07/09/2002 Archived Entry: "THE GREAT CRASH OF 2002"

Every cloud has a GOLD lining!
by Clive Maund

I suppose he is right about gold, as he points out, it wouldn't take much volume at this point to trigger a run-up. Some of the things he states are right on, such as this: Many commentators have remarked that we have had no panic so far in this bear market, failing to grasp that the reason for this is that WE ARE STILL IN THE TOP AREA. His reading of the 5-year long "Head-and-Shoulders" top of the S&P 500 is valid, and holds for the NASDAQ as well, which I was just noticing today, with ~900 a probable strange attraction area, if it's neckline support at ~1400 gives way. I agree with the possible premise, based on the technical analysis I've been doing with the NASDAQ composite, but what Clive sounds out around the TA could be questioned.

And about those booming real estate prices, Are real estate appraisers former Internet analysts? is a good read. The topic begins after the first few paragraphs.

There is an increasing debate on whether or not a bubble exists in residential real estate. The argument against the bubble is entrenched behind the notion that real estate only goes up. This was the same mentality that investors had while buying Yahoo at $150 per share. Sunday’s Philadelphia Inquirer carried a story titled, "Home buyers’ mad scrambles." Everyone is familiar with the frenzy in California, but this story exemplifies just how widespread the frenzy is. As with all stories of this nature, it contained several examples of buyers getting multiple bids over their asking price and offers being accepted the day after listing. But more interestingly, there were several quotes that were reminiscent of the internet bubble. One realtor lamented about "having trouble with appraisers because [houses] are selling $20,000 over price." The solution is "to find appraisers who are more aggressive." Another realtor warned that "if you see a house you like, you’re not going to have time to go back a few times. You have to make a very quick decision in today’s world." That almost sounds like a line out of the movie Boiler Room. This is from a city that is experiencing a declining population. Especially troubling is the idea that some appraisers are currently acting like Internet analysts a few years ago. When banks lend money based on inflated housing prices and the economy takes a turn for the worse, it usually does not have a happy ending.

Replies: 1 Comment

If the American people want to commit financial suicide, they would follow Bush like the children followed Pied Piper in Hamlin, Germany, and vote GOP this fall. If they do not want to commit financial suicide, for stronger accounting rules and greater transparency they would vote the Democrats back to power. As far as I am concerned, I cannot afford another thirty months of this mess!

Posted by G.C. Raj @ 07/10/2002 12:53 PM PST