Dubai Debacle: Validation of ‘Skyscraper Index’

From the WSJ’s MarketBeat blog:

In light of the current concern over Dubai’s debt, the inevitable questions are beginning. Might the market have seen this coming?

Sure, looking back on it, it seems like there were probably some red flags.

For example, that indoor ski slope, in hindsight, looks a bit, shall we say, frothy. And yes, a particularly prescient observer might have cited the creation of that string of palm-shaped islands off Dubai’s coast, as a manifestation of irrational exuberance.

But if you were looking for a reason to get worried about Dubai over the past few years, you needed only look at the Burj Dubai — the world’s tallest skyscraper — according to the ’skyscraper index’…

Continue reading on MarketBeat

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Post-Thanksgiving Special: A Rant Against Ranting

Newspaper editors like “real-life” examples in our stories. So, if we write about the dangers of slicing bagels, we find someone who splattered blood across the kitchen counter. If we write about people who have mortgage troubles, we quote someone who fell behind on payments or risks doing so.

One thing I’ve learned over the past few years is that many of these examples enrage readers. Any time I write about someone having trouble making mortgage payments, I get scores of indignant emails. “I hate these people,” one emailer told me last week. Others tell me that people who face foreclosure brought it upon themselves by trying to live beyond their means. Many want me to know that they have absolutely no sympathy for these people and blame them for wrecking our economy.

In my view, Gentle (or Fierce) Reader, it really doesn’t matter whether you or I have sympathy with the millions of people in financial trouble.

Here’s what does matter: There are lots of these people; their actions will have a big impact on the economy, and we will all have to deal with it, even those of you who may be totally blameless. We are never going to sort out the exact degree of blame to assign to each lender, broker, investor, regulator, politician and borrower in this debacle. No public policy will punish or reward each of us according to an exact measure  of our guilt or virtue.

Rather than debate who was the most irresponsible during the boom, let’s try to think about which policies will prove most effective in returning our economy to health.

Here’s today’s scriptural reading: “Let he who is without sin cast the first stone.” It so happens that I am not to blame for the mortgage-default crisis. Congenitally averse to debt, I bought a modest home for cash. Yet, when I consider all of my other sins and shortcomings, I’m not very eager to judge people who got carried away during the housing boom and borrowed too much. I’m grateful when they have the courage to tell their stories and let me quote them by name.

As some of my gentler readers say: Thanks for letting me rant. I feel better already.

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