** **
W. Curtiss Priest, Ph.D.
Center for Information, Technology & Society
466 Pleasant Street Melrose, MA 02176
E-mail: [EMAIL PROTECTED], Voice: 781-662-4044, FAX: 781-662-6882
March 6, 2003
Public Issue #95:
CITS DEBT WATCH
"Greenspan Cautions on Housing"
Commentary by Dr. W. Curtiss Priest, Director:
For about five years our analysis showed that, at times, at
least 2/3rd's of the growth in the GDP was due to debt-financed
consumer purchases, and, that the target of the debt collateral
was the homes of our country's homeowners.
And, because the housing boom was relatively smaller than the
boom in the stock market, most pundits refused to say that the
housing market was in a "bubble" but they often did say there
was a boom in house prices.
I write this newsletter in the Boston Metropolitan area, and,
in that house prices have risen here, faster than any other
metropolitan region, in the last three years, I am now, also
acutely aware of a boom, simply having watched the priced
value of my own house double in the last six years.
Only yesterday, an aggressive but friendly agent with Century 21
called and asked if we thought about selling?
Actually, we have had the "selling discussion" several times
in recent months. Why? I, as an investor, buy low and sell high.
However, I said we were ensconced. Now, I like a person who
asks what an unfamiliar word means :) So she was pleased
to have me read from the American Heritage Dictionary, "To
settle (oneself) securely or comfortably: 'She ensconced herself
in an armchair'"
So, while if I were to thoroughly listen to the advice of a dear
colleague, Dr. Batra, I would cleverly sell my house and rent it
back, and then, purchase it in a few years for perhaps half what
I sold it for.
However, my income does not permit me to pay the "rent" -- though
it is sufficient to pay the taxes. So, this strategy is more
appropriate for someone with a higher income.
***
However, I did not write this edition of the DEBT WATCH to
merely describe my own finances, but, rather to note that Alan
Greenspan, now about five years after we talked about home-debt-
financed expenditures, has finally come out of the closet on this
issue.
In that the minutes of Federal Reserve Board (FRB) meetings are
delayed five years, it takes a while to see what they knew, when?
And, the Reuters article below says that Greenspan's comments
yesterday "rattled housing markets" and mentions that the "Standard
& Poor's Homebuilding index fell nearly 7 percent while the
Dow Jones industrial average closed down 1.7 percent."
As we economists know, the "perfect market" always takes into
account all factors affecting prices (and demand). So, the
current prices, say, of DOW stocks should already reflect the
"wisdom of the marketplace" and that wisdom, of course, should
include an awareness of the way in which home-based borrowing
has propped up the GDP.
However, when markets make sudden shifts, as described above,
it suggests that we are witnessing "market imperfections" and,
in particular, that investors were not as savvy about what was
propping up the stock market over the last few years. (The
dot-com boom and bust is a wholly separate matter, not to be
confused with what is happening now.)
For interested readers, our prior issues of the DEBT WATCH
that document real estate-financed consumer debts can be
found here:
http://groups.google.com/groups?hl=en&lr=&ie=ISO-8859-1&scoring=d&q=%22cits+debt+
watch%22+%28%22real+estate%22+OR+%22debt-financed%22%29
[please rejoin, without spaces if this above line becomes split]
You can see in this Google (Groups) search, that we are searching
the CITS DEBT WATCH for either newletters that mention
"real estate" or those that mention the phrase "debt-financed."
Of 111 entries for the DEBT WATCH, 45 mention this topic.
The entries appear in reverse chronological order, with the
most recent, first.
**********************************************************************
Previous issues of (all) the CITS DEBT WATCH:
http://groups.google.com/groups?q=cits+debt+watch&hl=en&scoring=d
The entries appear in reverse chronological order, with the
most recent, first.
**********************************************************************
NOTICE: Contains copyrighted material, do not redistribute unless you
abide to the copyright notice appearing at the end of this article.
As provided for under Section 107 of the 1976 Copyright Law, the
following piece is being distributed for non-profit purposes and for
comment, criticism, and teaching. In cases where the purpose of
conveying information is to fully inform the reader, an entire entry
or article is reproduced. However, these extracts are typically a
very small percentage of the overall original work or publication.
Should you wish to convey this material, in the same spirit, you are
free to do so.
****************************Advertisement*****************************
Subscriptions to the Boston Globe are available at 617-929-2000 Boston
Globe archives are available for a fee at www.bostonglobe.com
****************************Advertisement*****************************
Greenspan cautions on housing
Says prices may fall, cutting into spending
By Reuters, 3/5/2003
WASHINGTON -- The five-year-old US housing boom is likely to slow in
2003 and could dampen consumer spending, which has been fueled by the
thriving housing market, Federal Reserve chairman Alan Greenspan said
yesterday in comments that rattled housing markets.
