The following is an excerpt from our March issue:

By: Chuck Bates

Last month we discussed the real state of our economy, not the rose colored picture that is most often presented to we the people by various politicians and government agencies. What we hear on the nightly news does not always square with reality. This is particularly true the closer we get to an election day and the powers that be desire to remain the powers that be.

Typically the largest single assets most Americans hold in their portfolios are their homes. In recent years one would have to be completely out of touch with modern communications not to be aware of the meteoric rise in home prices (note I am not saying values) largely based on the expansion of easy credit. Of course the realtors associations have maximized the phenomena to their benefit and to their credit. They have taken advantage of a bull market (note the emphasis on bull) with great aplomb and many have done very well for themselves as have many a real estate investor. However, just as we all witnessed in the Internet bubble burst in the stock markets in the late 1990’s so we must apply some of that hard earned wisdom to the current trends in the housing market. Internet companies were raking in billions upon billions of dollars in start up companies that more often than not had little to no sales. They had ideas and even ideas for an actual product but while they were long on fundraising and genius in marketing their “products” to the investor they were short on actual follow through with a long term and viable business model. Long story short most failed, tumbling stock asset holdings of investors and leaving many baby boomers with a shortage of feathers for their retirement nests. I have noticed a very curious and disturbing event that often takes place toward the end of most of the frenzy investing periods in the economy. Fact and thought take a back seat to irrational hopes of unparalleled gains despite growing evidence to the contrary and to quote old P.T. Barnum, “a sucker is born every minute.”

There are many of the same dynamics at hand in the real estate bubble. There are also a few differences of course, the buyer is not merely getting a share in a company that may or may not have any profitability but is instead actually working toward purchasing an ownership asset that is tangible. But the affect on the psychology of the investor and the frenzy that has followed is completely the same. The greed factor has turned the American Dream into a real American nightmare for households across this great land of ours. Lenders made it easy for the wonder lu