Paul writes:
Whoo-hooo! Just in time for me to refinance the 12 exploding ARMs I have on my flip properties. That have all been on the market for 10 months.

Actually, all this means to me is it is probably time to buy some longer-dated CDs.
Paul | 09.22.06 - 3:06 pm | #

Idaho_Spud writes:
Dr. Roubini's arguments are extremely compelling, as is his assertion that the markets haven't yet come to grips with the implosion of the housing bubble.

The economic impact of the housing crash is a bit like an iceberg in that 9/10 of the mass of the problem is submerged. Right now we're just beginning to see distressed homeowners and flippers, and a bit of pain is showing in the builders and lenders.

It's a certainty that the Fed is watching housing with an impending sense of dread because bankers' profits and economic well-being will be next on the chopping block.

Not that a rate cut will do any good at that point...
Idaho_Spud | 09.22.06 - 4:34 pm | #

The Insider writes:
Rate cuts are nice, but not the medication many believe, nor is "raising" of the overnight rate the cause of implosions.

It is clear the FED wants the dollar to crash so they can give this delusionary belief that will start up exports and industrial production thus restoring balance, but the way this global economy is shaped right now, that may not work and just upset the global system into a major free for all.

Beware of the myth of 'FED stimulation". Gov. Strong's open market policies in the 20's undoubtly helped prop the stock bubble up to unreasonable heights, but it wasn't the root cause of it. Nor did the FED's intial attempts at cheap credit(aka tanking the overnight rate) revive the economy when the overnight rate was almost down to 1.00 in 1930. Yet, cry baby intellectual economists try to blame the FED for the depression). It is the FED's lack of ability to blow these asset bubbles up when they are just starting that is the problem and undermines why the FED was created in the first place. Matter of fact, people like Greenspan and Strong argueably committed crimes against the people.
The Insider | 09.22.06 - 4:55 pm | #

bailey writes:
insider, GREAT post!
bailey | 09.22.06 - 5:12 pm | #

mjy writes:
anyone check out the recession odds after todays bond market activity??
mjy | 09.22.06 - 6:41 pm | #

dryfly writes:
Your mean This?

I'm no bond wiz but looks like the bond market is saying 'hard landing'.

The inversion mid-page here is a bit of a hint too. Wow.

dryfly | 09.22.06 - 7:02 pm | #

dr strangemoney writes:
The Insider:
Nice post. What I find really funny about the Fed and the general acceptance of their shenanigans is that from a purely mathematical perspective they can only lead to system instability over the long run with a purely data-driven policy. The general public probably didn't take a course in Signals and Systems and Control Theory which is why they aren't very wise to the process. The response time of a system determines the frequency at which you can make adjustments while keeping the system stable. Anybody that has driven an old pickup truck with a large steering wheel with a lot of play knows what I'm talking about.

Another more harrowing and personal analogy is the time a car started fishtailing in front of me at 75 mph (aborted lane change) while I was riding my motorcycle. Rather than proactively anticipating and damping the oscillations, the driver reactionarily attempted to correct them which resulted in just continually magnifying them. A couple of seconds later, he managed to destabilize into a much more interesting system state -- high-speed 360s. Fortunately for me, he picked up some righthanded momentum and moved out of my lane just as I slipped by him on the left. Unfortunately for him, a semi t-boned him on the passenger side and flattened him into a metal pancake against the sound barrier wall. The data driven Fed reminds me of the feedback driven driver. Both gradually lost more and more control. 1% interest rates were the 360s for me. I plan to just barely slip by on the left again this time but I'm sure the semi is going to jacknife and there is going to be quite a pile-up.

As for the Fed's original purpose, I thought "elastic currency" implied it absorbs shocks. Something that only expands isn't elastic. Decaying Currency is more accurate. Physical money should be printed on something like newsprint to accurately capture the spirit of inflation.

As for crimes against the people -- the majority are too lazy to string together a chain of events greater than maybe 3 over a time period longer than their attention span to divine the root cause of anything, so whatever lazy inspired platitude is engineered will be accepted as the root cause by the public. The masses will never understand that the problem was magnified by the Fed fooling around with the price of risk. Sadly, they don't seem very curious about it anyways. Hopefully, once the fan blades start hurling feces on everything, people will start paying closer attention. Hopefully a leader that is more than just the lowest common denominator populist IQ will show up. Otherwise, I'm packing my bags. :)

Sorry for the long post and bad analogies -- touched a nerve.
dr strangemoney | 09.22.06 - 7:13 pm | #

Rajesh Raut writes:
The housing bubble has not burst yet. Prices have reached a plateau and will remain flat for some time as people use the usual tricks to make it seem that the prices aren't dropping. The talk of dropping short term rates and near zero real long term rates are only helping to fund the games used to hide the losses that are occuring. Low interest rates hide a multitude of sins.
There will be a hard landing but not this year. There are still fools out there with money to be parted. The nasty part comes when the fools run out of money.
Rajesh Raut | Homepage | 09.22.06 - 8:30 pm | #

dryfly writes:
The nasty part comes when the fools run out of money.

Not trying to be snarky... but who would that be? The People's Bank of China?

dryfly | 09.22.06 - 8:36 pm | #

dc1000 writes:
i love low interest rates!
dc1000 | 09.22.06 - 9:32 pm | #

The Insider writes:
The housing bubble has burst and no, prices will not remain flat, because right now, they have nominally dropped.

You people are laymen, don't have the pulse on the current situation and the lags that you see from official sources. But nominally prices started downword NATIONALLY late last summer.
The Insider | 09.22.06 - 9:54 pm | #

sharkbait writes:
dr strangemoney -- I'd like to chat more about this offline -- no I'm not the press. Is there a way I can get in touch with you? your insight would be highly appreciated.

dc1000 --- you will get more than you are wishing for. You may get tax cuts as well --- lemme think --- perhaps some nice tax trick to make housing more affordable (and more expensive thereby).
sharkbait | 09.22.06 - 11:11 pm | #

dc1000 writes:
The Insider:

The market certainly peaked last summer. Price drops are fast and furious in some areas in DC. almost 20% in less than a year at times.

then again, other areas are setting new records. a house in my neighborhood sold for almost $700sqft. 8000 sqft. in five days.

on one hand i plan to let my residentiail pipeline finish up and keep focusing on commercial exclusively.

but then i'm tempted to build a spec house in the neighborhood where they continue to sell for higher and higher prices. in 5 days.
dc1000 | 09.22.06 - 11:25 pm | #

dr strangemoney writes:
iwantmoredata spam yahoo spam com
dr strangemoney | 09.23.06 - 4:24 am | #

Dik writes:
Insider, you sound like you know but what source suggested/proved that "prices NATIONALLY started down late last summer?" I thought Shiller was the gold standard and while that data certainly says prices in some markets were falling, even the June '06 numbers don't show the national fall that we know is in the cards.

Strangemoney - When you pack your bags where will you go?
Dik | 09.24.06 - 1:45 am | #