– We’re out of the gate little slow on this Monday, but for good reason. Extreme Ian, our trusty steed, crashed in a cyclo-cross race this weekend and is nursing a concussion.

Never fear, however, cyclo-cross, it turns out, makes a fitting metaphor for today’s stock market. The following video will help illustrate:

Cyclo-cross: An Hour in Hell

Ian has apparently won a few of these crazy races on the circuit this season.

– Investors slogging through the mud this morning, helped the Dow open up 153 points. But then they had to jump off and deal with the manmade hurdles on the track. It’s down 17 points, as we write. 

– Here’s one of them: Circuit City filed for bankruptcy. After losing money in 5 of the last 6 quarters, Circuit city says it will have to shutter 155 stores in order square up with more than 100,000 creditors. They plan to eliminate 17% of their US based workers.

Stock in Circuit City fell more than 50% on the news. You can now pick up a share at the super low discount price of just thirteen cents.

– Then investment banks across the board, threw up a few more, this morning. Banks in the lower Manhattan region are planning to cut some 70,000 jobs over the next quarter.

“Executives and analysts,” says the Financial Times this morning, who tabulated the results, plan to eliminate “redundancies” and to pile on this latest number on the estimated 150,000 jobs already lost by the financial sector worldwide.

As sorry as you may be to hear this, investment bankers and traders – those who’ve been bitten hardest the frosty capital markets and the “collapse in takeover and financing activity” – will be the first to leave the track.

– Sovereign wealth funds (SWFs) – the ambulance chasers of this credit crisis tricycle wreck – seem to be losing their appetite for rescuing distressed financial institutions… and “for investing in US and developed markets generally” says a Morgan Stanley report this morning.

The investment bank says: “Lower oil prices, lower export growth rates, capital flight and new domestic fiscal needs may lead to a less rapid pace of asset accumulation for sovereign wealth funds.” At the beginning of 2008, SWFs had nearly $3 trillion in assets under management. Paper losses on their considerable investments have reduced that amount to $2.3 trillion.

Morgan Stanley reduced their forecast for SWFs. At one point they thought these players would have $10 trillion under management by 2011. Now they’re projecting it won’t reach that level until 2015. “If at all,” we can’t help but add.

– Hedge funds didn’t fare so well in last month’s race, either. Fund managers lost an aggregate 5.4%, the firm Hedge Fund Research by way of The New York Post this morning. In September and October, the industry lost more than 10% and it is now down over 15% percent year over year.

– Chinese officials hope to inject a little adrenaline into their team of bike riders… China announced a 4 trillion-yuan - $586 billion – stimulus package of their own this morning. The news help boost light sweet crude oil up more than 7 percent. Copper had a banner day, too. It rose over 7 percent as well.

China, the world’s second-largest oil consumer, said yesterday it will spend a big chunk of its yuan on new housing and infrastructure projects, thus boosting demand for iron ore, crude oil and copper.

Oil also gained after Saudi Aramco, the world’s biggest state oil company, told South Korean and Japanese refiners it would cut December supplies. So far, Russian officials have declined to follow the lead of Opec leaders like Hugo Chavez to put the kibosh on oil production.

– "Low" oil prices and an uncertain economy have created a, perhaps limited, buying opportunity for a group of offshore drillers… shares in many of them have been pummeled off their summer highs. 

“We’ve found a no-brainer offshore driller,” writes our small cap explorer Greg Guenther. “The value is obvious for those willing to look beyond the immediately reality that oil is not gaining 5% a day on a regular basis anymore. 

“We’re not talking about an unproven technology or some endless exploration boondoggle here. This is real oil under the sea being pumped out the old fashioned way. Look – oil has made investors money time and time again. And as much as we appreciate a huge shift in public attitude toward renewables, old-school oil isn’t going anywhere for quite some time. And these tiny companies that are capitalizing on the ‘scraps’ on and offshore in North America have the potential to be very successful for years to come. 

