Monthly Archives: September 2007

Be Careful What You Wish For

-The destructive forces, swirling behind arguably the most monstrous real estate bubble in history, are becoming more evident as each day passes and like hurricane trackers watching their computer models, the FOMC seems to finally understand that what they had originally forecasted as a CAT 2 hurricane has now intensified to a full-blown CAT 5.   

Unfortunately, stock market bulls—lured out of their storm shelters by what they perceive to be a bail-out from the FED—are, according to the BAM model, about to discover that the blue skies above are strictly temporary (like those associated with the passing of the “eye” of a hurricane) and that the most dangerous portion of the storm—the eye wall—is about to strike.

We think Bernanke knows just enough to understand that he doesn’t know much about what the full repercussions of this housing bubble fall-out are going to be.  And more importantly, he doesn’t know what the public’s reaction to the fall-out news is going to be.  Proof of this, we think, is the fact that people have been so quick to make runs on banks.  This is an odd phenomenon considering the fact that we’re so close to an all-time high in markets around the world and considering the fact that the general economy, if we’re to believe government stats, is in decent shape.  Given this backdrop, a bank run is simply NOT normal and we think this might be indicative of the idea that the public at large knows better than the Central Bankers that the foundation of the housing bubble—no money down and funny money no-doc loans—is even weaker than the levies surrounding New Orleans were as Katrina approached.

Full report coming soon