Hello Everybody,
Sorry for having fallen off the face of the Earth lately. I'll try to be more reliable now that the rain seems to have come back.
This is a slightly cheap post, but I think an important one. In yesterday's Financial Times Alan Greenspan had some of the following choice comments:
US house prices are likely to fall significantly from their present levels
...the decline in house prices “is going to be larger than most people expect”.
He said the price of risk had fallen to unsustainably low levels beforehand, with investors addicted to asset-backed securities that offered some additional yield over Treasury bonds as if they were “cocaine”.
Interesting that Greenspan is finally acknowledging a situation he helped create. We also pick up this tidbit:
As Fed chairman, Mr Greenspan had talked about “froth” in the housing sector, but never said there was a bubble in the market as a whole. His successor Ben Bernanke has also avoided the word “bubble”.
But Mr Greenspan told the FT that froth “was a euphemism for a bubble”.
He said he still thought froth – a collection of bubbles – was a better description, because of the variation in house price appreciation in different local housing markets. But he said “all the froth bubbles add up to an aggregate bubble”.
5 comments:
More validation for blogging and posting bears.
I learned in my history classes, that people's memoirs are often little more than great apologies and rationalizations.
As chairman of the Federal reserve for more than a few years, Greenspan seemed to be no shrinking violet in offering his views on a wide variety of issues of the day, and his opinions carried a lot of weight. It is curious then, on the matter of underpriced risk or the real estate market, his critical observations seem to have been issued so long after the fact.
Great Article on The Mess that Greespan Made calling Al on some revisionist history in the FT article that I've quoted.
http://tinyurl.com/3avva9
US house prices are likely to fall significantly from their present levels
Here's what Greenspan actually said:
'Mr Greenspan said he would expect “as a minimum, large single-digit” percentage declines in US house prices from peak to trough and added that he would not be surprised if the fall was “in double digits”
Mr Greenspan said house prices were probably already down about 2-3 per cent from their peak on a national level.'
One again, Mr. Magoo is out of touch. Even the stronger metros such as NYC are already down more than that. The US in aggregate may well be down double digits already (given the high % losses to date in expensive markets like California, Florida, NoVa, etc), and unquestionably the weakest markets are already down 20%+.
patriotz: Are you questioning Al's ability to predict the recent past?
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