patrick.net

The GSE’s portfolio had been growing too fast and too big to make OFHEO and AG uneasy.

That is my point. The housing bubble caused an explosion of loan volume. Had there been no housing bubble the portfolio would not have been growing so quickly and any problem would have been less apparent.

The world is full of silly people with ideas such as this.

There's always a 'greater fool', if you look hard enough.

"However, I’m not touching it."
Zeph's not touchin' no fannie...bloated or otherwise. :)
(enough of the fannie jokes, huh?)

Peter P, you should seriously look into some of the Behavioral Finance courses at UCB. You seem to have a penchant for this subject, and it quite exciting at the moment as an emerging discipline of study.

Thanks for your recommendation. I will look into that.

The problem is that once you have a job, it is easy to be complacent. Going back to school seems to be an unnatural step.

Kohn: complacency would be ill-advised

Perhaps I should consult the stars.

There’s always a ‘greater fool’, if you look hard enough.

And they "intelligently" think that there is a greater-fool-of-last-resort, namely a bailout.

After all this time, he’s no longer saying “bubble burst”, but “soft landing”. His words.

What makes you think a "soft landing" is necessarily better? Strictly speaking, the correction should be of the same net magnitude, just spread out over a longer period of time. Great; instead of one big slap we can get ready for a decade-long water torture.

instead of one big slap we can get ready for a decade-long water torture

LOL, did Japan invent the water torture? ;)

"What makes you think a “soft landing” is necessarily better? Strictly speaking, the correction should be of the same net magnitude, just spread out over a longer period of time. Great; instead of one big slap we can get ready for a decade-long water torture."

I agree...kind of like grounded in bedroom for a weekend is more effective than no TV for a week.

"After all this time, he’s no longer saying “bubble burst”, but “soft landing”. His words."
In dot.com bust, after some time, even the strongest skeptics resorted to self-doubt and acceptance of the new paradigm...IIRC.

"Why do you assume I care one way or the other?"
Hey, thanks for giving us a glimpse. :)

In dot.com bust, after some time, even the strongest skeptics resorted to self-doubt and acceptance of the new paradigm…IIRC.

Very true. I would not mind a soft landing though (like it is possible, duh).

Peter, there are no $2,850,000 homes ten miles from the Mexican border.

I really admire Texas. It is pro-business and pro-growth. It is even kind enough to accomodate Katrina victims.

In Cali-phonier, we cannot get that 4000 sf house built for 285K. The construction cost of a 2000 sf house will cost more than that. Add this on top of NIMBYism and growth laws...

Anyway, watch for the deadcat bounce tomorrow for FannieMae(FNM)
It could be a chance to short . (imho) It should be way down before the market closes

Hopefully my Put orders get filled. :-D

Now, what do you think “prices on mortgage assets remain high relative to the cost of borrowing” mean? Can they just come out and say real-estate is overvalued?

I don't know the details regarding the accounting treatment for FNM's mortgage assets. But, GAAP regarding real-estate is problematic at best. They probably can't come right out and say "overvalued" because, from an accounting perspective, that isn't a straight-forward statement. It is quite common to find over/under-valued -to-book-value RE assets. This area is fraught with complexity and prone to mistatement, both intentional and accidental.

And it IS weird that the media, after chanting “bubble, bubble, bubble” for three solid months is now bending over backwards to NOT say the “B” word! Its all soft landing this and soft landing that now. The way the media is playing this is what REALLY has me scared now. Creepy.

The "media" is little more than a sensationalizing echo machine at this point. My guess is that there is no vast conspiracy, but just a single-mindedness driving their coverage choices. Right now, they have a bigger sensational story with DeLay, gas prices, and Mountain Lion attacks. I did hear the word "bubble" and "burst, crash, pop" last night on local news coverage, though. So, it depends on who they're marketing their blood & gore to.

This is why I love these blogs (and less than a year ago I was decrying blogs as indicitive of the decline of Western civilization, no less).

With economics & politics...my point of view is that it's impossible to be unbiased if you're the one deciding what the headlines are...no matter how hard one tries. What a job though! Imagine deciding what millions will read, first thing, over their cheerios every morning!. I find the utmost irony in the NY Times slogan "All the news that's fit to print".

I worked in TV and Newspaper for a while when I was just out of college. The main thing that biases the media is ratings.

SQT,
Ratings drive advertising right? They have ratings for newspapers? Don't hear too much about them...since each local region is pretty much dominated by a single newspaper...so probably newspapers more directly driven by addy $$$.

Ratings drive advertising right? They have ratings for newspapers? Don’t hear too much about them…since each local region is pretty much dominated by a single newspaper…so probably newspapers more directly driven by addy $$$.

Exactly right. I worked for a small local paper, and at one time they had printed a story about a local car dealer and the dealer pulled all his advertising as a result. After that, they treated their advertisers with kid gloves.

With newspapers they don't look at ratings, but circulation. But ultimately it amounts to the same thing.

They have ratings for newspapers?

Newspapers are the best-of-breed, moreso because their audience is literate and relatively comprised of critical-thinkers (emphasis on relatively).

Unfortunately, news print is a minority source of information for most Americans. Anyone know the actual numbers on this? I'd be curious about the percentage of adult Americans who derive their news from newspapers, and what percentage of that read financial print (WSJ, FT, Economist, etc.) I guess the numbers are low compared to the overall voting, tax-paying public.

