I recently read a few articles about the perils facing Bear Stearns Cos. regarding some highly leveraged bets they made on the subprime mortgage industry. Bear Stearns is in hot water as subprime defaults have skyrocketed, causing huge losses in Bear Stearn's hedge funds. The market was down sharply late last week as investors worried that the subprime mess in the housing market is worse than previously thought.
I'm by no means an expert in anything housing, but as a conservative, logical, and in most cases a "value" investor, I've been voicing the pending housing doom since 2003. The data show that 2 years of housing boom continued, peaking in 2005. The last few years, however, have been a sobering reminder of what happens when investors get caught up in greed and, as Alan Greenspan so famously said "Irrational Exuberance". Greenspan, in 1996 gave the speech concerning the technology-driven stock market boom of the late 90's. The same holds true for the housing market of the 2000's.
Personally, I'm quite interested in the state of the housing market as a 2003 grad, I was a few years too late to capitalize on the price appreciation of the last few years, which has left me to continually monitor housing, looking for a time to buy. Recently I came across some data that made me believe the worst of it is not quite over:
From 1985 to 1990, California housing increased by about 75%. In the early 90's, there was a correction - followed by 8 years of depreciation/stagnation. In other words, housing was valued the same in 1998 as it was in 1990. From 1998 to Q1 2006, the California index almost tripled! Which has been followed by a fairly flat 2006. With the Fed concerned about inflation and interest rates rising, one can only guess what will happen next.
The point of this post is not to discuss what I think will happen next (there are a billion housing indexes and articles out there - help yourself). The above discussion is what ultimately reminded me what the Bible says about all of this...
Last Sunday at Mark Dever's church (Capitol Hill Baptist in Washington, DC), Mark touched on Luke 12:13-21 which is a parable about a man who had a few years of plenty and said to himself "I will tear down my barns and build larger one, and there I will store all my grain and my goods. And I will say to my soul, 'Soul, you have many goods laid up for many years to come; take your ease, eat, drink and me merry.'" But God said to him, "You fool! This very night your soul is required of you; and now who will own what you have prepared?" Now after listening to this, I was immediately confused. Doesn't God require us to be good stewards of what he's given us? Is this not exactly what Joseph did in Egypt when he build large grain storage for the 7 years of famine? Why not "build bigger barns" and open up the bubbly?!
This lead my back to to Matthew 25:14-30 where Jesus tells the parable of the 3 slaves whom were entrusted their master's possessions. The slaves who made returns on their master's money were rewarded, and the slave who "hid the money in the ground" and returned it to his master upon return was chastised - which provides proof that we are supposed to make returns and be profitable with what we've been given.
But then James throws a curve ball at us in James 4:13 "Come now, you who say, 'Today or tomorrow we will go to such and such a city, and spend a year there and engage in business and make a profit.' Yet you do not know what your life will be like tomorrow. You are just a vapor that appears for a little while and then vanishes away. Instead, you ought to say, 'If the Lord wills, we will live and also do this or that.'"
So what gives? Should we try to "make a profit"? Should we engage in business? I think the answer lies in the intent.
Matthew 6:19-21 says "where your treasure is, there your heart will be also" and further I Timothy 6:10 says "For the love of money is the root of all sorts of evil..."
I think the Lord is telling us through his Book that we are required to be good stewards of what He's given us. I think we are required to be savvy "Be shrewd as serpents and innocent as doves". But I think, more importantly, we must understand that all things are God's and the moment we think that we have done anything on our own, we will be humbled. We are stewards, not owners. "If the Lord wills", we will do this and that.
What does all of this have to do with subprime mortgages, Alan Greenspan, and the California housing market? We as Christians need to be very careful not to get caught up in greed or, as the world refers to it "Irrational Exuberance", but rather we should be smart, savvy, and God-honoring with our finances. "If the Lord wills", we will be profitable with what he's given us and we will then be required to use it for His glory.
