In the past decade, since the release of the flawed 1998 study by Michael Mann, now known as MBH 98, the phrase “hockey stick” has been used to describe a certain shape of a graph. It has also become synonymous with poor data selection and bad statistical procedure.
Yet again and again we see climate studies pushing this hockey stick shape as a way of saying we are “living in the worst time period of the data”.
Here, without statistics, without bristlecone pines, inverted lake sediments, midge larvae carcasses, larch trees in Yamal, or convoluted never before seen statistical methods, I present a directly measured data set that produces a real “hockey stick” shape.
The data is directly measured and not a proxy, the plot is real. There’s no data adjustment or statistical manipulation. Care to know what it is?
From the website “Calculated Risk“
Here is the monthly Fannie Mae hockey stick graph …
Click on graph for larger image in new window.
Fannie Mae reported today that the rate of serious delinquencies – at least 90 days behind – for conventional loans in its single-family guarantee business increased to 4.45% in August, up from 4.17% in July – and up from 1.57% in August 2008.
“Includes seriously delinquent conventional single-family loans as a percent of the total number of conventional single-family loans. These rates are based on conventional single-family mortgage loans and exclude reverse mortgages and non-Fannie Mae mortgage securities held in our portfolio.”
Just more evidence of the growing delinquency problem, although these stats do include Home Affordable Modification Program (HAMP) loans in trial modifications.
Now that’s a hockey stick to be worried about.
It hardly is a surprise then that when we see that sort of graph of actual data in the American economy, we start to see graphs like this one depicting confidence in climate change as an important issue:
Source: Pew Poll, story here
(h/t to WUWT reader Michael)
Wow. The mortgage crisis ain’t exactly over.
What helter-skelter
Barney Frank and Boston Fed.
So, gimme shelter.
===========
No, no it is not. Housing prices will continue to have downward pressure on them because wages and employment are not recovering. Can’t buy a house (anymore) without any money.
I think the parallels between economic modeling and climate modeling are too richly ironic to ignore.
Both are subject to confirmation bias and popularity-based promotion. Tell people what they want to hear based on your model, and you are praised; tell people what they don’t want to hear and you are scorned and derided.
Both take chaos-rich systems and reduce them to a few simplistic explanations, which work perfectly for a while and then do not work at all once conditions morph beyond the bounds of the original model.
Both are used to drive policy, gaining influence far beyond their intrinsic worth.
Large amounts of money follow the popular projections, and then the money vaporizes. Those who promoted the models are not held accountable for the consequences of people taking them seriously.
Anyone else find this all a bit scary and foreboding?
It’s the ECONOMY, stupid!
IWWTWT
IT’S WAY WORSE THAN WE THOUGHT!!!!
but to be expected when politicians and Gubmint are involved!!!
No, Frederick, it’s a long ways from over. Not quite as big as the when the Savings & Loans went belly up but, still, big. Sad thing is both financial messes were predictable and primarily caused by government.
Funny, I was guessing that the graph represented the accelerated use of faked data by our friends, the warmists.
The Center for Responsible Lending estimates that there will be “13 million defaults over the time period 2008Q4 to 20014.” That is their estimate of “foreclosures on all types of mortgages.”
It’s doubtful if we are even halfway through the mortgage crisis.
The worse is yet to come. The time bomb hasnt even gone off yet. Hyperinflation will be coming soon.
I see you’ve identified a new proxy to be used in the next round of spaghetti graphs – I wonder if they’ll credit you?
As a renter who has never taken out a mortgage, I am not too worried about your hockey stick.
I am more worried about this one:
http://www.chartingstocks.net/wp-content/uploads/2009/03/money-supply.gif
A graph of FDIC bank closures will have the same shape (with no leveling).
Sunfighter (20:48:25) :
The worse is yet to come. The time bomb hasnt even gone off yet. Hyperinflation will be coming soon.
