Rocktex

Greenspan: Large Losses Loom

He (Mr. G) cautions the current credit crisis will not end until huge inventories of new homes are sold, and home-price deflation ceases. ......... Very large losses will, no doubt, be taken as a consequence of the crisis. But after a period of protracted adjustment, the U.S. economy, and the world economy more generally, will be able to get back to business."

Gee! He is really a genius and finally gives us his real words and the real medicine.

Case-Shiller Index Falls By Record 4.5%

Sorry, I forgot to mention one vital point that Dr. Shiller is totally wrong by saying "the housing cycle is very important to the business cycle, according to Shiller. Most economic recessions are preceded by housing declines housing downturn." He said the recession possiblity we may have is 50%. What a saying: a housing downturn leads to a economic recession?

What is the cause and what is the conseqence? How does Dr. Shiller concludes that housing distress cause a recession? Or what is the base for him to say such a cause/ recession relationship? I have no idea.

However, It is not true in history. Usually, it should be a recession cause a depressed housing market.

Do we have a reverse situation here today? Even I believe that a recession is possible long time ago. But it is just a cyclical economy. Hardly to have a sufficient evidence to say a housing situation is the cause, not the consequence.

Basically we agreed that an irrational exuberance of dot.com leads us to have a housing downturn in SF area in early 2002. That means we agreed that dot.com bubble is the cause. How can we now change the tune to say it in a totally reverse way if the epicenter is at the reckless credit bubble created by the Wall Street? Is there any reasonable logics or a cover-up behind the scene to excuse the irresponsibility of those financial speculators?

To me, a speculator in stock is a gambler in Vegas. They have to take the consequence (loss) and blame themselves. When a bunch of gamblers lost their shirtsand drop shoes in Vegas, is it going to create big chaos to the general publics? Why those Wall street speculators cry loudly all the way to ask a bail out plan or a "forced" inflation to ease their paper loss at the expense of all the tax payers?

In short, I don't think it is going to have serious effects on the life of majority of us, if FED can resist their massive propaganda, stay firm on evaluating a more broad picture and take right moves.

Case-Shiller Index Falls By Record 4.5%

I read a CNNmoney report right after Dr. Shiller has his press release conference.

Hardly for me to accept that Shiller Index is the most reliable vehicle to judge the trend of our housing market as CNN claimed. I wrote some articles using real cases to express viewpoints on the discreditibility of median or average housing price.


I believe Dr. Shiller invented his Index based on median prices. It is out of touch of the reality. Simply put, it is a phantom concept created in the Ivory Academic Tower.

After my discussion with my appraiser/ partner two days ago, I have re-enforced my belief that there is a better way to realistcally do a "real time" quote to reflect the current housing price or market trend as we have done it in the stock market.

Sure there is more time lag needed compared to the real time quote we have in stock market. It might be done in 1-2 days in some metropolitan areas, not like a month delay needed for the Case/Shiller's Index.

It is absurd to have Case/ Shiller' Index as a DJ or SP Index and see people accept it as those dot.com.