"Ultimately, the lending practices of the late 1980s resulted in an extended period of weakness in home sales, house prices, and mortgage market volumes. We may be in year two of a similar five-year downturn today."
After 20 years I'm sure he leaves Fannie with a sweet pension. And I hear you can get some real steals on foreclosure properties a little east of Walnut Hills.
Continued from the last thread about Bob McTeer's comments:
See pg. 214 of the attached link. There is a correlation between the dollar index and Current Acct Deficit as a % of GDP, but there was a 2-year lag in the 80s and about a 3-4 year lag now as the Current Acct deficit has finally started to shrink in response to the lower dollar (not shown in this graph). Maybe the lag time has increased as the % of U.S. GDP from manufacturing has decreased.
--
" economists are notorious for egregiously missing business cycle turning points (both up and down)."
Whodda thunk dat?
"The high odds of a downturn (even if not over 50 percent) suggest that households, businesses, and governments should start to make contingency plans for such an event."
"More recently we have had a plethora of low-doc, no-doc, investor, 2/28 subprime, even more investors, and option ARMs -- arguably more aggressive lending than in the late-1980s. Of course, in late 1987 the housing/mortgage market was still ramping-up with these new mortgage products. Today, we are suffering the downside of overexposure to them (making 2007 perhaps more similar to 1990, in that regard). Ultimately, the lending practices of the late 1980s resulted in an extended period of weakness in home sales, house prices, and mortgage market volumes. We may be in year two of a similar five-year downturn today. (Note that not all of these areas fell for five years in the earlier period, nor are they all likely to decline for five years this time -- but some of them may.)"
You're going to miss "brilliant" analysis like this. Let's see:
The current bubble is vastly larger than the late 80's.
S&L blow up was going full force by 89.
I love "These areas fell for five years in the earlier period, nor are they all likely to decline for five years this time". Not likely to decline for ONLY five years. WTH is he smoking? Rubbish, this thing ain't gonna bottom until 2011 at the least. If it started 2 years ago that's 6 years.
I could go on but I find this anal-isis garbage. However, it was free, so I guess you get what you pay for.
No love loss for me to see this clown go. Yes I'm being churlish and don't care.
Misean - this thing could bottom in five years or less but that wouldn't necessarily be a 'good thing'... my guess is faster it bottoms the harder it bottoms... that would make the next 2-3 years some kinda fun.
Having said all that - I'd guess you are right that it takes longer. It looks like policy makers are doing everything possible to stretch this agony out a generation.
I'd still argue that the changing demographics and peak oil will hammer us just about when you'd expect a recovery to occur. Sort of like getting beaten when you're already down.
I understand the demographics except this time it really is different... why?
'Cause boomers (of which I am one) can't retire - most of my peers have no savings. With the (expected) drop in asset values even fewer retire. And as we've discussed SS will be there but the money won't be worth what 'we' think it will be - so not much help there unless your idea of retirement is three hots & a cot.
So 'we' boomers keep working & consuming until they drag us cold and stiff from our cubies. Not what most thought old age would be about when they were doing it during the Summer of Love...
On peak oil - it really isn't anywhere near as big a problem as folks think it is. Its a lifestyle issue & will correct with 'price pressure'.
'Yes' energy will be scarcer and 'yes' more expensive - but do the math... drive half as much and drive a car thats twice as efficient and you cut consumption by 75%. More than half peoples driving is 'discretionary' not necessary.
Multiply that across the whole economy & all inputs and the savings dwarf the effects scarcity places on the system.
I am not like Rob't C who sees no problem - I see the issue but see so damned many low hanging fruit solutions (like the one I just mentioned about driving less and driving more efficiently) that I don't see peak oil biting hard until the next century at the soonest (when if by then we haven't found other sources even 75% reductions won't be enough).
Understand I spent my early years as a chem eng working in energy and now work in mfg support with products that consume energy... the amount of low hanging fruit available with just modest lifestyle change is mind boggling.
If there is a snafu in the plan to recover fairly soon - its debt. That will be the hole hardest to dig out from unless we start 'producing' our way out.
Curlydan - that Anderson UCLA piece on currency exchange rates vs deficits is excellent - thank you. I copied the PDF and goes in my permanent save file.
dryfly - you know of any firms that do factory automation? I make computing/control products mainly for higher end customers but I've been curious about who is sticking what into that area.
dryfly - you know of any firms that do factory automation? I make computing/control products mainly for higher end customers but I've been curious about who is sticking what into that area.
