Wednesday, January 30, 2008
Tuesday, January 29, 2008
Here is what you get:
Los Angeles -27.0%
San Diego -9.8%
San Francisco -11.7%
Washington DC -20.9%
Las Vegas -26.5%
New York -12.5%
This says Denver, Atlanta and Minneapolis are OK, and Chicago is close to OK. Boston was probably overpriced in 2002 (see my paper with Chang and Cutts), but I find it plausible that it is near bottom, because it started its downturn before other markets. Four percent nominal growth is not in the cards for Detroit and Cleveland, and Dallas has never had a lot of house price growth, so don't get excited about their positive numbers. Florida, Las Vegas, Los Angeles and Washington appear to have a way to go (although Washington and LA are very fragmented, a point I will get to in another post). I am not sure whether the Pacific Northwest is seriously overpriced, or whether it, like San Francisco, can sustain higher house price growth than the rest of the country.
The following is particularly important:
Many of the losses in housing markets cannot be avoided because they are the result of lax credit standards and otherwise excessive underpriced risk taking in the past. Policymakers cannot undo all those losses, and attempting to do so would reward the excessive risk taking, which could encourage excessive risk taking in the future, and shift the losses from borrowers and lenders to taxpayers.
A possible role for policymakers is to help the housing and mortgage markets cope with the aftereffects of the end of the housing boom. Some actions (described below) have already been taken.38 Policymakers may consider other proposals for helping mortgage markets overcome impediments to changing terms of troubled mortgage loans, which could both reduce lenders’ losses and help homeowners. Policymakers may also consider increasing opportunities for subprime borrowers to refinance mortgage loans. Both actions would help avoid foreclosures, eliminating one source of downward pressure on house prices. Finally, policymakers might be able to help stabilize the subprime mortgage market by establishing or empowering an agency to buy subprime loans. Such an option, however, could significantly shift mortgage losses from current lenders and investors to taxpayers.
Important factors to note, however, are that house prices are likely to fall farther before the housing correction is complete and that misguided policies can make matters worse. Policies that work against the market’s necessary adjustments may delay the recovery of financial markets and impair the pace of economic activity. One example is the forbearance policy of Japanese bank regulators during Japan’s recession of the 1990s. By allowing Japanese banks to delay recognizing losses on real estate and other loans after Japan’s real estate boom ended in 1990, the policy helped delay the recovery of Japan’s banks.
Monday, January 28, 2008
I am not saying we have hit bottom yet, and some markets (Florida, the California Inland Empire) have some further price declines ahead, but I am just a little optimistic for the first time in awhile.
Saturday, January 26, 2008
Heavy rail is not a good transporation option in the absence of high levels of density. John Kain showed years ago that inapporpriate heavy rail cannibalizes funding for other forms of transit, and tends to reduce public transportation ridership.
A rail line to Dulles is particularly inappropriate because there is already a dedicated four-lane highway to Dulles--a highway that is vitually never congested. This means a viable public transportation option--nice express buses that run frequently--could be put into place at relatively little expense. The problem now is that the buses don't run frequently enough to enough places, and so they are not an attractive option relative to driving. But $5 billion (the cost of the proposed extension) placed in treasury securities could fund an awfully large number of bus routes.
I am actually a little more sympathetic to heavy rail than was Kain--I am not sure his work captured all the general equilibrium benefits of rail under certain circumstances. But I am pretty sure that the proposed extension to Dulles is economically a non-starter.
Friday, January 25, 2008
A person with a $500,000 mortgage would find an extra $4,000-$5,000 in her pocket before tax if she could refinance out of a recent jumbo into a conforming mortgage. This is much larger than the proposed tax rebate, and would also be permanent. The downside for consumption is that investors in jumbo loans would see their investment incomes fall, but still...
Wednesday, January 23, 2008
Anyway, I looked up their web site tonight, and found this.
Given that the players range in age from 14-17, this is amazing. In fact, one needn't make much allowance for age at all.
One other thing from the Prof's point of view. New assistant professors are much more tooled up than older professors like me, and then (rightly) want to teach the latest and greatest knowledge. But it has been true for me that as I have grown older, my knowledge of what I teach has grown deeper (at least I hope so), which in turn has enabled me to make points in class that I could not have made when I started (again, at least I hope so).
Tuesday, January 22, 2008
Before the early 1980s, the owner-occupied housing component was measured as the user cost of housing: that is, the value of the housing stock multiplied by an appropriate rate of return plus depreciation and maintenance net of expected appreciation. This measure had the problem of being exceedingly volatile, in contrast to rents, which are not. So beginning in the 1980s, households were simply asked what they thought was the level of rent that their house would command. So how many of you out there know what your house would rent for, and by how much it would change each year? I thought so.