“The company that has obtained several offshore drilling locations – one that had been shut for almost a decade. The oil is there… it’s just a matter of pumping it out. The company has already brought an older platform back to life. Now, they’re producing oil and record revenues, while continuing exploration and additional drilling.” For more, be sure to check out Gunner’s latest BBE.

– The U.S. dollar was a bit dazed and confused while riding against its competitors last night. The euro traded up slightly to $1.27 from Friday’s close. The yen ticked down to 98 and change. In Canada, the loonie gained a penny… across the big brackish pond, the British pound lost one.

– In a dash for the lead spot in the pelleton, gold gained nearly $20 rising to $753 an ounce… up from $735.25 late Friday.

– The grease on the chain of the economy, the London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars dropped to the lowest level in four years.

The rate slid almost 6 basis points to 2.24 percent today, the lowest level since Nov. 5, 2004, according to British Bankers’ Association data. It was the 21st consecutive decline.

The overnight rate rose 2 basis points to 0.35 percent, still 65 basis points below the Federal Reserve’s target rate.

– Looks like the bailout plan for AIG is getting restructured already.

“To improve AIG’s chances of repaying its debts,” notes Bloomberg this morning, “the U.S. will reduce the $85 billion loan to $60 billion, buy $40 billion of preferred shares, and purchase $52.5 billion of mortgage securities owned or backed by the company, the Federal Reserve said today in a separate statement.

“The first rescue plan wasn’t sustainable,” Edward Liddy, AIG’s CEO, said during a conference call today. AIG’s third-quarter loss equaled $9.05 a share and compared with profit of $3.09 billion, or $1.19, a year earlier, AIG said in a statement. Losses in the past year erased profit from 14 previous quarters dating back to 2004.

AIG stock rose 10% on the news from the Fed… up to a whopping $2.33. At this time last year, they were at $56 and change.

– U.S. automakers – fearing that investors will lose a taste for their lot altogether – are continuing to beg Nancy Pelosi for a bigger share of the bailout package than they were originally allotted. Here’s a better idea: Why don’t they just make cars that people want?

– Meanwhile, hybrid car and powertrain maker AFS Trinity is pulling out of the 2008 auto show in L.A. saying that “show management ‘muzzled’ them by disallowing claims that their highly modified Saturn Vue plug-in hybrids can achieve 150 mpg.”

AFS Trinity’s statement reads: “carmakers continue to seek tens of billions of taxpayer dollars, ostensibly to develop fuel-efficient vehicle technologies, but their conduct is evidence they are reluctant to embrace solutions they didn’t invent.”

The car show management’s beef with the 150 mpg claim is simple. In order to achieve the optimum gas mileage the cars must be “driven 40 miles per day for 6 days and then 80 miles on one day of the week.” If driven in exactly this manner, they use 2 gallons to go 300 miles… or roughly 150 mpg.

That would be great if you lived exactly 20 miles from your work.

– “The reader that claims that advancements in the robotics field are going to cause unemployment needs a lesson in history,” writes a reader.   “We have been through the industrial revolution, computer revolution and countless other technological advancements and miraculously we (most) still have jobs.  Yes there may be people that temporarily lose their jobs in specific fields, but with every door that closes another one opens.  Are we supposed to prohibit technological advancements if they threaten certain unskilled jobs?”

– “In 1999 Bill Clinton signed the bill repealing the Glass Steigal Act,” writes another searching in the dark for the jugular, “separating the investment houses (banks) from our normal regulated banking system. The only bad thing is the Republican lead Congress sent it to him. Why has this not been in the headlines.  Did McCain vote for it?”

The 5: This is our favorite part of the economic cycle. When the bubble is growing everybody loves it… when it bursts, people just want to know where to stick the knife in.

