I know logically that Larry Kudlow has no shame, because...Larry Kudlow! Nonetheless I can't help but wonder if he might feel a faint touch of a related emotion when he considers this 2005 offering, "The Housing Bears Are Wrong Again":
Homebuilders led the stock parade this week
with a fantastic 11 percent gain. This is a group that hedge funds and
bubbleheads love to hate. All the bond bears have been dead wrong in
predicting sky-high mortgage rates. So have all the bubbleheads who
expect housing-price crashes in Las Vegas or Naples, Florida, to bring
down the consumer, the rest of the economy, and the entire stock market.
None of this has happened. The Federal Reserve has effectively mopped up excess cash and calmed inflation expectations. That’s why bond rates are hovering around 4 percent, with most mortgage rates about a point higher.
Meanwhile, the homebuilders index has increased 76 percent over the past year, with particularly well-run companies like Toll Brothers up about twice as much. The bubbleheads missed all this because they haven’t done their homework. If they had put a little elbow grease into their analysis, they would have learned that new-housing starts for private homes and apartments haven’t changed much during the past three and a half decades....
Since 1997 home prices have been increasing at a 6.5 percent pace on a yearly basis, with a 12 percent gain over the past year. In contrast, stock prices have gained only 3 percent yearly during the same period. Simply, real estate has had the tax-advantage over stocks as an investment vehicle. There is no $500,000 per family tax-free capital gain for shares, nor are the borrowing costs for the purchase of stocks tax-deductible....
Which leads to a final thought: Why not apply the same tax laws that have benefited home owners to stock market investors and home buyers? If this were to come about, even more wealth would be created in America, leading to even more new business and job creation.
Tax reform to create a level playing field could boost our economy’s potential to grow beyond almost anyone’s wildest dreams. Homeownership, stock ownership, and small business ownership should be taxed at the same minimal rates as they are all key components of economic growth and wealth creation.
None of this has happened. The Federal Reserve has effectively mopped up excess cash and calmed inflation expectations. That’s why bond rates are hovering around 4 percent, with most mortgage rates about a point higher.
Meanwhile, the homebuilders index has increased 76 percent over the past year, with particularly well-run companies like Toll Brothers up about twice as much. The bubbleheads missed all this because they haven’t done their homework. If they had put a little elbow grease into their analysis, they would have learned that new-housing starts for private homes and apartments haven’t changed much during the past three and a half decades....
Since 1997 home prices have been increasing at a 6.5 percent pace on a yearly basis, with a 12 percent gain over the past year. In contrast, stock prices have gained only 3 percent yearly during the same period. Simply, real estate has had the tax-advantage over stocks as an investment vehicle. There is no $500,000 per family tax-free capital gain for shares, nor are the borrowing costs for the purchase of stocks tax-deductible....
Which leads to a final thought: Why not apply the same tax laws that have benefited home owners to stock market investors and home buyers? If this were to come about, even more wealth would be created in America, leading to even more new business and job creation.
Tax reform to create a level playing field could boost our economy’s potential to grow beyond almost anyone’s wildest dreams. Homeownership, stock ownership, and small business ownership should be taxed at the same minimal rates as they are all key components of economic growth and wealth creation.
It's sort of funny now to think that there were two whole years more of Kudlow and his ilk crowing, and Calculated Risk and such being a voice in the wilderness, before things came crashing down. Via Krugman.
jholbo-at-mac-dot-com
bbwaring-at-yahoo-dot-com
I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.
Joyce
http://www.videophonesguide.com
Posted by: Joyce | December 30, 2008 at 02:11 PM
Did you see the "Where Were They Then" on Arthur Laffer? I'm not sure it's fair to go just on Peter Schiff (who really does appear to be a perennial bear), but Laffer looks terrible.
Posted by: PG | January 01, 2009 at 03:13 AM
The first comment is spam.
"Tax reform to create a level playing field" would mean that CapGains taxes would no longer be less than half of income taxes. But Cokehead didn't want you to think that then, and certainly wouldn't admit it now. Create bubbles only to benefit "conservative pundits."
Posted by: KenHoughton | January 03, 2009 at 03:34 AM