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Stocks

Postby Yoda » Fri Nov 18, 2005 5:13 pm

Anyone invest in stocks? I've been investing in real estate and after watching the rates go up in the last few months, I think stocks are a good play.

I love index funds and invested in VFINX two years ago... I have some cash to play with and wanted to know if anyone is into stocks.
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Postby Cleveland Steamers » Mon Nov 21, 2005 2:05 pm

I am here and there. As a college student, I cant invest too much since I dont have much to acutally invest. Right now I only have aobut $500 in the market but invest fake dollars through an Excel program. I think Im up over 120% from this time last year....
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Re: Stocks

Postby Coppermine » Mon Nov 21, 2005 2:13 pm

Yoda wrote:Anyone invest in stocks? I've been investing in real estate and after watching the rates go up in the last few months, I think stocks are a good play.

I love index funds and invested in VFINX two years ago... I have some cash to play with and wanted to know if anyone is into stocks.


It looks like the "real estate bubble" is about to pop.
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Postby Cornbread Maxwell » Mon Nov 21, 2005 4:11 pm

Why do you think the real estate bubble is about to pop?

Im not disagreeing, I just would like to know why you (or anyone else who wants to chime in) think it will.
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Postby Mercer Boy » Mon Nov 21, 2005 4:16 pm

I heard on CNBC that every time that a new Fed chief comes in something bad happens... :-o
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Postby Coppermine » Mon Nov 21, 2005 4:39 pm

Cornbread Maxwell wrote:Why do you think the real estate bubble is about to pop?

Im not disagreeing, I just would like to know why you (or anyone else who wants to chime in) think it will.


First of all, it's inevitable. Part of it is the new Fed chief, Bernanke. The other part is simple economics.

Right now, interest rates are relatively low while demand for new homes is very high. That means a home in a desirable area will sell for 100,000 to 200,000 or even 300,000 dollars more than it is worth. Supply and demand... supply is low, demand is high and home sellers, coupled with low interest rates, have been getting great prices for their homes.

Now it seems sellers are not getting the prices they once did and have had to lower their asking price to sell. Homes are still selling for more than their worth, but interest rates are starting to climb. Also, new homes are being built at an incredible rate.

All of this will add up to the "bubble" bursting... that is, home values will plummet and those who paid $500,000 for a home a few months ago and a presumably desirable area will find theat the value of said home will drop by as much as $200,000.

Areas in question include Southern California, Seattle Metro, Phoenix Metro, New York, Philadelphia and Washington, DC suburbia, coastal Florida and to a great degree, New Orleans.
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Postby RugbyD » Mon Nov 21, 2005 4:57 pm

Mercer Boy wrote:I heard on CNBC that every time that a new Fed chief comes in something bad happens... :-o

Too few data points to make a case for that, but then again I'm not surprised CNBC would spout jabberwocky.

I will say that bad decisions are a distinct possibility or even a liklihood with Bernanke given the right opportunity. His agenda is too asymmetrical for my tastes. He's made an academic career out of studying the Great Depression and its caused him to be overly concerned about deflation. So much so that he is intent on creating inflation, albiet a 'managed' inflation. In past writings and Fed minutes he has clearly stated his preference for helicopter money if the consumer is not 'spending like they should be'. This smacks of a mandarin belief structure that I find unsettling. Very Wizard of Oz-ish.

Part of my discomfort comes from the fact that our measures of inflation are inadequate. CPI is a crock. Owner's equivalent rent and healthcare are mismeasured. Add to that the seasonal adjustments and the treatment of non-core items and you get a very hazy picture of what is real inflation. Too bad that people's bank accounts aren't seasonally adjusted and can't exclude non-core items. Chain-weighted measurements have their benefits as well, but there are plenty of measurement problems they create too. Other indicators produced by the Bureau of Labor Stats are also inadquate and frought with myriad adjustments that make the picture more blurry rather than clear. Employment reports are problematic at best, especially when part of the methodology is to blindly assume levels of small bussiness job creation. Its the CE Birth/Death rate for thoses intersted in going to http://www.bls.gov to learn about measurement methodology.
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Postby Mookie4ever » Mon Nov 21, 2005 5:00 pm

menyak has enough work as it is....do you really want to make him change the Cafe banner again?

"No spittin', no swearin', no politics and definitely no economics"

:-o
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Postby Coppermine » Mon Nov 21, 2005 5:05 pm

Mookie4ever wrote:menyak has enough work as it is....do you really want to make him change the Cafe banner again?

"No spittin', no swearin', no politics and definitely no economics"

:-o


Oh man! And I was just typing up a huge response concerning the elasticities of demand and how it relates to the marginal supply curve of microeconomic demand.

Guess I'll table that one :-D
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Postby RugbyD » Mon Nov 21, 2005 5:08 pm

Coppermine wrote:
Cornbread Maxwell wrote:Why do you think the real estate bubble is about to pop?

Im not disagreeing, I just would like to know why you (or anyone else who wants to chime in) think it will.


First of all, it's inevitable. Part of it is the new Fed chief, Bernanke. The other part is simple economics.

Right now, interest rates are relatively low while demand for new homes is very high. That means a home in a desirable area will sell for 100,000 to 200,000 or even 300,000 dollars more than it is worth. Supply and demand... supply is low, demand is high and home sellers, coupled with low interest rates, have been getting great prices for their homes.

Now it seems sellers are not getting the prices they once did and have had to lower their asking price to sell. Homes are still selling for more than their worth, but interest rates are starting to climb. Also, new homes are being built at an incredible rate.

All of this will add up to the "bubble" bursting... that is, home values will plummet and those who paid $500,000 for a home a few months ago and a presumably desirable area will find theat the value of said home will drop by as much as $200,000.

Areas in question include Southern California, Seattle Metro, Phoenix Metro, New York, Philadelphia and Washington, DC suburbia, coastal Florida and to a great degree, New Orleans.


Agreed. there's definitely a bubble, though a regional one. I think we're more apt to see a gradual blood-letting than a pop, but it will still be bumpy. Higher rates will be one contributor b/c as interest becomes a larger part of the cost of a mortgage, the base price of a home will have to come down if buyers are to be able to afford the monthly payments. ARM owners will get hurt as rates go up and their mortage gets more and more expensive over time. IO users will get slaughtered. ARM and IO owners who can't afford the monthly payments will need immediate liquidity and be forced to sell under lesss-than-ideal circumstances. Add in the fact that so many people jumped on the ARM/IO bandwagon at the same time and it will add to an already building supply glut. And you know the rest of that story.......

Over the next 5-7 years I am looking forward to being a shark thrashing around in a mass of distressed, overburdened, short-sighted, financially irresponsible tuna. }:-) :-°
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