– “I had the opportunity today to view the IOUSA movie in San Antonio, Texas,” writes a third continuing the same vein, “The audience was small (matinee), comprised 1/2 of 35+, and 1/2 of college age students some of whom were taking notes! While I thought the documentary was good – I feel that you made two mistakes that greatly decreased the impact of your message.
 
“The first mistake was the partisan nature of the documentary.  I am not suggesting that you are Democrat or Republican – only that the documentary was very Pro-Clinton and Anti-Bush.  While your commentary in the past has shown that you hold no regard for Bush et al, this came out in the movie in a big way.  How did it detract?  Well, whenever you ripped Bush by producing some failing number, the college crowd cheered and jibed and the older crowd grumbled – mainly at the younger crowd. 

“When Clinton came on, the college crowd was slightly more quiet, but the older crowd grumbled louder – probably because they despise Clinton.  In fact, what could have alleviated most of this ‘old vs young’ turmoil would have been to focus the Clinton-era success on Newt Gingrich and the Bush-era failures on Pelosi, Reid and Franks.  Just a thought, but remember, I bet that many of the young watching this documentary do not realize that federal spending is initiated in the halls of Congress – not the Oval Office.  You could have enlightened the public with more teaching.
 
“Furthermore, if you wanted to be fair, then you would have had to focus on the fact that while Bush presided over the housing crisis and bank deregulation, Clinton presided over the stock bubble – which burst just before Bush was taking over. While the economy hurt McCain this time it likely hurt Gore last time.  Also, before harping on Iraq, you would have to mention as an aside, that the Trade Towers likely occurred secondary to Clinton’s refusal to address previous attacks like that against the Cole in Yemen.  In other words, while you have your leaning and I have mine, neither had a place in this movie. 

“You should have focused on Congress, many of whom the general public could not name.”

The 5: Funny, we just ran a note from a reader on Friday who accused us of the opposite leanings… being too RNC and not enough DNC. Maybe all this leaning is why Ian crashed over the weekend.

The real problem seems to be with the film’s distribution:

– “You’re not only have viewing problems in Concord,” another chimes in “you’re have problems in Chesterfield, MO (suburb of St. Louis).   I received an email from you stating that I.O.U.S.A. was showing at the local AMC theater in the Chesterfield Mall. I could not find any listings for times in the paper, the ‘St. Louis Post-Dispatch’. We decided to drive to the theater to ask for the show times and were informed by a ticket taker that ALL AMC theaters in St. Louis are in a labor dispute with the Post-Dispatch. Therefore, there is absolutely NO advertising for your movie in the St.Louis. My husband, my mother (age 90) and I took in the 5:00 PM showing.  We were the only people in the entire large theater.
 
The 5: Hmmm… well, at least she finishes with:  “We were very impressed with the film and think substantial efforts should be made to get it into schools and colleges.” 

Thanks for reading… and taking the time to find the movie in theatres,

Addison Wiggin,
The 5 Min. Forecast

P.S.: In the meantime, the film has apparently been “certified fresh” by the independent film website RottenTomatoes.com. “Certified fresh” means it has received at least 40 media reviews… 90% or more of which are positive. I don’t follow Rotten Tomatoes, but when Patrick, the director, e-mailed the news to me he ended with a “congratulations!” so I’m assuming that’s a good thing.

With that, I have a small favor to ask. If you have read the companion book, and honestly liked it, or believe the complete transcripts of all the interviews we conducted are helpful… would you mind reviewing the book on Amazon and saying so?

The latest one posted gave us a 3-star rating and complained that we referred to Empire of Debt too many times. That would be a valid critique, of course, except for the fact that we only refer to Empire of Debt in the introduction to the book… meaning that’s all they read before posting a reveiw. Oy.

Either that, or the dollar is falling off a cliff and the oil price is skyrocketing.

“The loss of the AAA rating is far from just symbolic,” warns our Chris Mayer. “Current holders of U.S. government debt include foreign central banks, huge pension funds and sovereign wealth funds. Some of these investors will invest only in AAA-rated securities.

