Well, the bubble has popped. For the record, this is the third real estate bubble I’ve seen– Tokyo in 1988, Seoul in 2004, and now all of the USA in 2007. Funny thing about bubbles, they’re so apparently obvious in hindsight, or even in the middle of them, but The Fever takes over, and no one wants to hear anything bad. For me, a big sign was the show “Flip This House”, which essentially showed idiots in SoCal who would buy cheesebox shitholes, redo the kitchen, and make $200K in 6 weeks. I say ‘idiots’ because most of them really were that– preoccupied with paint and tile selections rather than improving the structural integrity or usable space of these homes.
Dilettantes. Middle-class schnooks with some disposable money chasing the big payoff but not enough patience nor smarts to really pull it off. They’re not the suckers down at the Cash-n-Go, and they’re not the rational thinkers at Morgan Stanley, they’re in-between. They know someone really rich, and think that they are just as smart (but they’re not). They work, and they probably save, but not enough. They invest, but regret those investments because they didn’t buy Google.
The Dilettantes come in waves. They were multi-level marketers in the 80s, day-traders in the late 90s, and web developers soon after. The Dilettante Economy revolves around, provides the toolsets for, and celebrates the rare winners (just like a Casino billboard on the freeway that promises you Freedom) within this demographic. Shows like “Flip This House” and “Property Ladder” fed on this, just as Countrywide Loans and all those other loose finance companies made real dollars enabling all this poor behaviour. Before this wave, eTrade, Charles Schwab, and Ameritrade made their mark with fees from the day-traders, and NuSkin, Avon, and Amway before then. Hell, I could trace this economy all the way back to Levi Strauss: the California Gold Rush of 1849 brought a lot of dilettantes, but it was ole’ Levi who got rich by selling them blue jeans sewn from the surplus sailing canvas torn from the ships rotting in San Fransisco Bay.
The New York Times picked this up (and actually did some interviews, unlike my cheap rants here):
“That is an income Randy Haddadin would have welcomed. Mr. Haddadin, 38, moved to Miami Beach in December 2003 from Washington, after leaving a job in information technology. He promptly got his real estate license.
[…]
Mr. Haddadin is now weighing his options. He might seek a job in information technology again, or perhaps help a friend open an Italian restaurant in Miami Beach, while selling real estate on the side.”
In other words, this guy jumped on the IT thing when that was hip, burned out when his skillz weren’t enough, then hawked property. I hope his pesto sauce actually has some punch behind it, because he sure sounds like a Dilettante to me.
So, now that the Dilettantes can no longer feed on each other and the suckers below them, now that the interest-only floating-rate NINJA loans are gone, what is the next big thing?
My guess: debt collection and repo men. I am working on my ‘How to Succeed at Finance Recovery’ kit right now. It goes on sale next month for $499.
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Well, it looks like my friends made out pretty good.