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Jeff Randal wrote a good piece in today’s Telegraph on the death of common sense.
He talks a bit about Spain, and I quote:
In southern Spain, ugly estates of quick-fit apartments have been thrown up to suck in foreign buyers, especially Britons, eager to secure a place in the sun. A year ago, I drove past miles of empty or half-built properties not far from Malaga. It looked like a disaster zone, yet I was informed by a local consultant that prices were still “going to the moon”.
Common sense screamed that this could not last. It didn’t.
The Spanish housing market is now in freefall. Illegally built homes are being bulldozed, Madrid’s financial authorities are investigating some property companies and corrupt officials who dished out bent planning certificates have been imprisoned.
As JK Galbraith wrote, it is often only after a crash that we discover, “the severe mental and moral deficiencies of those once thought endowed with genius”.
Also, in the comments section, someone posted this, which amused me:
Common Sense
In MemoriumToday we mourn the passing of a beloved old friend by the name of Common Sense.
No one knows for sure how old he was since his birth records were long ago lost in bureaucratic red tape.
He will be remembered as having cultivated valued lessons such as knowing when to come in out of the rain, why the early bird gets the worm and that life isn’t always fair.
Common Sense lived by simple, sound financial policies (don’t spend more than you earn) and reliable parenting strategies (adults, not kids, are in charge). His health began to rapidly deteriorate when well intentioned but overbearing regulations were set in place.
Reports of a six-year-old boy charged with sexual harassment for kissing a classmate, teens suspended from school for using mouthwash after lunch, and a teacher fired for reprimanding an unruly student only worsened his condition. It declined even further when schools were required to get parental consent to administer aspirin to a student but could not inform the parents when a student became pregnant and wanted to have an abortion.
Finally, Common sense lost the will to live as the Ten Commandments became contraband, churches became businesses and criminals received better treatment than their victims.
Common Sense finally gave up the ghost after a woman failed to realize that a steaming cup of coffee was hot, spilled a bit in her lap, and was awarded a huge settlement.
Common Sense was preceded in death by his parents, Truth and Trust, his wife, Discretion; his daughter, Responsibility; and his son, Reason. He is survived by two stepbrothers; My Rights and Ima Whiner. Not many attended his funeral because so few realized he was gone.
Special thanks to Lynda Penning Gatelaro for this submission.
August 2003Full article: http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/05/02/do0201.xml
By the way, I guess you all heard that Inside Track went to the wall, but not before making millions out of their clients.
Mark
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Jeff Randal piece is very good.
There is one problem with it: it comes 2-3 years too late! Why didn’t journalist from mainstream newspapers warn the buyers in 2005 and 2006 when the excesses were
at the peak? Why did they then encourage purchasing property by leveraging to the hilt?Why did not say about the lost of common sense then?
Writing these things 3 years too late, they are guilty of manipulating the people and then laughing at their expense!
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“There is one problem with it: it comes 2-3 years too late! Why didn’t journalist from mainstream newspapers warn the buyers in 2005 and 2006 when the excesses were at the peak? Why did they then encourage purchasing property by leveraging to the hilt?”
Since when has it been the responsiobility of journalists to offer property advice? I thought journalist’s job was to report on the news. If property is at its ‘peak’ they inform us, if its experiencing a slump – again, they inform us.
Why do people look for people to blame? If only we had been warned in 2005/6 not to buy poor quality property in less than desirable locations. Is it not time for people to take responsibility of their own actions? If they want advice / exepertise then go and seek it!
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“Since when has it been the responsiobility of journalists to offer property advice? I thought journalist’s job was to report on the news. If property is at its ‘peak’ they inform us, if its experiencing a slump – again, they inform us.
Why do people look for people to blame?”Have you read newspapers in 2005-2006? They were filled with “success” stories about flippers who got rich overnight!
Now take the many mathematics uneducated in this world and pour into their ears that they can become rich wothout working by buying and selling house. Offer them plenty of mortgages and they will but without thinking, because this newspaper said this and that newspaper said that.
Then, after the sheeple gets into financial trouble, start writing article saying that they lack common sense and they are greedy.
Of course people should take responsability but the media created the property hype…
Do you think it is a fair attitude?
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Have you read newspapers in 2005-2006? They were filled with “success” stories about flippers who got rich overnight!
Thats because people ‘were’ making money flipping property – most of these people were educated and understood exactly the risks (which were low at the time) and the returns (which were high).
Once the ‘bandwangon’ slows down sufficently for everyone to jump on, so to speak, this is when most educated property speculators move on. By this stage the margins are too short and the risks too big.
I do not blame the media one bit. If you only read trash newspapers and watch headline news channels then you will get an insight into what is happening, as it happens. For more, detailed analysis of events and professionals offering predictions as to the state of the markets – long before they turn into reality- then the reader can turn to better quality news!
If people decide to make property investment decisions based on mass media coverage then there is serious trouble. But to blame the media is plain silly… they’ve been reporting on the possibility of this matter for months / years.
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“Thats because people ‘were’ making money flipping property – most of these people were educated and understood exactly the risks (which were low at the time) and the returns (which were high). “
Educated people know the history of investment and know that prices cannot increase by 20%/year for too long. After 3-4 years of 20% increase, it is time to sell and not time to buy.
I think we have different definitions for educated people… People that bought in 2005-2006 with the hope of more 20%/year increase were totally uneducated.
“If you only read trash newspapers and watch headline news channels then you will get an insight into what is happening, as it happens. For more, detailed analysis of events and professionals offering predictions as to the state of the markets – long before they turn into reality- then the reader can turn to better quality news!”
Do you consider Guardian, Telegraph, New York Times, , Finanancial Times and Time and Newsweek magazines to be thrash newpapers???? They were full with success flipper stories in 2005-2006. Maybe you forgot or do not want to remember…
“But to blame the media is plain silly… they’ve been reporting on the possibility of this matter for months / years.”
They started reporting about crash since August 2007. That was about 1 year too late!
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Prices in the UK have increased on average 190% over the past 10 yrs alone. This cycle has lasted alot more than 3/4 yrs. The media report on annualised prices rises and indices. The media waits until the information has been analysised and then they report it. Anyone bailing out 6 years ago, as you suggust, will have made a hell of a loss since. However, its evident in the past year that the market was overheating and becoming unsustainable. Anyone buying for investment purposes at this time needs to make sure their sums stack up!
I think we have different definitions for educated people… People that bought in 2005-2006 with the hope of more 20%/year increase were totally uneducated.
Agree. But those flipping the property were still making serious money. Those buying, with hopes of price inflation at 20%, were the one’s to feel the heat.
Do you consider Guardian, Telegraph, New York Times, , Finanancial Times and Time and Newsweek magazines to be thrash newpapers????
No these are quality productions. I agree that they were full of flipper stories. But see above. Thee’s a difference between flipping and holding. Those holding got the bad deal.
They started reporting about crash since August 2007. That was about 1 year too late!
See first reply. The media tend to report on trends / indices. It takes time for info to filter through. No point blaming the media for delays in callig the top of the market. As i say – they simply report the news.
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marcoloco10 wrote:Prices in the UK have increased on average 190% over the past 10 yrs alone. Anyone bailing out 6 years ago, as you suggust, will have made a hell of a loss since.
OK, this is a good point. I agree that selling in 2003 would have been a big mistake in UK.
But Spain, California and Florida are examples that were massively overbuilt.
“Thee’s a difference between flipping and holding. Those holding got the bad deal.”
Well, it just happened that the last of the flippers became the holders. As in any Ponzi pyramidal scheme.
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