Bubble Files, Part 1: What 30 Plus Years in Real Estate Will Teach You about Bubbles

I worked in real estate off and on for many years – starting in the late 1970’s, boots on the ground, selling real estate as a young man in Center City, Philadelphia.

There at that time, we witnessed a localized bubble, and I saw prices jumping 25% to 35% per year. And it was very clear to me then that this simply wasn’t sustainable. Sure enough, the market did seize up, volume disappeared, and prices came down sharply.  

I worked in and out of that business during the 80’s – and then moved to Florida in the late 80’s and worked as a commercial real estate appraiser.

And there at that time, we were in the midst of a commercial real estate bubble. The Savings and Loans and the commercial banks were issuing credit at insane rates. And the prices of commercial real estate – office buildings, shopping centers, apartment complexes, etc. – were rising rapidly. I saw the same kinds of price increases of 25%, 30%, and 35% per year. I saw international investors from Asia and Europe come and buy trophy properties at prices that were not sustainable.

The crisis began to gather in the late 1980’s, and I saw it collapse. By the early 1990’s the collapse had happened, the bank regulators had become very tough, and some of the fraudulent banksters were being prosecuted. Many of the properties had gone through bankruptcy and mortgage foreclosure. And many of the properties that I had valued correctly in the first place came back to me for reappraisal. So by having done honest appraisals in the first place, I found a lot of work during the period of the readjustment and recovery.

And the same things I saw happening in Philadelphia and Florida, I saw happening again in the 2000’s. I was a commercial real estate appraiser from 1988 until 2001, which is when I started my market letters and moved into the publishing business. During the early 2000’s, I saw a lot of shenanigans, a lot of fraud, a lot of excessive lending, and a lot of inflation – and it was all corrected very violently by the crash of 2007 and 2008.

To see the rest of the transcription, or listen to the actual recording, click here. You’ll learn exactly how to spot a bubble.

The WSJ and Bloomberg Got It Wrong. Retail Sales Are Still Through the Roof

Don’t believe the hand wringing about last week’s retail sales miss. Retail sales are going gangbusters.

But that’s not bullish, and you know why. Strong retail sales will keep the Fed on its tightening track. And even stronger retail sales would encourage the Fed to tighten even more and even faster than currently expected.

And that might just be the path the economy is on.

So beware being so easily convinced by the media playing the game of “Divert the Herd” on the August retail sales release.  

Instead, let’s peel back the onion so that we can get a better understanding of why the reports were off, as usual.

Click here to see

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