Greenspan on Housing Bottoms

Earlier this week, we noted that former Fed Chief Alan Greenspan had said that "the drop in US home prices will probably end ‘well before’ early next year as the number of houses in the market diminishes" (Greenspan ‘Reputation Tarnishment’ Tour Continues).

How good of a bottom caller in housing is The Maestro? A friend emails us this quote from, well, back a few years:

"I suspect that we are coming to the end of this downtrend, as applications for new mortgages, the most important series, have flattened out. I don’t know, but I think the worst of this may well be over."
Alan Greenspan, October 6, 2006

  

The only thing he got right in that sentence was the phrase "I don’t know."

>

Source:
Greenspan sounds optimistic note on housing: report
John Shinal
MarketWatch 12:49 p.m. EDT Oct. 7, 2006
http://tinyurl.com/4rlfzb

Has housing bottomed? Most economists say no
Rex Nutting
MarketWatch, 5:02 p.m. EDT Oct. 26, 2006
http://www.marketwatch.com/news/story/B6j9tQjqtgt8tLzj7g4B57M

Print Friendly, PDF & Email

What's been said:

Discussions found on the web:
  1. Ross commented on Apr 10

    Just ignore the echos. The autopsy is over and the results showed he wasn’t even from this planet.

  2. The Financial Philosopher commented on Apr 10

    “The only thing he got right in that sentence was the phrase ‘I don’t know.'”

    Correct, Barry. And none of us should imply or infer that we DO know.

    After all, you are a philosopher, which is why your posts ask questions more than provide answers that can not be known. Wisdom truly is the realization that there is much we do not know.

    There are, however, those who “know” less than others but think that they do!

    “The fool doth think he is wise, but the wise man knows himself to be a fool.” ~ Shakespeare

  3. Bob A commented on Apr 10

    Well it’s a goog thing someone wrote it down or I doubt he could remember saying it.

  4. Egg commented on Apr 10

    “A broken clock is right twice a day”

  5. bdg123 commented on Apr 10

    New housing starts have returned to the early mid 90s trend so the issue now becomes affordability and jobs as stabilizing factors. In a normal cycle, he would probably be close to accurate. A few problems with that. Large overhang of inventory, messes in the condo explosion on the coasts and the increasing bankruptcies that is going to spill into the corporate world as well. And, price declines are far from over. We’ve seen recent price increases in NY and that market is going to crater. That’s not an if but a when.

    Then wait till emerging markets start choking on their own vomit. That’s when the fun really starts. And, that is already happening at a quickening pace.

    It’s a deflationary world.

  6. NOR commented on Apr 10

    Either this old man

    1. suffers from dementia, encephalopaty or has daily seizures erasing his long term memory and I suggest he does a cerebral CT scan and an electroencephalogram. Preferrably both. If this is the case, he should be locked up somehwere and medicated.

    OR

    2. he assumes the us people are downright stupid and I would interpret that as quite insulting.

    So what will it be?

  7. DonKei commented on Apr 10

    Financial Philosopher,

    Yes. In all realms of intellectual endeavor, human hubris trumps knowledge. Ever heard an economist admit he’s got no idea what the next quarter growth rate might be?

    The natural sciences have become some of the worst offenders, but particularly in biology and physics, of which I consider economics a subset.

    It is a curious age. Centuries ago, knowledge and faith were inextricably intertwined, w/ the church as the final arbiter of what we could know and did know based on its interpretation of scripture. Now we’ve rejected the faith of the church as the basis of knowledge and instead place our faith in a science that refuses to admit that some things are unknowable. In many respects, it is no less a faith-based knowledge system than before, but with a lot of pretty scientific garments to adorn it.

    Spinoza said applied reason reveals God and gets us closer to him. Twain observed that scientists are a curious bunch that seem able to leverage a whole lotta speculatin’ from such a thin reed of facts.

    Greenspan’s speculating, and nothing more.

  8. Chuck commented on Apr 10

    Wishful thinking! with no merit, as Commercial, Housing, Automobile and Credit Card delinquency is on the rise with no end in sight, the only sign of optimism is the cooking of the books and tweaking of the unemployment numbers, and the censured media telling us the worst is over, take a stroll to the nearest shopping mall there lies the truth, they are virtually empty with clearance items the only thing luring the weak traffic flows.
    Yes, things are bad and false optimism is going to make things worst by preventing those with unemployment or underemployment needs being denied benefits they should be entitled.

  9. mccarry commented on Apr 10

    Greenspan was involved with Charles Keating, get use to hearing that name again, so was John McCain.

