This struck me as apropos — and given the big uptick in traffic recently, I get the sense that some newer readers are not hip that i consider part of my charge as providing a counterbalance to more mainstream fare.  As I wrote last week:

1. Purpose: This blog has evolved into a place where we can discuss general market and economic issues. It is a counter-balance
to the general mindless cheerleading of Wall Street, the spin of the
Federal government, and the superficial coverage presented by much of
the MSM.

2. Slant: This is not a Bear cave. However,
when "the facts themselves are biased" I present them — especially
when the headline spin is all most people hear. Again, if you want MSM
or cheerleaders, there’s plenty of that elsewhere.

3. Contrariness as a virtue:  On a related note, you can
expect lots of pushback here. When I flipped Bullish in October 2002, I
got the same angry response (a good sign). If the perma Bulls weren’t
so nervous, they wouldn’t troll here.

I think the contra-story is more interesting than the mainstream, the facts below the headlines are more valuable the sound bites, and the unspun analysis is more intelligent than the spin cycle.

Hey, its not like you can’t find the mainstream fare out there if you want it…

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What's been said:

Discussions found on the web:
  1. Uncle Jack commented on Aug 25

    Not a bear cave? What a letdown! Actually, I would imagine you’ll be the same insufferable Bull at the next bottom that Kudlow has been since, well, ever.

  2. Josh commented on Aug 25

    Barry, That little traffic chart has to make you feel good.

    Have a good weekend.

  3. JKl commented on Aug 25

    You scooped MSM for months on housing , but each day now , every article on real estate is bearish now in MSM

  4. OldVet commented on Aug 25

    I like this site for combining general economic news and also some trading/investing discussions at the same time. I do both, why not go behind the headlines – it’s the rational thing to do when you’re able.

  5. Tom D commented on Aug 25

    I’ve only posted a couple times, but I read this site daily. Keep up the good work Barry! and everyone else. The discussions here are usually quite robust and a pleasure to read. I agree with OldVet. It’s almost irresponsible to not seek greater understanding about the world around us. Or, I should say, it’s irresponsible to express an opinion without researching it as best you can and basing it on facts. MSM likes to sell stories. IMO, reality is much different.

  6. bt commented on Aug 25

    Good work indeed. We need a place to discuss the big picture. There is very little discussion of the big picture PLUS stock market elsewhere and whatever BS we get from MSM on the macro is what Wall Street and the gubmint want us to hear.

  7. Cherry commented on Aug 25

    My, my, we have a nice inverted yield curve.

  8. blam commented on Aug 25

    I don’t understand why overpriced assets, like equities, are considered a good omen by the mainstream. The carnage left after the NASDAQ bubble busted is a recent example of what the pump can do to people. Fairly priced assets and equities are a good thing. Look at the mess looming from the overhyped housing bubble.

    The recent discussion here has certainly included many people that think the market is overbought and overpriced, including myself. What is so scary about people discussing over-valuation as opposed to under-valuation.

    The public news has been has become corporate news with an agenda that provides liitle access for competing points of view. The blogosphere is an equal opportunity place for expression. It is honestly biased but provides a forum for debate.

    I appreciate your intellectual honesty, sponsorship of alternative ideas, and hard work.

  9. Sherman McCoy commented on Aug 26

    You know, I find your post on MSM quite interesting right now. And a bit ironic.

    You’ve just posted a whole bunch of housing stuff. Calculated Risk is doing the same thing. Nouriel Roubini is running around saying that the Nuclear Holocaust will begin soon, basking in the spotlight that he is the Robert Schiller of a whole new bubble. (Me thinks Roubini is in a nice position to be the “public face” of the housing decline, which is very good publicity for Roubini).

    Every major paper runs the housing slow-down story. It’s on the nightly TV news.

    BUT: Why is everyone acting like it’s a foregone conclusion that this is going to have a tremondous negative effect on the economy? Sure, housing’s set up for long-term lower volumes and potential price declines, but it is only IN THEORY that the bust is going to lead to overall economic pain.

    Where’s the evidence in the data? How about the new claims for unemployment insurance- all those housing-driven jobs should have had an impact on that by now! Nada! Nada Nada Nada!

    Maybe it’s possible that the suberbly healthy Ferrari-engine of global trade will help the alleviate the housing crunch. Global trade… huh? Where have I heard that before? Where o where?

    Oh yeah! That’s what the FED CHAIR was talking about in Jackson Hole!

