Dr. Robert Shiller, the renowned Yale professor and creator of the S&P Case-Shiller Housing Index, recently made several dire announcements about the short-term and long-term prospects for the housing market. Asked for his prediction on housing prices in a recent interview, Dr. Shiller reported that prices might fall another 10% to 25% in the next few years. (Shiller also acknowledges that forecasting the direction of the housing market is as hard as predicting the weather and that we are in uncharted territory on a range of fronts.)
The Housing Market: A History of Poor Performance
Let’s set aside the short-term housing predictions and focus on long-term issues.
Dr. Shiller analyzed the financial benefits of home ownership from an investor’s point of view. His research found that housing prices did not outperform Continue reading →
There was a recent story in the WSJ titled Treasury Market Gets Volatile. The article notes that a widely-followed measure of government bond volatility, the MOVE index from Merrill Lynch, has risen from 75 in August to 109 today. The MOVE index is simply derived from options prices on bonds. The more expensive the options are, the higher the market expects volatility to be. As such, the rise in the index really does mean that the volatility of Treasury bonds has increased by 45% from August through November. Continue reading →