Just a few observations after 6 years:

1) Most of money you being spent at fancy restaurants, KTV’s, vacations, etc. “Consumption” is all company money (many of which are government companies). There is a enormous gap between what people will spend of their own money and government/company money.

2) People will spend on noticeable status symbols, so it is true that you will see a girl who makes 1000 RMB/Month spend 5000 RMB on a top Nokia Cell phone or a LV bag, but only as long as others can see the label and what it costs. Everything else they scrimp on.

3) Shopping is the #1 hobby in Shanghai, but it is amazing how little people actually buy. It is a source of entertainment.

They say you can't call the top. Well, I think it just depends. I guess it's tough calling the top to the day, week or month, but there are little hints that the time is at hand. How about interest only loans - I/O loans? Maybe it's 125% LTV loans? Or, maybe it's a hint when they pamphlet the local apartment complex with 'FICO 500 Program'!!!!!!!! Bullet points - Zero down payment options, First-time home buyers, Credit-challenged buyers, Self-employment, no income verification? Seems that they are looking for the lowest bottom of the barrel applicants. Maybe the jig is up? Looks like they are trolling for some suckers, er... potential home owners in these parts.

Now, this is not California. By comparison, real estate is not expensive. But when you consider that the working wage here is about $10/hr. or $20K annual and a house is $100K, then you still have a 5X multiple, which is on the high side. Of course, if you assume double income, then it's $40K annual and only 2.5X multiple. There may not be a housing crash, but given that living expenses are rising faster than wages, sales will eventually suffer. It depends on how you define 'crash'. Either way, Who needs negative equity?

Bullish blogs remind me that all's well with the economy and the smart folks at the Fed really do know what they are doing. Problem is, I remember that there were a bunch of smart guys at LTCM, too. But their models turned out to be slightly flawed. Modeling is a tricky business and the economy is a fluid system. If it were that easy there would not be hedge funds melting down.

If I were given to a conspiratorial view of history, I might try to make a case that the central banks do indeed know what they are doing and that the plan all along is to enslave the middle class in debt. However, that plan cannot succeed without the cooperation of the middle class. There's no doubt that some folks are going to end up in a world of serious pain and there will be alot of finger pointing. When I look in the mirror, I remind myself that nobody can do anything to me that I do not allow. There is an element of choice involved, as well as an element of chance. Besides, the way I see it, even if segments of the mortgage market come crashing down it is not the end of the world. It will present a different set of challenges and opportunities.

Then, there's something about triple digit P/E's that shouts 'The top is near'! My biggest problem is that I still remember when the Nikkei topped out. You might remember when the Japanese were buying up all of the west coast. Pebble Beach? Even the bid for Sears Tower in Chicago? At the time, I didn't pay much attention. But I remember thinking that one day I might have to learn Japanese. That bubble died a slow, silent death. After there was all the buzz about Tokyo being the most expensive real estate on earth.

Doom and Gloom? I don't think so. Just a mild dose of reality. Fact is, profit growth rates are in decline according to the data. Consumers are just about tapped out. Toss a bag of popcorn in the microwave and enjoy the show.

The way I see it, the economy is a sideshow, and not the main event. It's (not) the economy, stupid! That's just a distraction. It's the decline of the family that will have the most significant impact. Every day of the week, I face this challenge. How are you supposed to raise kids in the world we live in today? The world of George Orwell's 1984 where right is wrong and wrong is right, and tolerance is the greatest virtue? Not that long ago, the family was intact. That's not to say that everything was perfect. But as I look around me today, I see that just like the signs of a market top, there are signs that the family has suffered disintegration. It's funny recalling the time when they thought that the Beatles were a decadent and corrupting influence on the youth of America.

Over time, I have come to the conclusion that everything revolves around theology. Even the atheist holds a theological perspective -- he believes himself to be the Ultimate Reality. The way that people look at and interpret the world around them is colored by their view of Ultimate Reality. In modern America, the habit of immediate gratification has replaced habits of delayed gratification. In Christian theology, it is the idea of the hereafter -- delayed gratification -- that drives one to continue the effort in spite of apparent 'losses'. Below are a couple quotes worth considering along these lines.

First, choice and uncertainty as the Ultimate -- where we got off track long ago:

Let me conclude with the following: People who assert that everything comes down to choice and that the future is full of possibilities believe that they have a basis for hope, but acknowledge that the future is unknown. Of course, the French existentialist writers were famous for this. I was recently at a conference and asked all who had read any of the existentialists to raise their hands. A surprising number did. I then asked them to keep their hands in the air if they had ever read a happy one. Two things happened. Everyone put his or her hand down, and everyone laughed. There is no such thing as a happy existentialist novel! Why? For all the existentialists’ desire for hope, when their open future was realized, it always disappointed. Indeed, confronted with this void, some (like Camus) concluded that suicide was the "one truly serious philosophical problem."5 In this sense, hope becomes wishful thinking when it has no secure future. Michael Ramsden1

Then, a clear contrast with Judeo-Christian theology:

Someone once described an historian as a prophet in reverse, and it is the coming together of both of these records, of the prophetic and the historic, that makes up the series of books known collectively as the Bible. This is precisely the claim that the authors of the Gospels make. Descriptions of past happenings, predictions of future events and the recording of these events "coming to pass" make up the written record of God's own authoritative interpretation of both the world in which we live and the understanding of our place in it. It is a fantastic claim, and one that I think can be supported by good evidence. Have you taken time to look into it? Michael Ramsden2