Herd About the Housing Bubble?
Yesterday econ/real estate guru Robert Schiller penned an article for the Times examining why Greenspan, market experts and individual investors didn’t see warning signs of the disastrous housing bubble: The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets in the United…
Yesterday econ/real estate guru Robert Schiller penned an article for the Times examining why Greenspan, market experts and individual investors didn’t see warning signs of the disastrous housing bubble:
The failure to recognize the housing bubble is the core reason for the collapsing house of cards we are seeing in financial markets in the United States and around the world. If people do not see any risk, and see only the prospect of outsized investment returns, they will pursue those returns with disregard for the risks. Were all these people stupid? It can’t be. We have to consider the possibility that perfectly rational people can get caught up in a bubble.
Schiller concludes that the lack of foresight about the bubble has to do with “herd behavior” and “information cascade,” whereby rational investors’ individual decisions add up based on incomplete info. The phenomenon helps explain why an entire nation would be under the thrall of the notion that housing=a great investment. A cascade is possible when a whole country buys into the same belief despite individual analysis that refutes prevailing wisdom. The result? Rising prices and a big bad bubble. So what’s next? “It is now possible that a downward cascade will develop — in which rational individuals become excessively pessimistic as they see others bidding down home prices to abnormally low levels,” writes Schiller.
How a Bubble Stayed Under the Radar [NY Times]
Collage by Amy Jaz.
biff champion with a name like that dont be be a loser.
Please tell us the points you were making by correcting everyone’s grammer.
ok I think I firgured it out:
(a)this guy is based in Nevada;his salary is commisson driven, and depends on the number of “sky is falling” articals he cuts and pastes to nyc blogs
(b) this guy is actually Mr.Brownstoner alter ego
12:32-there’s a huge difference between making a point and saying nothing… you do know this right?
well,
renting is so much more expensive – especially if you have a high income.
not everyone over leverages, fyi.
it is possible to buy something that is not at the top of what you can afford.
people get married, have kids, etc… you need somewhere to live.
will never be convinced that renting is the way.
not overspending/over-extending yourself however, is good advice.
I think the What use to work on Wall Street (like Brownstoner); he loves it when the hedgies and banks blow up.
Here assfucks, This is called systemic. I know you want to believe in the bullshit but, it’s coming to a end…
Banks Seize Assets of Peloton Hedge-Fund Firm
http://online.wsj.com/article/SB120432135068003795.html?mod=googlenews_wsj
Just last year Peloton was named Rookie Hedge Fund of the Year. They was flying high with assets of 3 Billion witched was leveraged 7 to 1 or high as 10 to 1. See leverage works in the opposite direction too and this is just the beginning of the crash.
I think this if the first time in history we are witnessing a real time crash.
Now come on with the attacks, Flame on!
The What
Someday this war is gonna end…
I think the What use to work on Wall Street
The What is a bitter, bitter renter.
Hmmm, I thought The Times article was completely silly and made no real points based on any sort of tangible facts…It focuses on a “classic study from 1992” and it just rambles without really saying anything at all.
“..a 60 percent probability that any one person’s information will lead to the right decision.” Huh? Who says? Where does this number come from? How can ANY percentage of probability be tossed out there? Some people will be right 95% of the time no matter what’s going on, up or down. Others will always make bad decisions, no matter what.
Way too many variables at play to take this article seriously…
The Fed chairman’s job is to be an optimist and a cheerleader. They’re not gonna put Mr. doom and gloom in that position, isn’t that obvious? They’re NOT gonna put a guy in there that says “stop buying real estate – It’s overvalued.”
Plus, predicting a market downturn is completely unimpressive. It’s called a cycle and even though we’re in a downward one right now, NYC has been quite fortunate.
The reason this fiscal crisis happened is because corporate banks acted like starving pigs at a food orgy and they got so fucking greedy they bet the farm on shitty loans for shitty properties.
If loans weren’t designed to be immediately resold and repackaged for investors very little of this would have happened anyway.