Financial bubbles are inflated by investors who pile into an asset class with flawed assumptions. In most cases, these investors have unrealistic expectations for future appreciation and wouldn’t want to own the asset based on its cashflow alone. Such is the case with stocks, bonds, land, houses, tulips, and even gold. At some point, investors question their original assumptions on appreciation and start to sell. Of course, this causes any appreciation to stop, and even more speculators decide to exit. Further selling causes prices to fall which prompts even more selling that culminates in complete market capitulation and a crash [Read More...]

Of all the people who’ve played a role in the housing bubble and its aftermath, the one who continually impresses me is Edward DeMarco, conservator for the GSEs. He is a career bureaocrat who was placed in charge of the GSEs when they were taken into conservatorship in 2008. He has steadfastly protected the interests of taxpayers much to the chagrin of politicians on both the left and the right. The left hates him because he refuses to give loanowners free money through principal reductions. The politicians on the right who’ve sold their souls to banking interests don’t like him because [Read More...]