Tuesday, September 26, 2017

A List of Presentation Topics: Give your audience a new view.

The work I have been doing over the past two years has led me to many surprising conclusions about the economy and financial markets.  I have developed an incredible amount of material that will be thought provoking for many types of audiences.

I will be making a number of public appearances and presentations in 2018.  I expect to publish two books on the topics of the urban housing problem and the financial crisis early next year.  In the meantime, I can present this work to your firm, your trade group, your conference, etc.

If you have been following this blog, you know that the content here will contain new empirical evidence and concepts that your audience will either find surprising, dubious, or maybe even infuriating.  They will definitely leave with new food for thought.  I say that with confidence because I have had those reactions myself as I have discovered this story and its many facets.  Readers here also know what I'm talking about.  We have discovered these surprises together.

If you need a speaker please contact me via the email address in the right hand margin ( idiosyncraticwhisk@gmail.com ).  If you know of someone who might be interested, please pass this post on to them.  This is a chance to give your group an early peek at the emerging understanding of the housing bubble and the financial crisis.

Because this project has developed such a broad reach, I can easily focus the topic on any number of specific ideas, depending on the interests of your audience.  Following is a list of some of those topics.

Various Audiences
A new retelling of the housing bubble and the financial crisis.  The motion graph here summarizes the story.
  • The bubble didn't make the US different.  The bust did.
  • The "Housing Bubble" Scariest Chart in the World should be disaggregated.  The housing bubble is a metro area phenomenon, not a national phenomenon.
  • The subprime bubble, and the CDO bubble were not associated with new homeownership.
  • Migration was a key factor in the housing bubble.  There are two distinct kinds of bubble cities.
  • The bust didn't undo a bubble.  There was a supply bust and we added a demand bust to it.
  • Mortgage defaults, and ultimately defaults of CDO securities, were largely the result of late decisions in credit regulation and monetary policy that undermined low tier housing markets in 2009 and after.

Financial Advisors & Real Estate Investors
There was never an overinvestment in housing or an inevitable supply overhang.  Understanding this provides insight into real estate investment potential.

Since 2007, there has been an extreme bifurcation of yields between real estate and fixed income asset classes.  This has implications for investors.

Since 2007, the US economy has experienced a regime shift in access to capital.  For those with access, this can lead to high returns.

Low tier real estate markets have experienced two distinct valuation shocks over the past twenty years.  Together, those shocks make low tier markets appear to be more volatile, but the shocks were unrelated to one another.  Going forward, these markets are likely to be less volatile.

Understanding the effect of housing on inflation can provide insights on Fed policy biases and the business cycle.

Rent is how we consume housing.  Homeowners are both tenants and landlords.  When housing markets were stable, we could get by with unchanging, simple heuristics about price, rent, and ownership.  But, supply constraints, volatile prices, and regime shifts in credit access require a more detailed approach.  Understanding these shifts can help families to make better decisions about ownership and consumption.

An upside-down CAPM.  Thinking of risk free interest rates as a discount subtracted from at-risk yields instead of thinking of at-risk yields as a premium added to risk free rates can yield subtle new understanding about the business cycle, investment returns, and leverage.

Public Policy
The high level of household debt is not funding consumption.  It is funding the obstruction of production.  Urban density is the gateway to equitable post-industrial abundance.

The mortgage crackdown has been a crackdown on young families and middle class homeowners.

A review of limited access governance and euvoluntary exchange.  If your "affordable housing" policy means that developers have to build "below market rate" units so that they can also build units whose prices are well above the cost of construction, then your city has actually implemented a peculiar and specific long term commitment to unaffordable housing.

The "China problem", secular stagnation, and labor immobility problems are actually housing shortage problems.  An unsustainable housing bubble didn't temporarily mask these problems.  Housing expansion was the sustainable solution to these problems.

Access is key.  The financial crisis was the result of a rejection of access, not a surplus of it.

The urban housing shortage leads to demands for ruinously tight monetary policy.  The housing shortage leads to zero-sum political battles.

Loose monetary policy didn't cause a housing bubble.  Monetary policy has ranged from neutral to tight for 30 years, and the housing shortage has a lot to do with that.

The GSE's mortgage guarantee, properly understood, is a monetary function.

Stability inevitably rewards the profligate and reckless.  Support stability anyway!  Raising risk spreads on purpose is the broken window fallacy applied to money.


  1. Nice summary. I just don't see a change in zoning mindset as being possible...people are too obsessed with increasing the value of their real estate to ever allow more supply. The rest of your suggestions won't amount to much without zoning reform. Which leaves us in a problematic situation.

    Perhaps another way around the issue would be for the government to somehow jump start the development of new metro areas. Perhaps infrastructure investment into "tier 3" cities to try to move them into tier 1 & 2.

    1. Thanks for the input.

      I see the work more as the development of new information than as a cudgel with which to change people's minds. In policy, this can lead to new understanding at the margin, even if it doesn't affect the average person's view. In personal financial management, it can be useful for thinking clearly about asset allocation or business cycles, regardless of the beliefs of others.

  2. The urban housing shortage leads to demands for ruinously tight monetary policy. The housing shortage leads to zero-sum political battles.

    Loose monetary policy didn't cause a housing bubble. Monetary policy has ranged from neutral to tight for 30 years, and the housing shortage has a lot to do with that.--KE

    Amen, brother, amen.

    My only comment is that the housing shortages lead to even worse then zero-sum political battles.

    They lead to battles to "shrink the pie, but make my slice larger."

  3. http://politicalcalculations.blogspot.com/2017/09/us-new-home-sales-market-cap-tops-out.html#.WcuKUks8NHg

    Egads---and the Fed is raising rates? Housing starts have rarely been so low.

  4. A couple posts back you posited central banks are under pressure to be tight. And have been tight for decades. Of course, there is also a whole body of literature (see Cato) that central banks are inflationist-statist institutions,

    My question is this: Why have global central banks been so tight? Institutional reasons? Captured regulatory agency reasons? Class politics? Interest-group politics? Ossification?

    1. Bad policy begets bad outcomes which beget bad policy. These things seem to run in cycles. The Great Depression and the 1970s both seemed to have similar characteristics. But I don't know what causes the cycle to turn better again.

  5. http://politicalcalculations.blogspot.com/2017/09/relative-unaffordability-of-new-homes.html