    Anyway, Greenspan was hired by Keating and wrote a report on Keating’s banks saying all was “A-OK”, 2 months later they were insolvent.

  10. Tell Me Why?!? commented on Apr 10

    Barry,

    Why when Greenspan was talking about high odds for US recession, you did not question his credibility, but you are quick to attack him when he said something that goes against your bearish thesis? Why?!?

    ~~~

    BR: Greenspan was talking about low odds of recession. While I was at 60% last year, he was at 25%.

    He is now at 50/50, and I believe the recession likely started December/January.

    BTW, your rhetorical device — a critique by the failure to comment about “XYZ” — is a well known and thoroughly discredited bit of argument.

    I also have not discussed Dharfur, but that doesn’t mean I support genocide.

  11. michael schumacher commented on Apr 10

    Skeptic-

    Use the chance to do it yourself…..

    Ciao
    MS

  12. Eric Davis commented on Apr 10

    peter Schiff last night was railing about him.

    Greenspan “there is a commodities bubble”

    Schiff “The guy who couldn’t spot the NASDAQ bubble, Said ‘you can’t spot bubbles’. now thinks there is a commodities bubble”

    I’ve said it before… Greenspan in an intellectual Kludge. Not realizing that 30 years of easy money would cause inflation. No wonder he has hidden his PHD Thesis. If I can’t read your Thesis, your not a Doctor.

    Greenspan “Who knew that in Japan, you could have Deflation with a Fiat Currency?”

    and he is right if you just print money. I wonder how that worked for Zimbabwe, Mexico, and Wiemar.

    Pimco is going to take a hit, listening to that dipshit. His advice is worth 1 CDS.

    what was the other great quote. “we made a good decision, because it was professional”, I’ve heard that bullshit from every scapegoating (Nutless) bureaucrat I’ve ever met.

    but there is enough blame to go around.

  13. NOR commented on Apr 10

    Comments from Norway:

    It would help if your government started telling the truth that is obvious to the majority, ie that your economy is severed. Before they do that, the bulls will have their way for quite some time.

    There is a lot of truth in the bear stories nowadays, whether you like it or not. The evolving FED strategies and consequences of this is not known, maybe they will pull it off, maybe not. It does not help to bury your head in the sand, Freud said ostrich strategy is an immature coping mechanism, so maybe it is.

    Ofcourse, the more you look for negative sides of anything, it is self-reinforcing, that is a fact.

    Then again, Soros lost money bec of bad timing doing shorts, he claimed recently that he was surprised the meltdown took so long, and he is not the weakest link around.

    So, in effect the FED actions have at least achieved something. They might be on the brink, but then again they could always come up with a 4th lending facility.

    My point being, if you dont want to read BP stories, then leave it. Stay out of the water if you are afraid of the sharks, but this saying applies equally well for the stockmarket.

  14. David commented on Apr 10

    Greenspan also said “50% chance of recesssion” on Monday & “in the throes of recession” yesterday.

  15. The Financial Philosopher commented on Apr 10

    DonKei:

    You are correct and your observation was made over 2,000 years ago, if not earlier:

    “Art has a double face, of expression and illusion, just like science has a double face: the reality of error and the phantom of truth.” ~ Publilius Syrus (~1st century BC)

  16. David Jackson commented on Apr 10

    Greenspan has discredited himself. Most of those who have followed his statements and actions closely know this about him.

  17. Brianp commented on Apr 10

    “As events evolved, we recognized that, despite our suspicions, it was very difficult to definitively identify a bubble until after the fact — that is, when its bursting confirmed its existence.”
    -Alan Greenspan

  18. Andrew Schmitt commented on Apr 10

    Barry:

    I’d like to see an article that explains what you would need to see in order to change you mind re: general economy. At some point writing more and more articles that reinforce your well known beliefs just isn’t that interesting anymore.

    Just like any other good debater, you should be able to see what is needed on the other side of the table in order to make an effective argument. The facts may not be there today but one day they will. What are the facts you will be looking for. That’s the article I’d like to read.

  19. Barry Ritholtz commented on Apr 10

    Andrew,

    I made a bullish market call on January 23rd. It was technical, not fundamentally or economically driven.

    The Economic call is far more complex, but the short answer is that I would need to see improvements in retail sales, NFP, wages, industrial production, home sales and inflation data. Its much more nuanced than that gross simplification — but those half dozen issues, is what would make me flip to a more bullish economic posture.

    When the data changes, I change. What do you do?

  20. mhm commented on Apr 10

    DonKei’s “…instead place our faith in a science that refuses to admit that some things are unknowable.”