    A whole lot of nothing? Hardly! A nice talk on globalization is nice to hear because it reflects the importance of this topic over the next year or two. And, most importantly, it shows that Mr. Ben is an ADULT who is going to take his job seriously, wait for the data before jumping to conclusions, and NOT BE A REACTIVE FOOL when everybody and their mother is in a panty-bunching panic because of a couple bad housing reports.

    And what exactly is the surprise about the housing stuff anyway- there is no surprise at all! The only difference is the coverage.

  10. vfsv commented on Aug 26

    I keep moving this blog upwards in the list of places I try to check daily. I guess I never saw the non-mainstream, or balance, slant formally stated but it’s great.

    BTW, our premise is very similar over at:

  11. tj & the bear commented on Aug 26

    Why is everyone acting like it’s a foregone conclusion that this is going to have a tremondous negative effect on the economy?

    Perhaps it’s because housing currently is the economy.

  12. tj & the bear commented on Aug 26

    Why is everyone acting like it’s a foregone conclusion that this is going to have a tremondous negative effect on the economy?

    Perhaps it’s because housing currently is the economy.

  13. Cherry commented on Aug 26

    Sherman, you mumbled, but didn’t say anything, please try harder.

    FWIW, why would “unemployment” claims mean anything at this time. They don’t . You obviously don’t understand the lag with the decline.

  14. Barry Ritholtz commented on Aug 26


    The MSM has finally caught up with our expectations, stated rather explicitly 18 months ago. They are (were):

    1) This recovery is govt stimulus dependent;
    2) Real estate is the prime driver of the economy;
    3) A recession is far more likely than people realize
    4) As rates go higher, housing contribution will rapidly fade;
    5) a tremendous buying opportunity in Real estate will develop over the next 5 years.

    One NYU prof getting very bearish is hardly representative of the MSM

  15. Mark commented on Aug 26


    Nice try. As soon as MSM starts the stories about the implications of housing, you basically accuse Barry of being fifth row back on the bandwagon and a “reactive fool”.For your purposes you have completely ignored the fact that he has been on this early and often. You want facts about the potential effects of housing on the economy? This list of Barry’s entries and relate links detailing the contributions of housing to employment and GDP are again too numerous to list and go back several months. Google it if you want. I’m certainly not going to do your work for you.

    If you want to wait for the data, that’s an interesting approach. But I find that a difficult one to understand as you are an investment professional. You would then be forced into the position of reacting to the situation. Everyone else will have analyzed the scenario beforehand and taken their positions. At least the good ones in my estimation, i.e. the “adults”.

    I have a strong feeling you wrote this entry as something to gain attention. That would at least be consistent. It is also consistent with the “Hey, everybody knew the housing decline was coming and it’s priced into the market” blah blah blah that is coming from the CNBC/Happy Days crowd right now, a spin job that puts the lie to what they were saying just six short months ago.

  16. S commented on Aug 26


    95% of the people who contribute to this blog are on the same side of the trade. Do you only want to hear views that confirm or reinforce your own? What benefit can you get from that?

    Sherman offers a refreshing, plausible alternative. Dismiss it if you want, but don’t run the guy out on a rail just because he is an independent thinker with a different point of view.

    Market determined interest rates are currently going down, not up. And the move down has been significant. Mortgage rates are following. That is important for at least two reasons. First, it is throwing a life preserver to all those ARMs scheduled to reset. Second, the decline in interest rates combined with the fairly large increase in rents in the previously hot real estate markets means housing prices have to adjust less to convert renters into buyers. That will speed up the absorbtion of all the excess housing inventory. Markets are adjusting, just as they’re supposed to do.

    And, by the way, commercial real estate is doing quite well. Spending on non residential structures increased 12.7% in Q2. As a side note, did you know there’s a shortage developing in data centers? Remeber those from the internet boom? That’s right, most of the excess data center capacity has finally been sucked up and rates are increasing. I can name at least 5 projects with plans to build more data centers. We can thank MySpace, YouTube, and Google Video. But the point is that commercial real estate is picking up part of the slack from housing.

    I have no doubt housing prices are adjusting downward and GDP is sure to slow. And the housing doomsday scenario stories currently run 10 times per day on CNBC and Bloomberg may ultimately prevail, but it is not a foregone conclusion as 95% of the people here seem to think.

    I would like to thank Sherman for his contribution.

  17. trader75 commented on Aug 26

    95% of the people who contribute to this blog are on the same side of the trade. Do you only want to hear views that confirm or reinforce your own? What benefit can you get from that?

    I am so @#$%@# sick of this lame-brained, unimaginative, statistically illiterate fallacy. Anyone with debating skills worth their salt should be embarrassed to use it. There are plenty of places to get alternative views.

