|
When you think of a bubble in the
1920s, what comes to your mind? We are willing
to bet that it isn't the Florida real estate craze
of 1925. That's right, in the early 1920s, land
prices in Florida began to rise as tourism was
thriving and celebrities from around the world
were spotted partying in and around Miami. Add
to that exponential population growth and the
superficial, money-centered culture of the time,
and housing prices in this new playground of the
wealthy and famous were guaranteed to grow exponentially.
By 1924, the Miami Herald was rumored to be the
nation's heaviest newspaper in terms of weight
because of the colossal amount of real estate
classified ads in its pages. Easy credit was abundant
and it seemed like 99% of the public was either
a real estate investor or broker. Stories of property
prices rising 500% in less than a year reached
the rest of the country and soon capital poured
in at an even faster pace. The music finally stopped
during the summer of 1925 and prices started to
decline by Christmas. The pace of selling increased
and, just when it couldn't get any worse, a hurricane
wreaked its havoc the following year. Game over.
Between 1926 and 1929, the Florida
real estate market barely recovered. Economic
historians will tell you that the only reason
why Florida real estate saw any relief at all
in the late 1920s was because of the wave of nation-wide
prosperity from a dramatically rising stock market.
But as you all know, the stock market stopped
rising and crashed in October of 1929. Stocks
collapsed and took everything down with them including
real estate.
Today, we see many parallels to the 1920s, except
this time the stock bubble came first. We suspect
that when history books are written about the
first ten years of the millennium, it will be
a (credit crunch-induced) real estate collapse
that is most memorable, rather than the NASDAQ
collapse of 2001. Perhaps 2005 will be the year
that real estate takes everything down with it,
similar to how 1929 saw stocks take everything
down with them. The parallels are obvious. How
many people do you know who are real estate agents,
mortgage brokers, appraisers, builders, developers,
etc? Can you recall the last time you were at
a restaurant or cocktail party and the conversation
didn't swing to real estate?
What we see coming is classic deflation folks,
where cash is king and all other assets will suffer.
Hold on a second - are we suggesting you dump
all of your money in some junky money market with
an anemic yield? Of course not! If you have been
reading our newsletter for anytime at all, you
will realize that there are other cash alternatives
to the US Dollar. Our two favorites are gold and
silver as they are the world's oldest forms of
money - dating all the way back to biblical times.
January 14, 2005
Todd Stein & Steven McIntyre
Texas Hedge Report
*****
Todd Stein & Steven McIntyre are internationally
known analysts and editors of The Texas Hedge
Report, a market newsletter that highlights under
and overvalued securities in the equity, bond,
currency, and commodity markets
For more information, go to http://www.texashedge.com
|
