Great Article on The Wall st Collapse.

[El Presidente]

I read this morning a great article on the history of the Wall St collapse. Here is the link.

For those who have not done so and who have an interest in banking....read it. Fantastic stuff.

http://www.portfolio.com/news-markets/nati...eets-Boom#page1

For Aussies I copy below a small section from the article (referenced above).

Note the Australian Median Residential Property Price is $401,000 AUD. The Median household income is $41300 AUD. Ratio 9.71

At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.” Zelman alienated clients with her pessimism, but she couldn’t pretend everything was good. “It wasn’t that hard in hindsight to see it,” she says. “It was very hard to know when it would stop.” Zelman spoke occasionally with Eisman and always left these conversations feeling better about her views and worse about the world. “You needed the occasional assurance that you weren’t nuts,” she says. She wasn’t nuts. The world was.

[billyh79]

I read this today as well. Michael Lewis is a great writer, brutally honest. Anyone who enjoys reading business should pick up some of his books; Liar's Poker, the New New Thing, Blindside, Moneyball, and a few others are awesome.

» I read this morning a great article on the history of the Wall St collapse.

» Here is the link.

»

» For those who have not sone so and who have an interest in banking....read

» it. Fantastic stuff.

»

» http://www.portfolio.com/news-markets/nati...eets-Boom#page1

»

» For Aussies I copy below a small section from the article (referenced

» above).

»

» Note the Australian Median Residential Property Price is $401,000 AUD.

» The Median household income is $41300 AUD. Ratio 9.71

»

»

»

»

» At the end of 2004, Eisman, Moses, and Daniel shared a sense that

» unhealthy things were going on in the U.S. housing market: Lots of firms

» were lending money to people who shouldn’t have been borrowing it. They

» thought Alan Greenspan’s decision after the internet bust to lower

» interest rates to 1 percent was a travesty that would lead to some

» terrible day of reckoning. Neither of these insights was entirely

» original. Ivy Zelman, at the time the housing-market analyst at Credit

» Suisse, had seen the bubble forming very early on. There’s a simple

» measure of sanity in housing prices: the ratio of median home price to

» income. Historically, it runs around 3 to 1; by late 2004, it had risen

» nationally to 4 to 1. “All these people were saying it was nearly as high

» in some other countries,” Zelman says. “But the problem wasn’t just that

» it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And

» then you coupled that with the buyers. They weren’t real buyers. They were

» speculators.” Zelman alienated clients with her pessimism, but she

» couldn’t pretend everything was good. “It wasn’t that hard in hindsight to

» see it,” she says. “It was very hard to know when it would stop.” Zelman

» spoke occasionally with Eisman and always left these conversations feeling

» better about her views and worse about the world. “You needed the

» occasional assurance that you weren’t nuts,” she says. She wasn’t nuts.

» The world was.

[Colt45]

No problem. Just give them $750 billion and everything will be OK. If the government is going to

bail out these financial institutions (and auto indusrty as well), then the people should become the

share holders. Immediately.

[El Presidente]

;-) » No problem. Just give them $750 billion and everything will be OK. If the

» government is going to

» bail out these financial institutions (and auto indusrty as well), then

» the people should become the

» share holders. Immediately.

I am with you Colt.

$750 Billion Dollar Company called "USA Trust No 1"

Make it a Publicly Listed Company. Shares non redeemable for 5 years.

Distribute Shares/or units in a trust..... proportionally to all American taxpayers.

Nice Stimulus package ;-)

[hoyopr]

Rob a great read thanks for posting.

[Ken Gargett]

i remember reading liar's poker late 80s or so when doing banking law in the UK and USA. fascinating stuff. was one of those books passed around betwen everybody.

[Chaki]

Excellent article.

Thanks Prez for posting it.

[Guest rob]

» Note the Australian Median Residential Property Price is $401,000 AUD.

» The Median household income is $41300 AUD. Ratio 9.71

That's an amazing stat.

For years I have been shaking my head in disbelief:

*So many people in their 20's are buying $600k+ houses.

*Go down to the shops and see people lined up for the latest plasma screens and new fandangled gizmos.

*Spending a more than one years salary on a car that only serves to transport them to their place of employment so they can earn the money to pay it off.

But then again, money is easy to come by. The banks have been giving it away.