Andrew Ross Sorkin: belief

Transcript context

…If we look back to 2007 or 2006, can’t we now today say that in most parts of the country, there was not a housing bubble? The high prices were basically correct, maybe a smidgen ahead of their time, but they’ve come back and then some in most parts of America, maybe not every single part. Again, the people who said there was a housing bubble — they seemed so wise at the time, but now they’re just wrong. That’s not even having to wait 30 years. Well, yes and no, in that so much of those prices were being inflated with debt, I would argue to you. I would say that if the 2008 financial crisis was a function of too much leverage and debt in the system that effectively brought forward this remarkable growth, a somewhat similar story was taking place in the 1920s in terms of the euphoria around the technology, whether it was automobiles or telecommunications or radio. But all that was powered by leverage, and in particular, back then, people buying stock on margin. It’s the leverage that allows these prices to get ahead of themselves in some ways, even if they are accurate over the longer term. This gets to a liquidity story. But surely, it’s begging the question to say that the debt is inflating the prices. If the homes really are going to be worth much more, to borrow to buy a house is exactly the thing you ought to do, at least if you don’t have to sell the next year. The people who borrowed money were the right ones. The Negative Nellies who panicked in 2008, 2009 — they were the wrong ones. They got the prices wrong. Still seems true to me.…

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