Well the week definitely ended on a sour note and appropriately so. A trio of CEOs made their case for insane compensation while their companies walked off the proverbial cliff. We also had the largest number of job losses in 5 years making it harder for certain people to deny that we really are in a recession. Curiously, the unemployment rate dipped and the market zigged and zagged in the early stages of the day until they realized that many folks simply stopped looking for work. Way back in July 2007 I made the case that housing had entered its Minsky Moment: Housing Minsky Moment: 3 Factors. Prime Contagion, Record Foreclosures, and Publicity. In fact, Countrywide was making the news at that time as well:
“Mozilo likened the housing market to a gigantic ship needing to turn in the ocean. It will take time was his underlying point. I like to think of the housing market more like a NASA mortgage rocket with no turning back. Have you ever tried turning back a rocket-propelled vessel? His statement seems to offer some hope that housing will return even though he unloaded millions in his company stock. Maybe he forgot to mention that the ship he was referencing was the Titanic. Either way, housing is passed the shaky ground stage. I’ve shown countless examples in our Real Homes of Genius series that clearly highlights an outrageous bubble housing psychology. We also discussed a few months back the subprime implosion as credit suddenly tightened and subprime lenders started dropping like moths heading toward the light. In fact, I felt this was the watershed event and would set the tone for the summer.”
The idea behind a Minsky moment is that long periods of economic stability usher in demand for leverage which slowly begins to build into the system. This stability provides grounds for credit growth. In the initial stages, credit is given out in moderate portions, starts to expand, and finally reaches Ponzi like characteristics. Finally the market implodes on itself. I’m surprised how many are saying this is the true Minsky moment. No, the moment at least in reference to subprime happened last year and we are now facing the afterglow of the bursting. I wanted to sum up my sentiment in a poem and creative writing piece. I call it, Ode to the Housing Market:
Ode to the Housing Market
Housing always goes up!
Real estate is the best investment ever!
They’re not making anymore land.
What do you mean housing is down?
Speculating in housing is risky?
The US has other states besides California and Florida?
I’m surprised as to what is occurring.
My realm of understanding is now shattered.
But surely I’ll be able to flip my home because of granite countertops.
Alas! Granite countertops will save me.
That shimmering rock that allows me to display my 20 credit card bills all in one spot.
Are you not the true rock of Gibraltar?
HGTV told me that you were so it is written in stone.
Up, up, up…crash.
Jobs, jobs, jobs…no jobs.
Surprised I am.
SIV, CDO, MBS, CMO, VIE, and all I really want is to gas up my SUV.
The alphabet soup of confusion swimming in a sea of $100 barrel oil!
What do you mean my rate just doubled?
What do you mean a margin call requires me to come up with capital?
My HELOC is disappearing quicker than Chris Angel.
Credit cards are really freaking my mind.
Who’s this Alan Greenspan and Ben Bernanke?
First, they tell me adjustable rate mortgages are good.
Now they are telling lenders to cut my mortgage.
Deep in the pit of my stomach I like lower mortgages.
They lower rates every six weeks.
Ergo, I like these people.
Can we also slash the balance on my credit cards?
Raise the roof! Raise the caps! Alleluia!
Bigger is always better.
So why not bigger mortgages?
Maybe it is I who should be the next presidential advisor.
Monster hybrid loans are next.
Whoops, I just resigned.
Angry are the people!
They didn’t see this coming they cry.
Minimum wage and no million dollar home?
Living in a 500 square foot home with a 100-inch flat screen TV.
Best Buy is happy.
That wasn’t a best buy when the bill comes in.
Talking heads make sense of this all!
You genetically altered cyborgs.
They call you talking heads because we never see your body.
Reveal your full torso to us!
Disclose your torso by April 15!
We’ll trust you more if we can see your Docker khakis.
You open your mouth and the ticker moves up.
Conflict of interest, not today.
The US Dollar goes down like an elevator descending into the basement.
We arrive at the basement and find a sea of debt.
Take me back up!
I cannot stand the horror!
What do you mean we need $2 billion a day from foreigners?
In comes, toys, electronics, clothes, and all the things we buy.
Out goes raw materials and jobs.
Fair trade it is.
Housing has now bottomed!
Best time to buy!
Who cares about the economy because they aren’t making anymore economy.
Get in before rates go lower and home prices go lower.
I see that Snoop Dogg is teaching us about fatherhood.
We have a former Goldman Sachs CEO as US Treasury Secretary.
A presidential candidate tells us he doesn’t know much about the economy.
Economy number one issue for voters.
Wins party nomination.
Get in right now that things make perfect sense.
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