One:
If we go back to 20 percent down payments, the market will be more stable. I’m sure that in a free market we would see 20 percent down payments. Barney Frank is the only person I can think of who still wants to lend with little or no money down. He’s welcome to do it, but I dare him to use his own money instead of ours. –Arnold Kling, EconLog, via Cafe Hayek
Two, Donald Luskin at Poor and Stupid:
I’m quoted extensively in Debra Saunders’ column in today’s San Francisco Examiner.
On the campaign trail Wednesday, Obama bemoaned “the most serious financial crisis in generations.” He said the exact same words the day before…
“The most serious financial crisis in generations?”
Donald Luskin, a chief investment officer with the Menlo Park investment research firm TrendMacrolytics and an economic adviser to McCain – who tells me he has never talked to McCain – remarked that if Obama “had a little bit more experience,” he would “put these things in more context.” Luskin has lived through five or six recessions, and “this ain’t one.”
It isn’t a recession because the U.S. economy has grown in both of the last two quarters. Read: It is not receding. And while Luskin sees the unemployment rate as “a little high,” it is “not as high as it typically is in a recession.” Yes, Luskin is concerned about inflation, now at 5.4 percent. The drop in oil prices may help…
Luskin questioned what has happened to politics, when a candidate “must pretend this is a recession or you’re seen as hard-hearted.” And: “What does it say when we can’t be nuanced? And we can’t say, ‘Look, we’re in a little bit of a slowdown, but the fundamentals are strong’?”
The answer, of course, is that Democrats can’t win without trashing the economy. As Luskin pointed out in a piece in Sunday’s Washington Post, in Obama’s famed anti-Iraq war speech back in 2002, the then-Illinois state senator suggested the war was waged “to distract us from corporate scandals and a stock market that has just gone through the worst month since the Great Depression.”
In fact, the stock market had four bigger one-month drops since the Great Depression, but facts don’t matter. The winning candidate in 2008 may well be the man who can say the worst things about the American economy. That’s how he shows he really cares.
Technorati Tags: investment, real estate, real estate marketing
Brian Brady says:
Great article. I liked Saunders’ perspective when she explained that she works in the “shrinking newspaper industry”. It shows that she is admitting potential bias (which she didn’t show).
This reminds me of an Active Rain post. The shrieks from a liberal, 30 year old, loan originator about the carnage Bush has inflicted on this economy, were completely self-serving and devoid of Saunders’ perspective.
Are we better off now than we were 4 years ago? Absolutely not if you’re a stockbroker, REALTOR, loan originator, or newspaper columnist. I suppose vinyl record manufacturers were REALLY pissed off at Reagan, in 1984. The economy is shifting (as it always does)and most if us are unprepared for the shift.
We’ve taught property owners to treat their properties like securities (h/t Greg)but didn’t properly price the “margin loans” to be reflective of the risk of a volatile asset. Had Wall Street properly priced the “easy money”, we may not be in this mess today.
The economy is fundamentally sound. Unemployment has ticked up- a reaction to a shifting economy. Bemoaned screeches about when auto jobs will return will go unanswered. We’re a paper economy, an information-based economy.
Don’t believe me? Which would you rather do without for a week…your car or your internet?
September 18, 2008 — 8:42 am
Michael Cook says:
“Economy is fundamentally sound…”
Glad we have you saying that in writing because I have to disagree. The job loss and revenue loss from this banking industry fall out alone will be enough to tip the scales. Add to that inflation numbers on top of job losses, which seem to be increasing. Finally, look at production and the glut of inventory (factory and home) combined with low consumer confidence and I cannot see where there is positive news. Sure GDP is positive, but I really think inflation has more to do with that than anything. They have been tinkering with the ex. inflation number to keep the boat afloat, but that shell game will have to end soon.
I predict prolonged downturn. The economy will be in the tank for at least another year and for the record is not fundamentally sound. I hope I am wrong, but I dont see it.
September 18, 2008 — 10:48 am
Don Reedy says:
Are you better off now than 8 years ago? Is the economy fundamentally sound?
Let me answer this question with the words of our former President, Bill Clinton. “It depends on what the meaning of ‘is’ is.”
Look, I grew up in the 50’s and 60’s in Youngstown, Ohio, a steel town. Now, from my perspective, we had some pretty serious problems then. My dad, and almost every other dad, were unemployed. No, I didn’t have to walk up hill to and from school, but I did work alongside my father blacktopping driveways and doing other odd jobs to keep the family going. Then, after a few very tough years, men found other work, some moved, all of us had learned to buckle down and appreciate what we had, and, yes, Virginia, the economy proved to be “sound.”
Michael, you state truths in describing the downturn. But “fundamentally sound” means just what it says. We are wounded, but are wise enough to stop the bleeding. We are frightened, but strong enough to pick ourselves up by our bootstraps and move on anoher day. We have problems to solve, but we actually have the means and opportunity to implement new solutions.
That’s my definition of “fundamentally sound.”
September 18, 2008 — 11:46 am
ERIC OLSON says:
The financial market is having issues because a great majority of those who are having trouble are giving up. With nothing invested its easy to walk away. Its like paying rent for awhile except for the hit to your credit. I bet if those same people had 20% of their own money invested then they would do what ever it takes to get the mortgage money. BTW did the same people forget to read the stack of disclosures talking about their payments and possible future increases…of course not they were getting a home handed to them for zero down. Not everyone should be able to buy a home. It requires responsibility!