I'm by no means an expert in anything housing, but as a conservative, logical, and in most cases a "value" investor, I've been voicing the pending housing doom since 2003. The data show that 2 years of housing boom continued, peaking in 2005. The last few years, however, have been a sobering reminder of what happens when investors get caught up in greed and, as Alan Greenspan so famously said "Irrational Exuberance". Greenspan, in 1996 gave the speech concerning the technology-driven stock market boom of the late 90's. The same holds true for the housing market of the 2000's.
Personally, I'm quite interested in the state of the housing market as a 2003 grad, I was a few years too late to capitalize on the price appreciation of the last few years, which has left me to continually monitor housing, looking for a time to buy. Recently I came across some data that made me believe the worst of it is not quite over:
From 1985 to 1990, California housing increased by about 75%. In the early 90's, there was a correction - followed by 8 years of depreciation/stagnation. In other words, housing was valued the same in 1998 as it was in 1990. From 1998 to Q1 2006, the California index almost tripled! Which has been followed by a fairly flat 2006. With the Fed concerned about inflation and interest rates rising, one can only guess what will happen next.
The point of this post is not to discuss what I think will happen next (there are a billion housing indexes and articles out there - help yourself). The above discussion is what ultimately reminded me what the Bible says about all of this...
Last Sunday at Mark Dever's church (Capitol Hill Baptist in Washington, DC), Mark touched on Luke 12:13-21 which is a parable about a man who had a few years of plenty and said to himself "I will tear down my barns and build larger one, and there I will store all my grain and my goods. And I will say to my soul, 'Soul, you have many goods laid up for many years to come; take your ease, eat, drink and me merry.'" But God said to him, "You fool! This very night your soul is required of you; and now who will own what you have prepared?" Now after listening to this, I was immediately confused. Doesn't God require us to be good stewards of what he's given us? Is this not exactly what Joseph did in Egypt when he build large grain storage for the 7 years of famine? Why not "build bigger barns" and open up the bubbly?!
This lead my back to to Matthew 25:14-30 where Jesus tells the parable of the 3 slaves whom were entrusted their master's possessions. The slaves who made returns on their master's money were rewarded, and the slave who "hid the money in the ground" and returned it to his master upon return was chastised - which provides proof that we are supposed to make returns and be profitable with what we've been given.
But then James throws a curve ball at us in James 4:13 "Come now, you who say, 'Today or tomorrow we will go to such and such a city, and spend a year there and engage in business and make a profit.' Yet you do not know what your life will be like tomorrow. You are just a vapor that appears for a little while and then vanishes away. Instead, you ought to say, 'If the Lord wills, we will live and also do this or that.'"
So what gives? Should we try to "make a profit"? Should we engage in business? I think the answer lies in the intent.
Matthew 6:19-21 says "where your treasure is, there your heart will be also" and further I Timothy 6:10 says "For the love of money is the root of all sorts of evil..."
I think the Lord is telling us through his Book that we are required to be good stewards of what He's given us. I think we are required to be savvy "Be shrewd as serpents and innocent as doves". But I think, more importantly, we must understand that all things are God's and the moment we think that we have done anything on our own, we will be humbled. We are stewards, not owners. "If the Lord wills", we will do this and that.
What does all of this have to do with subprime mortgages, Alan Greenspan, and the California housing market? We as Christians need to be very careful not to get caught up in greed or, as the world refers to it "Irrational Exuberance", but rather we should be smart, savvy, and God-honoring with our finances. "If the Lord wills", we will be profitable with what he's given us and we will then be required to use it for His glory.
1 comment:
Great points! Thanks for bringing this up Joe. It's really a fine line we walk- trying to be wise and yet not finding our security in money.
Have you ever read "The Treasure Principle" by Randy Alcorn? (It's a keeper!) He says: "God expects us to act out of enlightened self-interest." I like that, because it acknowledges that when we commit our resources to Him, it isn't really a sacrifice.
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