Happy 2009!
Not too many investors are going to be sorry to see 2008 go - it’s been a disastrous year for the markets and, of course, the global economy as all our 2007 bubbles popped one by one: Housing, Construction, Mortgages, Investment Banking (including LBOs and IPOs), Retail Banking, BRIC and, finally Commodities all fell apart one by one. These were all the "new paradigms" that would never end and would infinitely grow in the new global economy.
Perhaps they would have kept growing if they did not, one by one, get caught up in the speculative bubble that began and ended with home speculation. It can be argued that this was all just one big bubble, with housing carrying the others along, creating a mania of easy money and heavy leverage that overvalued commodities which, for quite some time, went into building more and more homes and buildings that, ultimately, no one actually wanted. The same thing happened to the Auto industry as more people buying more homes and more families refinancing their own homes felt rich enough to go from 2 cars to 3 or 1 car to 2 but now that’s a luxury that has also been scaled back and once again, as it was until only recently, when a teenager wants to go out they will need to borrow THE car.
The same goes for the BRIC countries, where kids were leaving the farms in record numbers to start a life in the big city. This led to "demand" for new housing as YUM, MCD, WMT et al raced over to build stores to welcome the new consumers who were able to readily find jobs building new YUM, MCD and WMT stores and working for the banks that were financing the construction and the electrical companies putting in the wiring and the countless other TEMPORARY industries that spring up to support the construction of entire cities. Those temporarily employed people needed housing and that led to another boom in home construction and the demand for the limited amount of current housing led to skyrocketing prices which made all the people who bought early feel rich and they traded up and fed the boom and PRESTO - another housing bubble!
Think about how many people are employed and what type of jobs they have building a McDonalds in China for 6 months vs how many people and what type of jobs will be housed…
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