It’s not quite a true hockey stick shape, but probably a much more frightening graph. From the St. Louis Fed, the adjusted monetary base since 1910
http://research.stlouisfed.org/fred2/series/AMBNS
“The Center for Responsible Lending estimates that there will be “13 million defaults over the time period 2008Q4 to 20014.” That is their estimate of “foreclosures on all types of mortgages.”
It’s doubtful if we are even halfway through the mortgage crisis.”
20014 is a long time away. If we only have 13 million defaults by then we’ll be just fine…
I’m really glad you posted this one!
Now that they are realizing their climate hyperbole isn’t productive lets have something to be really scared of, and here it is, right before Copenhagen!
And Bush started warning of this problem in 2001 but Democrats in Congress and Senate Democrats (using the filibuster) in particular blocked any action. They went so far as to say in Congressional testimony that the problem was a figment of the Republican imagination.
There is a lot of testimony where Democrats are upset at Republicans for even calling attention to the problem.
They were warned going back to 2001 that this was going to happen. They chose to stick their head in the sand.
It is the same thing that is going on right now with climate “science”. They believe what they want to believe, facts be damned.
Anyone here live in California? Starting Monday you are going to find a surprise in your paycheck. The state government has decided that they are entitled to withhold more from your pay than is due in taxes in order to give themselves an interest free loan. They simply decided to take more of the people’s paychecks … which they might or might not be able to repay at the end of the year. And it is NOT voluntary. Anyone subject to withholding in California is going to have more withheld than is actually due. They believe your paycheck really belongs to them. We need to get rid of these idiots at EVERY level of government, municipal, county, state, and federal and get some people into office that know how to say “no” when it comes to the spending (and outright grabbing) of the people’s money.
I am so angry I could spit.
I meant to add that from Aug 08 to Sept 09 the economy was contracting sharply, so that 109% increase in the money supply was almost entirely the result of the fed printing money.
Here’s a similar post you guys might like. Briffa posted a sensitivity test reply to Steve McIntyre’s latest where he substitutes a bunch of other data with Yamal and still get’s hockey sticks.
Well rascal that I am I used his data and made my own versions of Yamal.
http://noconsensus.wordpress.com/2009/11/01/fixing-briffas-latest/
Bravo! Bravo! Direct, succinct, measured data for once! I am enthralled!
I am not so enthralled that is the ‘rate of serious [mortgage] delinquencies’, however. Be that as it may, it nice to see such a straight-forward presentation for once (not that there is anything wrong with that, or any deviation from that by the Team, the Team’s representatives or the Team’s duly deputized proxies for that matter) …
.
.
.
It’s sounds so good to let people who aren’t ready for a house loan to get one anyway with no money down, and then when they get in serious arrears on the payments, because they had no experience with handling money in that way, to offer them a re-worked loan. It sounds so nice to get as many people as possible in to their own house. But nice ideas don’t always work in the real world.
Nice ideas of benevolence create nightmares in the real world sometimes!
Anthony Watts,
Thank you for caring and putting this graph up as a post. I’m glad that more people are being made aware of this.
It may be a long road out of these troubles America has put itself into. But there is a better day on the way!
crosspatch (21:13:30) :
Anyone here live in California? Starting Monday you are going to find a surprise in your paycheck. The state government has decided that they are entitled to withhold more from your pay than is due in taxes in order to give themselves an interest free loan. They simply decided to take more of the people’s paychecks … which they might or might not be able to repay at the end of the year. And it is NOT voluntary. Anyone subject to withholding in California is going to have more withheld than is actually due. They believe your paycheck really belongs to them. We need to get rid of these idiots at EVERY level of government, municipal, county, state, and federal and get some people into office that know how to say “no” when it comes to the spending (and outright grabbing) of the people’s money.