"With home price increases now subsiding, and mortgage interest rates
no longer declining at last year's impressive pace, some slowdown in
the rate of mortgage debt expansion is to be expected," he said at a
conference of the Independent Community Bankers of America in Orlando,
Fla., via satellite.
Shares of homebuilder stocks tumbled as the Fed chairman, while ruling
out a national housing bubble, raised the specter that the torrid pace
of house price increases could slow and even decline in some regions.
"Clearly, after their very substantial run-up in recent years, home
prices could recede," Greenspan said.
Greenspan's comments fed fears about the stamina of consumer spending
and housing, both of which have somewhat offset weakness in the
broader economy. Reports this week showed retail and auto sales have
weakened.
"The thought process is that the consumer is sort of hunkering down,
and the appetite for real estate is exhausted at this point," said
Matthew Johnson, managing director of trading at Lehman Brothers. The
Standard & Poor's Homebuilders index fell nearly 7 percent while the
Dow Jones industrial average closed down 1.7 percent.
Analysts said Greenspan's raising of the possibility of home price
declines could have a chilling effect on the housing market.
"All of a sudden -- after all he has said about the house price topic
-- to say home prices could recede, I think struck people, at least
those who follow this sort of thing, as stunning," said David Seiders,
chief economist for the National Association of Homebuilders.
This story ran on page D2 of the Boston Globe on 3/5/2003. c Copyright
2003 Globe Newspaper Company.
**********************************************************************
NOTICE: Contains copyrighted material, do not redistribute unless you
abide to the copyright notice appearing at the end of this article.
As provided for under Section 107 of the 1976 Copyright Law, the
following piece is being distributed for non-profit purposes and for
comment, criticism, and teaching. In cases where the purpose of
conveying information is to fully inform the reader, an entire entry
or article is reproduced. However, these extracts are typically a
very small percentage of the overall original work or publication.
Should you wish to convey this material, in the same spirit, you are
free to do so.
******************************************************************
Copyright Notice:
This article is protected under copyright law. The right to
disseminate this article is also protected under copyright law.
The copyright law permits copying of materials for personal use under
the protection of fair use.
The copyright law also permits the copying of recent materials for the
"teachable moment." This allows copying for educational purposes.
Also, the courts generally interpret copyright protection by economic
criteria. If the copying of a material reduces revenues to the
copyright holder, the court usually decides in favor of the plaintiff;
if the copying doesn't effect or increases the revenues, the court
usually decides on behalf of the defendant.
It is our judgment that occasional copying of a newspaper article does
not reduce revenues to the publisher and can actually create more
demand for a newspaper by attracting readership. An excerpt provides
free advertising for the publisher.
Thus, under fair use, teachable moment, and economic criteria we
selectively convey this copyrighted material to others.
*********
On October 27th, 1998, a new law called The Digital Millennium
Copyright Act was signed (Public Law 105-298). A copy of the law is
available from the Government Printing Office at:
http://frwebgate.access.gpo.gov/cgi-bin/useftp.cgi
?IPaddress=wais.access.gpo.gov&filename=publ304.105
&directory=/diskb/wais/data/105_cong_public_laws
This law helps bring the U.S. into uniformity with the World
Intellectual Property Organization (WIPO) treaty.
While a lengthy law, it's main orientation is towards "stored
copyrighted materials" and supports the right for libraries and
archives to contain copyrighted materials for non-commercial purposes.
There is a procedure outlined by which a publisher may ask that
material be removed from an archive, but there are no liabilities on
the part of the archive site for the storage of copyrighted materials.
There is a requirement which every archive site should meet (including
the owners of list servers) to provide contact information to the U.S.
Copyright Office of a "designated agent" -- a person whom a copyright
holder can contact.
Further, the Act provides the "subscriber" with certain rights with
respect to maintaining materials with the archive service provider.
In particular, if materials are removed from a site, the subscriber
may notify the archive service with a "counter notification" which
explains why the subscriber believes the material has been removed by
mistake.
This language clearly recognizes the subscriber's 1st Amendment rights
for free speech and provides a remedy should the subscriber believe
his/her free speech rights are being abridged.
It is our opinion that it is extremely unlikely that a copyright
holder will ever contact an archive site's designated agent when
language, as we use, is provided to indicate the "fair use" aspect of
its dissemination and storage.
**********************************************************************
==^================================================================
This email was sent to: [EMAIL PROTECTED]
EASY UNSUBSCRIBE click here: http://topica.com/u/?a84IaC.bcVIgP.YXJjaGl2
Or send an email to: [EMAIL PROTECTED]
TOPICA - Start your own email discussion group. FREE!
http://www.topica.com/partner/tag02/create/index2.html
==^================================================================
