January 08, 2008

Morgan Stanley's Stephen Roach writing in the FT today: "A sharp decline in asset prices is necessary to rebalance the US economy"

America’s inflated asset prices must fall

"A sharp decline in asset prices is necessary to rebalance the US economy. It is the only realistic hope to shift the mix of saving away from asset appreciation back to that supported by income generation. That could entail as much as a 20-30 per cent decline in overall US housing prices and a related deflating of the bubble of cheap and easy credit."

-Stephen Roach, Chairman of Morgan Stanley Asia, January 2008


Anonymous said...

How soon until China realizes these people from MS etc. are crooks and Execute them?

keith said...

NAR says value of US housing stock is $12.2 trillion http://tinyurl.com/2d8g2q

30% hit = $3.6 trillion loss

That's $36,000 per american household (3.6t / 100m)

then add in the lost jobs, lost wages, lost profits, lost add-on-sales, etc

the final number is huge

And damn, I feel sorry for those that bought in 2004 - 2007. They're gonna get wiped out

Thanks Suzanne.

Anonymous said...

ben stein says don't panic:


Patriotis said...

She's not worried about the economy:

"CORAOPOLIS, Pennsylvania (AP) -- A high school gym teacher was charged with sending nude pictures of herself and sexually suggestive cell phone text messages to a 14-year-old freshman at the school.

Beth Ann Chester, a 26-year-old health and physical education teacher at Moon Area High School in suburban Pittsburgh, was arrested Friday and charged with child sexual abuse, statutory sexual assault and related counts, authorities said.
Police said Chester, who is married, had sent a boy three pictures of herself, two of them naked, by cell phone on December 22, and the boy replied with a naked picture of himself.

The boy denied having physical contact with Chester, but there probably was contact, Moon Township Police Chief Leo McCarthy said. The boy also told police he "felt he was in love with the teacher now," police said."""""


Shit,my gym teacher was a middle-aged lesbian with a striking resemblance to George Washington.
Man, I wish Ms. Chester the Molester, was my teach.

Mark in San Diego said...

I have always quoted Stephen Roach, and was disappointed that he was shipped off to China. . . probably to shut him up a year ago, as he was the only one at MS who had any clue about what was happening. He had been writing about real estate for longer than HP, and THAT is saying something. I read his editorial this morning, and was glad the FT gave him a large forum.

The ink was hardly dry on his editorial when our beloved Countrywide and Mozillio were accused of false documents (Shocked, Schocked I say). . .what a grand day. . .and 238 drop in the Dow. . .let the games begin . . .perhaps a middle class family will once again be able to afford a house without mortgaging their great grandchildren!

Anonymous said...

Stephen Roach is one of the few good guys who have been warning about the housing bubble for years, you stupid ass. Google it up.

Anonymous said...

Kum By Ya, Kum by ya...

Paul E. Math said...

I read this earlier today. I miss Roachie. He used to publish his opinion every week when he was Morgan Stanley's chief global economist but now that he's their chief of Asia I guess he's too busy. It's too bad, as far as global macroeconomics goes, the guy is a God.

Anonymous said...


Anonymous said...

Suzanne should have done more research.

Anonymous said...

Is he insane? 50% is whats needed!

suzannesfriend said...

"Thanks Suzanne."

she gave them the biggest f**k of their lives! I wonder why they're not smiling?

Anonymous said...

There goes the middle class. Hello banana republic.

Russ DoGG said...

So what about the inflated asset prices of housing in Europe and the UK?

Don't these need to fall as well?

Anonymous said...

Wells Fargo target of Baltimore lawsuit

The city alleges predatory lending in black neighborhoods; says the bank deceived borrowers who are now defaulting at twice the citywide average. \

(close) January 8 2008: 1:49 PM EST

BALTIMORE (AP) -- Black neighborhoods in Baltimore were disproportionately affected by the subprime mortgage fallout, according to a federal lawsuit expected Tuesday from the city, which is attempting to recoup the costs of maintaining neighborhoods wracked by foreclosures.

The suit alleges Wells Fargo Bank N.A. engaged in a pattern of predatory lending practices in Baltimore's poorest neighborhoods, leading to foreclosure rates nearly double the citywide average.

"When you have foreclosures, the property values drop, and you get less tax revenue. There's fire and police costs that come from abandoned and boarded-up and vacant properties," said John P. Relman, a Washington-based attorney who is representing the city in the lawsuit. "It leads to crime and drugs and school problems as the community is being destabilized."

Benji Frank said...

Don't worry: I'm SURE all the real estate agents, mortgage brokers, etc. will be willing to give every client a refund for what they were overpaid!

Anonymous said...

What kills me is that my family waited, we avoided a "bubble" city/state, we put 20% down, we used actual not stated income (and took a hit on the interest rate I have to say - idiot bankers), were financing less than 3x real income, had other assets (stocks, bonds, savings) to cover any bumps in the road, cost of house per month (payments, insurance, taxes) comparable to local rents for similar houses in similar neighborhoods and what we had been paying for a much smaller place, and now we are being screwed multiple times over by all of this mess...

My taxes are going up, my job is at risk, I can't tell who to send my payment to as my mortgage keeps being resold...so much for the American dream! That 30% hit if it gets to the "fly-over states" like mine means that all of my down-payment and the last few years are just up in smoke...thank god I sold some housing stock to make the down-payment!

All I have to say is screw California and Florida (plus DC, etc) and all the speculators...and screw the politicians who want to reward the people that inflated the bubbles on the coasts.

Andrew Hac said...

The Americano is so toasted like a snapper turtle skewered on a stick from head to tail all sizzling, juicing with aromatic popping fat over a bed of white hot charcoal.

Americano = Grilled Snapper Turtle

Heeeee... Haaaaa... Arrrrr

Stupid, greedy, head-in-the-ass Americano deserve this disaster coming to them.

Anonymous said...

Hey, leave the bloody snapping turtles out of this. I happen to adore them. Do not kill the innocent snapping turtles.

Anonymous said...

Is he insane? 50% is whats needed!

You have to factor in the massive tsunami of inflation headed to our shores. That will absorb some of the loss. Let's say 10% inflation/yr over three years and with the 30% loss, you will have a roughly 60% drop in real home values. The nominal drop will be 30%.


Snapper said...

I'm going long Snapping Turtles!

Anonymous said...


stuckinthecity said...

Anonymous said...
Is he insane? 50% is whats needed!

January 09, 2008 1:54 AM

I agree. Here in Chicagoland, some prices are way above incomes, others are WAAAAAAAAY above incomes.

Inflate is great!!! said...

@anonymous at January 09, 2008 3:09 PM,

You're incorrect. If inflation increases by 10%, then if you have a fixed mortgage, you will actually not experience a fall price, but a fall in cost.

That's why my grandparents used to have a $100/ month house payment, and we thought it was an amazing deal.

Not so amazing - just inflation.

That's why a higher rate of inflation is actually good for fixed-rate mortgage holders.

Or at least as not as bad as you're making it out to be....

Anonymous said...

Inflation in food, gas, durable goods, deflation in assets and incomes.

Sorry people we will not all get
%10 raises.

Rich get richer and poor get poorer.