As I understand it quite a number of those old oil platforms off the California coast are sitting on top of already drilled wells that have been capped. At any point, now or in the last 20 years, they are a month or two away from producing large quantities of oil. The royalties and taxes from them could or would have provided significant relief to California taxpayers and national relief for our imported oil bill. Given that studies I saw earlier in the year indicate that the predominate source of oil contamination in the oceans is now from sea floor seepage and pumping the wells might in all probability lead to a decline in oil pollution off the California coast, you might want to ask your legislators what they’re waiting for. Although at this point giving them more revenue to dispense is probably analogous to giving heroin to an addict.
That is a song I have been singing for quite a while. More oil seeps naturally from Coal Oil Point into the ocean in one year than was spilled by all offshore drilling operations in the decade of the 1990’s.
I also have a dear friend whose mother is in her 90’s. Her mother spent the summer in Santa Barbara. She said that before offshore drilling started, the beaches were foul with tar and the air smelled like kerosene. Her mother made the kids wash their feet in turpentine before they were allowed back in the house after going to the beach.
She said drilling did more to clean up those beaches than anything else.
“Her mother spent the summer in Santa Barbara.”
Meant: “Her mother spent her childhood summers in Santa Barbara.”
“”” gt (20:57:26) :
As a renter who has never taken out a mortgage, I am not too worried about your hockey stick. “””
Great thinking gt.
So what is your plan for when YOUR landlord goes belly up and they foreclose on the place you are renting, because he had it leveraged up the ying yang and now can’t pay HIS mortgage ?
Just asking; I bet you are glad you don’t pay property taxes either; do you ?
You have discovered the perfect way to sidestep the financial collapse.
Wait till the commerical real estate mortgage shoe drops !
“Wait till the commerical real estate mortgage shoe drops !”
That is not the ONLY shoe set to drop. There is another. When housing prices were rising quickly, people were put into short term (generally around 5-year) adjustable rate mortgages. When interest rates started to rise a bit in 2006 and 2007, these mortgages adjusted up and people who were on the edge of being able to pay at the initial rate defaulted at the adjusted rate. Ok, we have worked our way through most of that. Now there is a different problem. Most of those 5 year mortgage terms are due to expire and people will be forced to refinance. These are the people who COULD afford the higher interest rates back then and didn’t default. The problem is that they now hold a $500,000 mortgage for a home worth $300,000 and they have to refinance it or come up with the $500,000.
There are a ton of these mortgages that are due to expire (or “reset”) in 2010 and 2011. Who is going to finance a $20 bill for $50? There are going to be a LOT of people walking away from a lot of mortgages in the next year or so.
Well, I guessed wrong twice. I first thought it was the unemployment rate, and then the M1 money supply.
I’m starting to hate that shape…
Crosspatch says: “I also have a dear friend whose mother is in her 90’s. Her mother spent the summer in Santa Barbara. She said that before offshore drilling started, the beaches were foul with tar and the air smelled like kerosene. Her mother made the kids wash their feet in turpentine before they were allowed back in the house after going to the beach.”
When I was a kid in the ’70s, we would vacation in Carlsbad CA and we would get tar on our feet from the beach. My grandfather would use gasoline to get it off. You can actually see the black lines in the ancient sediment stratas of our eroded cliffs. Tar, or vast wildfires, something deposited black layers on top of the ancient sea floors.
How to lie with statistic charts. The graph actually shows a 4% change, but since the y-axis range of the graph is 5%, the up-tick spans 80% of the graphic range. A more representative graph would show it against a 100% range – possibly +/- 50%, against which the change would scarcely show at all. The parallel with the kind of charts churned out by the AGW models and IPCC is striking because they both induce similar misunderstandings of available information. My statistics professor used to come down very hard on anyone that proposed to use percentages where actual numbers were available. He also liked to ridicule poorly designed graphics.
Wow that money supply chart is not a mere hockey stick, It’s a tsunami.
Those curves are explained in this video… http://tr.im/DMbq
“The graph actually shows a 4% change”
Incorrect. That graph shows a nearly 900% change from about 0.5% of mortgages in default to about 4.5% of mortgages in default. That is nearly a 900% increase.
