Jim Grant: “From Bear to Bull” – WSJ 9/19/09

[temeculaguy]

I have to admit, I had never read Jim Grant or made a mental note of him if I had. Thanks for posting it, right or wrong, I really like his writing style. Authors of that quality are rare in such dry subjects, the blend of history, historical references, philosiphy of balance, the guy writes like a Taoist, I loved it. Thanks davelj

The problem is the topic, by writing an opinion somewhat against the grain, many readers will ignore the style because they disagree with the content. I did like the overiding theme, that value sells and pendulums swing but skies don’t fall.

The whole thing reminded me of a poem/story about overeacting to every incident in a vacuum, that events are not always what they appear to be, that there is opportunity in bad fortune and risk in good fortune.

http://www.inspirationpeak.com/cgi-bin/stories.cgi?record=31

Like Econprof, I find it hard to disagree with him, it’s a a cogent argument, albeit a big picture view. I do think, that regardless of the size or speed of the recovery, if it even arrives at all, we as a people will be slightly different, slightly more frugal, having experienced the depression of our generation. I’m not so sure that’s a bad thing.

[scaredyclassic]

….” However, by driving money market interest rates to zero and by setting all-time American records in money-printing ($1.2 trillion conjured in the past 12 months), the Fed is putting the value of the dollar at risk. Its wide-open policy all but begs our foreign creditors to ask the fatal question, What is the dollar, anyway? Why, the dollar is a scrap of paper, or an electronic impulse, the value of which is anchored by the analytical acuity of the monetary bureaucracy that failed to predict the greatest financial crackup since the 1930s.”

Act II could be way in the distance, or it could be around the corner.

[scaredyclassic]

….” However, by driving money market interest rates to zero and by setting all-time American records in money-printing ($1.2 trillion conjured in the past 12 months), the Fed is putting the value of the dollar at risk. Its wide-open policy all but begs our foreign creditors to ask the fatal question, What is the dollar, anyway? Why, the dollar is a scrap of paper, or an electronic impulse, the value of which is anchored by the analytical acuity of the monetary bureaucracy that failed to predict the greatest financial crackup since the 1930s.”

Act II could be way in the distance, or it could be around the corner.

[scaredyclassic]

….” However, by driving money market interest rates to zero and by setting all-time American records in money-printing ($1.2 trillion conjured in the past 12 months), the Fed is putting the value of the dollar at risk. Its wide-open policy all but begs our foreign creditors to ask the fatal question, What is the dollar, anyway? Why, the dollar is a scrap of paper, or an electronic impulse, the value of which is anchored by the analytical acuity of the monetary bureaucracy that failed to predict the greatest financial crackup since the 1930s.”

Act II could be way in the distance, or it could be around the corner.

[scaredyclassic]

….” However, by driving money market interest rates to zero and by setting all-time American records in money-printing ($1.2 trillion conjured in the past 12 months), the Fed is putting the value of the dollar at risk. Its wide-open policy all but begs our foreign creditors to ask the fatal question, What is the dollar, anyway? Why, the dollar is a scrap of paper, or an electronic impulse, the value of which is anchored by the analytical acuity of the monetary bureaucracy that failed to predict the greatest financial crackup since the 1930s.”

Act II could be way in the distance, or it could be around the corner.

[scaredyclassic]

….” However, by driving money market interest rates to zero and by setting all-time American records in money-printing ($1.2 trillion conjured in the past 12 months), the Fed is putting the value of the dollar at risk. Its wide-open policy all but begs our foreign creditors to ask the fatal question, What is the dollar, anyway? Why, the dollar is a scrap of paper, or an electronic impulse, the value of which is anchored by the analytical acuity of the monetary bureaucracy that failed to predict the greatest financial crackup since the 1930s.”

Act II could be way in the distance, or it could be around the corner.

[CA renter]

From the link, Mr. Grant writes:

Bargain-hunting is the balm of recovery even today, dead set against low prices the Federal Reserve might be. Detroit is a living laboratory in many things, including the so-called real balance effect. As Marshall Mandall, a RE/MAX agent in that city, tells the story, house prices are still falling at the high end of the market, though they have stabilized at the low end. Transaction volumes are rising. Speculators are on the prowl, but so, too, are ordinary home buyers. It seems—who’d have guessed it?—that value sells. “They can buy something for half of what they could three years ago,” Mr. Mandall says. “Everybody perceives bargains in their house-hunting.” At the end of the second quarter, according to the Detroit Free Press, the supply of unsold houses was equivalent to 8.5 months’ sales, down 39% from the year before.

