I saw a programme on CNBC yesterday, about the guy who did the Big Short and made $750 million in the process of shorting (short selling) Mortgage Default Swaps.
The guy has Asperger's syndrome; that affliction is a gift to him, for it enables him to concentrate on research he's doing to the exclusion of much else. Normal people get distracted or bored, but this guy can concentrate easily. And he finds a gold mine.
He finds trades which win. He notices that the housing market is overdone - a lot of people who have taken out jumbo loans, subprime loans, won't be able to service the mortgages when the housing bubble bursts.
He also realizes that someone else will also get the same perspective. On his goldmine,
he checks with his Analyst : How to profit from the housing market's impending collapse, which to him is sure to happen although most people at that time are blissfully euphoric and will simply not entertain that idea even.
The Analyst suggest Mortgage Default Swaps. And the inspired owner of Scion Capital LLC loads up on these 'shorts'. In due time the housing market falls, and Scion Capital makes a killing.
Why am I telling you this old story? Because, if the housing market collapse made this guy $750 million but wipes off $5 Trillion from the housing market, then don't we have a reason to celebrate? The obverse of this is....? Hopefully by pumping $750 million dollars or even a couple of billion, it may prove possible to rejuvenate the housing market in America! As the housing market has started to recover anyway, it just needs judicious use of the derivative instruments and consumer confidence in the market to get everything back into a happy position.
Thanks to seeing this programme, my heart and mind can see a great restoration of confidence and value in the US housing market. Maybe the only proviso that needs to be there is that house ownership should be allowed first to people who are buying their first house, large families who need a house for themselves, and friendly people who will share big houses. The market will become solid as a rock.