CHESSNOID

So far the year has kept me busy and I feel I have accomplished many little things and feel very productive.  There seems like alot more to get done but I will chip away at each task and relish in each one as I complete them.

I am anxious to see which way the stock market will go this week.  The first week was a down week so I expect a bounce this week.  As different news about jobs, housing, economy, etc come out I expect it to continue its downtrend.  I have been doing a lot more reading of business articles and am starting to see a trend of more negative news reported about the economy.  Even though we have been in the downturn of the business cycle, there seems to be a long lag time reporting it.  I know in the beginning of 2007 as many housing bubble blogs were blogging about the doom and gloom of the housing market, while many other organizations denied it from the federal reserve, NAR, and other real estate related industries seem to hold the opposite opinion.  Now that 2008 is here and certain events such as skyrocketing record number of foreclosures and big bank billion dollar losses, everyone is in agreement there was a bubble caused by the subprime debacle and subsidized low interest rates from 7 years ago.   I don’t think last quarter was the worst of it either.  I think the banks will continue to announce bigger losses as this whole process unfolds.

My gauge on the economy is mostly based on the prices of houses.  I have read many great blogs about rent vs mortgage payments that analyze what is reasonable based on location and wages.  There are still plenty of 1/2 million dollar homes in California where mortgage payments would be $4500 a month but rents can be had for a comparable home for only $2000 a month.  I think when we say mortgage payments balance out with rent after tax savings, then I think we will back to a normal economy.  It seems like common sense not to buy a house when you can rent it for half the amount.  Many of these bloggers did get it right early on when they were the minority looking like they were chicken little declaring the sky was falling.   As long as there are excesses, the business cycle will squeeze it out.   In this case, we will be pushed into a recession.