A peek into the abyss.

A peek into the abyss.

It was not a column, but a mob, an awful river that filled the street, the people of the abyss, mad with...wrong, up at last and roaring...I found that I was now looking at it for the first time. Dumb apathy had vanished. It was now dynamic—a fascinating spectacle of dread...concrete waves of wrath, snarling and growling, carnivorous...drunk with hatred, drunk with lust for blood...

The Iron Heel, Jack London (1908)

Yes, that Jack London. The Jack London of favorite action tales like White Fang and The Cruise of the Dazzler. The writer of a collection of "stories of adventure" my grandparents gave me for Christmas 1963. And also for Christmas 1966. And author of The Iron Heel, an apocalyptic prediction of a totalitarian America that foretold totalitarian Europe instead.

Jonah Raskin, editor of the collection I take the quote from, The Radical Jack London (2008), says that London wrote often of the abyss, both psychological and social, and it makes sense that a hashish-smoking alcoholic white supremacist who died of a self-administered morphine overdose (accidental or not) at a burned-out forty might know a thing or two about the depths.

But you and I can also peek into the abyss, anytime we want, from the comfort and security of our spare bedrooms.

Not that I realized it, but I'd been hanging onto a seemingly innocuous article, "Home-price data has its flaws", that appeared online at the Wall Street Journal's Market Watch, until chapter 23 of The Iron Heel helped me put, no, not the article in perspective, an article that mildly disses pop economist and, apparently for some folks, pop messiah Robert Shiller and his thrill-ride Home Price Index, but instead the many responses to the article.

The many many responses. The many many angry responses. I count forty-four printed pages of responses, many of them angry, some of them mildly scary. These guys may still be pulling hair and pushing, more than a year after the article appeared.

So what crimes did the writer of this MarketWatch article, one Chris Plummer, who by now may have changed his identity and entered a witness protection program, commit against the good sober citizens of the Internet?

Quoting National Association of Realtors® chief economist Lawrence Yun to the effect that Shiller's home price index is "flawed" (and also quoting someone from Case-Shiller who retorts that NAR's home price index is "faulty")
Quoting National Association of Realtors chief economist Lawrence Yun without making faces behind his back
Quoting National Association of Realtors chief economist Lawrence Yun
Repeating Yun's unsavory and implausible notion that an unusually high number of home sales at the low end, when combined with an unusually low number of sales at the high end, will skew the median sales price toward the low end, a notion that, as all good real estate conspiracy buffs know, is simply another example of the NAR trying to fudge the numbers
That because of gaps in the coverage of both Shiller's and NAR's home price indexes, neither gives a complete picture of what's happening to home prices
That the media, when faced with choosing between a barely eyebrow-raising five-year low in consumer confidence and an eye-popping twenty-six year low, hyped the twenty-six year low, without asking how there could be such a gaping difference between two well-known indexes
That when Shiller's home price index declined 12.7 percent, its largest drop ever, "the Associated Press reported that home prices 'plunged by a record' percentage and 'at their fastest rate ever'" without mentioning that the index these claims were based on goes back only seven years
That in February 2008, shortly before the article's publication, even Shiller's index showed that when broken down by price range, as the media rarely if ever does when reporting it, high-priced homes had declined far less in value than medium-priced homes which had, in turn, declined far less in value than low-priced homes, confirming the real estate industry's self-serving contention that "all real estate is local"

Well, I think you get the idea. Plummer, card-carrying member of the media, "former senior editor for MarketWatch and Bloomberg News and a reporter for such papers as the Los Angles Times and San Jose Mercury News", had the effrontery to suggest that the media's coverage of real estate mixes credulity and sensationalism into one hard-selling package. Which is, unfortunately—as someone who also feels knee-jerk liberal and anti-business impulses, it gives me no pleasure to say this—the truth, and maybe not just about the media's real estate coverage. But the truth is always dangerous to militant minorities, including the one that roams the Internet looking for confirmation that real estate is a roiling catastrophe in every neighborhood and at every price point, because for years they watched friends buy homes and then had to listen to them bragging about their skyrocketing equity.

Now it's the militant wing's turn, and nothing—not even the truth—will deny them.

