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The Mortgage Meltdown

Please don't come without RSVP'ing.  I would prefer that any guests RSVP themselves unless approval is given in advance by the organizers.

In this meeting we'll have (less than an hour) of required reading.  I've found with other meetups that this really improves the quality of discussion, by A: focusing things and giving people some common factual basis to discuss, and B: filtering out loud-mouthed idiots who don't want to learn anything and just want to talk.

The meeting will cover everything up to and including the collapse of Lehman Brothers,  but nothing after that.  So we will not be discussing the bailout, we'll save that for a later event.

I was working as a software developer dealing with mortgage bonds for a couple of years prior to the mortgage meltdown, and I wrote up my view of what had happened in my blog.  Also, for about 20 years before the meltdown, I had been telling anyone who would listen that buying the dwelling you live in was not a good way to invest, and pretty much nobody listened to me.  Here's my write-up: Real Estate: Evils of the Owner-Occupied Paradigm. (Roughly 15 minutes of reading).

Michael Lewis, who has written a couple of excellent, fun books on finance, wrote a book about the mortgage meltdown.  Many, many people claim they saw it coming, and nearly all of them are completely full of baloney.  For this book, Lewis sought out the people who can credibly make the claim that they saw it coming, because they figured out how to profit from it and got rich: Book Report: The Big Short by Michael Lewis.  (Roughly 20 minutes of reading).

For extra credit, on a separate topic, there is a little bit of reading on some statistics I put together last summer regarding inequality, taxation levels, and the federal budget, and it would be good if people knew about these things: Tax / Inequality Fact Sheet.  (Roughly 15 minutes of reading).

 

US Home Prices Nationwide[masked] -- Y axis from[masked]


"Somehow we just missed that home prices don't go up forever."
Jamie Dimon, CEO of JP Morgan Chase

"The [housing] bubble took in everyone. We all fell into this trap of thinking housing prices could go nowhere but up.”
Warren Buffet

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  • Bill

    Today I bumped into someone who models mortgage bonds for a living. I knew she had been doing it before the meltdown. I asked her, before the meltdown, if she saw anything was wrong. She said "Yeah, I knew. We all knew.".

    May 13, 2013

  • Sheryl

    Can't make it, unfortunately.

    May 11, 2013

  • A former member
    A former member

    In the book report on 'The Big Short,' a reading for 5/12, the notion is raised that "we see all the signs that the subprime mortgage bond market was insane, which looks so obvious in hindsight, while so few people actual paid attention to these signs at the time." I hope you don't mind my jumping the gun here but since a question is raised as to what people knew and expected before the fact, I want to offer two links to articles I published on SeekingAlpha.com on housing stocks back in 2006 where not only do I raise the prospect of trouble ahead for housing but also cite housing futures data that shows that such expectations were definitely out there on Wall Street -- not in 2008 but as far back as 2006.

    http://seekingalpha.com/article/15381-homebuilder-stocks-not-the-bargain-they-seem

    http://seekingalpha.com/article/16542-what-s-the-real-cause-of-housing-softness

    Anecdotal accounts such as those offered by Lewis are readable, but not necessarily representative of broader reality.

    May 5, 2013

    • A former member
      A former member

      Anyway, yes, things did start to level off around mid 2006 before falling out of bed in 2008. Anyone interested in trends in home prices may want to check the Case Shiller Indexes, which are published by S&P. Here's a link: http://www.standardan...­----

      May 6, 2013

    • Bill

      Marc, the graphic that I have posted above is plotting the case-shiller index. There's also another similar graphic at the start of my blog entry.

      May 7, 2013

  • Judi

    Thanks, Bill!

    April 18, 2013

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