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Posts Tagged ‘Daniel Gross’

Dumb Money Yields Paradox of Thrift

April 29, 2009 | 10:55 am |
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My friend Dan is at it again – he claims to be on the “C” list of regular guests on MSNBC Countdown – now he’s achieved the pinnacle of every writer’s dream, to be interviewed by Stephen Colbert. He’s humping his new book, Dumb Money.

Colbert Nation summarizes:

Daniel Gross urges rich cable TV personalities to buy steaks, cigars and whiskey.

Very salient interview and I must say, very entertaining.


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[Non Non-Heinous] Past Performance is No Guarantee of Future Results

February 9, 2009 | 10:27 pm | |

Daniel Gross has an insightful post at Slate called Declining Declinism: Don’t believe the historians and economists who say America’s best days are behind us.

Aside from Declining Declinism, I would also could consider Recessionary Recess and Falling Fallout. My kids remind me often of the double-negative wonder of “That’s totally non non-heinous” used effectively in Bill & Ted’s Excellent Adventure.

Bill and Ted take this to the extreme and use it to their advantage to really emphasize words. If something is heinous it is bad. If it’s non-heinous that’s one negative and it becomes good. It’s it’s non-non-heinous then the negatives cancel each other out but the emphasis of the word heinous becomes double, so it becomes really bad.

Here’s the gist from Dan:

Economic prognostication is hamstrung by a tendency to extrapolate from recent trends far into the future. It happens at the top of a cycle—the Dow is going to 36,000! Housing prices will never fall!—and it happens when we plunge into a ditch.

Of course that was part of the problem with the way the bad news was delivered by Robert Shiller and Nouriel Roubini a few years ago. For some reason the former hasn’t retained his momentum and the latter is now loved by the media. Perhaps its more about the way they party.

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[GSE Reminder] Hey, There Are No Guarantees

July 21, 2008 | 1:58 pm | |

Fannie Mae and Freddie Mac are government sponsored enterprises (GSE). Yet they have shareholders and are profit driven. They play a critical role in the stability of the US mortgage market (and housing) by promoting liquidity, helping mortgage rates and availability consistent throughout the country.

One of the things that made them have a competitive advantage over others was their inferred backing by the federal government.

In the New Yorker this week, James Surowiecki writes in his column Sponsoring Recklessness

The two companies have long been required to tell investors that their securities are not guaranteed by the federal government. But in the financial markets everyone has always assumed that this demurral was just window-dressing, and everyone, it turns out, was right. Last week, when fears of a possible collapse of the two companies threatened to spark a major financial crisis, the Treasury Department and the Federal Reserve quickly came up with a rescue package. What had been an implicit guarantee became an explicit one

Fannie was privatized in 1968 so president Johnson could move the debt off the federal books to help sell the Vietnam War budget, not to help the mortgage market.

Help to the consumer in terms of their impact on keeping low mortgage rates may be exagerated.

A paper by the economist Wayne Passmore, of the Federal Reserve, suggests that in fact Fannie and Freddie have only a small effect on the interest rates that homeowners pay, saving them less than one-tenth of a percentage point.

The GSE self-preservation mechanism has been aggressive lobbying using former high placed government officials, very effective in enabling them to grow to $5 trillion in mortgage debt. A blip on the radar could cause more damage than Congress is able to burden the taxpayers with.

More than $10 billion in losses in the past two quarters, the GSEs (and FHA) are looking for more money to capitalize to help bailout the housing market at Congress’ urging.

Holden Lewis over at Bankrate wrote a great post on this last week called The GSEs and moral hazard.

Daniel Gross, my friend over at Slate and Newsweek, makes a better argument for the help GSEs provide to the taxpayer/homeowner suggesting that a bailout of the GSEs would actually be a bargain.

I guess I have a hard time accepting that anything the federal government would do would be a bargain and the long term concept of nationalization of the GSEs would be cost effective, but hey, I don’t have to refinance my mortgage.


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Catch Phrases That Capture Our Housing Hindsight Morality

July 21, 2008 | 12:23 pm | |

Here’s a collection of phrases that caught my eye for our newfound understanding about our new housing/credit morality/thinking:

Moral Hazard – I have linked to Holden Lewis’ brilliant post before: Moral hazard is when people take unwise risks because they are sheltered from the consequences. For example, if you wear a seat belt and drive a car with airbags, you’re more likely to tailgate.

