Episode 7: How One Woman Tried To Sound Housing Crash Alarm

Joe Weisenthal (0:04)

Hello, and welcome to the December 21st edition of Odd Lots. I'm Joe Weisenthal, Managing Editor at Bloomberg Markets.

Tracy Alloway (0:10)

And I'm Tracy Alloway, Executive Editor of Bloomberg Markets.

Joe Weisenthal (0:13)

So last week was pretty momentous with the Federal Reserve raising interest rates, getting off zero exactly seven years to the day that the Fed cut its rates to zero. I feel like it's a real bookend to a certain chapter of the financial crisis.

Tracy Alloway (0:28)

Yeah, I think you're definitely right. It's a new era for both of us because I think we both kind of started our careers right when the financial crisis was picking up and interest rates were at rock bottom. So neither you nor I have ever covered financial markets above the zero bound.

Joe Weisenthal (0:46)

And so we have no idea what we're going to cover anymore. We were just talking about this issue. What do we talk about now? Because everything that we've been writing about and talking about for years has to some extent been tied into the financial crisis, the housing crash and its aftermath, whether it's the Fed, the slow economy, the Eurozone crisis.

Everything has basically been about this one thing.

Tracy Alloway (1:10)

Absolutely correct. We've been dealing with the fallout of all those issues for years and years and years, and it's time to enter a new chapter. But before we enter that new chapter, we're going to bookend the old one, right?

Joe Weisenthal (1:23)

Right. It's just sort of a perfect time for a little nostalgia trip because right now, the big short is in theater, the film based on the book about one of the hedge fund managers that made a fortune, betting that the entire system of housing finance was going to collapse long before most people saw it.

Tracy Alloway (1:42)

That's right. So Michael Lewis wrote that amazing book that basically set out exactly what happened in the subprime crisis and the guys who saw it coming. And the group of those guys were all usually hedge fund managers, analysts, guys like Steve Eisman, hedge fund manager Michael Burry, also a hedge fund manager.

And so I think the reality is when people think about who saw the crisis coming, they usually think about smart money guys like that. But there were some other people who were really smart about this issue.

Joe Weisenthal (2:15)

That's exactly right. There were some of these hedge fund managers that absolutely made a fortune, and there were some of these general doomsayers that were always warning about something. But one of the, you know, speaking of journalism and speaking of our careers, both of us in the early years of our careers were reading the blog Calculated Risk.

And it was one of the first financial blogs I started off blogging. And it was one of the first sites that sort of really chronicled the economic data in a very detailed way. And early on was warning, hey, something isn't exactly right here with the way housing works in the US these days.

Tracy Alloway (2:53)

Right. So that is exactly right. I remember being a baby financial blogger reading Calculated Risk, which was then and still is an incredibly influential blog when it comes to the housing market.

They were amazing on the housing crash. It's been great on the recovery ever since.

Joe Weisenthal (3:12)

Yeah, I think that's a key point, too, about how good Calculated Risk has been on the recovery, because a lot of people could say, oh, I saw it coming. This is the guy who called the crash. But a lot of those people, their track record since the crisis, they haven't really done anything that extraordinary. Calculated Risk has really chronicled the recovery, too, in a very clear way.

And while the main author of Calculated Risk, this guy Bill McBride, will be joining us today, in the early days, he had a co-blogger, a woman named Doris Dungy, a mortgage industry professional. She went under the nom de blog Tanta. And everybody was obsessed with her writings, because she could write about the mortgage industry from the perspective of an insider better than anyone.

Tracy Alloway (3:57)

Oh, she was amazing. She knew the ins and outs like no one else.

Joe Weisenthal (4:00)

Sadly, Doris Dungy died in November 2008 No one knew who she was except under her pen name until then.

But today we're going to talk to Bill McBride, who's still writing Calculated Risk, about those early years and about Tanta's legacy and why people loved her writing so much.

Tracy Alloway (4:20)

Right. So I think for those of you listening, if you get one thing out of this, it should be when you go to see the big short in movie theaters and you're watching Christian Bale and whoever else on the screen shorting the subprime market, and they're the smart guys that saw it all coming, remember that there were some really, really intelligent bloggers who were out there saying the exact same thing at the exact same time.