2005 Quote of the Day: Excessive Pessimism in Housing

As someone who is frequently wrong on a great many subjects (just ask Missus Big Picture), one of the things I like to watch is seeing what other people get right and wrong. And since we seem to be focusing on Economists today, let’s find a fun example.

Its one thing to be wrong about the future — thats merely a low probability best guess; What I always find interesting is when economists get the present "wrong."

The danger of erroneous evaluations of the present is that it often is extrapolated to incorrect conclusions about the future. My own tendency is to get the immediate present right, but the future wrong.

But the present is important. Misunderstand the present, and your future forecasts will have no utility. Like a rocket launch off half an inch, out in space it misses its target by millions of miles.   

See if you can guess the source of this comment:

"These nattering nabobs expect a housing collapse to take down the U.S. economy. But excessive pessimism is unwarranted: Fears of a housing bubble are overblown…

The good news is that demographic, tax and economic factors explain most, if not all, of the greater-than-expected activity in housing."

-May 31, 2005


Hint: Its off of a page where PCP is regularly added to the office water cooler . . .

Once you are done guessing, you can highlight below.


Mr. Greenspan’s Cappuccino
May 31, 2005

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What's been said:

Discussions found on the web:
  1. Doug Watts commented on Feb 7

    Wow — Kool graphics trick, too, Barry. You’re hitting quite a few out of the park lately. It must be the Calvinist in you.

  2. Whammer commented on Feb 7

    WOO HOO! I knew it!!!

  3. rubberbandman commented on Feb 7

    I would have said that $3Bill Kudlow

  4. GMF commented on Feb 7

    I love how they’ve gone from, “there’s no bubble,” to, “the housing market is really an insignificant portion of the overall economy, so its collapse doesn’t matter.”

    I guess the next line will be the recession isn’t that bad because the cardboard box sector has skyrocketed as people use them for housing.

  5. Tracy Coyle commented on Feb 7

    I have a degree in Economics and I can tell you without any reservation, that ANY economist that predicts the future to any degree and to any extent, is WRONG.

  6. Thom H. commented on Feb 7

    We all remember what happened to the reputation of the last person who used the phrase;

    Nattering Nabobs

    Don’t we?

    btw the relevant definition of nabob?

    nabob – a wealthy man (especially one who made his fortune in the Orient)
    man of means, rich man, wealthy man – a man who is wealthy


    An important, influential person: character, dignitary, eminence, leader, lion, notability, notable, personage. Informal big-timer, heavyweight, somebody, someone, VIP. Slang big shot, big wheel, bigwig, muckamuck.

    I rest Barry’s case.

  7. Kuds commented on Feb 7

    I thought it was Kudlow or one of his groupies that frequent his shows. It turned out it was Wesbury so I was about right. Actually in the WSJ survey of economists, Wesbury finished #20, Kudlow was #44.

  8. Mr. Obvious commented on Feb 7

    cinefoz is Brian Westbury’s handle?

  9. bluestatedon commented on Feb 7

    Just read this on Calculated Risk:

    Horton: More Bad News

    A few headlines from D.R. Horton (largest U.S. homebuilder):

    Cancellation rate 44%.

    Housing environment is “Challenging”

    Average ordered home price fell 17%.

    Inventory of homes is “too high”.

    Cancellations high in California, Arizona, Florida, Las Vegas.

    California housing market won’t recover in next 12 months.

    Pricing weaker than expected.

  10. karen commented on Feb 7

    Have you read what’s being said at the Chicago Auto Show today??? Please hold your laughter…

    The top executive at Navistar International Corp (NAVZ.PK: Quote, Profile, Research) said on Thursday the North American truck market has “absolutely” bottomed, and that the industry will experience growth in 2008.

    “What we’re assuming is that the economy doesn’t get any worse, and that it starts to get better as the year goes on,” he said.


  11. rob commented on Feb 7

    spiro agnew!!!

  12. bluestatedon commented on Feb 7

    The Navistar guy was misquoted. What he actually said was:

    “What we’re assuming is that if we stick our fingers in our ears, cover our eyes, and fervently pray, the economy doesn’t get any worse and that it starts to get better as the year goes on,” he said.

  13. Street Creds commented on Feb 7

    I got dibs on Cramer, I got Cramer.

  14. Justin commented on Feb 7

    What’s scary is that he was right for the two years after the quote, where he should have been wrong, but yet the market kept going up, up and up! Reversion back to the mean is going to be awfully mean!

  15. Peter Davis commented on Feb 7

    Hey, give Cramer a break. His track record of predicting what happened yesterday is an astounding 100%.

  16. Boom2Bust.com commented on Feb 7

    Karen, you have to excuse the Navistar exec. It seems that someone dumped PCP into Lake Michigan this morning out here in the Windy City. I guess it’s not an isolated incident, according to Barry.

