>No question, either extreme is bad. But how to manage the volatility is the billion - >or is that trillion? - dollar question.
There are several things to consider here. First is the obvious. We require real truth in selling, and for the sellers to know what they are selling. Along with this we have hard reserve requirements, like we had for decades (with a kinda exception in Houston in the mid-80s that fueled the S&L crisis. All financial institutions can be leveraged no more than 10-13 to 1. Then, we need to recall that this is the first gigantic, nation wide housing bubble we've seen in 150 years. There are several causes for it. First, the balance of trade deficit, kept by foreign governments and other investors as cash meant there was cash looking for a place to roost. The inherent trust in the US dollar helped fuel this. So did the lack of the US actually producing much of anything. The US is, by far, the most flexible economy, so it handles disruptive innovations better than any other economy in the world. The last significant one was the mass use of the PC, which Japan missed out on when they spent tens, maybe hundreds of billions on worthless "fifth generation" computers in the '80s. This lead to their lost decades. But, the internet bubble of the late '90s showed that the 'net didn't have earth shattering profitable changes inherent in it. It allowed consultants like me to get drawings and email results, had some nice multi-billion dollar companies, but didn't change the economy the way fast cheap computers did. For example, the trillion dollars of wealth created by geosteering would have existed without the internet, but not without cheap computing. So, we had a US economy that was really doing nothing, but lots of money looking for a US home...thus real estate, which the Risk Assessment Model said couldn't go down more than a couple %. Third, to get out of this, the US needs a positive black swan to change all the rules again. This will soak up investment capitol, with a real return on investment, because wealth will be created. Until it comes, we're treading water. Dan M. _______________________________________________ http://box535.bluehost.com/mailman/listinfo/brin-l_mccmedia.com