Ha. It ain’t a problem until it’s a problem… then it’s a really big problem. And that’s what history labels a financial crisis.

“Downside risks to growth have become more pronounced. Notably, the demand for housing seems to have weakened further, in part reflecting the ongoing problems in mortgage markets. In addition, a number of factors, including higher oil prices, lower equity prices and softening home values, seem likely to weigh on consumer spending as we move into 2008.”

The S&P 500 gained 0.8%, and the Nasdaq closed up 0.5%.

BoA had already lost $1.4 billion of its $2 billion “bailout” of Countrywide back in August… we’re getting the sneaking suspicion that Countrywide will bleed Bank of America for billions more before it returns to profitability.

Should Countrywide CEO Angelo Mozilo leave the company (or get fired), he’ll pocket a $115 million severance package.

Mozilo’s reward for stewardship of Countrywide into the head winds of subprime hell will include $87 million in salary advances, two separate pensions worth $24 million, health care for life for him and his wife, three free years of “financial planning benefits,” free trips on the company jet and his country club bills until 2011.

In the last year alone, CFC stockholders are down over 84%, and about 11,000 Countrywide employees have lost their jobs.

Hmnnn…

So… coupled with third-quarter write-downs of over $46 billion, total industry losses — by the end of the fourth-quarter earnings season — will easily surpass the $100 billion mark… ouch.

Rumors abound that Merrill will seek at least $4 billion more in sovereign wealth fund (SWF) investments on top of the $4.4 billion it received from Singapore’s Temasek in December.

The pound has broken ranks with the dollar entirely.

Since November, the pound’s gone nowhere but down, falling a dramatic 16 cents in about two months. As our friend Chuck Butler put it in today’s Daily Pfennig, the pound “has been beaten like a rented mule lately.”

Labeled “the people’s car,” the Nano will be made and produced almost exclusively in India. Tata estimates seven of every 1,000 Indians own a car. With 1.1 billion people in the country… looks like the market could be huge.

Make no mistake, Indians will get what they’ll pay for… the Nano comes equipped with a 0.6 liter engine, a top speed of 60 mph, no air bags, no passenger-side mirror, no power steering, no radio, no A.C. and one windshield wiper.

Tata plans on making 250,000 Nanos by July 2009, and if successful, plans to market the car in Latin America, Southeast Asia and Africa. In a related note, Tata is also a leading candidate in line to take Jaguar and Land Rover off Ford’s hands. Heh… interesting times.

We’ve been in and out of Tata a few times for good money. With this news hitting the major media and the Indian market as frothy as it is, we’d be wary of buying again right now. But it’s definitely a stock worth watching.

As an aside, we learned yesterday that the premiere for the movie at Sundance on Jan. 19 is sold out. We’re not sure, but we think that’s a good sign. There are several other screenings that still have tickets, if you or someone you know is interested.

“Meanwhile, in the midst of daily declines in the Dow, I saw the congenitally bullish Larry Kudlow on some show bellowing, ‘Goldilocks is alive!’ He reminded me of that Iraqi military propagandist standing on a pile of rubble shouting, ‘We are defeating the Great Satan’ as U.S. tanks were about to roll over him.

“What’s with these people? They act like they’ll lose their jobs if the Dow goes down.”

Have a good weekend,

Addison Wiggin
The 5 Min. Forecast

The unemployment rate has now risen 0.6% in less then 12 months. Historically speaking, any rise of more than 0.5% in less than 12 months also indicates a recession:

We report these data under the assumption that the Labor Department is releasing accurate numbers… during an election year.

“Politically, it is extremely important for the Bush administration to keep the monthly jobs changes on the plus side, because a down month or two could provide the timing base needed for the National Bureau of Economic Research to call a recession, and such is not wanted in an election year. As with the month before, the reported monthly payroll gain was statistically indistinguishable from a monthly contraction.

