May 19, 2006

FLASH: Dig a hole, fill it back up... Greenspan Says Housing Boom Over

I think it's important to really listen to what the dude has to say. He knows what he did, he knows why he did it, and he knows what's gonna happen now (hello Phoenix, hello Miami, hello San Diego, hello Boston, hello ...)

From August 2005:

Thus, this vast increase in the market value of asset claims is in part the indirect result of investors accepting lower compensation for risk. Such an increase in market value is too often viewed by market participants as structural and permanent. To some extent, those higher values may be reflecting the increased flexibility and resilience of our economy. But what they perceive as newly abundant liquidity can readily disappear.

Any onset of increased investor caution elevates risk premiums and, as a consequence, lowers asset values and promotes the liquidation of the debt that supported higher asset prices. This is the reason that history has not dealt kindly with the aftermath of protracted periods of low risk premiums.

And then from yesterday:

Former Federal Reserve Chairman Alan Greenspan said Thursday that Americans' consumption could taper off somewhat now that the U.S. housing market's "extraordinary boom" has ended.

Greenspan, in his first public U.S. speech since retiring in January from a storied tenure leading the Fed, predicted there is no danger of a total collapse of the housing market.

"This has been quite an extraordinary boom," Greenspan said in remarks at the Bond Market Association's 30th anniversary dinner in New York. "Home sales are off, applications are off, everything is going in the same direction. The boom is over, and you can say that with a fairly strong degree of confidence."

Greenspan said he doesn't see home prices falling on a national basis, but instead in certain areas of the country. He warned reduced access of Americans to equity loan extraction would have an economic impact, which has had an "important effect" in stimulating the economy.

His comments come as Wall Street was spooked by inflation worries after a jump in energy costs pushed U.S. consumer prices up sharply last month, according to a government report.

7 comments:

Smart Grid blogger said...

BLOGGERS knew this MESS for quite a long time now... why can`t the Economic Intelligencias can`t ???

Remember why they abruptly change the Bankruptcy Law in advance and make it harder for individuals to file for Bankruptcy !!!

Anonymous said...

Greenspan should shut up. How would you like to be Bernake, with your predeccesor moving markets at speeches where he's being paid $100K or more?

Anonymous said...

he didn't say "whoopsie - sorry!"

Anonymous said...

Ben bernakake is doing a fine job. I am enjoying the market meltdown. Sorry, but it won't matter what he says, this market is heading south. One reason: inflation.

David said...

"Greenspan said he doesn't see home prices falling on a national basis, but instead in certain areas of the country."

The National Association of Realtors already said national median price is falling. Greenspan you are wrong.

Anonymous said...

Can we re-elect Bill Clinton?

I miss him, grunge rock, world peace, economic prosperity, etc..

blogger said...

fyi - I closed out my gold and silver last night... the fed is gonna keep tightening and the dollar play is over for a bit (I think). easy money to be made was made for now... i'll look to get back in later

went big short on the QQQQ's though yesterday morning... with a protective stop of course