Thread: Porsche bubble?
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A Man of Wealth and Taste
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Join Date: Dec 2002
Location: Out there somewhere beyond the doors of perception
Posts: 47,782
Dear Wayne:

Your right about the flurry of cash chasing too few HARD asset investments around the world. But the RE market is not the driving force... it is a symptom of a Low Interest envirnoment. If you as a lender or Stock market investor only receive a small return on investment you will seek a higher rate of return in another asset class. What has been driving this low interest rate envirnoment or should I say what has caused Interest Rates to resist Fed Rate increases is turmoil in the World. The US Treasuries are still considered to be safe haven investments. China has also been using US Bonds as a backstop for their own currency.

If the World Political situation moderates itself out vis a vis Iraq, Iran, N Korea, and Al Qadea U will see Interest Rates rise commencerate with the robustness of the World economy. as Bonds won't be needed for safe haven purposes. At that point those Hard Asset investments won't be so cheap to buy anymore and there will be an outflow into other investment classes. The US Stock market will the receipiant of that ouflow from hard assets as it is now considered to be trading at a 25% discount to value.

After 911 the USA found it necessary to decrease interest rates to keep the World Financial system liquid which avoided a deep economic downturn the likes of which havn't been seen since the 1930s.

With regards to those collectable autos taking a hit price wise first I rather think a sofftening in the RE market would be the first sign as the Big Ticket items show the first signs of weakness...and of course the non utilitarian auto or toy will be the first asset to hit the classified ads rather than the house.

Many Economists predict a soft landing for RE, however the softness of the landing will determined by its affordability factor . In markets where RE has become overly expensive a large correction is do and in other markets only a minor correction maybe warranted.

"Some Observer"
Old 03-07-2006, 02:40 AM
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