Randall B.

4 Comments

    • Two Book Reviews on Derivatives: George Soros and Satyajit Das [view article]
      A agree with your reviews.

      "Traders, Guns, and Money" was an excellent book to gain an understanding of expectations may be intentionally manipulated and how Robert Schiller's "Irrational Exuberance" may be caused. Dangerous are the unknown unknowns created by intentional opacity. Das continues to write very insightful articles.

      George Soro's book was also insightful and I found his concept of "Reflexivity"... to be valid. Reflexivity, also addressed by another name in "Irrational Exuberance", must be addressed if rational expectations are to be formed. Also, his mini-autobiography was fascinating.

      Here's one more to consider: "The Panic of 1907".       Jun 17 01:55 PM
    • Concerning the Case Shiller Housing Index [view article]
      Great article.

      I've read Robert Schiller's "Irrational Exuberance" from cover to cover. Although not a page turner, it was the single most insightful guide that I have read to rationally consider what lies ahead. I greatly respect his work, which appears to be motivated by his personal desire to minimize the downside effects of capitalism - primarily by increasing market transparency to properly align expectations.

      Although the index may be flawed, it is the best tool so far to provide a timely and widely respected window to observe the changing state of house prices.

      However, the best picture that Schiller provides to the public (in my opinion) is that found at his irrationalexuberance.c... website (irrationalexuberance.c...). I believe his inflation adjusted historical graph of home prices speaks volumes. The limited fuel (credit bubble and over exuberance) which launched the prices into the air has run dry. Now, the plane can no longer defy gravity and will settle back to earth - the only question is how long.

      More specifically, my stance is as follows:

      Markets often behave irrationally and tend to return to fundamentally supported levels over time. The housing market is no different.
      - It is reasonable to expect that U.S. national REAL housing prices could fall by about 50% from their December 2005 peak back to their historically normal level.
      - It is reasonable that national NOMINAL prices could also fall significantly (10%-45%) over the next eight years or so unless the U.S. experiences a greatly increased rate of inflation (6-11% for the next 4-8 years).
      - Because deflation is often considered to be a greater evil than inflation, the Fed will likely pursue an inflationary policy.

      (Inflation/housing numbers created from projecting the data from the "irrational exuberance" graph located at irrationalexuberance.c...       Jan 04 11:26 PM
    • Lennar's Insolvency: Enron Redux? [view article]
      I agree and have been short on Lennar since June. I believe that buying stock option puts on homebuilders and/or mortgage related companies will continue to be a reasonable hedge against real estate related potential losses. My general stance is as follow.

      Markets often behave irrationally and tend to return to fundamentally supported levels over time. The housing market is no different.
      - It is reasonable to expect that U.S. national REAL housing prices could fall by about 50% from their December 2005 peak back to their historically normal level.
      - It is reasonable that national NOMINAL prices could also fall significantly (10%-45%) over the next eight years or so unless the U.S. experiences a greatly increased rate of inflation* (6-11% for the next 4-8 years).
      * Because national deflation (housing) is often considered to be a greater economic threat than inflation, the Fed will likely pursue an inflationary policy.

      (Inflation/housing numbers created from projecting the data from the "irrational exuberance" graph located at irrationalexuberance.c...
       Jan 02 12:17 AM
    • Yet Another Problem with Mortgage-Backed Securities [view article]
      Very good work. The evidence which supports a home price reversion back to the historical mean seems to keep building. Dec 11 05:28 PM
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