Here is part three of a Chris Thornberg lecture given in November 2006. I think Chris has nailed our current situtation in housing and its relationship to the economy. I think he is extremely conservative on its consequences. The one point that he makes in this segement that stands out to me is that economist, and you can throw in Wall Street for that matter are totally underestimating the sheer size of this housing bubble. They have not budgeted accordingly its impact on GDP. Looking at the stock market right now is like looking at Bizarro World. One of the reasons for this bull run is because Wall Street is totally underestimating the impact of the housing downturn. Another reason is the “global glut of liqudity” needs some place to go. This is a momentum play. IMO we will be in a recession by year end or 0% growth. Don’t be fooled by what seems to be pleasant changes of a falling dollar. Remember the downside of the dollar is that it makes it more difficult for US companies to expand. Also prices of products we import go up fueling more inflation.