“Keep in mind that beyond the standard gimmicks, the Bureau of Labor Statistics simply can report any jobs number it desires. The current message from the reporting seems to be that the administration does not want to show a recession, but it would like Mr. Bernanke to ease further.”

And if last week was any indication, the stock market won’t be faring very well in 2008, either:

The new year sell-off accelerated on Friday after an exceptionally dismal job report… the S&P 500 shed 2.5%; the Nasdaq fell 3.7%.

Grab the Zoloft. It could be a tough year.

“I think we’ll break records in this department. My bet is earnings shrink in the first quarter, too.”

(If you seek to diversify your portfolio during these troubled times, we recommend Capital & Crisis. Chris has a slew of great value picks in nonmainsteam sectors, like water businesses, natural resources and wealth-amassing conglomerates. For the price, it can’t be beat. Learn more here.)

But don’t worry, faithful consumer… all is well. Sharp announced yesterday that it will soon begin selling the world’s first commercially available 108-inch LCD television:

What recession? Sharp has yet to reveal the cost of this, umn, large TV… but you might want to begin that refi application this afternoon.

Yay.

Word of the year… in 2008?

“Here’s a story that’s flown under the radar,” notes Dan Denning.
“Citibank told customers in December that outgoing wire transfers from the bank’s accounts would be limited to just $2,000 per day.

“But wait, there’s more,” Dan tells us. “Last week, under the guise of responding to a wave of fraud from automated cash machines, Citi also announced a limit on cash withdrawals from its ATMs in New York City.

“And you thought the money in your bank account was yours.

“There could be a perfectly reasonable explanation for all of this. But the simplest explanation is almost always the best. Citibank is in desperate need of its capital. The best way to keep your customers’ money is to prevent them from taking it out of the bank. It’s a kind of low-level, mild-mannered capital control.”

$100 oil is “not necessarily very high,”
said OPEC president Chakib Khelil on Sunday.

The new leader of the world’s largest oil cartel believes inflation-adjusted highs in the 1980s were “between $102-110.” Thus, $100 in 2008 is no big deal.

“The surge in price will probably go on until the end of the first quarter of 2008,” Khelil predicted, “before stabilizing during the second quarter.” How he comes by this view… he didn’t say.

“It would take a lot of economic slowing to arrest the squeeze between growing demand trends and depleting supplies,” notes our own oil adviser, Byron King. “Oil supplies are so tight… between sabotage in Nigeria, bad management in Venezuela, raw depletion in Mexico, Peak Oil in the Middle East…. the slightest amount of bad news — a hurricane in Gulf of Mexico, a pipeline leak in Alaska, a bomb blast in Iraq… would send prices up even further.”

If you’re not reading Energy & Scarcity Investor, the drawdown in the world’s oil supplies could really disrupt your investment strategy. Or… give it a boost… for example, you might want to consider:

The only pure play on California’s “slow volcano” power supply.

“Shoot straight in 2008!”

“We had our best year in 2007… It was much easier to [find good help] than in a boom year, when we could hardly keep up.”

“There appears to be a 25-year logarithmic support trend line for the Dow Jones industrial average that goes back to September 1982,” writes a third reader, doing a little tea-leafing on their own.

“This past Friday (Jan. 4), the Dow’s sharp drop appears to have been stopped almost exactly by this 25-year log support trend line — please see my chart:

Click here to zoom in

“The Dow is at a very major long-term technical ‘reckoning’ point and is testing the support line. It remains to be seen in the next week or so (especially on Monday) whether the Dow passes the test by bouncing back up off the support line or fails the test by continuing to drop through it.

“According to my calculations, the support line is rising at approximately 12.3% per year (on a compounded basis). IF — and this is a very important IF — the support line holds for the rest of 2008, the Dow will close the year at a worst-case value of approximately 14,340.

“However, given the deteriorating macroeconomic fundamentals, it is difficult to predict whether the support line will remain unbroken.”

