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Originally Posted by Uncle Erik /img/forum/go_quote.gif
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Check out where Option-ARM, ALT-A and commercial mortgages are right now. Things are going to get ugly in 2012 and into early 2013. Nothing is going to "recover" until real property prices stabilize. I think they're still overvalued as much as 75% in some markets. That's also when a lot of corporate bonds come due.
The bailout funds sure haven't gone to increase credit or build businesses. Most recipients used the funds to go right back to the casino.
I'm dumping my stock holdings for cash and real property in markets where rents are covering mortgage payments. And a few tangible assets, too.
If you must buy stocks, I'd go with utilities and heavy industries. Anything else is a gamble.
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Unfortunately, you are absolutely right, which is very sad for the country. So many states, especially my own California, and the federal government are still on drunken-sailor spending binge on borrowed money. Add to that the trillion or more $ needed for Obama healthcare and increases taxes coming, not to mention the inevitable VAT needed to make any kind of sense on the balance books, and the current optimism on Wallstreet just puzzles me.
In addition to all that, commercial properties defaulting on their payments and empty storefronts are increasing alarmingly, which will come to critical mass soon. Banks have also so far held on to foreclosed houses, only selling slowly in order to avoid instability in the housing prices, but they can only hold on to so many properties for so long.
To add to the injury, coincident with federal government stopping to buy mortgage-backed securities by end of March, mortgage interest rates have definitely taken a trajectory up, which will put added pressure on the housing market and adversely affect "economic recovery." Many experts predict current 5-5.25% 30 yr rate to reach mid 6's within a year or less.
Having said all that, all this presents an opportunity for those with the will and money. The huge opportunity for commercial property investment is coming, and billions will be made..