Rally between Concern Phase and Fear & Capitulation Stage – Comstock Partners has some great commentary about the housing market: Now even Fed Chairman Bernanke has caught on to the dangers of the bursting of the bubble.  He stated in both Tuesday’s and Wednesday’s testimony before Congress, “the housing market is the central element of the financial crisis.  Anything we and Congress can do to strengthen the housing market, or strengthen the mortgage financing market, will be helpful.  We can do this by restoring confidence in the Government Sponsored Enterprises (GSEs).”  We are happy to have Mr. Bernanke on board, but are not too happy about begging Congress to slow down the process by trying to get bills passed that would postpone the inevitable decline and make the eventual decline even worse. We have to let the free market work its way through the housing crises.

Flat is the new up – Daniel Gross of Slate’s column captures the feeling of victory in today’s economy. Last weekend, at a suburban barbecue, I asked a friend who works for an asset-management company how his firm was faring in these turbulent times. “We’re actually doing OK. Keeping our heads above water.” At which point another guest chimed in: “Hey. Flat’s the new up.”

Nexus between fear and greedI wrote about this one before.

Foreclosure Contagion – Zubin Jelveh’s Odd Numbers blog in Portfolio.com offers a wealth of sharp insight on an array of economic topics: The researchers also find that the negative hit from a foreclosure is strongest right before a lender takes control of the property. They argue “that when foreclosure is inevitable, efforts to speed the foreclosure process would be effective at reducing the contagion effect.”

It’s a good time to buy real estate – housing prices double every ten years – NAR is hard selling and yes, it may be a good time to be real estate in certain markets and for some people. Because NAR says this 24/7, it’s hard not to cast a jaded glance their way.


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[Riding The Bus] For Closure Of Optimism

February 19, 2008 | 11:02 pm | |

As I sit an look at how we got here, its apparent to me that no one really has a clue about how we got here in the housing market. Its a “cover my you know what” scenario now, but its really our nature to look on the bright side while its happening and the dark side after its over.

Unbridled optimism got us here.

The Dark Side of Optimism [Salon] via Naked Capitalism: Why looking on the bright side keeps us from thinking critically,” management consultant Susan Webber argues yes. In her view, “the financial and business communities dismissed all the warnings” about the housing meltdown/credit crunch bearing down upon them because they wilfully adhered to an always-sunny-side-up view of life.

Ok back to reality…

Foreclosed homes that sit vacant are sometimes a better option for homeless because the utilities are still running.

“Many homeless people see the foreclosure crisis as an opportunity to find low-cost housing (FREE!) with some privacy,” Brian Davis, director of the Northeast Ohio Coalition for the Homeless, said in the summary of the latest census of homeless sleeping outside in downtown Cleveland.

That’s not the optimism I was expecting.

Daniel Gross in his Moneybox Column on Slate explores the proposed restrictions on foreclosures. He argues that these actions simply delay the inevitable process of “price discovery“, a process where the market determines a price based on supply and demand.

In other words, the optimism that got the mortgage industry and borrowers in trouble has carried through to the political process, whose optimism will delay getting out of this quagmire.

The carnage in subprime loans has led to a spate of foreclosures. When banks or investors take over properties, they recoup whatever they can by placing it on the market quickly and accepting any reasonable offer.

Foreclosure also has the effect of hastening price discovery on the mortgages on those homes, and on the bonds backing them. Here, again, the impact can be devastating to those who bought the assets with a great deal of leverage. Hedge funds and other institutions sitting on the depreciating debt either had to put up more collateral to maintain their leveraged positions, or dump the assets to raise cash. Bond insurers must increase reserves to prepare for defaults of the bonds they insured. And if the bond insurers fail, the financial firms that purchased insurance from them will have to take their own write-downs.

Optimism is met with an equal and opposite reaction: Pessimism.

Banks are blacklisting condo projects to minimize their damage. Major lenders have created blacklists. This seems like a prudent decision…avoid certain projects to avoid issuing a high risk mortgage. But doesn’t this accomplish exactly opposite by poisoning a local market delaying its recovery and placing performing assets in the market at higher risk?

Warning to developers: this will make it extremely difficult for most buyers to come to close on Miami’s newest buildings.

Unbridled pessimism brings unforseen risks just like optimism does by inserting external forces that fight the natural order of supply and demand.

Of course, there is another way to deal with our natural housing optimism: take a bus and get a boxed lunch on a foreclosure tour.


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Of Recessions, Overtime Wins And Hydrox Cookies

January 21, 2008 | 10:21 pm | |

This was a good weekend: both my 9-year and 14-year olds’ respective basketball teams won their games in overtime and the New York Giants beat the Green Bay Packers in OT in sub zero weather to go to the Superbowl in two weeks.

So why I do I feel out of sorts? No, its not because Hydrox cookies are being discontinued [hat tip to The Stalwart]. Hydrox cookies were mediocre at best, while the original Oreo cookies always ruled.