Through the first six months of 2009, the Case-Shiller 10-City Composite index of house prices fell by 5.5% compared to year-end 2008. However, the rate of decline has been slowing and, indeed, the index recorded month-to-month appreciation in May and June. It may just be that the Fed’s assumption of a 14% decline in prices this year (built into the base case of its bank stress test) is unrealistically bearish.
—————-

Think about that. The housing market is HOT in Detroit, and I’ve read/heard about the strength of investment activity in the Detroit housing market for at least a year. Detroit. The city that is on its knees because of the failing auto industry (not fooled by Cash for Clunkers, either).

IMHO, this is not bullish. Instead, it signals some severe distortions in the market.

This is what so many of us have been complaining about. They are going to destroy the currency in order to “save” the housing/mortgage market. I’m not convinced this is a good thing.

[CA renter]

From the link, Mr. Grant writes:

Bargain-hunting is the balm of recovery even today, dead set against low prices the Federal Reserve might be. Detroit is a living laboratory in many things, including the so-called real balance effect. As Marshall Mandall, a RE/MAX agent in that city, tells the story, house prices are still falling at the high end of the market, though they have stabilized at the low end. Transaction volumes are rising. Speculators are on the prowl, but so, too, are ordinary home buyers. It seems—who’d have guessed it?—that value sells. “They can buy something for half of what they could three years ago,” Mr. Mandall says. “Everybody perceives bargains in their house-hunting.” At the end of the second quarter, according to the Detroit Free Press, the supply of unsold houses was equivalent to 8.5 months’ sales, down 39% from the year before.

Through the first six months of 2009, the Case-Shiller 10-City Composite index of house prices fell by 5.5% compared to year-end 2008. However, the rate of decline has been slowing and, indeed, the index recorded month-to-month appreciation in May and June. It may just be that the Fed’s assumption of a 14% decline in prices this year (built into the base case of its bank stress test) is unrealistically bearish.
—————-

Think about that. The housing market is HOT in Detroit, and I’ve read/heard about the strength of investment activity in the Detroit housing market for at least a year. Detroit. The city that is on its knees because of the failing auto industry (not fooled by Cash for Clunkers, either).

IMHO, this is not bullish. Instead, it signals some severe distortions in the market.

This is what so many of us have been complaining about. They are going to destroy the currency in order to “save” the housing/mortgage market. I’m not convinced this is a good thing.

[CA renter]

From the link, Mr. Grant writes:

Bargain-hunting is the balm of recovery even today, dead set against low prices the Federal Reserve might be. Detroit is a living laboratory in many things, including the so-called real balance effect. As Marshall Mandall, a RE/MAX agent in that city, tells the story, house prices are still falling at the high end of the market, though they have stabilized at the low end. Transaction volumes are rising. Speculators are on the prowl, but so, too, are ordinary home buyers. It seems—who’d have guessed it?—that value sells. “They can buy something for half of what they could three years ago,” Mr. Mandall says. “Everybody perceives bargains in their house-hunting.” At the end of the second quarter, according to the Detroit Free Press, the supply of unsold houses was equivalent to 8.5 months’ sales, down 39% from the year before.

Through the first six months of 2009, the Case-Shiller 10-City Composite index of house prices fell by 5.5% compared to year-end 2008. However, the rate of decline has been slowing and, indeed, the index recorded month-to-month appreciation in May and June. It may just be that the Fed’s assumption of a 14% decline in prices this year (built into the base case of its bank stress test) is unrealistically bearish.
—————-

Think about that. The housing market is HOT in Detroit, and I’ve read/heard about the strength of investment activity in the Detroit housing market for at least a year. Detroit. The city that is on its knees because of the failing auto industry (not fooled by Cash for Clunkers, either).

IMHO, this is not bullish. Instead, it signals some severe distortions in the market.

This is what so many of us have been complaining about. They are going to destroy the currency in order to “save” the housing/mortgage market. I’m not convinced this is a good thing.

[CA renter]

From the link, Mr. Grant writes:

Bargain-hunting is the balm of recovery even today, dead set against low prices the Federal Reserve might be. Detroit is a living laboratory in many things, including the so-called real balance effect. As Marshall Mandall, a RE/MAX agent in that city, tells the story, house prices are still falling at the high end of the market, though they have stabilized at the low end. Transaction volumes are rising. Speculators are on the prowl, but so, too, are ordinary home buyers. It seems—who’d have guessed it?—that value sells. “They can buy something for half of what they could three years ago,” Mr. Mandall says. “Everybody perceives bargains in their house-hunting.” At the end of the second quarter, according to the Detroit Free Press, the supply of unsold houses was equivalent to 8.5 months’ sales, down 39% from the year before.

