If You Wait Long Enough, Everything Comes Back

Hard to believe but another 5-7 inches of rain here between today and tomorrow. Spring time has started off a little spotty so far. That's New England I guess.

Another "Peak" to be Concerned About?
Most are well aware of the "Peak Oil" line of thought. There are many more including:
-Peak Gold Mining
-Peak Credit
-Peak Water

Ad to this the possibility of "Peak Phosphorus"? From the great site The Straight Dope:

Dear Cecil:
I've recently read claims that world reserves of phosphates, a mined resource essential in the production of agricultural fertilizer, are rapidly running out. The potential implications of this fact, if it is a fact, make global warming sound like a back-bencher in the End o' Civilization tournament. Can you, in your vast knowledge, shed any light on the subject? Is peak phosphorus worth worrying about, and if it isn't, is it not worth worrying about like a random wasp isn't worth worrying about, or not worth worrying about like the hounds of inescapable doom slavering on your neck aren't worth worrying about?
— Arcadia

Cecil replies:
Now, Arcadia. Let's not be dramatic. Yes, we face the dread prospect of peak phosphorus. However, we're also looking at peak oil, peak uranium, peak coal — hell, even peak gallium, a metal used in electronics and solar cells that may have reached peak production eight years ago. The obvious question is, how much worse can things get?

Answer: a lot, maybe. Without oil, uranium, or coal we'll be short of energy, which is bad enough. But without phosphorus we'll starve.

Another thing to worry about!

If You Wait Long Enough, Everything Comes Back
The policy of the United States in regards to the banking structural issues and for Real Estate in particular is to hunker down, pretend everything is ok, and wait for the inevitable rebound in prices that will bring the banks back to where they were before all hell broke loose. If one considers the course of action favored by most market participants over time this is no surprise.

Common thought is that markets are "forward looking" and price in events and/or conditions about 6-12 months ahead of time. This is convenient and plays to the idea that markets have any idea what is going on.

I have written plenty about how the housing market can never really move on unless prices reach their equilibrium level. In some places that level may well have been reached. For others there is still a long way to go. Government programs have been fighting this process tooth and nail. This waste of capital has robbed prospective new buyers from stepping in at lower prices. It is not just the big players either, as Housing Wire shows:

Marshall & Ilsley Extends Foreclosure Moratorium Through June
Monday, March 29th, 2010, 4:49 pm
Wisconsin’s largest bank with $57.2bn in assets, Marshall & Ilsley, extended its foreclosure moratorium another 90 days through June 30, 2010
The initial moratorium began Dec. 18, 2008 as part of the M&I Homeowner Assistance Program and covers all owner-occupied residential loans for customers who agree to workout a new repayment plan. M&I extended its moratorium three times before, once at the end of June 2009, again in September and once more just before Christmas.

Just keep waiting.

It seems a bit funny that all across the country there are millions of delinquent mortgages and yet the banks are in no hurry to do anything about it. 2 years mortgage/rent free tales abound.

So how long can the waiting go on? I think this should be a question Ben Bernanke and Tim Geithner should have to answer. Some "waiting to get back even" time lines from recent history:

Late 1980's Housing Bust
While regional differences make it hard to cast a broad net, the late 1980's to early nineties housing bust took about 10 years (1989-1999) for prices in Metro Boston to get back to even.

Stock Market Bust early 2000's
Calculated Risk's chart of the S&P 500 Closing Prices

Even after the big rally, it is 1998 all over again!

It is clear that when things go bad they tend to go bad for a while. Will foreclosures be postponed for 10 years? Will Fannie Mae, Freddie Mac, and the FHA buy every mortgage for the next decade? At what point are support efforts going to stop? These are answers I would like to know.

Of course some things pan out faster. The government was able to make a few bucks off their Citigroup stock purchase:

Maybe that 8 Billion will come in handy when the FED has to unload a trillion in MBS paper they paid full price for!

All this great news has had an effect. As Econompic shows us, it seems the US consumer is going back to the spending that is expected of them:

With high unemployment, massive "under-employment", and falling wages I have no idea where this money is coming from. Maybe all that cash is from a mortgage free year? With taxes of all sorts set to go higher I fully expect the US consumer to do their duty to the bitter end.

Of course how bad can things be? Geekologie unearths a sure fire winner of a business idea if I ever heard of one: Paying girls to play online video games with you! This will be a huge winner I predict:
Paying Girls to Play Video Games With You

Have a good night.