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September 2008 - The Month When Reality Invaded
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This Link is located in the Public Channel Housing Bubble and Bear Links.
Posted by ian 45 days ago (www.lewrockwell.com). Views: 76
Tags: housing bubble credit crisis |
| Related Tags: wall street banks economics countrywide gold peter schiff federal reserve |
September 2008 will go down in the history books as the month in which the bulls finally looked like losers. It took eight and a half years. March 2000 marked the end of the Reagan stock market boom, although the supposed experts did not see this at the time or thereafter. Even after the NASDAQ had declined 80% by 2003, they still told people that the best strategy is to buy stocks and hold them long-term. They still believed that the stock market was going to produce 15% per annum returns for the foreseeable future. September 2008 and he ended that mantra. On September 3, the Dow Jones Industrial Average was where it had been at its peak in 2000: 11,700. The Standard & Poor's 500 index was lower: 1280 vs. 1529 (close). Subtract from that over 20% price inflation.
The experts on CNBC on September 1 still clung to the illusion that there was no recession, the boom was still in force, and everything would work out just fine. By the end of September, all that lay in ruins. There is no optimism on CNBC today. There is a kind of stiff upper lip determination not to panic.
It should have been obvious in August 2007 that the end of post-2003 stock market recovery was over. Bernanke had tightened money from the day he took over as chairman of the Board of Governors of the Federal Reserve System in February 2006. Real estate was the driving force of the expansion, and real estate was in decline. It was obvious to me in late 2005 that the bull market in real estate was over. I said so at the time. It was surreal estate. A handful of us saw this coming, but it seemed so far-fetched at the time that virtually nobody paid any attention. They now pay attention.
Real estate from 2001 to late 2005 was the largest bubble in American financial history. It dwarfed the bubble of the stock market in the 1920s, because that bubble had involved only a tiny fraction of American investors. The residential real estate bubble involved two-thirds of the population, all of whom owned homes. The other third were affected because of rising rents.
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