    That is so true…

    But you think Economics as a derivation of natural sciences, and it can only result in frustration. There is no sure outcome for a human action, much less a group of humans. You can observe and infer what is the most likely to happen, but never be sure. It fails the most basic scientific method (A->B)

    The thinking goes like “bad retail news -> market must go down”. It makes logical sense, but market goes up and people cry “it is rigged!”. Well, it might be, but the major problem is to expect a group of humans (market) to behave logically.

  21. stapleton commented on Apr 10

    When the data changes, I change. What do you do?

    What many others do: 1) Stubbornly hold onto an opinion defendable only with smoke and mirrors. 2) Blame someone else or deny, deny, deny when proven wrong.

  22. Eric Davis commented on Apr 10

    We didn’t really just call Science Faith did we…

    Science is the antithesis of Faith.

    Not knowing that, shows a fundamental misunderstanding of the word. Since we exclude anything but the most rudimentary science education in our education system, the misunderstanding doesn’t surprise me.

    But I’m not here to take away your magic.

    Shine on you Crazy Diamond.

    Maybe I’m wrong but Economics was part of the College of Business, and I think it doesn’t even count as a “Social Science”

    and not the College of Natural Sciences.

    No wonder economists can’t add well enough to calculate inflation.

  23. Eric Davis commented on Apr 10

    Sorry,
    but you have hit the mother load of sensitive subjects, with me….

    Rant ON!

    I sort of categorize it as part of the “conspiracy to keep us poor and stupid”. The last thing we would want to teach people is “the scientific Method”, so they learned to think for themselves and stopped believing in Unicorns, Magic and that Trickle Down Economics is good for you.

    Because Sociology, woman’s studies, Economics, and Massage Therapy use the “scientific method” and therefor call themselves Science, Then to classify them with “Hard Science/Natural Science”. Is ridiculous, and sort of an attempt by Pseudosciences to “Star Fuck” legitimate Science, and get pretend credibility for their bullshit, which is mostly Rationalization.

    and to correct, we live in a Judeo-christian society. Besides the Middle east, by my supposition, we live in one of the least secular societies on the Planet….
    but this isn’t a Religious Forum.

    It’s an economic one, and As soon as and economist can explain why with 2% inflation, everything has become 3x more expensive in 6 years. That is when I’d buy that an Economist is a Scientist….. When that Asshole learns to do math, and stop trying to convince me that “supply Side Economics” is anything but an attempt by the Aristocracy to Steal from everyone.
    Either that or Economists are so fucking stupid they can’t do simple math. As they try and use a bunch of “Kludge” thinking, akin to rationalization, about Hedonic inflation, Fiat Currencies, and Deflation to counteract Inflation.(see I can do the math; if My dollar buys less, or if I sell the shit I have fewer dollars for it… It’s the same Fucking thing.)

    As soon as one of the Economists stands up in front of Congress, and Goes off about Inflation being used to keep entitlements and wages down, supply side economics being a way for Corporate America to live on the public Tit, and Fiat Currencies used to keep people from being able to Maintain wealth.

    As soon as an economist stands up in our government like Galileo did to the church… Maybe I’ll grant them Scientist status. But no, because “on one hand….. and on the other”. The point of Science is to draw a conclusion….. They missed that part of “scientific Method”.

    I guess I’ll have to buy Steve Liesman is a “Scientist” too because he is a “Journalist”, and they are included in “Social Science”… On Par with “Economists”.

    Wow! though that took some time, it felt good…..

    Thanks for the Rant Space BR.

  24. wunsacon commented on Apr 10

    Science isn’t a “new god”, except with contrived definitions of terms. But, empiricism is a “new” epistemology, competing with faith. Maybe that’s what you mean.

    >>> instead place our faith in a science that refuses to admit that some things are unknowable

    Which examples do you have in mind?

  25. mhm commented on Apr 11

    The scientific method is a tautology, sort of. It only proves what you said in advance what you were going to prove. Just like this paragraph.

    Is a scientific fact useful alone? Probably not. It only explains what can be explained. Something that cannot be proven by that method ceases to exist?

    A inflation number calculated to be 2% is just that. There are economists that will say anything they “have” to say, just like many other professionals in every country on earth.

    “conspiracy to keep us poor and stupid”
    It is not a conspiracy, it is wide open for all to see…

    “Which examples do you have in mind?”
    The Fed micromanaging interest rates? They had a theory, it worked or was correlated by chance, but no longer. Now they are up to new things… Not sure if it is science or faith. There are a lot o folks praying it to do the Right Thing.

Posted Under