    There is a simple way to spot check the value of a response. If a given response to an argument is generic enough to apply to almost any debate, then that response is likely to be useless at best and sophistry at worst.

    For instance, the exhortations for tolerance and faux-contrarian ‘arguments’ that bulls like to peddle here could apply to almost any nuanced argument, on any blog, on any subject, where conviction of opinion is displayed. The only apparent solution for the tolerance-loving sophists is to not allow for any convictions at all, at least in matters where they disagree.

    As for respecting someone’s right to present an alternative view, that’s all well and good–but it doesn’t mean treating that point of view with kid gloves. It is wholly possible to present well-formed arguments that suck, you know, especially when the presenter has an agenda from the get go. It happens all the time. Not to mention the fact that Sherman’s post was obviously and intentionally inflammatory in nature.

    Grow a pair and get some convictions of your own. If you don’t have any convictions to speak of, fine, but that’s no reason to force milktoast down other people’s throats. Argue with data, not sophistry, and if someone thinks your argument sucks, then defend it, don’t whinge about it. That’s my .02 anyway.

    p.s. I’d double check that 95% figure that you pointlessly repeated twice. They tell me spurious statistics are up 27% this year.

  18. angryinch commented on Aug 26

    As far as the housing “bust” affecting unemployment claims, a good pct of the construction industry is illegal workers. So they won’t show up on the gov’t rolls.

    If the housing bust picks up steam, it will likely be a “rolling” bust that will affect the economy one sector at a time. The homebubblers have taken most of the pain so far, mostly thru stock price declines. As it rolls along, assuming it does, we will begin to see other players get hit: retailers (especially those correlated to housing), banks, etc.

    You will see employment numbers and general economic numbers reflect the pain down the road. You have to remember that the housing ATM has poured a trillion or two in funny money into the economy over the past few years. It takes a while for this to run thru. Once the ATM has gone dry for a year or more, then you will really see the pain pick up.

    I’m thinking this bust will hit hardest in 2009-2011.

  19. RW commented on Aug 26

    ‘S,’ exactly what contribution did ‘Sherman’ make? Was it the hectoring tone, implying those with a negative view of the markets were not “ADULTS,” being “REACTIVE FOOLS,” not data driven and somehow late to the game and behind the curve? Or was it the regurgitation of the same old sell-side talking points with no supporting primary sources or in-depth analysis nor even links to same?

    I suspect many of us here get enough of this sort of thing from the touts and cold callers, trotting out their carefully crafted wirehouse scripts (appropriately vetted by legal to avoid later prosecution for fraud), which later become talking points echoed by MSM outlets who appear increasingly unwilling to engage in rigorous analyses themselves.

    I’ve got no beef with sales, they’ve got to make a living too, but my primary business is the financial security of my own family not theirs and while I do not pretend to speak for others I will say that, paraphrasing the old Wall Street adage, that bulls and bears both make money, it’s the pigs that get slaughtered, and hog swill is all too easy to come by; I personally prefer to see something more substantive and, yes, contrary when evaluating objectives and appropriate asset mix.

    For example it appears the MSM has finally noticed there is a housing problem looming. Okay, that’s been obvious here for well over a year, but pissing contests about it are much less interesting than attempting to decipher what the real implications of that trend may be. Random Roger posted an interesting graphic at from an article by Doug Kass ( ) that suggests the home builders have become quite strongly correlated with the broader market recently and their sudden, deep plunge should therefore be given greater weight as a predictor. I commented at Roger’s site but won’t reproduce that here except to say that I’m not sure there’s enough history there although the trend is sufficiently suggestive to possibly add a bit more weight to the bearish case. Now, what further evidence might be pursued to assess the probability that correlation will continue? That would be interesting.

  20. Sherman McCoy commented on Aug 26

    My previous post was not intended to inflammatory in nature, and least of all towards Barry. In particular, I would be the last one to think of Barry as a “reactive fool”.

    Let me explain a little more what I see:

    MSM- I see them having achieved “critical mass” with the housing bust issue. I caught NBC Nightly News on Thursday evening and was struck by the negative tone as well as the tone of surprise. Same “tone of surprise” with the print media- the NYTimes coverage also struck me, but there were also wire stories that were picked up by every outlet.

    So now I think the news organizations have the “housing crisis” as a topic on their whiteboards and will be looking for stories. It won’t be long until CNN has a “The Housing Bust” segment with catchy music, and where they do “in-depth” special reports on how the housing market is crashing in specific local communities.