Some. And some of the plants I ship to would constitute 'high end'.
Mostly I'm on the other end though... my parts are processed by such systems. But maybe we can share notes - it never hurts to know folks.
Next time we are both on line tell me how I can email you.
Dry,
You are right there is a lot of low hanging fruit, but so much of our consumption is sort of locked in. We are still buying lots and lots of gas guzzling SUV's and pick ups, just check out the list of the best selling vehicles. those will be on the road for at least another decade. Will all those McManisions 40 miles from downtown be torn down, or will they just fall in price and people will live in them, my guess is the later. Meanwhile, I am wrtting this from Calcutta, and let me tell you that world wide demand is not about to slow down, and yes in India, they do drive fuel efficent vehicles and car pool. The carpooling is down right comic, how many people can fit into the equivenlent of a geo metro...more than you would think after watching the clowns at the circus. A $2500 car is about to come out and will sell millions of copies (my bet is that in unit volume, Tata motors and Maruti Sazuki will soon be among the largest car makers in the world). Unlike in the U.S. each of these represents an incremental addition to vewhicles on the road, not a replacement of existing vehicles like new car sales are in the US. The mid east does not have anywhere near the reserves claimed officially, just look at the long term numbers in the BP annual statistical reveiw and look at the reserve additins by OPEC memebers in the mid 80's. You would have thought that the Reagan era was the heyday of oil discovery in the mid east, but there were major discoverys at the time. All just grabs for market share within OPEC.
Good! Now we can stuff Fannie with everyone's junk.
Not to be too churlish, but if Berson's so smart, why is he going to PMI? I wouldn't go back there, and most of my friends have left.
Some people enjoy a challenge.
Anon - I think for the same reason Jerry Rice went to the Oakland Raiders.
Or Bob Seger's music appears in Chevy Truck ads.
Best of luck, David - if you are out there lurking.
"Ultimately, the lending practices of the late 1980s resulted in an extended period of weakness in home sales, house prices, and mortgage market volumes. We may be in year two of a similar five-year downturn today."
How about year two in a fifteen year downturn?
Best of luck, David - if you are out there lurking.
I guess that means "Shnaps Parlor" isn't Berson's alias, huh?
I confess I haven't spent a lot of time thinking "Gee, I wish I worked for a mortgage insurer" lately, but we all have our perversities.
David, if you're lurking, quit lurking. We'd all love to read any comment you post under "Porky Pig" or anything else you come up with . . .
After 20 years I'm sure he leaves Fannie with a sweet pension. And I hear you can get some real steals on foreclosure properties a little east of Walnut Hills.
Walnut Hills?
Continued from the last thread about Bob McTeer's comments:
See pg. 214 of the attached link. There is a correlation between the dollar index and Current Acct Deficit as a % of GDP, but there was a 2-year lag in the 80s and about a 3-4 year lag now as the Current Acct deficit has finally started to shrink in response to the lower dollar (not shown in this graph). Maybe the lag time has increased as the % of U.S. GDP from manufacturing has decreased.
http://www.anderson.ucla.edu/faculty/sebastian.edwards/current-account-brookings-2005.pdf
OK - Walnut Creek. What do I know of West Coast geography?
OK, I guess I was being churlish. Sorry, Dr. Berson--best of luck at PMI. Walnut Creek is a very nice place to be.
--
" economists are notorious for egregiously missing business cycle turning points (both up and down)."
Whodda thunk dat?
"The high odds of a downturn (even if not over 50 percent) suggest that households, businesses, and governments should start to make contingency plans for such an event."
Contigency plans by cheerleaders?
A system of...
Jas
"More recently we have had a plethora of low-doc, no-doc, investor, 2/28 subprime, even more investors, and option ARMs -- arguably more aggressive lending than in the late-1980s. Of course, in late 1987 the housing/mortgage market was still ramping-up with these new mortgage products. Today, we are suffering the downside of overexposure to them (making 2007 perhaps more similar to 1990, in that regard). Ultimately, the lending practices of the late 1980s resulted in an extended period of weakness in home sales, house prices, and mortgage market volumes. We may be in year two of a similar five-year downturn today. (Note that not all of these areas fell for five years in the earlier period, nor are they all likely to decline for five years this time -- but some of them may.)"
You're going to miss "brilliant" analysis like this. Let's see:
The current bubble is vastly larger than the late 80's.
S&L blow up was going full force by 89.
