Sep

5

1. The markets, though imperfect, are right far more often than they are wrong.

2. Interest rates are low by any historic or absolute metric, and falling.

3. The stock market had the "Greenspan put", wherein investors believed Sir Alan would ride to their rescue, cutting interest rates if prices faltered. We are seeing the emergence of a "Bernanke put" on housing.

4. Extension of the old joke: If you owe a bank $1,000, you have a problem. If you owe a bank $10,000,000, the bank has a problem. If mortgage holders are upside-down $10,000,000,000, then the Fed has a problem.

5. There is a tremendous political interest for the chattering classes to induce fear in this area, making it hard to stay objective amid the screaming.

6. There is also great ambiguity about the mix of economic ordinary home purchasing, and speculative "investor" positioning. Real pain is likely to be concentrated primarily in the very last cohort of non- economic house buyers. How big is that group? And how are the vulnerabilities distributed? Those are the core questions that remain unanswered amid the daily scare stories.


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