Spin Cycle?

I know that politicians are supposed to put the best "spin" on things, but this story makes you dizzy.

" The high-flying housing market should make a safe landing by gradually losing altitude, the White House suggested Monday. "

"A gradual slowing of homebuilding appears more likely than a sharp drop because the elevated level of house prices will sustain homebuilding as a profitable enterprise for some time," according to President Bush's annual economic report to Congress."

"The direction of the housing market is being closely watched. Most private analysts also are expecting gradual moderation. If the housing market were to collapse, it would pose grave dangers to the country's overall economic health."

"House prices, which have risen rapidly in value, also will probably see slower growth this year, Matthew Slaughter, a member of the White House's Council of Economic Advisers, said during a briefing on the report."

" In other matters, the report said:

"• The decline in Americans' personal savings rate "may not be cause for much alarm for retirement preparedness." The personal savings rate last year dropped to its lowest point since the Great Depression."

"The savings-rate measure doesn't provide a complete picture of households' finances because it does not capture gains from such things as higher real-estate values or financial investments, the White House report and private analysts say."

"• Limiting the massive portfolio holdings of mortgage giants Fannie Mae and Freddie Mac would decrease "the likelihood of systemic problems with little adverse impact on the liquidity of the market." Proposals before Congress would curb the mortgage giants' holdings."


Well, that clears things up! IF the housing market were to collapse, that would" pose grave dangers to the economy"? Really??? And, the United States of America does not care about savings because it does not provide a "complete" picture??? Since when are "gains from such things as higher real-estate values" included in M1, M2, or M3? (Oh I forgot.... M3 is no longer reported as.) And a quick question sir??? What happens if those "gains" go away because the "higher real-estate" prices erode? Hello??? What about the negative savings rate?( First time since the Great Depression.) And what the heck is a "safe landing" and "gradually losing altitude." Now, are we talking going from 30,000 feet to 28,000 or to sea level?- he did say "landing" Darn those little details.

This quote I thought was worth examing,"because the elevated level of house prices will sustain homebuilding as a profitable enterprise for some time." Really?? Someone forgot to tell Toll Bros. that one last week as they announced a very dissapointing quarter. And Centex has to offer $100,000 reductions in price in an attempt to "sustain" their business.

The part about "limiting" FNMA and FHLMC is just too funny. "Little adverse impact on the liquidity of the market," are they kidding? They want to curtail a trillion dollar industry with little impact. Riigghhht............. This is telling you that you are pregnant after you've had the baby. We all know that easy money has created monsters out of th GSE's. In typical government fashion, they want to put the genie back in the bottle. Nice try fellas.

So there you have it. The U.S.A. is devoid of savings, no problem. Real Estate is going to save the day for all of us with a "soft landing". Builders will continue to sell at "elevated levels", and the GSE's will be "limited" but not so much as to have an "adverse impact on the liquidity of the market." If you flash back to 2000 the same things were said about the stock market. But it's different this time, right?