Right Again…Web 2.0 Boom & Debunking Housing Myths
Wow..right again. I told people to buy google earlier this week before earnings and, not surprisingly I’m right again. Google crushes estimates and surges, as well as the entire market. It’s fun making money and being right while these deficit hawks and permabears sit on the sidelines watching everyone else make money in the stock market, while waving their fists at Bernanke, Obama, and Geithener for supposed ‘wasteful spending’..lol what a bunch of sore losers.
There is also a pervasive myth that somehow the last bull market was fueled entirely by American tapping into their homes for equity. In actuality, the growth had more do with strong sales from exports, defense spending, and a steady decline in consumer savings rates. The US consumer is still the cornerstone of the US economy, but this importance is being lessened progressively due to globalization and free trade. Companies like Apple, Walmart, McDonald’s, Google, Potash, and MasterCard are thriving because of globalization, free trade, and a falling dollar.
Here is a great article that debunks the housing myth http://www.financialsense.com/fsu/editorials/jain/2006/0130.html
Most importantly the article states
AT ITS PEAK, THE SINGLE FAMILY HOUSING ALONE WAS ADDING 5.45%, OR 3% MORE THAN THE HISTORICAL TREND-LINE CONTRIBUTION, TO THE GDP GROWTH RATE
The graph below illustrates the insignificance of housing with regards to its contribution to the GDP
But what about the credit crunch and liquidity crisis? As it turns out, the ‘crisis’ was also a hoax. Americans still have access to tons of liquidity and and are still maxing out credit cards, but unfortunately the personal savings rate is at 4%, which is too high. Consumers need to do their duty and spend more instead of being frugal. However, by the end of the year I predict savings rates will return to negative, where it will remain.
We need more credit card debt, easy money, a widening of the wealth gap, outsourcing, bailouts & stimulus, and tax cuts for the rich. It’s the top earners and entrepreneurs who create jobs and economic growth, in addition to paying the bulk of taxes. Economic favoritism is justified because the way you enable growth and prosperity is though the most efficient allocation of economic resources.
4 Responses to “Right Again…Web 2.0 Boom & Debunking Housing Myths”
Comment from TJ
Time April 20, 2009 at 7:10 pm
The “insignificance of housing”?! Did you read the article you linked, which argued the opposite of your conclusion?
If GDP was 3% above norm because of housing, and housing has now sunk into a funk, GDP will fall 3% to the norm. But housing usually falls right on through the norm by roughly the amount it exceeded the norm. So we get -6% change in GDP (a severe recession) from housing alone.
In support of the conclusions in the article you linked, John Maudlin estimates that without mortage equity withdrawals, “the US economy would have grown less than 1% a year for five years, and barely that by 2006. And that is with consumers saving less than 1-2%.” Check this graph:
http://www.genwealth.net/bm/bm~pix/jm020609image001_5f00_3c63f565~s600×600.jpg
“Now, let’s imagine a world with savings going to 6% (or more), because shell-shocked US consumers now realize they may actually have to save to be able to retire. And what is it going to feel like when housing drops another 10-15%?”
Comment from Anonymous
Time April 22, 2009 at 9:30 pm
This guy writes himself in deeper with every post. There was a point where I would read and consider things….now it reads like sarcasm to me. Which I would not rule out as a possibility
Comment from Administrator
Time April 24, 2009 at 4:54 pm
This guy writes himself in deeper with every post. There was a point where I would read and consider things?.now it reads like sarcasm to me. Which I would not rule out as a possibility
I’m not being sarcastic. I back this blog with facts and figures. I’m presenting an alternative viewpoint to ill informed masses.
The fall in consumer spending,decline in exports, and rise in personal savings rates contributed more to the fall in GDP than the decline in housing.
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Comment from Jimbo
Time April 20, 2009 at 6:42 pm
Wow. Hey Ned, Obama called he wants you to be his press spokesman.
Ned, having half the country up to their eyeballs in credit card debt and bad mortgages is not good for the economy. Sorry.