People reading this blog need to keep in mind that, by the very fact you're reading this for information and entertainment, you are in a tiny minority compared to the overall masses. Hell, there aren't even any cute pictures and graphics to break up these threads (ala USA Today).

When I was in school (Journalism degree) my teacher's told me the average newspaper was written at a 6th grade level to ensure that the majority of readers could understand the articles.

What reading level is USA Today written to? I personally know 3rd and 4th graders who can mostly read and comprehend their articles. Of course, these are children of parents who probably read papers too, which I still maintain is a minority.

Exactly right. I worked for a small local paper, and at one time they had printed a story about a local car dealer and the dealer pulled all his advertising as a result. After that, they treated their advertisers with kid gloves.

I think the same goes for one of my local papers which is peppered with realtor ads. Not surprisingly, their articles on local housing are decidedly bullish. I'm sure Jack or Randy can guess the rag...

Local papers are funny because the sources for the articles are local in nature. If you have a story on RE, you'll interview local RE agents and homeowners, so the story is going to have the local bias. It would actually be very difficult to find a local "expert" on housing that would have a less biased pov.

It would actually be very difficult to find a local “expert” on housing that would have a less biased pov.

They could interview me. I is a "expert".

I don't know Randy. You might be too articulate for the average reader. ;)

Local papers are funny because the sources for the articles are local in nature. If you have a story on RE, you’ll interview local RE agents and homeowners, so the story is going to have the local bias. It would actually be very difficult to find a local “expert” on housing that would have a less biased pov.

Yes, they typically assume their micro-perspective carries more weight than the macro. Hence the quotes from realtors stating "this market is special, unique, etc.--it never goes down; buy before it's too late" Yada yada yada...I hear the same from Vancouver to San Diego. Meanwhile, homebuyers freak out and get up to their eyeballs in debt.

Personally, I can't wait to write a scathing note to our local paper when all their foolish drivel is proven wrong. Angry and trivial perhaps, but I'm thinking of friends who bought into the distortion-fueled buying frenzy.

Personally, I can’t wait to write a scathing note to our local paper when all their foolish drivel is proven wrong. Angry and trivial perhaps, but I’m thinking of friends who bought into the distortion-fueled buying frenzy.

I can understand, but remember the local paper is merely repeating what the local realtors (tm), mortgage brokers and homeowners are saying. It's true the paper should, and it could be argued has a responsibilty, to put a more macro perspective into the stories. But most local papers aren't run all that well to tell the truth. The one I worked for (briefly) had writers who had never gone to college and had really no journalistic experience. Anyone with any talent or drive usually left to go to bigger and better jobs as soon as possible.

he one I worked for (briefly) had writers who had never gone to college and had really no journalistic experience. Anyone with any talent or drive usually left to go to bigger and better jobs as soon as possible.

So...that leaves us with undereducated "reporters" with few marketable skills, quoting others with the same? (realtors). I guess the outcome is no real surprise, although I expected better.

So true that media in general is merely an advert. vehicle, while people ironically turn to them for objective info (or at least what they want to hear). Isn't it a good thing how the Web provides the public with alternate sources of information? :)

The steady drip drip drip and chip chip chip of endless intellegent contrarian thinking is enough to make any bull become downright– well, “moderate”!

Jack, I am a moderate bear.

Peter P, did your Puts get filled?

Peter P, did your Puts get filled?

Yep. :)

How goes the 10 sigma event?

Do you mean the October event?

Just to clarify: I did expect a small bounce today. However, I significantly underestimated the size of the rally. Byt hey, the market is quite random, right? ;)

Byt hey, the market is quite random, right? ;)

In fact, it is a random walk.

Head of FNM is a hybrid believer: High end will burst, mid and low will appreciate but at slower pace.

Hybrids are hot nowadays, in light of high gas prices.

More price compression? One day, a low end home will cost twice as much as a high end home.

In fact, it is a random walk.

You did not expect me to believe this, did you?

Random walk theory is as good as natural order and financial astrology.

The truth is somewhere in between.

October started yesterday?

Did I explicitly say the FNM drop yesterday was the 10 sigma event?

That’s the inverted curve you guys warn about?

Right. 2M shitboxes in East San Jose and 1M houses in the Marina.

Interesting article today in WSJ about Banks tightening leanding standards…effects of flat yeild curve starting to show

Good observation. The reflexivity between tightening standards and cooling prices will soon turn the market and reinforce a new trend.

So true that media in general is merely an advert. vehicle, while people ironically turn to them for objective info (or at least what they want to hear). Isn’t it a good thing how the Web provides the public with alternate sources of information?

I really think the internet has been a great influence on the media. It's a lot harder to force-feed the public canned news items when there are other avenues of information availiable. I think the days of having news anchors like Cronkite set the agenda are over.

I also think it's a good thing the public is aware that a lot of news outlets have agenda's that might conflict with reporting the news accurately. Ratings play a part as does advertising. But a lot of the news outlets are owned by larger corporations that have financial interests in all kinds of business, and they will try their hardest to keep a story out of the news if it impacts them financially. Personally I think big business affects accuracy more often than politics.

I really think the internet has been a great influence on the media.

Yes, we are part of the media now, as a blog. SactoQt, you have returned to journalism without knowing it.