Bubble bubble, Toil & Trouble!

Yep, after all of crabbyolbastard's recent Jackolantern haunted abandoned building pictures I'm in a Halloweeny type of mood, hence the title. The article however, isn't just being used as a scare tactic - buyer beware is what I say - and ALWAYS watch for who's going to profit when someone suggests something. The guy's right, the people making the most noise about there being no bubble in the housing market are the one's profiting the most by it. Go figure. Seems like SUV makers and the oil industry aren't the only one's trying to pull the wool over our eyes. DON'T BE A SHEEP! (no this isn't geared toward any of my friends who are currently in the market, just something you all know I'm interested in watching.)

oh, and before the act on center stage... we should all write FX for them to re-air Oilstorm as a warning of what behaviors to avoid during the coming crisis. Depending on how long the oil refineries and supply lines are down in the Gulf, we could be in for a very cold and painful winter. From what I'm hearing it may be a few months or so until we are back up to speed. I heard an interview with the Port Authority Director on NPR this morning, 90% of the supply is messed up, there could be extensive underwater damage to the pipeline, there are a bunch of overturned and drifting oil barges/ships... etc.


Behind the Bubble Babble

http://www.fool.com/news/mft/2005/mft05082518.htm

By Seth Jayson (TMF Bent)
08/25/2005


Housing is a big topic these days. Everyone's wondering if rising interest rates are 1) ever going to actually arrive and 2) cause any trouble for banks such as Countrywide Financial(NYSE: CFC), Wells Fargo(NYSE: WFC), and J.P. Morgan Chase(NYSE: JPM), or homebuilders like Toll Brothers(NYSE: TOL), Centex(NYSE: CTX), Pulte(NYSE: PHM), and D. R. Horton(NYSE: DHI).

At the moment, I'm actually more concerned about what interest rates might do to an average Fool's wallet, especially if said Fool takes out a risky loan in order to afford an overpriced house. I got some pretty interesting responses to my recent article in which I made the (unbeknownst to me) heretical suggestion that prospective home buyers settle down a little bit and not take on a risky interest-only or "pick your own payment" loan.

One loan officer wrote to berate me for my "scare tactics." Another didn't like my math (which was done on a mortgage broker's own online calculator, by the way). Still another gave me the tired old excuse that these products are marketed only to sophisticated real-estate investors. My article cited a clear example to the contrary, and I'll bet this is not an isolated case. After all, I hear ads for "pick your payment" loans on the local top-40 radio station. What do I know? Maybe today's sophisticated real-estate investor is listening to Britney and Hilary Duff.

A manager at one mortgage outfit wrote that I "must not live in a lucrative housing market." It so happens that I live in a place where people are shelling out $500,000 for a run-down, 600-square-foot, 2-bedroom, single-bath crackerbox built in the 1950s. Last year, the same houses were going for $420,000. So I know that this certainly is a lucrative market, at least for realtors and mortgage bankers.

And that's just my point today. The very people most vehement about denying a housing bubble are precisely the people who have the most to gain from seeing one continue: mortgage sellers and realtors. (If you're wondering what's in it for me to rain on the housing parade, good for you! Pinky swear: Last time I checked, my paycheck was not contingent upon urging all of you to watch out for risky loans.)

And don't count on the mainstream media to emphasize this conflict of interest. Just for fun, try Googling this sound bite, provided in a press release describing the small drop in July existing-home sales. "The level of existing-home sales in July was the third highest on record. This is a big number any way you slice it, and housing is continuing to stimulate the overall economy."

You will find this tidbit repeated scores, if not hundreds of times, by business writers across the U.S. Come on, people! These remarks come straight from the chief economist of the National Association of Realtors. What do you expect him to say?

Let me state, for the record, that I'm not trying to predict a bubble pop or a long hiss, call a market top, or anything else that requires clairvoyance I clearly don't have. All I'm saying is that homebuyers should at least consider the motives of the people who continue herding them toward ever-more-expensive houses and risky loans. Despite what the realtors and loan officers want you to think, a home is not always (or even often) an investment.


Seth Jayson would rather rent and have money in the bank, plus leftovers for vacations, cars, bikes, and beer, than buy an overpriced shack for risky terms. At the time of publication, he had positions in no company mentioned here. View his stock holdings and Fool profile by following the links provided on the article's page provided at the top of this offering.