The reaction starts out quietly, if not intelligently: I'm not buying this mea culpa[?]. Median still means median. Yes, it does, unless you understand statistics.

The pace picks up a bit with this favorite old wives' tale: This whole foreclosure problem was not caused by the lenders but by the government. Lenders in the past required being able to pay the loan. Washington stepped in and called that discrimination...The lender (sic) were then forced to loosen their requirements thus the foreclosure and housing market problems. I'll let FDIC chairman Sheila Bair, one of those bleeding-heart liberals that plague the Republican Party, refute this idea: "You've heard the line of attack", she says. "The government told banks they had to make loans to people who were bad credit risks, and who could not afford to repay, just to prove that they were making loans to low- and moderate-income people." But where in the Community Reinvestment Act, she asks, "does it say: make loans to people who can't afford to repay? Nowhere! And the fact is, the lending practices that are causing problems today were driven by a desire for market share and revenue growth...pure and simple." You can call it "greed", Ms. Bair, and I won't mind.

Back into the abyss. Next we're treated to a long rambling monologue, filled with misspellings, on how we should all do our civic duty and "just suck it up". Somebody who should be doing motivational speaking.

Then the obligatory fifth-grade name-calling, including slams against NAR ("Never Accepting Reality") and Yun ("Yielding Untruths Nonstop").

Then the obligatory post prefaced with Hmm, which is a poster's signal that he's about to subtly refute some glaring bonehead error: I do not know how accurate Zillow.com is [not very] but if anywhere near correct [not likely] my house in Chula Vista has gone from a peak of $925,000 to $639,000. That's much closer to a 30% drop, don't you think? No, it's closer to 31 percent. And as we all know, as Chula Vista home prices go, so goes the nation.

Then more conspiracy theory, and then this outburst: I feel like I am back in High, no let me say, Grammar school. It seems to me that we have become a world of nasty, name calling individuals yada yada. And the funny is, nothing's really happened.

Yet: Nice to see Pummer (sic) using stats from the *single most biased* group of shills in the housing industry. Perhaps pummer (sic) should get off his lazy a** and do some research on how chronically understated the NAR's projections have been for the past two years. Pathetic! Do you really expect anyone to take this c*** report seriously?? No, of course not, especially if it challenges their beliefs. But tell me, have you ever gotten off your lazy...sorry, have you *ever actually read* the methodology for the Case-Shiller Home Price Indices? What? Methodology. M-e-t-h-o-d-o-l-o-g-y. Never mind.

Then this perceptive thrust: Were the prices skewed as home prices were appreciating a few years ago? Didn't a lot of higher priced homes sell as well, and the lower priced homes got a big boost on the coattails of higher priced homes. Does Mr. Yun actually believe the words that come out of his mouth? What "Mr. Yun" might well believe is that reading comprehension, not to mention critical thinking, has fallen by the wayside. Because what Mr. Yun implied was exactly what you just said: when "a lot of higher priced homes" sell along with lower-priced homes, sales are more evenly balanced between the two price ranges and the median price isn't skewed toward either end, giving us a fairly accurate picture of which direction overall prices are moving. Unlike when mostly lower-priced homes are selling. So, yes, I think he does believe this, and so do I and, apparently, so do you. I'm glad we were able to get some consensus on this.

More conspiracy theory: The Real Estate industry "Actively Manipulated and Inflated Prices working with unethical Appraisers and Mortgage Brokers"! Real Estate Brokers Wrote HYPE Promo Buy Stories Published in Local and National Newspapers...as Independent FACTUAL REPORTS! Co-Conspirators of Mortgage FRAUD with inflated Appraisals, Unqualified Buyers, and Liar Loans! Yeah, now we're cookin'! Now some of the regulars are showing up! And he'll be letting the truth shine as long as his shift key holds out!!!

Yet more conspiracy theory: Do you guys realize what the cities and counties use for computing property taxes , and I think thats (sic) more of an important debate than the values computed by these agencies, most of these agencies are skewing the data anyway. You skew, I skew, we all skew.