Cheers,

Addison Wiggin
The 5 Min. Forecast

But if you’re a betting man, you might think otherwise. Futures on the Chicago Board of Exchange are now giving 100% odds that the Fed will cut rates on Tuesday.

Ugh… while we said we thought the rate cut was “in the bag”… anytime investors start mentioning things like “absolute certainty” we can’t help but cringe. The same futures pit is currently giving 34% odds on a 50-point cut and nearly 100% odds that the fed funds rate will be 3.5% or lower by July 2008.

All of which might help to explain the market rally yesterday. The Dow and S&P 500 rose 1.5%, while the Nasdaq shot up 1.8%. Even the Russell 2000, which has had a difficult year and an even worse November, rose 1.8%.

“The past few weeks have tested investors’ resolve,” writes our small-cap sleuth Greg Guenthner, “especially those invested in smaller stocks. November is over. The month turned out to be one of the worst the Nasdaq and Russell 2000 have seen since December 2002. Many stocks are testing 52-week lows.

“Naturally, some of these companies are being unfairly punished. That’s where we’re looking for the majority of our penny stock opportunities right now.” Check out this chart:

“From its lowest point in early 2003,” says Gunner, “the Russell rose 60% in a little less than 10 months. We’re not saying 2008 will provide the same results. But it is clear that when small-caps bounce back, they do it in a big way. The S&P 500 only squeaked out a little more than 30% over that same time frame.” Gunner has already chosen his winners for the rally — you can follow along here.

The ADP report lit quite a fire under the dollar, as well. The euro was reduced to $1.45, the pound $2.02 and the yen was at 110.

As we suspected in yesterday’s 5, the Bank of England announced a 25-point rate cut this morning, down to 5.5%. While it may be too early to begin planning your London vacation, such news bodes well for the dollar in the short term.

The European Central Bank announced it will leave its lending rate unchanged at 4%… more tomorrow.

Gold got taken out to the woodshed overnight. It opened in New York this morning at $790.

Investors largely ignored yesterday’s Institute for Supply Management report,
which showed November to be the worst month for the service sector since March. The ISM’s services index fell to 54.1 from October’s 55.8, slightly worse than expected.

Even more telling were the three individual components of the index… new orders fell 5 points, to 51, while order prices rose from 63 to 76. And the third component from the ISM? Jobs… which fell to 50, a breath away from being “in contraction.”

For what it’s worth, the ISM estimates that over 80% of the U.S. economy lies within the service sector.

The U.S. housing market will fall into deep recession next year, with home prices dropping up to 35%, says Moody’s today. A report from Moody’s Economy.com estimated home prices will fall, on average, 13% from their 2006 peaks by early 2009. The report also suggested that some markets in Florida and California will fall as much as 35%.

“This is the most severe housing recession in the post-World War II period,” said Mark Zandi, the report’s author.

Click here to find out if your house could be worth 43% less by 2011.

This morning, luxury homebuilder Toll Brothers posted its first quarterly loss in 20 years.

“By many measures,” Chairman Robert Toll said in a statement, “Fiscal 2007 was the most challenging of the 40 years that Toll Brothers has been in business. 1974 was perhaps rougher, but the difficult times only lasted one year.”

After hitting it big this fall with corn, wheat and soybeans, the Maniac Trader has picked a new obsession: cotton.

“The longer-term effect of ethanol and all the extra corn and wheat planting in the south in 2007,” Kevin Kerr speculates, “could be a cotton shortage and much higher cotton prices in 2008. The ethanol boom and subsequent global food shortage had agricultural commodities like corn and wheat going through the roof in 2007. Lack of cotton planting and booming Asian demand could spell profits for savvy traders.

“Daily volume in Zhengzhou cotton futures,” says Kevin, “which will complete their first year of trading on June 1, is now running about 50,000 contracts. Open interest at the ZCE has been running between 60,000-80,000 contracts per day since last November –- that’s just an incredible number.

