Today we start a new series: Blog Spotlight.
We put together a short list of excellent but somewhat overlooked blog that deserves a greater audience. Expect to see a post from a different featured blogger here every Tuesday and Thursday evening, around 7pm.
First up in our Blogger Spotlight: Tim Iacono and The Mess That Greenspan Made. Tim is a software engineer in his mid-forties, living in Southern California. He calls his blog is a "vain attempt to stave off a mid-life crisis, and here’s hoping that it’s going to work."
Today’s focus commentary is called Friends in High Places? and it address the controversey we discussed last week.
Friends in High Places?
Life is always much more fun when there’s a good
conspiracy theory to kick around. When the New York Times starts kicking it
around too, then it can really be
Such is the case with the recent plunge
in the price paid for gasoline by formerly dour consumers leading up to an
election where the party in power is clearly having difficulty wooing the
electorate. It just so happens that the newly appointed Treasury Secretary used
to run the investment bank that controls the world’s most important commodity
index, which seven weeks ago cut the weighting of unleaded gasoline by nearly 75
percent, causing all commodity investments based on this index to sell their
unleaded gasoline futures.
For the same number of buyers, a glut of
sellers means lower prices, and voila! Prices at the pump drop precipitously,
consumer confidence rebounds, and the electorate develops a new spring in their
Or at least, that’s what some would have you believe. . .
"We do expect an adjustment in home prices to last several months, as we work through a buildup in the inventory of homes on the market. …This is the price correction we’ve been expecting — with sales stabilizing, we should go back to positive price growth early next year."
– David Lereah, economist, National Association of Realtors
The New York Times, September 2006
I am out of pocket most of today, but I wanted to reference something of Doug Kass’s from some time ago. Doug
discusses the details of his debate with NAR’s chief economist last
year (CNBC’s "The Real Estate Boom") and what it might mean going
"Back in April 2005 (on the CNBC special), Lereah and the managements of Hovnavian (HOV) , Prudential Realty and LendingTree were fully convinced (you might say glib) that the housing market was destined for a long boom. They saw a new paradigm of uninterrupted, noncyclical growth. One month later, Lereah was quoted as saying, "We simply don’t have enough homes on the market to meet demand."
Forgive my preoccupation with the housing markets, but it has had a disproportionate role in economic growth since 2000 (and maybe before). This merits a continued discussion as to the possible slope of the decline, and the nature of the inevitable recovery. The housing cycle, among other variables, is a key influence on aggregate economic activity.
I expect a hard landing, and I have roughly quantified my expectations as to when the housing market will bottom (2009). It is folly to think that an unprecedented rise in home prices (in real and nominal terms) will be over in relatively short order. Yet this has been suggested by Lereah and others.