Posts filed under “Really, really bad calls”
Blast from the past:
Turmoil in the housing market has led to fears that home prices will drop precipitously, particularly if foreclosures force large numbers of homes onto the market in the coming year. Recently, these fears have driven financial stocks down and led to the government rescue of Fannie Mae and Freddie Mac. But the projected losses have been wildly exaggerated. Most Americans have not experienced any significant decline in the value of their homes — nor are they likely to . . .
But fears of a huge loss in home values for most homeowners — and especially for middle-income homeowners — across the United States, and fears of the devastating losses by financial institutions that would accompany them, are greatly overblown.
Oops! Not so much!
And I know Charles Calomiris from Columbia — really nice, super smart guy — but like many traditional economists, he got this one totally wrong.
I bet there is a ton of other published stuff out there that truly missed the mark . . .
Housing Collapse Ahead? Not According to the Data
By Charles W. Calomiris, Stanley D. Longhofer and William Miles
Washington Post, August 4, 2008; A11
One of the more fascinating things about a crisis and its resolution is the post-mortems: The after-the-fact analyses that some folks do to explain what occurred. These analyses are fascinating for what they reveal about the beliefs, methodologies, biases and cognitive failures of the many crisis watchers. Human fallibility being what it is, we can…Read More
I read articles like these with dread and horror: “As the White House begins to ponder whether to reappoint or replace Ben Bernanke when his term expires in January, the Federal Reserve chairman’s standing on Wall Street is on the rise while attacks on him from Congress mount. Treasury Secretary Timothy Geithner is expected to…Read More
The CRA brouhaha last year led the Orange County Register to run an analysis of “more than 12 million subprime mortgages worth nearly $2 trillion” in late 2008. What did their data based analysis discover? “Most of the lenders who made risky subprime loans were exempt from the Community Reinvestment Act. And many of the…Read More
“The end to House price depreciation in the vast majority of areas in this country has at last arrived.” -James Cramer > Do we even need to mention the absurdity of this? James Cramer, who has called an inordinate number of Housing Bottoms since the market topped in 2005, now declares that “Housing Has Officially…Read More
The rush to repay TARP monies gives us another opportunity to consider why the hell this absurd financial giveaway ever happened in the first place. A close inspection suggests some dishonesty on the part of the prior Treasury Secretary. From its inception, the TARP never made much sense. Forcing banks that did not need money…Read More
In this morning’s NYT, Joe Nocera takes on one of my favorite subjects: Why the market is neither rational nor efficient. He does a nice job, interviewing both Jeremy Grantham and Burton Malkiel. Along the way, he mentions Justin Fox’s new book, The Myth of the Rational Market: A History of Risk, Reward, and Delusion…Read More
Will someone please explain to me why we are giving $22 Billion to Insurers? “The Treasury Department will make federal bailout funds available to a number of U.S. life insurers, acting on the embattled sector’s long-running effort to get government help. The Treasury is prepared to inject up to $22 billion into the insurers under…Read More
“We are finally beginning to see the seeds of a bottoming [in the housing industry. The U.S. is] at the edge of a major liquidation [in the stock of unsold properties, which may help to stabilize prices].
—Alan Greenspan, May 12 2009
“I don’t know, but I think the worst of this may well be over.”
—Alan Greenspan, October 2006
Why does the public — and the Press — constantly seek out reassurances from the same people who misled them time and again in the past?
That was the question on my mind as I pondered yet another declaration from Alan Greenspan that the Housing Market has bottomed. That he has consistently made similar such statements before is cause for doubting him here. That these prior bottom calls were as far back as 2006 is cause for ridicule.
Few people have been worse than Greenspan in analyzing the Housing market. In fact, the only person / group I can think of with a consistently worse track record than Greenspan’s of analyzing the housing market was the group he spun his foolishness to yesterday: The National Association of Realtors.
Indeed, consider this golden oldie from David Lereah, the NAR’s chief economist, circa December 2005:
Home sales are coming down from the mountain peak, but they will level out at a high plateau, a plateau that is higher than previous peaks in the housing cycle.
That 2005 declaration, made 5 months after Hosuign prices had topped out, was typical of the reality denial we saw from the NAR over the entire housing cycle. They continuously got it wrong, spinning all data, good or bad, in a shamelessly self-promotional manner.
That this group of blind flacks paid Greenspan $100,000 plus to spin them lies is somewhere between ironic and pathetic. At least it wasn’t taxpayer monies . . .
NOTE: These older Greenspan/Lereah quotes were were pulled from Chapter 21, The Virtues of Foreclosure, Bailout Nation.