Turvey's point is that we have a major component of the CPI that is not directly observed in any market, and that this creates some serious issues as we try to figure out real incomes. He suggested looking at the cost of new houses, but this of course has the problem that (1) new houses are not very representative of the stock and (2) are in very different locations from the general stock. The problem remains in search of a solution.
In his defense of his own book, Matthew makes the point that if economists fail to engage environmentalists rhetorically, they will be ineffective. But I think there is a more important point that Mills (who is, indeed, a giant in our area) misses: that environmentalists are able to advance policies that are demonstrably damaging to the environment (such as fixed railed transit systems in low density cities, land use regulation that effectively decreases density, and an at times antediluvian hostility toward urban development) because economists have so little credibility with the general public on environmental matters. Matthew's life work has been about combining credible economics with credible environmentalism. For that, reviewers, no matter how influential, should be grateful.
Monday, January 21, 2008
Tuesday, January 15, 2008
The study finds that price effects on consumption and vehicle choice are small. This suggests that gas taxes fare poorly as a Pigou Tax--a tax put in place to cure an externality--but perform well as a Ramsey tax--a tax that doesn't distort behavior.
A policy that has made sense to me for a long time is one that would use higher gas taxes (which are salubrious whether Pigou or Ramsey) to fund lowering the payroll tax. Lowering the payroll tax would stimulate spending and encourage workers to work and hirers to hire. It does decouple Social Security Revenue from Spending, and as such creates political problems, but still..
Sunday, January 13, 2008
CPI growth by Quintile relative to overall CPI growth, Nov '06-Nov '07.
Lowest 20% -.128%
Second Lowest .174%
Middle Quint .017%
Second Highest -0.017%
Highest 20% -0.094%
Someone out there should do this carefully--I would be happy to share my spreadsheet. It appears to be less of a big deal than I originally thought.
Friday, January 11, 2008
The top 50 countries in the World in net migration per capita are:
Rank Countries Amount (top to bottom)
#1 Liberia: 26.86 migrant(s)/1,000 populati
#2 United Arab Emirates: 26.04 migrant(s)/1,000 populati
#3 Cayman Islands: 17.34 migrant(s)/1,000 populati
#4 Kuwait: 16.05 migrant(s)/1,000 populati
#5 Qatar: 13.12 migrant(s)/1,000 populati
#6 San Marino: 10.57 migrant(s)/1,000 populati
#7 Aruba: 10 migrant(s)/1,000 populati
#8 Turks and Caicos Islands: 9.98 migrant(s)/1,000 populati
#9 Bosnia and Herzegovina: 9.65 migrant(s)/1,000 populati
#10 British Virgin Islands: 8.83 migrant(s)/1,000 populati
#11 Luxembourg: 8.64 migrant(s)/1,000 populati
#12 Singapore: 7.98 migrant(s)/1,000 populati
#13 Monaco: 7.65 migrant(s)/1,000 populati
#14 Northern Mariana Islands: 7.64 migrant(s)/1,000 populati
#15 Burundi: 7.13 migrant(s)/1,000 populati
#16 Andorra: 6.42 migrant(s)/1,000 populati
#17 Jordan: 6.11 migrant(s)/1,000 populati
#18 Canada: 5.79 migrant(s)/1,000 populati
#19 Botswana: 5.49 migrant(s)/1,000 populati
#20 Man, Isle of: 5.27 migrant(s)/1,000 populati
#21 Anguilla: 5.12 migrant(s)/1,000 populati
#22 Ireland: 4.82 migrant(s)/1,000 populati
#23 Liechtenstein: 4.73 migrant(s)/1,000 populati
#24 Hong Kong: 4.72 migrant(s)/1,000 populati
#25 Macau: 4.42 migrant(s)/1,000 populati
#26 Guernsey: 3.81 migrant(s)/1,000 populati
#27 Australia: 3.78 migrant(s)/1,000 populati
#28 New Zealand: 3.43 migrant(s)/1,000 populati
#29 Mayotte: 3.35 migrant(s)/1,000 populati
#30 Portugal: 3.31 migrant(s)/1,000 populati
#31 United States: 3.05 migrant(s)/1,000 populati
#32 French Polynesia: 2.81 migrant(s)/1,000 populati
#33 Brunei: 2.79 migrant(s)/1,000 populati
#34 Jersey: 2.74 migrant(s)/1,000 populati
#35 West Bank: 2.71 migrant(s)/1,000 populati
#36 Switzerland: 2.66 migrant(s)/1,000 populati
#37 Netherlands: 2.63 migrant(s)/1,000 populati
#38 Denmark: 2.5 migrant(s)/1,000 populati
#39 Rwanda: 2.41 migrant(s)/1,000 populati
#40 Greece: 2.34 migrant(s)/1,000 populati
#41 Bermuda: 2.34 migrant(s)/1,000 populati
#42 Germany: 2.18 migrant(s)/1,000 populati
#43 United Kingdom: 2.17 migrant(s)/1,000 populati
#44 Angola: 2.14 migrant(s)/1,000 populati
#45 Italy: 2.06 migrant(s)/1,000 populati
#46 Malta: 2.04 migrant(s)/1,000 populati
#47 Austria: 1.91 migrant(s)/1,000 populati
#48 Norway: 1.72 migrant(s)/1,000 populati
#49 Sweden: 1.66 migrant(s)/1,000 populati
#50 Croatia: 1.58 migrant(s)/1,000 populati
Note that the US is only 31st, and that Canada and Australia, two countries with lower incomes, have high net migration rates (although they also have more liberal immigration policies). Only one country of any size in Europe, Portugal, has higher net migration than the US, and it ranks only one place ahead. Migration to Germany, the UK and Italy are about 2/3rds the rate of the US.