I love "These areas fell for five years in the earlier period, nor are they all likely to decline for five years this time". Not likely to decline for ONLY five years. WTH is he smoking? Rubbish, this thing ain't gonna bottom until 2011 at the least. If it started 2 years ago that's 6 years.
I could go on but I find this anal-isis garbage. However, it was free, so I guess you get what you pay for.
No love loss for me to see this clown go. Yes I'm being churlish and don't care.
Cheers,
404 Error, No such article | Chron.com - Houston Chronicle
Already, this, at the bottom of the first...
Misean - this thing could bottom in five years or less but that wouldn't necessarily be a 'good thing'... my guess is faster it bottoms the harder it bottoms... that would make the next 2-3 years some kinda fun.
Having said all that - I'd guess you are right that it takes longer. It looks like policy makers are doing everything possible to stretch this agony out a generation.
dryfly,
I'd still argue that the changing demographics and peak oil will hammer us just about when you'd expect a recovery to occur. Sort of like getting beaten when you're already down.
I understand the demographics except this time it really is different... why?
'Cause boomers (of which I am one) can't retire - most of my peers have no savings. With the (expected) drop in asset values even fewer retire. And as we've discussed SS will be there but the money won't be worth what 'we' think it will be - so not much help there unless your idea of retirement is three hots & a cot.
So 'we' boomers keep working & consuming until they drag us cold and stiff from our cubies. Not what most thought old age would be about when they were doing it during the Summer of Love...
On peak oil - it really isn't anywhere near as big a problem as folks think it is. Its a lifestyle issue & will correct with 'price pressure'.
'Yes' energy will be scarcer and 'yes' more expensive - but do the math... drive half as much and drive a car thats twice as efficient and you cut consumption by 75%. More than half peoples driving is 'discretionary' not necessary.
Multiply that across the whole economy & all inputs and the savings dwarf the effects scarcity places on the system.
I am not like Rob't C who sees no problem - I see the issue but see so damned many low hanging fruit solutions (like the one I just mentioned about driving less and driving more efficiently) that I don't see peak oil biting hard until the next century at the soonest (when if by then we haven't found other sources even 75% reductions won't be enough).
Understand I spent my early years as a chem eng working in energy and now work in mfg support with products that consume energy... the amount of low hanging fruit available with just modest lifestyle change is mind boggling.
If there is a snafu in the plan to recover fairly soon - its debt. That will be the hole hardest to dig out from unless we start 'producing' our way out.
Curlydan - that Anderson UCLA piece on currency exchange rates vs deficits is excellent - thank you. I copied the PDF and goes in my permanent save file.
dryfly - you know of any firms that do factory automation? I make computing/control products mainly for higher end customers but I've been curious about who is sticking what into that area.
charles hugh smith-archive
Fannie offered generous early retirement packages to most of its senior officers.
Berson decided to leave the inside-the-beltway crowd and ply his trade elsewhere.
Godspeed David.
dryfly - you know of any firms that do factory automation? I make computing/control products mainly for higher end customers but I've been curious about who is sticking what into that area.
Some. And some of the plants I ship to would constitute 'high end'.
Mostly I'm on the other end though... my parts are processed by such systems. But maybe we can share notes - it never hurts to know folks.
Next time we are both on line tell me how I can email you.
Sounds good.
Dry,
You are right there is a lot of low hanging fruit, but so much of our consumption is sort of locked in. We are still buying lots and lots of gas guzzling SUV's and pick ups, just check out the list of the best selling vehicles. those will be on the road for at least another decade. Will all those McManisions 40 miles from downtown be torn down, or will they just fall in price and people will live in them, my guess is the later. Meanwhile, I am wrtting this from Calcutta, and let me tell you that world wide demand is not about to slow down, and yes in India, they do drive fuel efficent vehicles and car pool. The carpooling is down right comic, how many people can fit into the equivenlent of a geo metro...more than you would think after watching the clowns at the circus. A $2500 car is about to come out and will sell millions of copies (my bet is that in unit volume, Tata motors and Maruti Sazuki will soon be among the largest car makers in the world). Unlike in the U.S. each of these represents an incremental addition to vewhicles on the road, not a replacement of existing vehicles like new car sales are in the US. The mid east does not have anywhere near the reserves claimed officially, just look at the long term numbers in the BP annual statistical reveiw and look at the reserve additins by OPEC memebers in the mid 80's. You would have thought that the Reagan era was the heyday of oil discovery in the mid east, but there were major discoverys at the time. All just grabs for market share within OPEC.