Its that pesky recession talk that keeps coming back to the front burner of economic discourse. I happen to think we are already in a recession, but we just don’t know it yet. Here’s a useful Q & A.

Michael Santoli of Barron’s wrote a great piece in his Up and Down Wall Street column called ‘Til Next Paycheck, a Stimulus

Its funny how just 6 months ago, the economy was described more optimistically. I have been concerned about the economic impact of a housing slow down leading to a recession and the disconnect with federal policy makers for quite a while.

Bloomberg columnist Caroline Baum deals with this discussion in Recession Theorists Confront Recession Reality:

Most recessions are consumer driven, which makes sense since the consumer accounts for more than 70 percent of total spending. The 2001 slump, on the other hand, was driven by a sharp cutback in investment in equipment and software following a technology bubble, with too much money allocated to too much fiber-optic cable for which there was no possible use.

So what will the 2008 recession look like? Driven by home- loan defaults, falling home prices and cascading credit problems at financial institutions that have the potential to curtail lending to the rest of the economy, the recession may look something like the one in 1990-1991, which came on the heels of the savings and loan crisis.

Daniel Gross at Slate has an interesting take on recession perspective. A recession will:

  • cause inhabitants of the formerly high-flying sectors that got us into the mess—real estate and Wall Street—being laid low.
  • iron out distortions in the housing market, thus allowing them to move into previously unaffordable neighborhoods.
  • make econo-fretters hold out hope that reduced imports and the weaker dollar—both likely byproducts of a recession—will help close the trade deficit.
  • cause a few killjoys believe recessions can be morally uplifting. “High costs of living and high living will come down. People will work harder, live a more moral life,” as Treasury Secretary Andrew Mellon put it in the disastrous aftermath of the 1929 crash and ensuing Depression.

Whatever your spin or take on it, the markets seem to be showing recession concerns right now.

Its now overtime for the housing market. Housing may have been the last straw or the straw that pushed the US economy into recession.

Even ample supplies of Oreo DoubleStuff cookies won’t be enough to fix the problem.

UPDATE: Bring back the Hydrox, the FOMC just dropped the federal funds rate 75 basis points to 3.5%

The Committee took this action in view of a weakening of the economic outlook and increasing downside risks to growth. While strains in short-term funding markets have eased somewhat, broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households. Moreover, incoming information indicates a deepening of the housing contraction as well as some softening in labor markets.

UDATE 2: A Recession, If It Comes, Could Be Worse Than Those of Recent Past [WSJ]

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Contrarian Economics Of Housing Is Being Written

November 16, 2007 | 12:01 am | |

This is the golden era of contrarian economics. Its simply heaven. Its a pleasure to take a break from dry rambling economic theory that is detached from the real world.

There are a slew of great writers out with a lot of new ways to think and see the housing market. Here are a few recent articles that were written by some of my favorites:

But I digress…

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TPM: Not Just Housing – More Bubble Discussions

May 19, 2007 | 5:38 pm | Public |

A week ago, I wrote about Daniel Gross’ new book, Pop! Why Bubbles Are Great For The Economy. Dan invited me to participate in a dialog last week on Talking Points Memo [TPM], which provided some interesting discussions on the subject of bubbles, any bubbles.

Some talented writers were invited to contribute to the discussion (which begs the question…why me?)

Take a look. Some interesting insight.


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Book ’em Dano: Real Estate Reading List+

May 10, 2007 | 7:50 am | |

With 4 kids, 3 businesses, the Yankees and a lot of things going on in between, I still wonder why I haven’t been reading as many books as I used to. My wife is a voracious book reader, but over the past few years, I haven’t kept pace.

I took on this self-loathing view point after attending Daniel Gross‘ book launch last night for Pop! Why bubbles are good for the economy. I spoke with him at his book launch party last night as well as met Barry Ritholtz, who, along with Dan, are among the smartest and most acessible writers and interpreters of economics out there.

I read a large portion of Dan’s new book on my train commute home. Really good…enjoyable. When I got home, I decided to take a look at my magazine and newspaper subscription list and I realized how large it has become. To examine my list…

I am not including papers I pick up for my commute home including the NY Post, NY Sun, NY Daily News or Newsday, or count copies of Metro or AM New York for the subway.

I am not includimg the 119 rss feeds coming into my bloglines account, the email blasts I subscribe to, nor the sites like Slate, Salon, CNN/Money, Curbed, TheStreet.com, Inman, WashingtonPost.com, SFGate.com (SF Chronicle), Bankrate.com, PIMCO, Forbes.com, Seeking Alpha and quite a few others I like to check in with every day.