September 18, 2008 — 2:53 pm
ERIC OLSON says:
It also should require good credit and a job. Two things that many banks allowed to slide to far to the left. marginal credit and stated income makes for a bad combination. I wouldn’t loan my nephew 100% of the money for a car if he had a history of not paying people back and couldn’t prove he had a paycheck and thats family. These banks were often making 100% loans to strangers. It probably would have been much better if they secured the loan with 20% down. Less likely to loose on that deal since the bank can cut the price for a quick sale and still recover in full.
September 18, 2008 — 3:01 pm
Robert Kerr says:
Luskin, hunh? As Lehman was collapsing, as AIG was teetering, as the Dow prepared to nosedive his timing was impeccable.
His weekend editorial, obviously submitted in advance, insisted the fundamentals were strong and that Gramm was right, Americans are whiners.
Quit Doling Out That Bad-Economy Line
The unavoidable truth is that Senator McCain has surrounded himself with boobs, like Luskin and Gramm. They may be good, trusted friends of the Senator, but they’re clearly ignorant of what’s happening to the economy, to jobs and to people making less than $1M/yr.
McCain’s economic plan is really no plan at all – cut taxes more. Right. We’re starving for revenue and we should cut taxes more.
This will be the first time in my life that I will vote against the Republican candidate for President and vote for the Democrat.
I disagree with many of Obama’s ideas – especially on non-economic matters – but his advisors’ grasp of the actual economic problems that we’re facing is far, far better than McCain’s.
And in this economic climate, once more: “it’s the economy, stupid.”
September 20, 2008 — 10:29 am
Robert Kerr says:
But “fundamentally sound” means just what it says. We are wounded, but are wise enough to stop the bleeding.
I operate from a different definition of sound v. unsound; for example, I consider an unsustainable economy to be inherently unsound.
Since 2002, our economy has been unsustainable and increasingly so, right until late last year when it started falling apart.
The problems we’re having right now were probably avoidable, had we just let the 2001 and 2003 recessions work their way out of our economic system.
With a $500B deficit, with $2T in taxpayer money propping up the financials, with a $3T war, with a $9.7T debt, with the Fed funds rate at 2%, our economy is still fundamentally unsound.
We’re still very far from sound. IMO. YMMV.
September 20, 2008 — 10:42 am
Robert Kerr says:
Unemployment has ticked up- a reaction to a shifting economy.
“Ticked up?!”
-80K jobs/mo. -605K jobs YTD. 5.7% to 6.1%.
That’s not a tick, it’s a leap.
Think it’s bad now? Wait 3 mos.
September 20, 2008 — 10:48 am
Brian Brady says:
“Then, after a few very tough years, men found other work, some moved, all of us had learned to buckle down and appreciate what we had, and, yes, Virginia, the economy proved to be “sound.””
We are in a cyclical downturn, like Don illustrated.
“The financial market is having issues because a great majority of those who are having trouble are giving up
Eric illustrates the real problem. I called it a lack of compunction, a few months back. It could be called “no grit” or determination. Dare I say this nation is “whining” because the shot they took didn’t work out?
September 20, 2008 — 4:19 pm
Robert Kerr says:
We are in a cyclical downturn, like Don illustrated.
Sure, it’s just a cyclical downturn, Ok, you can look at it that way, you just have to stretch the cycle out to “once-in-a-century.”
That’s Greenspan’s take by the way, not just mine.
Your reaction surprises me, Brian. Of all the people here, I expect you to be able to appreciate the severity of this problem.
September 20, 2008 — 7:19 pm
Don Reedy says:
Robert,
I’m not minimizing, nor, do I believe, is Brian, the severity of the problem. I only state for the record that storms appear and wreak havoc, then subside and pass away.
I’m trying to say that no matter how severe the problem, no matter how deep and damaging, I’m going to make it. You, too, Robert, no doubt will make it as well. I guess rhetorically, all of us are going to make it.
Hardship is never welcome, and never arises without causation. I guess you’ve awakened the Nietzsche in me. Not losing sight of Greg’s original post, and with respect to all the pain that has come and is yet to come, we will simply survive, those of us who know how to work, why we work, and what we work for.
As Russell Shaw might say: “I’m not whining. I’m applying for a job.”
September 20, 2008 — 11:31 pm
Brian Brady says:
“Of all the people here, I expect you to be able to appreciate the severity of this problem.”
Oh, I do. What opportunity it presents us though ! This is a cycle, call it an extraordinary cycle- the kind that hits every century or so. (Think Elliott Wave by Robert Prechter).
I believe (and it’s in writing), that FUNDAMENTALLY, the US economy offers the greatest opportunity for a human being to build and retain real wealth. I’m not trying to be cryptic because I don’t REALLY know the answers…yet.
What’s done is done. I’m more interested on what can be rather than what was.
September 21, 2008 — 12:22 pm
Brian Brady says:
“What’s done is done. I’m more interested on what can be rather than what was.”
Read the first five paragraphs, of the third comment, of this post:
https://www.bloodhoundrealty.com/BloodhoundBlog/?p=4559#comments
Intellectual (entrepreneurial) capital is what I see as our fundamental strength.
September 21, 2008 — 1:32 pm