The Last, Best Hope For Prosperity, Part III: A Tale of Two Markets

We have plenty of evidence there’s a large amount of speculative activity going on in the real estate markets. The issue is where.

Like the Internet Bubble of 1998-2000, the real estate speculation is concentrated in certain markets—Las Vegas being the most visible, but also Phoenix, Austin, and anything near water, on either coast.

The best example of this tale of two markets comes from one reader, who tells of how lousy the housing market appears to be in her home area of suburban St. Louis—with “New Price” (real estate-eze for “Lower”) signs sprouting up outside stale homes for sale…

Meanwhile, on the Carolina coast, a piece of land she purchased two years ago went up something less than 50% the first year…and more than doubled in the last twelve months.

There was a time in 1999 and 2000 that you couldn’t pay enough for a money-losing internet stock, and you couldn’t give away a highly profitable monopolistic newspaper stock, because newspapers were part of the “dead-tree press” that was going to be made obsolete by those internet companies.

In fact, one newspaper chain—Central Newspapers—put itself up for sale precisely because the Trustees that controlled the voting shares of the company, had decided the internet represented precisely the threat to the business that was the sole reason the Trust could allow a sale of the company, and Gannett bought it for a huge price.

(Ironically, now that the newspaper stocks have all recovered from those “dead-tree press” fears, the newspapers are in fact being driven slowly out of business by the internet.)

There was a lot of value outside the dot-com “space” in those years, just as there are housing markets unaffected by the speculators crowding the tables at Vegas, Phoenix, Atherton, Charlestown, West Palm and other real estate casinos.

When raw land in a sweltering environment with mosquitoes the size of small dogs goes up 50% in one year and then doubles the next …that is 1999-2000 dot-com blow-off type stuff.

Keep your wits about you even while Time Magazine encourages others lose theirs.

Jeff Matthews I Am Not Making This Up

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.