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Jim Rogers, chairman of Beeland Industries, said yesterday that the housing industry is coming out of one of the biggest bubbles in history. The retrenchment of the financial sector last week and the loss of 2.1 trillion in shareholder value after the bad housing news was absorbed is the example he states.

Well, for those of us focusing on the industry, we know that the excesses were extreme and that the correction will have to take time. I think Wall Street thought that they were smarter than the marketplace and thought that all the new derivative and technical trading tools could circumvent the market power.

And these tools did for a while, but in reality they postponed the day of reckoning for the lenders that overextended and made risky loans. I still remember a friend who was building a DR Horton community telling me that anyone could get a loan for one the homes he was building. I scoffed at this at the time, but now I realized he was telling me the truth. When the purchase of a home took no sacrifice the value of the home was diminished, and the ability to walk away from it was made too easy.

Now we are facing the music, lets hope that the pride of homeownership will trump the ability to walk away.

Concern that defaults among subprime mortgages may be spilling over to other credit markets and hurting earnings and takeovers last week sent the Morgan Stanley Capital International World Index to its worst weekly drop in five years. Further losses may be in store even as shares rebounded this week, said Rogers, chairman of New York-based Beeland Interests Inc.
“This was one of the biggest bubbles we’ve ever had in credit,” Rogers, who predicted the start of the global commodities rally in 1999, said in an interview from Hong Kong. “I have been and am still short the investment bankers in America. I’m also short homebuilders.”  Bloomberg.com: Asia

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