Yet more conspiracy theory: Finally someone is speaking up about validity/credibility of information from the govt/industry. It never made sense. First time I noticed it was back in 2005, when inflation was just a bit over 2% while home prices increased over 10% Subway sandwiches rose by over 10% as well. And as we all know, as Subway sandwiches go, so goes the nation. And believe me, this isn't the only poster sophisticated enough to reject everything he hears unless it's posted on the Internet by a complete stranger with no credentials who thinks exactly like he does.

Someone else who's not buying any of it: Oh...homes are "under-priced". Ah, I get it. I am an American and I believe everything I hear in the media. A savvy guy, except that the article doesn't say homes are under-priced. And this guy probably does believe everything he hears in the media, as long as it fits his most cynical misconceptions—and you'd be amazed at how often it does.

Another big fan: This entire article is gratuitous uniformed pro-housing-industry schlock. Why? The NAR's measure does not adequately explain how much the economy is put at risk when home prices in any given area increase to more than 3 times the average yearly income of the same area. And Shiller's does? Both are home price indexes, not bubblehead manifestos.

More fifth-grade name-calling, in response to a previous post: "Location, Location, Location", Warning, Warning, Warning, Realturd Alert! What's ironic about this is that if the real estate industry has ever said anything credible, it's "location, location, location".

Five posts in a row praising the article, then the inevitable relapse into fifth-grade name-calling: I'm guessing your (sic) a paid shill, a realtor (sic), or just a homeowner in denial trying to sell, my pick would be paid shill... I'm guessing you might know a thing or two about "denial".

A minor scuffle breaks out, then: Seriously...The NAR dosen't (sic) want to get into an argument over the accurate nature of statistics!! Shiller and Schiff will BLOW THEIR DOORS OFF--Talk about ugly. Actually it's Shiller and Case, but you know that, because you know that old what's-their-names will BLOW THEIR DOORS OFF and besides, you've compared their methodologies. What? Methodologies. M-e-t-h-o-d-o-l-o-g-i-e-s. Never mind.

Then a long insightful debate on the war in Iraq, fiber optics, "Modern Day America" (is George Babbitt still alive?), then the guy who posted The Real Estate Industry "Actively Manipulated" etc. posts it again in its entirety (a guy who can stay on message that well should run for public office), then a few rounds of fairly moderate discussion punctuated by more inevitable fifth-grade name-calling, then two apparently independent references to the real estate market as a "Ponzi scheme", then a quote most likely lifted without attribution—"Zero sum games are symptoms of systemic risk"—from some pop economist's latest thriller, then a promise that the Case-Shiller Index "will get better" (Dr. Shiller? Is that you?).

Okay, here's one I like: Complete throwaway story. Quoting Yun (and so extensively) drops your credibility as a reporter to zilch. When I was a financial reporter, editors would have kicked that boosterish c*** back immediately. So you used to be a financial reporter, eh? Maybe back in the day when the financial press was hyping the dot-com and telecom booms like the Second Coming and touting Enron as a paragon of shareholder value? No boosterish c*** going on then, was there? And I agree, no reporter (whose gut tells him there's only one side to the story) worth his salt would quote a spokesman for the industry he's reporting on. Heck no, that would just be balanced reporting. Here's a suggestion: do this post in needlepoint, title it "Confessions of a Reporter" and hang in every (remaining) newsroom in the country as a somber warning against journalistic hubris. Hey, you don't suppose that's why this guy is an ex-financial reporter? I wonder how the Amway franchise is working out for him.

Well, after this things degenerate into more mondo bizarro economics, more wise-guy jabs at that can't-miss target the NAR, more inevitable fifth-grade name-calling, more rolls in the gutter over Iraq, more assertions that the real estate market in every neighborhood looks like a meteor hit it yada yada...excuse me, did I say "degenerates"? I meant to say "returns obsessively to its usual threadbare themes".

Now, in case you've forgotten, these are Wall Street Journal readers, at least supposedly. Our best and brightest. However, a client who knows far more about this than I ever want to tells me that many of these posters are fanatics who rove the Internet looking for articles on their favorite obsession to weigh in on, dump on and beat up on. The Internet, where informed people inform other informed people.

So welcome to the abyss and watch your step. No, it's not quite London's lurid abyss. In fact, it's not much of an abyss at all, barely worth the caution tape. Kind of shallow and insignificant, in fact.

Much like the conversation we just overheard.