PIMCO's Bill Gross: Housing bubble about to deflate, spurring recession.

". . . make no mistake about it, the froth in the U.S. housing market is about to lose its effervescence; the bubble is about to become less bubbly. If real housing prices decline in the U.S. in 2006 or 2007, a recession is nearly inevitable. If higher yields simply slow the pace of appreciation to a more rational single digit number, then we could escape with a 1-2% GDP economy. In either case, however, our Fed with its new Chairman will likely be in the enviable position of lowering rates come mid-year 2006."

http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2005/IO+October+2005.htm

Way to go Greenspan, you turd.

Eventually it will happen, and the person holding the prediction when the music stops will look like a genius.

Reminds me of the only thing Reagan ever said that made me laugh. He talked about economists predicting nine of the last five recessions.

He's not some dopey economist. He knows what he's talking about, and I would take his prediction very seriously.

They just turned out to be premature. Maybe Gross will, maybe he won't. If he's wrong, no one will remember, and the next guy we should all take seriously will say it six months from now. If he's right, he'll go down as a genius.

There is a stock scam where stock traders approach people on the subways around Wall Street, or sometimes where they do mass mailouts. They tell a hundred people a stock will go up, and a hundred it will go down. They do the same thing to the remaining fifty-- tell half a stock will go up, half down. After the third or fourth weeding out, they have a small group of naive investors who believe they are genuises, if they've sold it well. They then claim they know of this merger that is about to go public, and can get them in on if for ten grand. They take the hundred grand they scam from these people and hide.

http://www.nytimes.com/2005/10/04/realestate/04reals.html?pagewanted=1&ei=5094&en=e9bc032df8f4ec49&hp&ex=1128484800&partner=homepage

And, he is already regarded by many as a genius. This will simply add to his reputation.

Yield curve, stock market, economists, interest rates . . . have predicted 9 of the last five recessions.

The asset bubble in US residential real estate hasn't been going on for a decade. It just began to take off in the very late 1990s, just before the crash of the US stock market, and really ramped up right around 2000.

I think the factors Gross points to, rising interest rates being the most obvious and powerful factor, will take the air out of the inflated real estate markets. And, as Robert Shiller has bluntly illustrated in the most recent edition of Irrational Exuberance (his first edition preceded the popping of the stock bubble), localized or not, those burst US housing bubbles will have deleterious impacts on the whole of the US and World economies.

Now, for my favorite Reagan joke, pre-Alzheimers, pre-bastardized by a host of Republican primary candidates as told against one another:

From a Gore Vidal speech to the National Press Club carried on NPR:

I heard bad news on the way over here: the Ronald Reagan Presidential Library was just destroyed by fire, and, tragically, both books were a total loss. Worse yet, he wasn't finished coloring the second one.