Paul Nolte (Financial Sense yesterday) strikes a more judicious note. He points out that house price drops do not hit everybody equally, since not everyone has extracted equity and not everyone needs to sell:
... real estate is not like buying 100 shares of Cisco in early 2000 and watching it drop 80% - everyone loses the same amount, very unlike the real estate market. The point – the real estate market is not like the stock market bubble and will take a much longer time to work out – our best guess is an initial bottom is likely in 2009 and we won’t see a meaningful turn higher in overall real estate prices until sometime 2011-2012.
Similarly, there is opportunity for people to cut back on energy consumption in response to higher oil prices.
He expects a bit of a pullback in commodities and precious metals, and currently tends to prefer bonds to stocks.
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