- Joined
- Jan 16, 2002
- Professional Status
- Certified General Appraiser
- State
- Missouri
A front page article on 9/27 in WSJ is sub-headed Bad Guesses and Titled: Firms' Bets Based on 'Risk Models'. It's all about how unusual stock market patterns have messed up strategic planning for some firms including, EDS, Cigna, Fannie Mae, and others. To get the jist of the story, this quote:
Now what has all this got to do with appraising? (You might ask.) Well, this quote (in the article) from Mike Thompson, market strategist at RiskMetrics Group might help explain:
Do you think that might eventually influence the values of real estate in your market? I won't bother taking a poll, I suspect I already know the answer.
Yeah, I know that what this article is talking about is a seemingly unrelated to the appraisal industry. But.... The parallels with using AVM's to value real estate are unmistakable. Also, included in the article is information about how the re-fi boom has hurt Fannie's stock price; basically, they are loaning out money for less than the price they borrowed it. Does this sound familiar to any of you who can remember the S&L crises?
I especially like this quote from Paul Volcker, former Fed Chairman:
Again, the parallels to AVM’s are hard to ignore.
Sophisticated computer models used by big companies are supposed to help them plan for their predictions. Until lately, these mostly worked well.
Now what has all this got to do with appraising? (You might ask.) Well, this quote (in the article) from Mike Thompson, market strategist at RiskMetrics Group might help explain:
If this economy persists, more and more companies' weaknesses are going to be exposed.
Do you think that might eventually influence the values of real estate in your market? I won't bother taking a poll, I suspect I already know the answer.
Risk models have been especially poor at predicting events in the credit market.
Yeah, I know that what this article is talking about is a seemingly unrelated to the appraisal industry. But.... The parallels with using AVM's to value real estate are unmistakable. Also, included in the article is information about how the re-fi boom has hurt Fannie's stock price; basically, they are loaning out money for less than the price they borrowed it. Does this sound familiar to any of you who can remember the S&L crises?
I especially like this quote from Paul Volcker, former Fed Chairman:
A lot of the value-at-risk stuff was invented by mathematicians who don't know anything about the markets.
Again, the parallels to AVM’s are hard to ignore.