Oil Storm update.

Okay, I've sent an email to FX requesting them to reair the movie Oil Storm for the benfit of the American Public. For all of you who haven't seen it, here is some more information about it.

Aired on Sunday, June 5th, 2005 – Oil Storm; America’s Lifeline Has Been Severed.

As per the Synopsis of Oil Storm on FX.com:

Oil Storm examines what happens when a Category 6 hurricane in the Gulf of Mexico slams into Louisiana, crushing the city of New Orleans and crippling the vital pipeline for refined oil that is Port Fourchon. It examines the ripple effect of that event and the ensuing cascade of disasters associated with it, though the eyes of public officials, a brutal winter, and a ranching family in South Dakota who have their subsidy’s completely taken away and question whether we need oil or food to survive.

As the country reels from the loss of life and energy reserves associated with the hurricane’s fury, the price of crude oil skyrockets and the United States government sets forth to take immediate action. It puts in motion efforts to rebuild the infrastructure of Port Fourchon (8 months minimum) and the sagging and disabled deep sea rigs in the Gulf of Mexico (of equal length). It re-routes activity normally associated with the Port Fourchon shipping lanes to the Port of Houston and compels Houston to work 24/7 in order to get the crude to our refineries and out to the public.

As gas lines quickly begin and the price per gallon passes three dollars, the government reaches out to our good friends in the Middle East, Saudi Arabia, to increase its oil production. However the decision by the Saudi’s to help the Americans inflames an already unsteady Muslim population in that country already emboldened by the continuing challenges in the war in Iraq. Extremists’ interests then commit a terrorist act in an upscale shopping mall in Riyadh, killing some 300 Americans employed by multi-national oil companies in the country. With big business directly impacted and the need for more oil keen, the United States government agrees to send American troops to Saudi Arabia to help protect the oil infrastructure.

Meanwhile, in Houston, the increased activity in their notoriously narrow shipping channels has inadvertently created another challenge to the oil crisis when two, large tankers collide, creating a huge oil spill that shuts the channel down completely for an extended period of time.

As the country absorbs the Houston blow and anticipates increased production from the Saudi’s, those same terrorist interests strike again by assassinating the Saudi Oil Minister responsible for advocating the deal with the US and then, in an enormous act of cowardice, those same terrorists blow up sections of the huge Ras Tanura facility on the outskirts of Riyadh killing a vast number of American soldiers sent there to protect the infrastructure.

Lines at the gas pumps are the least of our worries. As the country grieves, winter has set in and heating oil is not only expensive, it’s often not available. Many in the country die from the cold. So the government turns to Russia for help and strikes a deal for 3 million barrels of oil per week for the foreseeable future. The Russians however are compelled to shop the deal to the other, largest consumer of energy in the world, China. The Chinese outbid the Americans for the oil, leaving the United States diplomatically exposed and with growing chaos on our streets.

As the year of 2005 continues, the true spirit of American sacrifice emerges. Aspects of a new agrarian philosophy take root, alternative sources for energy are put on a fast track and the basic decency of Americans rises to the occasion as the country attempts to take care of itself in ways that hearken back to a more simple time.

While this occurs, the United States government steps into the Russian oil deal and with diplomatic skill, heretofore abandoned, manages to put the deal back on track changing the course for the oil from China back to the United States.

As the story concludes, an awakened populace reconciles its losses and learns more about the character of our great nation. Our government expends all its financial, political and diplomatic resources to get the country’s infrastructure back on track. And our country emerges from these terrible events, stronger and more dedicated to protecting the American way of life; a way of life that now means a permanent gas price of almost 4 dollars a gallon.

But something nobler comes to pass. We are now amid a great shift into the future, a future filled with renewed purpose and renewed exploration of all means at our disposal for survival in a world that is not the world of our parents, but the world of our children. It’s a world that does not forego oil as an energy source, but rather creates a more healthy association with it. It’s a world that invigorates, in real terms, a look at all forms of energy creating an approach to that vital industry that will allow our children to thrive in the 21st Century.

To make a request of your own, send an email to FX at this address: user@fxnetworks.com