Apologies to our regular readers who came here and didn’t see any new material in almost a week. The KoolAidMan was on another mini-vacation, hitting the slopes in Utah for an adventurous weekend, returning with a minor cold that required some additional recovery time.

One observation the KoolAidMan made, just by looking and listening, was that the housing bubble we’ve grown to love is much bigger than most people imagine. Stay tuned later in the week for the exact details.

Today is one of those days where there’s some mainstream news that makes this post’s title worthy of sharing the name of this site: DRINKING IS BELIEVING! CNN is reporting that Wall Street analysts are living in a fantasy land (and drinking the fruity red liquid).

Maybe Wall Street analysts are more honest and less compromised than they were pre-SarbOx, but recent events show that they’re still awful at their most important job: predicting bad news. They haven’t lost their habit of falling in love with the companies they cover and refusing to face unpleasant realities until everyone else has already done so. Now, eight years after they were inflating the bubble, we again have to question whether analysts do retail investors any good.

The latest evidence: Analysts have only just discovered that corporate profits in the fourth quarter aren’t going to be nearly as strong as they had supposed a month or two ago.

Drink, and ye shall believe! In other news, Morgan Stanley is writing off more losses and reporting a first quarterly loss ever.

Morgan Stanley posted its first quarterly loss ever Wednesday and stunned the rest of Wall Street by taking additional $5.7 billion mortgage-related writedown, while announcing a $5 billion cash injection from a Chinese state-run investment fund.

If you’re interested in setting up a site to track the mortgage and real estate loss writedowns by the big banks, email me and I’ll be glad to help you get it up and running!

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The Motley Fool has a lengthy but excellent article showing us where the future of the US economy may be headed.

Despite a number of hiccups this year, the stock market is still just a rock’s throw from another all-time high.

But we’re coming up on a bend in the yellow brick road, and going ’round it could cause the party lights to go dark quickly. That could change everything about the way we and future Americans live. Sound scary? It is.

What now? Many of us would like to believe Uncle Bernanke will bail us out by slashing interest rates and bringing back the good old days. Right?

Kind of — and that’s where the massive economic debacle begins, my friends. Those same spend-happy consumers raised in the go-go 1990s — they’re still alive and kicking, and you better believe they still love to spend.

Despite some of the negative news we’ve been hearing about for the past few months with regards to banks writing off losses, real estate values going down, and a slowdown in economic activity, it appears that consumers still continue to spend. A visit to your nearest mall or retail shopping center, even before the ‘holiday spending season,’ would provide some evidence to support this. It’s still very early in the cycle for most people to see what is going on, but in the coming months and years there will be plenty of statistical data to paint a clearer picture of what is really happening.

I think you can see the predicament we face: One part of our economy demands lower interest rates to bail out the housing debacle, and foreign investors who finance our massive spending habits demand higher interest rates to forestall the dollar’s demise.

What’s a central banker to do?

Special thanks to Scott S. for bringing this article to our attention

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During the run-up days of the bubble, many buyers were defending their high priced purchases saying ‘things are different this time’ along with the usual defenses that ‘they aren’t making any more land’ and ‘real estate always goes up.’ Well things are different this time.

I’m not claiming this as an original idea, but this housing downturn will be different than previous downturns. Aside from loose lending and crazy mortgages, there’s a lot more open access to information now than there ever was. The last major slide in housing occurred in the early 1990s. In the early 1990s, the internet was still in its infancy for the most part. There was no such thing as a blog. If you wanted to buy a house, your knowledge of the Real Estate markets was limited to what you saw on TV or read in a newspaper. The other major source of information was from the agents themselves (can we say conflict of interest?).

This day in age, the average person has access to so much information related to real estate and the markets in general. There are blogs from people all over the country that show the true state of local markets, showing what is really going on.

We stumbled across a post on a blog called DeansGuide that discusses why Real Estate Agents (or their brokers) should blog, and how it can positively impact their business.

The power of this blogging platform and strategy will change the face of the real estate industry as you know it now. The era of your local newspaper and magazine listings, photos, and ads is quickly being overtaken by the explosion of online blogs with rich consumer-user experiences.

The blog or blog network drives information to consumers, consumers can directly communicate and collaborate with the author(s) of the blog or blog network, and the blogger(s) are able to instantly measure their target’s feedback and reading habits.

Things are different this time, and any business involved in the Real Estate industry needs to adapt to this dynamic environment.

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CNN is running an article with the headline “More Bad News From The Banks” which informs us that more banks are warning of bigger than expected writedowns which may result in disappointing quarterly results.

Among the first to issue a warning was Bank of America CEO Kenneth Lewis, who said that the company now expected to report bigger-than-expected writedowns in the fourth quarter.
…
“You certainly can assume results will be disappointing,” he said. “But we do expect to be profitable in the fourth quarter.”
…
Crosstown rival Wachovia (Charts, Fortune 500) followed suit, warning in an SEC filing that the value of its loan-backed securities lost $1.34 billion in value during the month of October and November, roughly equal to what the Charlotte-based bank reported when it delivered its third-quarter results in October.

Now that this news has been let out of the closet, the financial situation of these distressed banks should turn around next quarter. All major losses related to bad mortgages have been written off and accounted for, right?

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