Posts filed under “Really, really bad calls”

Former NAR Economist David Lereah is a Jackass

Alternative Title: David Lereah: Even More Full of Shit Than Previously Believed

>

Of all the various parties who contributed to the boom and bust in housing and credit, none have escaped more unscathed than the National Association of Realtors, and their former Baghdad-Bob-in-Chief, David Lereah.

The NAR turned a blind eye to fraud amongst realtors in terms of referrals to corrupt appraisers and mortgage brokers. They constantly cheerleaded prices, despite evidence to the contrary. For 3 years, they have been forecasting 2nd half price recoveries, dissuading realism amongst home sellers. They continually spun data, presented misleading commentary, and otherwise engaged in behavior that could only be characterized as sleazy.

I find EVERYTHING out of the NAR to be suspect, tainted and generally worthless. The NAR Housing Affordability Index is essentially worthless; from 1989 – 2009, the NAR showed housing as “Unaffordable” for just one month.

If you have any doubts as to whether or not the NAR are a bunch of shameless, lying hucksters who deserve to have glass catheters inserted in their Urethras then shattered, consider this:

Working for realtors, David Lereah was famously optimistic. Not anymore.
By Donna Rosato

As chief economist for the National Association of Realtors, David Lereah was famously optimistic. Now a private consultant, he’s abandoned what he calls the “positive spin.”

Q: Were you wrong to be so bullish?
A: I worked for an association promoting housing, and it was my job to represent their interests. If you look at my actual forecasts, the numbers were right inline with most forecasts. The difference was that I put a positive spin on it It was easy to do during boom times, harder when times weren’t good. I never thought the whole national real estate market would burst.

Q: The NAR’s latest forecast calls for a slight increase in home prices next year. Thoughts?
A: My views are quite different now. I’m pretty bearish and have been for the past year and a half. Home prices will continue to drop. I think we’ll see a very modest recovery in sales activity in 2009. But we’ve still got excess inventories, a bad economy and a credit crunch that will push prices down further, another 5% to 10% more. It’ll take a long time to get back
to the peak prices we saw in many markets.

Q: Any regrets?
A: I would not have done anything different. But I was a public spokesman writing about
housing having a good future. I was wrong. I have to take responsibility for that.

-DONNA ROSATO – Fri Dec 19 2008, 11:14

Ahhh, so he admits to being nothing more than a paid shill whose mouth was available for a price. How does that job description vary from the Trannies who hang out by the West Side Highway? In my book, not by very much. A whore is a whore is a whore. Anyone who pays attention to the garbage generated by the NAR is a fool.

Oh, and I’m presenting Wednesday at Global Connect:

A World of Innovation, today January 7 at the Marriott Marquis, on the main stage on Wednesday, January 7, 2009.

Session: Wednesday, January 7, 2009, 3:30 pm – 4:15 pm

Description: Bulls vs. Bears: A frank discussion of where we are in the cycle of housing prices.
Panel: Noah Rosenblatt, Nouriel Roubini, Lawrence Yun (NAR), Barry Ritholtz

Lereah’s replacement — Lawrence Yun — is also on the panel. He has yet to demonstrate whether he will be an improvement over Baghdad Bob Lereah.

>

Previously:
Realtors Get Real (March 2007)

http://www.ritholtz.com/blog/2007/03/quote-of-the-day-realtors-get-real/

Pending Home Sales Index, NAR Housing Market “Bottoms” (January 2008)

http://www.ritholtz.com/blog/2008/01/pending-home-sales-index-nar-housing-market-bottoms

How Counter-Productive is Realtor Association Spin? (March 2008)

http://www.ritholtz.com/blog/2008/03/how-counter-productive-is-realtor-association-spin/

NAR Housing Affordability Index is Worthless (August 2008)

http://www.ritholtz.com/blog/2008/08/nar-housing-affordability-index-is-worthless/

Source:
Former real estate bull admits, “I spun”
VOL. 38, NO. 1 – January 2009 – Mon Dec 22 2008, 08:58

http://money.cnn.com/magazines/moneymag/moneymag_archive/2009/01/01/toc.html

Confessions of a former real estate bull
Donna Rosato,
Money Magazine, January 5, 2009: 10:30 AM ET

http://money.cnn.com/2009/01/05/real_estate/Lereah.moneymag/index.htm

Category: Contrary Indicators, Legal, Real Estate, Really, really bad calls

How to Repair a Broken Financial World

Here is another excerpt — part II — of the all consuming OpEd of the Sunday New York Times by Michael Lewis and David Einhorn: Excerpt: When Bear Stearns failed, the government induced JPMorgan Chase to buy it by offering a knockdown price and guaranteeing Bear Stearns’s shakiest assets. Bear Stearns bondholders were made whole…Read More

Category: Bailouts, Credit, Derivatives, Legal, Markets, Really, really bad calls, Regulation

The End of the Financial World As We Know It (and I feel fine)

The entire OpEd section of the Sunday New York Times has been taken over by an article jointly written by Michael Lewis and David Einhorn, titled The End of the Financial World As We Know It. Its this morning’s must read piece . . . Excerpt: “OUR financial catastrophe, like Bernard Madoff’s pyramid scheme, required…Read More

Category: Bailouts, Credit, Derivatives, Legal, Really, really bad calls, Regulation

Risk Mismanagement & VaR

Terrific l o n g article in the Sunday Times Magazine by Joe Nocera, titled Risk Mismanagement. Its all about how Wall Street developed and still uses VaR — Value at Risk.