  17. GerryL commented on Feb 7

    Back in 2005 with all of the negativity in housing Kudlow on the old Kudlow and Cramer show did a study to figure out if there was a housing bubble. He interviewed 8 people from various cities around the country. Every one predicted that housing was fine and prices were going higher. Kudlow then came to the conclusion that there was no housing bubble.

    By the way it should be noted that all of the people he interviewed were real estate agents.

  18. Camille commented on Feb 7

    It’s Brian Wesbury from “Mr. Greenspan’s Cappuccino,” a WSJ article.

  19. saltwater commented on Feb 7

    My client’s have said over and over the last few months “the things you have been preparing us for are coming true”. (To which I owe this blog all credit.)

    The problem I’m having is when they ask “what needs to happen to correct all of the problems?”


  20. Brian Fox commented on Feb 7

    At what point does the WSJ Editorial Page get 86’d from this blog, as has been done to Ben Stein? I read the WSJ on a regular basis, but am always overwhelmed by shame and embarrassment when I get to the editorials.

  21. STS commented on Feb 7

    “Once you are done guessing, you can highlight below.”

    Nice HTML trick Mr. Big Picture … do you code your own HTML or did you get an assist from an employee?

  22. ken h commented on Feb 7

    I think that’s the question a lot of us are trying to answer. It’s made difficult by all the meddling. Straightfoward, IMO we have to have a reversion to the mean in our standard of living as Justin mentions.

    The scary part IMO, is you have the chance for a perfect storm causing real hard times. People blast Benny but I feel he has done okay so far.

    C’mon, Cheesefuzz is just Barry fucking with us on a drug high!

  23. Bob Morris commented on Feb 7

    Hiding the answer with white on white is a good idea but it’s best not to do that too often.

    Google will seriously downgrade a site for doing that as white on white used to be a favored way for sites to spam search engines with lots of keywords.

  24. watever commented on Feb 7

    Sounds like something Larry “Goldie Locks” Kudlow would say… that sad sad tool.

  25. Chuck Ponzi commented on Feb 7

    In the future, rather than using white on white, use a tinyurl.com link.

    Bob Morris may be on to something, and god knows, we wouldn’t want you downgraded from the #2 blog in the world.

  26. Emmi commented on Feb 7

    The problem I’m having is when they ask “what needs to happen to correct all of the problems?”

    Depends on your appetite for government involvement. Time and a return to financial regulation will heal it as much as it’s ever been healed. Once the uncertainty is reduced things will start running again on their own because banks do want to make money, at some point, and they have to lend money to do that.

  27. John F. commented on Feb 7

    Kudlow is the sucker’s guess: Barry is constrained in his criticism of Kudlow by his need to appear on TV from time-to-time. Not a criticism, B., just the way the world works. Say, are you interested in taking his time slot when his show tanks? I’ll support your candidacy 110%.

  28. Sam Park commented on Feb 7

    I bet David Lereah would still say something like that in today’s market.

  29. Mike G commented on Feb 7

    Don’t worry — now that the WSJ is owned by Rupert Murdoch, it’s sure to become more trustworthy and accurate (cough).

  30. Justin commented on Feb 7

    I read and listen to a heck of a lot of financial/economic news/opinions all day long, and it behooves me how “people in the know,” can have such vastly differing views/insight/ways of inturpeting the same statistics. Take Kudlows program this evening – the guy with the beard, who’s always “everythings great,” (sorry, can’t remember his name) mentioned how, “now that the ISM numbers have been recalculated they will show a more “honest” number. Well the fact is, is that they made the ISM milder than it otherwise would have been this last report – so I guess 41.3 wasn’t bad enough for him? That was according to moody’s economy.com… So who do you believe. What’s wrong is that there is too much asymetrical information floating around. I believe that the mass media, and the internet has made the problem worse, not better.

  31. VennData commented on Feb 7

    One of these days – like a stopped clock – Brian Wesbury will be right and THEN what will all you perma-Bears say?

    On CNBC one afternoon last week, BW said the residential housing market’s only down one percent. Now, he might have been talking about the “core” house price index which excludes California, Florida, Arizona, condos and certain McTracts.

  32. JSmith commented on Feb 7

    Brian Wesbury isn’t actually a perma-bull.

    He was predicting the last recession before it happened after all.

    Of course it could have been politics, Brian Wesbury at least comes across as a bit of a Republican cool aid drinker, but he was spooky accurate between about 1998 and 2002.

  33. DavidB commented on Feb 8


    A lot of drug references coming up on the blog of late Barry. First the speedballs, then Winehouse(who is a drug reference all to herself) and now PCP.

    Is there something you want to tell us?

  34. joefarmer commented on Feb 8

    Don’t be too quick to criticize Kudlow. He is still pumping the goldilocks economy. It ain’t over till he says it is over.

  35. joefarmer commented on Feb 8

    Don’t be too quick to criticize Kudlow. He is still pumping the goldilocks economy. It ain’t over till he says it is over.

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