“The New York Cotton Exchange reached this level only after a century of trading. The ZCE did it in less than a year. The power of China is amazing.”

“Still, even with all the global interest in cotton,” Kerr says, explaining why now is a good time to look at the cotton market, “futures have sold off heavily and there is a lot of bearish sentiment,” which is a good time to get in. For help doing so, see the Outstanding Investments December issue.

Japan’s ruling Liberal Democratic Party is spearheading the creation of a $100 billion sovereign wealth fund (SWF). That would put them on par with Singapore’s Temasek:

The group of 42 parliamentarians, led by former minister of financial services Yuji Yamamoto, hinted that it will tap into Japan’s $1 trillion-plus foreign reserve trust, $582 billion of which is held in dollars.

“You know how to get me going,” writes a reader. “Comparison of realtors to used car salesmen (OK, maybe some of them were), dishonest TV repairmen and cheating auto service personnel (NOT mechanics, who generally don’t quote the prices) really irks me. Putting my way through college as a mechanic, I later became a service manager to stop the promotion of a ‘crook’ who was being considered for the position, in order to make sure my customers were treated fairly.

“As a realtor, and a state director for the California Association of Realtors, I take pride in telling like it is, and told my agents in October 2005 to get tough or get out of the business. You shouldn’t have such a pompous attitude when the track record of some of your info is often off the mark. CANCEL my subscription of all the trash I am currently subscribed to associated with your company(s).”

The 5 responds:
Settle down. We’ll cop to the used auto salesmen charge. But TV repairmen and auto service personnel? Sounds like you have a few more chips on your shoulder than just our investment services.

As for track record, seems to me we’ve been warning people to stay away from exotic mortgages and overpriced housing since 2004… telling people to sell the dollar and buy oil, gold, commodities and alternative energy stocks since 1999… we’ve been buying oil services companies, spinoffs, special situations and single stock hedge funds… our track record has been spot on the big trends for some time — surprising as that may be, even to me.

We noticed this after the tech bust, too. On the way up, there’s a sense of euphoria in the market and people are generally nice to one another. On the way down, people lose their sense of humor and get nasty in a hurry. Good luck with that.

“I am a real estate broker in Sacramento, Calif.,” writes another who appreciates the spirit in which we offer our commentary. “I have and do receive a lot of ribbing about being a real estate broker and taking advantage of people. It comes with the territory.

“I was especially amused by the last 5’s comments from a reader and yourselves about going after the NAR for taking advantage of people and causing the latest mortgage disaster.

“I am never at a loss for amusement when the people in this country always blame someone else for their stupidity. Here are the facts as I experienced them:

“1.People were not listening to my advice about their risky mortgages or offering more than the asking price (which was already inflated), because they were going to make a fortune and sell before the note is due. Bigger-sucker theory.

“2. These buyers knew and understood the terms of these mortgages, but again, they were going to make a fortune, and besides it ’s 100% financing and their credit already sucked, so what did they have to lose?

“3. It is the buyers that drive the prices in any market. If prices are overinflated, it’s because someone is stupid enough to pay them.

“4. No matter what I think it’s worth, it has to be appraised.

“Why does it always make more sense to people to buy anything when everybody wants it and not buy it when nobody wants it, especially in a cyclical business such as real estate? Why is it that these people were so smart when they were buying and all of a sudden became so stupid when it all blew up?

“Here’s to hoping for an America where people accept responsibility for their mistakes. Thanks for the laugh.”

The 5 responds:
Amen. For the record, however, we didn’t go after the NAR for taking advantage of people. We asked what would you expect them to do, as an agency that represents realtors, other than be a proponent of the market? We were taking issue with the reader’s comment that they should be named in a class action lawsuit.

Cheers,

Addison Wiggin
The 5 Min. Forecast

P.S. If anything positive can be said about this election cycle, it’s bringing out the democrat — small “d,” in the true sense of the word — in everyone: