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How Far To Fall?

| Tue Mar. 24, 2009 6:09 PM EDT
Via Andrew Sullivan, Mike at No Empty Wallets wants to know why I think home prices have another 20% to fall.  It's nothing complicated.  The most widely accepted barometer of home prices is the Case-Shiller home price index, which canvasses housing prices in 20 cities.  Here's the raw data.

Case-Shiller was at 150 in December 2008.  The GDP price deflator stood at 123.  So the inflation-adjusted value of Case-Shiller was about 122.

In January 2000, when home prices were near their historical trend levels, Case-Shiller stood at 100.  The GDP deflator stood at 99.  So the inflation-adjusted value of Case-Shiller was about 101.

My arithmetic is pretty simple: getting from 122 back to 101 is about a 20% drop. (The chart on the right, from Calculated Risk, is a year old, but even so it gets the same point across for the graphically minded.  The orange line is the 20-city index.  It's fallen 20% in the past year, and looks to have another 20% to go before it reaches pre-bubble trend levels.)

Actually, it's worth noting that I'm being a little generous here, since in a recession values often overshoot on the way down.  Mike suggests that lower mortgage rates and the upcoming stimulus tax credit will prop up prices a bit compared to past levels, and that's possible.  But mortgage rates are only slightly lower today than in 2000, and the effect of the tax credit is hard to judge.  I'm just guessing like everyone else (and since I have a house I'm trying to sell I'd be delighted to end up wrong about this) but I'd keep my money on a further 20% drop.  We still have a fair bit of recession ahead of us.

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Friendly Reminder: Amadou & Mariam Album Out Today

| Tue Mar. 24, 2009 5:38 PM EDT
National borders not only make traveling to my summer compound in Monaco incredibly bothersome (ahem!), they also really gum up CD release schedules. Especially here in the United States of Kiss My Ass, where great music from around the world often gets delayed for months, if not years. Either labels are scared that us slack-jawed yokels just won't get it, or I guess they need a couple extra months to form brilliant marketing strategies? Whatever, it makes me mad, since we do have the internet in America, and an internationally-savvy press, desperate to jump on the Next Big Thing, isn't going to wait for a release date 90 days away, so then anybody reading that review has to go searching around for a little Rapidshare RAR file. Who would be so thoughtless? Oh. Well, to make up for it, I'll act as your release-date alarm system: Malian duo Amadou & Mariam's Welcome to Mali is finally out today here in the Homeland. Hooray! That means you can give them money on iTunes and everything. Welcome to Mali was for a while the highest-ranking album of 2008 on Metacritic, although the site has since moved it to the 2009 list out of respect for our flag, I guess (where it's currently tied with Animal Collective for best-reviewed album of this year). Back in November (I know, I'm sorry) I gave the album an enthusiastic review, and I only like it more now; its mishmash of styles and traditions feels both guilelessly celebratory and deeply respectful, even moving. Plus I'm a sucker for that Afropop guitar sound. After the jump, the oddly affecting video for the Damon Albarn-produced "Sabali," a more electronic-based track than the rest of the album. You can also isten to the whole album at their web site.

NPR Kicks GMA's Butt

| Tue Mar. 24, 2009 5:21 PM EDT
Speaking of NPR, those guys are going great gangbusters, ratings-wise. Bucking the trend experienced by just about every other media outlet, NPR has seen major listenership growth in the past eight years, reaching a record in 2008. While there are no nationwide radio ratings, NPR adds up local ratings for stations that carry its programming, and that total has grown 47 percent since 2000, with nearly 21 million people tuning in to their daily news programs every week. Broken out into specific programs, this means that NPR's "Morning Edition" has an average daily audience of 7.6 million, which the Washington Post says is "about 60 percent larger than the audience for 'Good Morning America' on ABC and about one-third larger than the audience for the 'Today' show on NBC." Who knew? Of course, as many of us in the non-profit world are aware, increased audience doesn't necessarily translate to increased revenue. The broadcaster was recently forced to lay off 7 percent of its news staff due to revenue shortfalls (primarily because of a pullback in corporate giving) and they're still about $8 million short for this year. At this risk of sparking flames of populist rage, I'd like to point out that NPR's entire annual operating budget is $160 million, which happens to look pretty similar to another recent number, something to do with bonuses? Flames... of populist rage... rising...

Car Stereo Theft a "Dying Crime"

| Tue Mar. 24, 2009 4:54 PM EDT

Here's an interesting trend noticed by NPR's Morning Edition: the theft of car stereos, once a ubiquitous urban crime, may be going the way of train robberies:

It's a crime that plagued car owners throughout the 1990s. But according to the FBI's latest crime report, car stereo thefts have fallen by more than half over the past 15 years, from more than a million in 1994 to just over 400,000, even as car theft rates have remained high. Washington, D.C., police officer Mark Lakomec has seen a dramatic difference on the street. For 10 years, his job has been to spot stolen cars, which he does two to three times a night. In the 1990s, he said, every stolen car was missing the stereo. These days, he says thieves will take just about anything — umbrellas, sunglasses, even motor oil — but they leave the radio


NPR gives a variety of reasons for the change, primarily the fact that most cars now come with tolerable stereos, custom-fitted to the dashboard, thus discouraging theft. Moreover, these days cars don't have stereos, they have Entertainment Systems, with DVD players and flip-down screens and Bluetooth interfaces and soothing interactive voice commands, and how do you steal the Hal 9000 from a Prius? The article mentions a piece of equipment also destined to go the way of the dodo bird, the trunk CD changer. Remember those things? It was like carrying a little jukebox in your trunk, and it seems like just three years ago that cool people had them. Nowadays, even my dad's pickup has an 1/8 inch plug for my iPod so I can play him the new Coldplay song.

Mexico's Drug War, Fully US Loaded

| Tue Mar. 24, 2009 3:20 PM EDT

Guest blogger Mark Follman writes frequently about current affairs and culture at markfollman.com.

The raging drug war in Mexico is about to command even greater attention inside the United States. It's not just the gruesome tales of drug cartel violence to the south; the US is far more caught up in the maelstrom than many north of the border may care to realize.

Today at the White House, Homeland Security Sec. Janet Napolitano laid out an Obama administration plan to throw additional money and manpower at the problem, amid mounting fears about "spillover" of violence and corruption into the United States. On Wednesday, Napolitano will go to Capitol Hill specifically to address the crisis, while Secretary of State Hillary Clinton is scheduled to arrive in Mexico.

The administration is deploying big guns like Napolitano and Clinton with good reason. As the Wall Street Journal reported recently, "The government is girding for a possible Katrina-style disaster along the 2,000-mile-long Mexican border that would involve thousands of refugees flooding into the US to escape surging violence in northern Mexico, or gun battles beginning to routinely spill across the border." A recent story from international reporting start-up GlobalPost shows how joint US-Mexican operations have been implicated in the spreading violence, on both sides of the border.

Some relatively obscure testimony by senior officials from the ATF and DEA to a Senate subcommittee last week contains stark details about our country's role in the predicament. Simply put, the US is serving as a vast weapons depot for the drug gangs.

Feminism: What's in a Name?

| Tue Mar. 24, 2009 2:58 PM EDT

Slate's XX Factor has a fascinating discussion about Sandra Day O'Connor's passing on calling herself a feminist even though she totally is one. Need proof?

Do you call yourself a feminist?
I never did. I care very much about women and their progress. I didn’t go march in the streets, but when I was in the Arizona Legislature, one of the things that I did was to examine every single statute in the state of Arizona to pick out the ones that discriminated against women and get them changed.

So, 'feminists' march in the streets (which is bad) but don't fight for a seat in government from which to focus on women's equality? I ain't mad at Sandra. The woman haters have worked very hard to make the word "feminism" synonymous with man- and baby-hating. With—gasp!—lesbianism and everything 'unladylike'. With all that scary protesting and refusing to play nice. Ah well, I much prefer women (and men) who pass on the name but fight the power anyway. Sandra O is just in the closet but active as hell on the feminist down low. Works for me.

As a side note, SDO'C rocks as an interviewee. What a breath of fresh air to hear someone say, essentially, 'Screw you. I'm pushing a majorly important new website and you want to talk about inanities. Shut the frack up (sorry—HUGE Battlestar Galactica fan), and let's talk about what I agreed to talk about.' Here's a taste of that great old-chick no-nonsense:

Although you were nominated to the court by President Reagan, you became known as a centrist who disappointed conservatives and provided relief to liberals.
Look, that's your spiel, not mine. I tried to decide each case based on the law and the Constitution.

Old feminists rock. Whatever they call themselves. BTW: if you're not a feminist, what are you: anti-feminist?

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Afraid of Risk?

| Tue Mar. 24, 2009 2:53 PM EDT
Brad DeLong points to a defense of Tim Geithner's toxic waste plan from Christopher Carroll:

Unlike the critics, the Treasury has absorbed the main lesson from the past 30 years of academic finance research: asset price movements mainly reflect changes in investors’ collective attitude toward risk.

....The details [of the Geithner plan] flow from an overarching view that the markets for the “toxic assets” that are corroding banks’ balance sheets have shut down in part because in those markets the degree of risk aversion has become not just problematic but pathological. The different parts of the plan reflect different approaches to trying to coax private investors back into the market by reducing their perceived degree of risk to levels that even a skittish risk-shy hedge fund manager might find tempting.

I don't want to disagree with this, but I think it's worth looking at it from a slightly different perspective. Obviously risk aversion goes up and down with economic conditions, but one problem with our financial markets is that over the past 30 years they've largely convinced themselves that risk doesn't really exist anymore.  This is especially true on the fixed income side of things, where I think it's been years since the Wall Street crowd really, truly, thought there was any risk left in the market for anyone smart enough to read a yield spread.  You just needed to have the right models and the right hedging strategy.

At the very least, investors should have learned their lesson on this score in 1998, when Long Term Capital Management collapsed.  There were multiple reasons for LTCM's failure, but the biggest one was that they felt comfortable taking enormous leveraged positions because they were convinced that their models had essentially hedged all the risk away.  They hadn't, of course, and they crashed spectacularly.  But in the end the Fed oversaw a rescue, LTCM's investors lost some money, and then they dusted themselves off and convinced each other that this was a once-in-a-century event they didn't really have to worry about.  (The guys responsible for LCTM's implosion went back to Wall Street 12 months later to start a new fund.  They had no trouble raising capital.)

But this time it's different.  It's pretty obvious that all the credit derivatives in the world, no matter how cleverly they're constructed, don't genuinely hedge away risk.  It's still there, and all the guys who thought they'd discovered a magical way to insure high returns forever discovered that they were wrong.

So, yes: risk aversion is sky high right now.  But this is more than just the normal ebb and flow of animal spirits.  It's sophisticated investors rediscovering the idea that risk really exists at all, even for them.  That's a tough transition.  Tim Geithner's about to find out if Wall Street has made it yet.

Police Deaths Call for Renewed Assault Weapons Ban

| Tue Mar. 24, 2009 2:19 PM EDT
Last month, Attorney General Eric Holder voiced his desire (and his boss') to renew the federal assault weapons ban, which expired in 2004. He said as much in response to questions about cartels and drug wars in Mexico. But after four police were gunned down in northern California this weekend the idea now hits closer to home.

Saturday, when four cops were killed by a parolee, was the deadliest day in the history of the Oakland police department. Lovelle Mixon, a convicted felon jailed for five years for assault with a firearm, shot the first two officers with the handgun he was carrying (illegally) after the police stopped his car for a traffic violation. He then used an AK-47 type assault rifle to gun down two SWAT officers before he was killed in a shootout. True, California has an assault-weapons ban and it didn't keep the rifle out of Mixon's hands, but a federal ban could only strengthen local enforcement efforts. The battle will be hard fought; last week 65 House Dems sent Holder a letter opposing his efforts to enact any sort of federal ban on assault rifles, citing concerns over ownership restrictions. "We will strongly oppose any legislation that will infringe upon the rights of individual gun owners," the letter stated.

The opposition to Holder moving on the ban has all been under the backdrop of the weapons concerns on the border and in Mexico, but will the debate shift now that police officers are getting gunned down here at home? Meaning, once Dianne Feinstein proposes new legislation related to the deaths of these four slain officers, what will the pro-gun Dems, and everyone else, say then?

Quote of the Day - 3.24.09

| Tue Mar. 24, 2009 2:00 PM EDT
From Marc Ambinder, explaining why he thinks Obama is moving more cautiously than his critics would like:

What's kept the administration from being as bold as its critics want is not a lack of imagination, or a lack of contact with the outside world, or an overreliance on the banks....It's a combination of the knowledge that Obama cannot do big things unless he remains a majority president, that he could make a hash of them if Congress perceives that the administration is pushing too close to the boundary of what's acceptable, and that the administration has accepted that it cannot allow Congress to be a partner in leading the American people towards a solution.  The stimulus package debate in February was dispositive; the administration lost confidence in Congress's maturity fairly quickly.

It's not clear how much of this is just Ambinder's own judgment and how much is informed by his reporting, but presumably he wouldn't say this if he didn't have good reason to believe it.  And that's pretty interesting: Obama no longer trusts Congress.  It's also a wee bit frightening, no?

(Ambinder also has a list of questions he thinks need to be answered before any kind of nationalization plan is possible.  I don't quite understand some of them — why would there be a run on a nationalized bank? — but they're worth taking a look at.)

The Price of Health

| Tue Mar. 24, 2009 1:45 PM EDT
Ezra Klein has a friend who got airlifted to a small town in Germany after an accident in Sierra Leone.  Now he's stuck:

My friend does not speak German. He does not know anyone in Germany. He wants to come home and receive his care in the states. He wants a doctor he can communicate with and nurses who can understand his requests and friends who can speak to him and calls that aren't subject to international fees. But his insurance is refusing the request. Medical treatment, they're arguing, is simply too expensive in America.

....My friend's insurers are not lying to him. They are not making a capricious decision. They simply have no wish to pay American prices when care can be obtained at German rates. And so my friend and his family must now focus their days and nights worrying over what to do, and how much to spend. As for the rest of us in America, we pay these prices anyway, and never realize how terribly we're being ripped off.

Just keep telling yourself: best healthcare in the world, baby, best healthcare in the world.  Say it often enough and you might even believe it eventually.