"Kid, you're on a roll. Enjoy it while it lasts, 'cause it never does."
- Lou Mannheim to Bud Fox in the movie Wall Street.
Very true words spoken by a great character in a great film. Young stock broker Bud Fox (played by Charlie Sheen) loses focus on what's real and gets caught up in the world of all things fast and all things grey. Grizzled exec Lou Mannheim (played by Hal Holbrook) tries to drop some golden nuggets in Bud's pocket. Unfortunately Bud isn't buying it. If you haven't watched the film then please do to see how it ends up.
Now we've seen some pretty heady times over the past decade. In the late 1990s the internet sector was white hot. And the desire to get in on high tech riches drove the stock market indices through the roof. People threw money at companies without even caring if there was a business model. Everyone was in. The venture capitalists were in. The bankers were in. The street was in. Average Joe's were in thanks to online trading. The fundamentals were missing though. Too many companies. Too many crazy ideas being promoted by people who had no business running companies. It all came crashing down.
Money poured out of the markets. And then slowly the money poured into real estate. The internet stock bubble gave way to a real estate bubble. Conditions were ripe. Low interest rates combined with easy credit created a situation where people felt comfortable spending more money. Mortgage products got exotic to meet the needs of those who had little capital to play. Fixed rate mortgages gave way to 5/1 option ARMs with 100% financing. People got stars in their eyes and suddenly offering above the asking price became all the rage. Buying to flip became the rage. Everyone was in...again. Heaven help us.
Can you see the cycle? The eighties, the nineties, the two-thousands. Its all the same. Lou Mannheim's words fade away easily when dollar signs are in the air. So now we're in the third hangover of the last twenty years.
A lot of people have gotten banged up by this latest tumble in the bushes. Like the last one I know some people who are scratched and bleeding. For many people the situation is worse than that. And like last time its all their fault. You have to assume that the people at the banks are not your friend. They aren't looking out for you. The real estate agents are not your friend. They are not looking out for you. These are the two people you deal with (and rely on) the most in a real estate transactions. They just want you to buy and hopefully buy something expensive.