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In recent days, Wall Street executives have been out front assuring investors that the problems in the subprime market won’t create a contagion that spreads to other markets. It’s as if they were reading from the same teleprompter, or from the same “talking points” provided by their PR handlers. But there are some investment pros who fear that this will spread to other markets, including some interviewed by Ambrose Evans-Pritchard for a story in the London Telegraph. Bond guru Bill Gross takes a somewhat different view, but in his latest commentary on the Pimco web site, he predicts that the fallout from the subprime mess will prompt the Federal Reserve to begin cutting interest rates within the next six months, with the belief that lower rates will provide liquidity, stimulate economic activity and hopefully keep the credit markets from freezing up. I’ll comment on the question of whether there’s a contagion risk later, but wanted to share this story to stimulate discussion.
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.