The application of VaR remains hotly debated today. Did it contribute to the credit crisis — or was it ignored/misapplied/distorted, and THATS what was a key factor.

Excerpt:

Risk managers use VaR to quantify their firm’s risk positions to their board. In the late 1990s, as the use of derivatives was exploding, the Securities and Exchange Commission ruled that firms had to include a quantitative disclosure of market risks in their financial statements for the convenience of investors, and VaR became the main tool for doing so. Around the same time, an important international rule-making body, the Basel Committee on Banking Supervision, went even further to validate VaR by saying that firms and banks could rely on their own internal VaR calculations to set their capital requirements. So long as their VaR was reasonably low, the amount of money they had to set aside to cover risks that might go bad could also be low.

Given the calamity that has since occurred, there has been a great deal of talk, even in quant circles, that this widespread institutional reliance on VaR was a terrible mistake. At the very least, the risks that VaR measured did not include the biggest risk of all: the possibility of a financial meltdown. “Risk modeling didn’t help as much as it should have,” says Aaron Brown, a former risk manager at Morgan Stanley who now works at AQR, a big quant-oriented hedge fund. A risk consultant named Marc Groz says, “VaR is a very limited tool.” David Einhorn, who founded Greenlight Capital, a prominent hedge fund, wrote not long ago that VaR was “relatively useless as a risk-management tool and potentially catastrophic when its use creates a false sense of security among senior managers and watchdogs. This is like an air bag that works all the time, except when you have a car accident.” Nassim Nicholas Taleb, the best-selling author of “The Black Swan,” has crusaded against VaR for more than a decade. He calls it, flatly, “a fraud.” . . .

What will cause you to lose billions instead of millions? Something rare, something you’ve never considered a possibility. Taleb calls these events “fat tails” or “black swans,” and he is convinced that they take place far more frequently than most human beings are willing to contemplate. Groz has his own way of illustrating the problem: he showed me a slide he made of a curve with the letters “T.B.D.” at the extreme ends of the curve. I thought the letters stood for “To Be Determined,” but that wasn’t what Groz meant. “T.B.D. stands for ‘There Be Dragons,’ ” he told me.

Best line in the article: “When Wall Street stopped looking for dragons, nothing was going to save it.”

I particularly loved the graphics and illustrations that were part of it:

Read More

Category: Credit, Data Analysis, Derivatives, Markets, Mathematics, Quantitative, Really, really bad calls

Vocabulary Problem: Cognitive Dissonance

Paul Krugman asks: Unusually, I’m having a vocabulary problem. There has to be some word for the kind of person who considers his mild discomfort the equivalent of torture, crippling injury, or death for other people. But I can’t think of it. What brings this to mind is this from Alberto Gonzales: I consider myself…Read More

Category: Investing, Psychology, Really, really bad calls

UPDATED: Worst Predictions for 2008

Special Schadenfreude edition: In case you missed it, here is our updated collections of the worst predictions for how 2008 would turn out: • The 10 Worst Predictions for 2008 (Foreign Policy) • The Worst Predictions About 2008 (Businessweek) • 2008 Investment Guides Are HILARIOUS (New York Magazine) • Famous Last Words (CNBC) • The…Read More

Category: Financial Press, Markets, Psychology, Really, really bad calls

2008 Investment Guides Are HILARIOUS

Via New York Magazine, comes this amusing collection of bad forecasts for the 2008 year: • Jon Birger, senior writer, Fortune Investors Guide 2008 Smart investors should buy [Merrill Lynch] stock before everyone else comes to their senses.” Merrill’s shares plummeted 77 percent. • Elaine Garzarelli, president of Garzarelli Capital, Business Week’s Investment Outlook 2008…Read More

Category: Financial Press, Humor, Markets, Really, really bad calls, Trading

The Fall of AIG

Part III of the Washington Post series on AIG. Today’s version: Downgrades And Downfall. Here’s an excerpt: Once a small part of the firm’s business, the increasingly popular [credit-default swaps] contracts had helped boost the company’s profits to record levels. The company’s computer models continued to show only a minute chance that the firm would…Read More

Category: Bailouts, Corporate Management, Credit, Derivatives, Really, really bad calls

Revenge of the Black Swan

“The models suggested that the risk was so remote that the fees were almost free money. Just put it on your books and enjoy the money.” –Tom Savage, President, AIG’s Financial Products > The second part of the 3 part series is now posted, A Crack in The System. This section gets into the details…Read More

Category: Bailouts, Credit, Derivatives, Really, really bad calls

72% of Conservatives Still Support Bush

I am still very surprised at this: “George W. Bush remains popular among conservative Republicans (72% approve of him) despite his low overall approval rating. Meanwhile, moderate and liberal Republicans are as likely to disapprove as to approve of the job he is doing, and Democrats of all political orientations hold Bush in low regard.”…Read More

Category: Politics, Psychology, Really, really bad calls