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Next Stock Market Collapse In Hiding
Recently my family spent a week in Florida, where we lived until a few years ago. Everywhere we looked, we saw property for sale, with real-estate signs competing for buyers' attention. "Bank will accept SHORT SALE" and "Any Offer Considered!" were typical.
My husband and I were reminded how close we came to being among the homeowners sporting those for-sale signs. Fortunately, we sold our Tampa home in 2006. Otherwise we might be one of those families unable to sell without taking a huge loss.
But what about the next investment bubble? How will I recognize it? Here are five important warning signs:
1. I start believing the experts are infallible. Five years ago, real-estate experts were using these two arguments to justify soaring home prices in Florida:
Retiring baby-boomers were moving in mass from the northern half of the United States to frolic in the Florida sun.
The strong euro was prompting record numbers of Europeans who had vacationed in Florida to snap up housing, particularly waterfront homes.
It sounded perfectly reasonable. And to a certain extent, it was.
Unfortunately, eager buyers believed the experts and asked no hard questions. Their collective buying created an artificial demand that drove up prices.
2. I become willing to do things I swore I would never do. Near the peak of the bubble, a realtor friend said: "I've been selling real estate for 30 years, and I've never seen so many people willing to do anything so they can buy a house."
"What do you mean?" I asked.
"Well, it's like this," she said. "At our first meeting, they tell me there are certain things they'll never do in order to own a home. But after they locate their dream house, they go back on everything they said. Suddenly, they're willing to commute outrageous distances, borrow scary amounts of money, zap all their life savings, and fearlessly sign on the dotted line for any kind of crazy mortgage that lets them close the quickest."
Now, average sale prices for homes in Florida fell almost 40 percent from July 2006 to June 2009, according to the Case-Shiller Home Price Index.
3. I start to view strange behavior as not only normal, but smart. Demand for homes reached such a frenetic high point in Florida that people began sleeping out on sidewalks for the chance to win a lottery; the prize was the opportunity to buy a new condo that hadn't even been built. Worse, this behavior felt not only normal but smart!
4. I become emotional and annoyed by anyone who disagrees with me. As an independent financial adviser, I was in the perfect position to watch a lot of strange behavior from people who were under the spell of bubble mania.
One day a woman in her 60s became teary in my office after I wouldn't bless her plan to invest all of her meager life savings in local real estate. She had become convinced that this was the path to quick riches. The more I tried to dissuade her, the more she cried. After awhile, she dried her eyes, picked up her purse, and walked out abruptly. I never heard from her again.
Another prospective client stormed out of my office when I failed to properly endorse his plan to start lending money, at high interest rates, to would-be home buyers whose credit was too bad to get conventional loans (remember, money was easy then!).
About this time an acquaintance of my husband began telling him he should hurry up and buy a waterfront home before they were all unaffordable. When my husband explained that he and I had decided to stay put because we thought we were in the midst of a real estate bubble, he noticed an immediate change in her demeanor. She barely spoke to him again when their paths crossed.
5. It feels like the good times will never end. According to the classic book "Manias, Panics, and Crashes: A History of Financial Crises" by Kindelberger and Aliber, past bubbles have occurred during good economic times when interest rates are low, credit is plentiful and easy to obtain, and national optimism is running high.
So as happy as I may feel when these conditions are occurring, I hope to remember that they potentially are seeds of the next bubble. Elaine Scoggins is a Certified Financial Planner with Merriman, Inc., a fee-only investment advisory firm in Seattle (MarketWatch.
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In the movie Into the Wild, why did he starve to death?
He had a collapsible fishing rod and fish net, he was almost next to a river as shown in the last scene of the movie and
with- in walking distance of other rivers, so why he did choose starving when his rice gave out and couldn't find any game to shoot?
In one scene it shows him standing on some land surrounded by water which was sure to have fish in it.
I believe at that point he was to weak to catch anything, but he didnot die of starvation he died from the poisioned berries