So if you have a million total mortgages, to go from 5,000 defaults to 45,000 defaults is quite a jump. And look how stable it was at 0.5% for so long.
Well, 800% but you lose count at 400% or so 🙂
Good hockey stick Anthony, but could have looked better if put in a ‘portrait’ syle box instead of landscape.
My own forecast on economic recovery is that by July next year we will be in Recession Part Two, which will be far worse than part one and could easily be another Great Depression. Should Copenhagen get signed, this will happen in December this year.
“20014 is a long time away.”
Yep.
JDougherty (00:04:19) wrote:
“How to lie with statistic charts. The graph actually shows a 4% change, but since the y-axis range of the graph is 5%, the up-tick spans 80% of the graphic range. A more representative graph would show it against a 100% range – possibly +/- 50%, against which the change would scarcely show at all.”
Nonsense. A chart should be scaled to show the range of possible movement made by the trendline, not its theoretical maximum. For instance, it would be absurd to show an earthly temperature graph with a maximum of 500 degrees, just because it gets that high on Venus. And it would be absurd to employ a chart with a delinquency rate of 50%, because it’s hasn’t approached that rate, remotely, in the post-war period. The current rate is a post-war high, by far. Until recently, a good upper bound for the chart would have been 2%.
“A more representative graph would show it against a 100% range – possibly +/- 50%, against which the change would scarcely show at all.”
If you want to conceal what’s going on–that the line has risen ninefold in the past two years, from about .5% to 4.5%–that’s the sort of chart to employ.
“My statistics professor used to come down very hard on anyone that proposed to use percentages where actual numbers were available.”
Nonsense–that implies that statisticians should abandon batting averages in favor of number of hits. The percentage is a better figure. Similarly, percentages are better to use here, because they’re what’s relevant: the percentage of mortgagees who are delinquent, not the number. The population of home-owners has grown significantly since WW2, so a chart that stuck to the raw numbers wouldn’t show us the relevant information.
“He also liked to ridicule poorly designed graphics.”
I’ll bet what he’ll ridicule is your argument. Why don’t you e-mail him a link to this thread and ask him to comment? (It’s easy to obtain the emails of faculty members by searching the sites of their institutions.)
I guessed wrong – I thought the hockey stick would be a measure of damage done to the lives of honest ordinary citizens by the antics of AGW eco-fascists and their scientifically illiterate political followers.
But perhaps I wasn’t too far adrift….
The end result of the shoes dropping is to facilitate a form of a land grab.
Once displaced from the land, the people are finished. So too is the power of the US.
Just one more piece of the puzzle: Where are the mortgages really held?
For the benefit of non-American’s, is this just more of the same or a (unintended) consequence of new rule making where default is a better option than carrying a now overvalued asset?
Thats not a trend, that is an outlier. It should be smoothed, modelled, compared with tree rings, or ice cores and then we will see that no-one is actually in any financial hardship at all.
There used to be tar on Cornish beaches when I was a child, and it’s very rare now. Ships used to clean out their oil-tanks at sea in those days, a practice that has been largely stopped. There are no off-shore oil wells in this area. Could ships have been the reason for dirty Californian beaches in the past?
We have a similar problem over the pond and a bunch of idiots in government who don’t have clue one what to do about it.
Before I expanded the article I thought this particular hockey stick was measuring the increase in warmist alarmism on the run-up to Copenhagen…
This thread underscores, rather emphatically, the problem most folks have with investing. You have heard or maybe even studied a great deal about the economy and recognize imbalances and/or bubbles. But market sentiment often runs opposite generally because the sentiment investment horizons are much shorter than economic trends. If you weight long term over sentiment you’ll likely lose. In this environment, hedging or straddles or such is likely to be a good thing along with placing emphasis on hard assests (commodities). There is no doubt we will have Fed induced inflation, it’s just a matter of when, how much and over what timeline.
It’s just a matter of time before someone brings out a paper with this conclusion: “It is now 95% certain that loan delinquencies are caused by global warming”.
