both look more Norwegian than many Norwegians.  Luckily, virtually everyone in Norway also speaks near-flawless English, too, so there was never any confusion after the first sentence.

I also counted myself lucky to have been able to see the other presenters on the slate, including:  Lynda Gratton of the London Business School, Chris Bangle (former chief designer for BMW), Blake Mycoskie (founder of Tom’s shoes – “one for one” – founded on the principle of profit and giving being part of the same business model), Rohit Talwar (a futurist and strategist with a quite enviable client list), Roger Flynn (a young-ish though big-time executive for Virgin, BBC, and other ventures), and Peter Diamandis, who is the founder of the X-Prize, which saw the first private success at space travel and is now sponsoring other such prizes in a multitude of areas.  A few of these people were world-class presenters, so I learned a few things, most notably that it is time to spiff up my slides.