Sunday, January 3, 2010

Bailout Nation

Bailout Nation
Welcome back! We're just going to do a quick post tonight, cause the December resale numbers should be out in the next two days and I have a neat little analysis on tap for later in the week. Hope everyone has recovered from all the merriment and revelry of the holidays. Things were good in the EHB household... though I do suspect that some of Santa's elves broke in here and systematically shrunk all my pants in the last week or so. Not that I have any proof, but that's the only explanation I can think of for them to suddenly be more snug than usual.

As I've gotten older I've noticed that my list of people I need to buy for keeps growing, all the while my list of things I want keeps getting shorter. This year it was just a couple books, couple movies.. but chiefly Megan Fox complete with a pool full of chocolate pudding. Admittedly there may have been some practical limitations on that last one, and judging from the dirty look the girlfriend flashed me after giving her the list, possible some issues above and beyond those.

Regardless, the good sport that she is, she came through with the books. I was particularly excited about the Barry Ritholtz tome about the financial crisis, 'Bailout Nation'. Those who have explored my "recommended reading" blogroll would have noticed the link to his blog 'The Big Picture'... and my tweets are also continually directing people to his entries. Anyone who likes this blog would surely enjoy his. Tons of stats, analysis, macroeconomic discussion, clever, practical, and a vastly better writer than yours truly.

I could hardly put the book down, tore threw it about a day and a half. It was fascinating, and a great play-by-play for all the who's, what's, where's, when's and why's of the financial crisis. A big part of that being the housing bubble in the U.S., which he discusses at length.

Which while we find ourselves in a different boat here in Canada insofar as the impact a housing bust would have on our financial sector (the taxpayers are already on the hook here should boom go bust... whereas in the U.S. it was the instrument holders holding the bag, at least initially before the government bailed them out to a large extent), the housing sector itself appear very much in the same boat. Prices suddenly and severely got out of line with everyone from income and market rents right up to GDP (speaking of which there is a fascinating look at the housing booms effect on GDP growth, something I'm going to try to replicate for Canada).

If you find yourself wandering through a bookstore and have a few minutes, I suggest picking up a copy (it would be in the finance and/or investing section) and read through Chapter 21 - The Virtues of Foreclosure. It's only ten pages, and at least two of those are graphs, so it's not heavy reading. You'll notice he hits many of the same points I've been hammering on here, only far more eloquently and succinctly. In fact, I'll probably be stealing and paraphrasing much of it in the future.

In conclusion, it's a great and very informative read for any of your arm-chair economists out there, or just anyone interested in finance. Like I said, it's an easy read, he's got a very pragmatic viewpoint, writes in a conversational style and the chapters are relatively short so you just fly through it. And no I'm not getting paid for all this gushing, I just think that for anyone that enjoys my blog here it's something should read and would enjoy.

Bailout Nation