Chris
Check out the graph here
http://news.bbc.co.uk/1/hi/business/8332861.stm
UK house prices
There seems to be a high inverse correlation between increasing global temps and lack of savings, and a direct correlation with foreclosures. Appears that global warming causes both. Facts to follow. Maybe.
Now can I have my Prize and more grant money please?
This way of scientific thinking would be more funny I guess if it weren’t so true.
Mark Steyn’s Sunday column: click
And Christopher Booker’s latest: click
There is another hockey stick but it is inverted.
it’s the price of carbon credits.
I hope it stays that way.
There is another hockey stick but it is inverted.
it’s the price of carbon credits.
I hope it stays that way.
BTW I love your blog!
Housing prices will continue to drop until the cost of ownership versus the cost of renting makes sense. Here is a tidbit for any future investors. The amount of gross monthly income you receive from an investment property should be about 1% of the purchase price. Straying too far from that is a recipe for foreclosure.
Frederick Michael (20:15:10) :
“Wow. The mortgage crisis ain’t exactly over.”
Just wait until they discover the commercial property side of the mortgage crisis.
David (20:19:25) :
“Can’t buy a house (anymore) without any money.”
Sure you can, I’ve seen recently booked dual first second mortgages totaling the sale price. You just have to be very selective in who you approach for money and have at least a sale price that is under 80% of the appraised value.
We don’t even need to talk about the 3% down loans being offered by Frannie and Freddy (can you say, I see another bubble forming. I knew you could).
Look at these numbers. If you can’t think of a plausible scenario that resolves this, then you have to consider the possibility that it doesn’t get resolved.
http://www.usdebtclock.org/
The US GDP is up 3.5% in the 3rd quarter of 2009. Whoohoo!
er, what is 3.5% of zero?
Mike (20:27:37) :
“No, Frederick, it’s a long ways from over. Not quite as big as the when the Savings & Loans went belly up but, still, big. Sad thing is both financial messes were predictable and primarily caused by government.”
Exactly.Being a Realtor in the last ten years,I have seen it all,and I can say if the govn’t steps in they could screw up a ball bearing with a toothpick.The S&L debacle was worse,but somehow this is now even worse due to intervention.And the perps,
Barney Frank and Chris Dodd- and a few others need to spend some time in a Fed
lockup.
“Like Government?
Ask an Indian.”
Haven’t looked at the answer yet…. It’s either National Debt… or a chart detailing over the few years the rise in my alcohol consumption!!!
Haven’t looked at the answer yet…. It’s either National Debt… or a chart detailing over the few years the rise in my alcohol consumption!!!
BTW I love your blog!
I thought it was going to be a graph showing the use of the phrase “it’s worse than we thought” as derived from the Lexis-Nexis database.
Funny, ain’t it…our economic climate is 100% caused and controlled by man….and we get a hockey stick.
If we decided to use the CO2 cap & trade model to fix this, it’d mean that the people who still own home, along with the people who’ve lost theirs or have been renters will have to pay a tax on property they do or do not own to people in a developing country who own property of a lesser value? Somehow that’ll cure the problem?
Word has it from some insiders I know that foreclosures are going to jump around the 1st of the year, and the banks aren’t happy.
The graph is, of course, as yet incomplete. The chances are that this will peak out and return to lower levels in a year or so.
You might find a similar curve if you measured viable zygote frequency delivered in mission-critical activities associated with human conception.
Any chance that the same will happen to global temperature? After all, if you look at the graph in one other recent article here, you’ll see the descent into an ice age is usually preceded by hockey stick-style temperature increases….
DaveF (02:39:52) :
There used to be tar on Cornish beaches when I was a child, and it’s very rare now. Ships used to clean out their oil-tanks at sea in those days, a practice that has been largely stopped. There are no off-shore oil wells in this area. Could ships have been the reason for dirty Californian beaches in the past?
No. Or if ships cleaning their oil tanks was a factor, it was insignificant.