Through the first six months of 2009, the Case-Shiller 10-City Composite index of house prices fell by 5.5% compared to year-end 2008. However, the rate of decline has been slowing and, indeed, the index recorded month-to-month appreciation in May and June. It may just be that the Fed’s assumption of a 14% decline in prices this year (built into the base case of its bank stress test) is unrealistically bearish.
—————-

Think about that. The housing market is HOT in Detroit, and I’ve read/heard about the strength of investment activity in the Detroit housing market for at least a year. Detroit. The city that is on its knees because of the failing auto industry (not fooled by Cash for Clunkers, either).

IMHO, this is not bullish. Instead, it signals some severe distortions in the market.

This is what so many of us have been complaining about. They are going to destroy the currency in order to “save” the housing/mortgage market. I’m not convinced this is a good thing.

[CA renter]

From the link, Mr. Grant writes:

Bargain-hunting is the balm of recovery even today, dead set against low prices the Federal Reserve might be. Detroit is a living laboratory in many things, including the so-called real balance effect. As Marshall Mandall, a RE/MAX agent in that city, tells the story, house prices are still falling at the high end of the market, though they have stabilized at the low end. Transaction volumes are rising. Speculators are on the prowl, but so, too, are ordinary home buyers. It seems—who’d have guessed it?—that value sells. “They can buy something for half of what they could three years ago,” Mr. Mandall says. “Everybody perceives bargains in their house-hunting.” At the end of the second quarter, according to the Detroit Free Press, the supply of unsold houses was equivalent to 8.5 months’ sales, down 39% from the year before.

Through the first six months of 2009, the Case-Shiller 10-City Composite index of house prices fell by 5.5% compared to year-end 2008. However, the rate of decline has been slowing and, indeed, the index recorded month-to-month appreciation in May and June. It may just be that the Fed’s assumption of a 14% decline in prices this year (built into the base case of its bank stress test) is unrealistically bearish.
—————-

Think about that. The housing market is HOT in Detroit, and I’ve read/heard about the strength of investment activity in the Detroit housing market for at least a year. Detroit. The city that is on its knees because of the failing auto industry (not fooled by Cash for Clunkers, either).

IMHO, this is not bullish. Instead, it signals some severe distortions in the market.

This is what so many of us have been complaining about. They are going to destroy the currency in order to “save” the housing/mortgage market. I’m not convinced this is a good thing.

[Arraya]

This is what so many of us have been complaining about. They are going to destroy the currency in order to “save” the housing/mortgage market. I’m not convinced this is a good thing.

That about sums it up. Keeping home prices high is becoming incredibly expensive and a fools errand.

It’s pretty obvious at this point the reason to keep home prices high is to maintain the solvency of the whole western banking system. Which they appear to be failing monumentally as the real economy continues to deflate via employment and wages, which make the whole experiment even more unlikely to work.

Time is almost up on this game.

[Arraya]

This is what so many of us have been complaining about. They are going to destroy the currency in order to “save” the housing/mortgage market. I’m not convinced this is a good thing.

That about sums it up. Keeping home prices high is becoming incredibly expensive and a fools errand.

It’s pretty obvious at this point the reason to keep home prices high is to maintain the solvency of the whole western banking system. Which they appear to be failing monumentally as the real economy continues to deflate via employment and wages, which make the whole experiment even more unlikely to work.

Time is almost up on this game.

[Arraya]

This is what so many of us have been complaining about. They are going to destroy the currency in order to “save” the housing/mortgage market. I’m not convinced this is a good thing.

That about sums it up. Keeping home prices high is becoming incredibly expensive and a fools errand.

It’s pretty obvious at this point the reason to keep home prices high is to maintain the solvency of the whole western banking system. Which they appear to be failing monumentally as the real economy continues to deflate via employment and wages, which make the whole experiment even more unlikely to work.

Time is almost up on this game.

[Arraya]

This is what so many of us have been complaining about. They are going to destroy the currency in order to “save” the housing/mortgage market. I’m not convinced this is a good thing.

That about sums it up. Keeping home prices high is becoming incredibly expensive and a fools errand.

It’s pretty obvious at this point the reason to keep home prices high is to maintain the solvency of the whole western banking system. Which they appear to be failing monumentally as the real economy continues to deflate via employment and wages, which make the whole experiment even more unlikely to work.

Time is almost up on this game.

[Author]

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