    What also struck me about the MSM coverage of the last few weeks- and the blog/alternative coverage too- is how much Roubini has been quoted. The guy is a salesperson! I was particularly struck by his blog headline “The Biggest Housing Slump in 40 Years… Or 53 Years?”

    So where did these numbers 40 and 53 come from? Mostly from Toll Brothers. Now Toll Brothers made some VERY BAD strategic decisions- in particular, they bet that their high-end, mid-margin product would continue to be in demand despite all signs pointing to a significantly slowing housing market. They lost the bet and are getting burned as a result. They think they can avoid market punishment by passing the buck to the “worst housing market in yada-yada decades”.

    But what’s so bad about it? Prices have leveled off so far- not gone down, even if incentives have increased a bit. And volume is down- but only to the (then record) January 2004 levels. There is no way that those conditions can create the worst housing market in decades. But saying so is very convenient for Toll Brothers, and for Roubini too when he tries to sell his reseach site.

    Finally, there’s the bond buyers. A significant pull-back in interest rates is priced into the bond market, apparently based on the idea that the housing situation will put an end to inflation worries and allow the Fed to ease. But why would the Fed ease? The data says that inflation is worrisome, and rates now are still low by historical standards and at a level that encouraged a well-oiled economy in the 1990s.

    I think the bond buyers are taking a perspective that is very similar to the “ONE AND DONE” mentality that was taken by quite a few market participants earlier this year. Except this time it’s “DONE AND GOING LOWER” instead of “one and done”. But we’ve seen through the course of the year how badly the majority bet has predicted rates, and we’ve also seen a tendancy to underestimate the Fed’s need to tighten. So I am very skeptical as to what these guys predict.

    All in all, it would be very advantageous to many players if the housing issue were to create a big overall economic slowdown and eliminate inflationary worries. But just because the group-think accepts that notion, and some very vocal participants really want that to happen, doesn’t mean that it’s reality.

  21. BW commented on Aug 26

    hey Sherman ,
    how about a drink ???
    I think a few of the posters above want to be friends

  22. Dave commented on Aug 27

    Just want to say its been so long and I don’t know how I found your blog but I love the format. Such good insight and snarky commentary. I work in the music industry and really enjoyed your posts on it, if you have more thoughts on music, film and technology please add them once in a while.

    Oh can we stop calling it the MSM I don’t feel like it is a good description…gives them more credit that they deserve. How about “Old Media” or “Corporate Media” wouldn’t you say it describes them better?

    Thanks again for the info and keep up the great work.

  23. S commented on Aug 27


    No reasonable person would take the 95% figure I used literally. That you were so moved by my inappropriate use of a statistic to write 6 paragraphs of gibberish about it is, well, quite amusing.

    The obvious idea I was making with the use of the “95%” figure is that most, hell I’ll risk another flaming and say the overwhelming majority, of the people who post here share a very similar view about how housing will impact the economy. So I find it refreshing when someone as articulate as Sherman puts forth an alternate perspective.

    I understand it is much easier for you to attack my use of a “spurious statistic” than it is to address the substantive points I made. Namely, the emergence of a few trends that MAY lessen the impact of the apocalyptic housing implosion on the economy. I will restate them for you:

    1. A substantial decrease in market interest rates the past couple of months will bail out SOME of the marginal ARM mortgagees. Good luck debating that fact.

    2. The increase in rent rates in the previously hot markets together with lower interest rates will require less of a price adjustment to convert renters into buyers and should hasten the absorption of the excess housing inventory. I’m afraid the “A” you got in debate class won’t help you much here, either.

    3. The increase in spending on commercial real estate is taking up part of the slack in housing.

    Knock yourself out.

  24. Max commented on Aug 28

    “A substantial decrease in market interest rates the past couple of months will bail out SOME of the marginal ARM mortgagees. Good luck debating that fact.”

    Mortgage rates don’t have to follow benchmarks.

  25. jkw commented on Aug 29

    ARMs do have to follow benchmarks. It’s in the contract. But most ARMs will be increasing soon even if the benchmarks had remained unchanged because they started with an introductory rate. But S is right. Some of the marginal borrowers will be able to make payments as a result of rates not increasing as much. If it is about 1% of the borrowers, it won’t matter. If it is 50%, it will. My guess is that it will slow down the fall somewhat, because housing won’t crash until the easy money dissapears. As long as people can continue to flip mortgages, they never have to sell or actually pay for the house. I’m still getting offers for 0% loans from credit cards, so the easy money hasn’t dried up yet.

Read this next.

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