IIRC, more oil seeps out of the ground under the ocean every 5 years than was spilled by the Exxon Valdez accident, though some people still blame it on the oil spills of the 1969. This paper says the amount of oil seepage is much higher: http://pubs.acs.org/doi/abs/10.1021/es802586g
Google for <> turns up a lot of hits;
For example, the local Indian tribe, the Chumash, built tomolos (a canoe-like boat)) and water proofed them with a tar mixture.
From:
http://www.ehow.com/about_4565667_the-chumash-indians.html
“The tomolo constructed by the Chumash were held together by a mixture of tree sap and naturally-occurring tar asphalt which flows from underwater natural gas and oil leaks in the Santa Barbara channel.”
That should be Google “santa barbara” oil exxon chumash tomol
UK Sceptic (03:09:08) :
“We have a similar problem over the pond and a bunch of idiots in government who don’t have clue one what to do about it.”
That, sir, is a universal statement which applies to all governments.
As they used to say in Vaudeville:”You ain’t seen nothin’ yet” (long before BTO recorded it)
Yep. Some banks have been sitting on foreclosures and short sale for as long as 18 months. Not sure how you get around that via accounting trick, but if the climate can still be warming when it’s cooling, then anything is possible.
“Could ships have been the reason for dirty Californian beaches in the past?”
No. That tar predates oil fired shipping by hundreds of centuries.
Great point, Halfwise. Anyway, I think the folks with the computer models are fundamentally the same as Court Astrologers from the middle ages. In essence, their jobs are to use pseudoscience to tell the King what he wants to hear.
North of 43 south of 44 (06:25:37) :
Just wait until they discover the commercial property side of the mortgage crisis.
Last Sunday, Capmark Financial, one of the largest commercial lenders, declared bankruptcy.
“Tom in Texas (11:50:07) :”
And 9 US banks failed and were taken over on Saturday.
North of 43 south of 44 (06:25:37) :
Just wait until they discover the commercial property side of the mortgage crisis.
The commercial market – I’ve been harping on this overlooked detail for quite some time. It’s gonna get worse before it gets better.
M White (04:21:00) :
“Check out the graph here
http://news.bbc.co.uk/1/hi/business/8332861.stm
UK house prices”
Extract from the BBC article.
“…Seema Shah, property economist at Capital Economics, said: “The upturn in house prices already appears to be losing momentum.
“With the housing market still overvalued, activity still at levels which would normally result in falling prices, and unemployment still rising, we expect house price falls to resume in 2010…”
By saving the banks, all governments around the world did was to provide a reprieve to stop the bubble bursting. This had the effect of deflating the bubble slightly, but it is now growing rapidly and governments can’t afford another bail-out when it starts to burst again.
i like hockey!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
Ah, excuse me but if that graph is accurate the worst of the financial mess has yet to happen. Yikes, start stocking up on staples and other supplies while the getting is good.
Anthony it would be really interesting to see the details of the Mannian errant math and especially the program that he used to calculate the hokey, er, hokey stick. I understood that it will produce a hockey stick curve even with random data, is that correct? It would be fun to see that.
crosspatch (21:13:30) :
Spot on!
Can anyone recommend some good econ blogs/forums?
“Can anyone recommend some good econ blogs/forums?”
Try the articles section of the Seeking Alpha site–it has a preponderance of bearish members–including me. Here’s the link:
http://seekingalpha.com/articles
Amherst Mortgage had a paper out Sept. 23 indicating nationally 1.35% the yearly inventory of homes for sale is currently on track for foreclosure, i.e., accounting for those loans in trouble that will be eventually saved.
So homes are set to fall another 10-15% in value. This does not include a commercial property crash that will occur with numerous businesses and developers in trouble. Which, of course, is more trouble for insurers and re-insurers.
Bank failures next year will double those of this year. The FDIC is asking for 3 years of premiums from remaining banks rather than beg Congress for another advance beyond the 100 billion it got this year.
Your ride ain’t over.