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Politics : Sioux Nation

DJT 11.24

-0.2%

1:36 PM EST

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To: see clearly now who wrote (162282)	3/5/2009 8:53:59 PM
From: cirrus	Read Replies (1) of 362899

Wow! Great post. Thanks. In the world of finance, too many quants see only the numbers before them and forget about the concrete reality the figures are supposed to represent. As Li himself said of his own model: "The most dangerous part is when people believe everything coming out of it." I am not clear about declining home values triggering the collapse... home prices fluctuate from time to time and I know folks who lost money in real estate well before the current crisis. IMHO opinion home values were not the trigger - the time bomb was the bankers writing variable rate mortgages at below market teaser rates. If you're locked into a 20 or 30 year fixed rate mortgage that you can afford and the value of your home falls 25%, so what? You keep making that monthly payment figuring that the market will eventually recover. The banks lent folks money a low rates and when the rates skyrocketed folks couldn't afford to pay - the value of the house is a side issue. Yes, had housing prices risen they could have sold for a profit... but since when did a roof over your head become a speculative investment?

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