Now there are a few on the list that are simply impossible to read everything or I choose not to (namely the New Yorker and The Economist because they are weekly and chock full of stories although I admit I look at every cartoon in the New Yorker.) I definitely don’t read all of these publications front to back. I included non-real estate subscriptions because, well, you never know.

Its apparent that anyone can get so involved in reading news, it could become a full time job. Where’s Evelyn Wood when I need her?

I feel like a sieve, with a slew of these publications going through my brain and the parts that stick, end up in my blog and in my understanding of the real estate market, the economy, and of course, make intelligent picks for next year’s March Madness tourney.

I suspect I am missing a few but don’t have time to check…too many to things to read. Here are the subscriptions I can think of and these are in no particular order.

new york times
wall street journal
barrons
financial times
new yorker
city journal
new york observer
crains
the economist
new york magazine
new york living
time out new york
the real deal
sports illustrated
portfolio
wired
hemmings muscle car
excellence (porsche)
panorama (porsche)
businessweek
american banker
valuation review
real estate weekly
yankees magazine
2 local weekly newspapers

The quantity has cut into my book reading time, that’s for sure. Its a good thing I have invented more time in the day (no time to explain). Suggestions for additions are welcome (no lesson learned from this exercise).

Hey did you hear about that new magazine that came out the other day….?

UPDATE: Here’s a few I forgot to mention:
rolling stone
haute living
new york home
appraisal today
real estate valuation magazine
appraisal journal


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If Greed Is Good…Bubbles Are Good

May 7, 2007 | 3:10 pm | |

As the character Gordon Gekko (not to be confused with the Geico version) said in the one of my favorite movie speeches in the 1987 film Wall Street, “Greed is Good” (I have been in the apartment Charlie Sheen “dumped.”)

The point is, ladies and gentlemen, that: Greed, for lack of a better word, is good. Greed is right; greed works. Greed clarifies, cuts through, and captures the essence of the evolutionary spirit. Greed, in all of its forms, greed for life, for money, for love, knowledge — has marked the upward surge of mankind and greed, you mark my words — will save not only Teldar Paper but that other malfunctioning corporation called the USA.

It seems that bubbles are good too. Daniel Gross, one of my favorite econ columnists in Slate and the New York Times wrote a book with an intriguing title and comic book cover design Pop! Why Bubbles Are Great For The Economy.

The book is available tomorrow. Click the widget above.

The concept is that the frenzy of irrational economic enthusiasm lays the groundwork for sober-minded opportunities, growth, and innovation. Of course that means ignoring the pain and suffering of individuals, but it peeks piques my curiousity enough to buy the book. Much of the bubble discussion out of the housing sector to date has been an us vs them, real estate industrial complex v. renters, etc. conspiracy theory.

Barry Ritholtz of Big Picture highlighted a TheStreet.com Brett Arends post that bubbles are everywhere as per value investor Jeremy Grantham who writes that the entire world is a bubble.

Here’s more on the topic (via Unstructured). No real visuals but its interesting nevertheless.


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Lame Blame Game of Shame = Bad Weather

April 25, 2007 | 12:05 am | |

I am always fascinated by the spectre of blame that fills the commentary of the housing market, from insane commenters on Curbed, to mainstream media sound bites. Last fall, before the outbreak of subprime fever, I had noticed the beginning of the transition from housing bubbles to mortgages.

Daniel Gross in his always interesting Moneybox column on Slate writes about the widespread blame on the housing market for our nation’s woes in The Real Estate Blame Game: the unlikeliest victims of the housing slump.

Here’s a summary of the problems caused by a weak housing market:

  • Pickup truck sales
  • Railroads
  • Boat retailers and manufacturers
  • All of Latin America

But we all know that the weather is the cause of all of housing woes so we can safely say that pickup truck sales, railroads and boat retailers, especially those who are exported to Latin America, are severely impacted when the snow on the ski trails in Utah, feel as light as champagne.

Sigh

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Ten Principles Of Economics: Translated

March 16, 2007 | 11:27 am | |

I first ran across Yoram Bauman’s name, in Daniel Gross’ NYT article: The Forecast for the Forecasters Is Dismal [NYT] and then in Freakonomics blog and Greg Mankiw’s Blog

Yoram K. Bauman, an economist who teaches at the University of Washington and performs stand-up comedy, summed up an often-used line: ”Macroeconomists have successfully predicted nine of the last five recessions.”

Bauman claim’s to be the world’s first and only standup economist.

He’s hilarious. It says a lot about the information that is pumped out into the public domain.

In college, the last question on my macro econ final was:

Which statement is true?

a. There is no such thing as a free lunch.
b. Look out or they’ll do it to you.
c. Them that has, gets.
d. All of the above.


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