I would not make too much of this, but it is an interesting indicator.
Thursday, January 10, 2008
-I am grateful to the people at Apple, who simply replaced my iPod with the trashed hard-drive (it was only 9 months old) for free. It enabled me to listen to Sweeney Todd--a piece that in my mind is just as good as La Boheme--on the way in. The emotions it stirred also brought to mind a conversation I had with Ed Glaeser many years ago. I told him that music moved me very much, whereas I just liked great paintings. He told me the opposite was true for him. I think it is too bad that we all aren't very moved by both.
Wednesday, January 09, 2008
by Atul GawandeThe article is a brilliant examination of the use of statistics to improve outcomes. It also finished with a pretty good philosophy of life.
I do not have to consider these matters for very long before I start thinking about where I would stand on a bell curve for the operations I do. I have chosen to specialize (in surgery for endocrine tumors), so I would hope that my statistics prove to be better than those of surgeons who only occasionally do the kind of surgery I do. But am I up in Warwickian territory? Do I have to answer this question?
The hardest question for anyone who takes responsibility for what he or she does is, What if I turn out to be average? If we took all the surgeons at my level of experience, compared our results, and found that I am one of the worst, the answer would be easy: I’d turn in my scalpel. But what if I were a C? Working as I do in a city that’s mobbed with surgeons, how could I justify putting patients under the knife? I could tell myself, Someone’s got to be average. If the bell curve is a fact, then so is the reality that most doctors are going to be average. There is no shame in being one of them, right?Except, of course, there is. Somehow, what troubles people isn’t so much being average as settling for it. Everyone knows that averageness is, for most of us, our fate. And in certain matters—looks, money, tennis—we would do well to accept this. But in your surgeon, your child’s pediatrician, your police department, your local high school? When the stakes are our lives and the lives of our children, we expect averageness to be resisted. And so I push to make myself the best. If I’m not the best already, I believe wholeheartedly that I will be. And you expect that of me, too. Whatever the next round of numbers may say.
I think he was wearing that hat when I took labor economics from him in, oh, 1978.
There is only one problem with this line of reasoning: rents for US office buildings are denominated in dollars! This means that from a European point of view, the income being produced by these buildings is declining.
The good news is that commercial buildings generally do not now receive the generous loan terms that homebuyers enjoyed recently. Loan-to-value ratios are pretty low, and debt-cover-ratios are pretty high, so a meltdown in the commercial mortgage market is not likely. But I would expect those with equity positions in office buildings to not be happy about the next couple of years.
Monday, January 07, 2008
Thus, the real question we face as a society is why is it that the price of 60 million urbanized acres is increasing at such a rapid rate when we have at least 1000 million acres of crop and forest land we could develop? Is it due to simple supply restrictions in New York and San Francisco? My guess is that it is not: What is going on with land and housing reflects something fundamental about the way we engage in production. It seems we need to focus our production in cities to exploit our comparative advantage of the production of services. Thus, over the next 20 or 30 years, I expect land and housing to be a good investment. It's just the next three years that are in question.
That said, over the next few years house prices are going to fall. The reasons are straightforward: A large class of borrowers that had access to mortgage credit just two years ago can no longer get a mortgage; down payment requirements have increased; and the jumbo-conforming spread has widened. This is terrible news for house prices and homeowners. Any regulations or outcomes that make it harder or more expensive for households to obtain mortgage credit will put downward pressure on house prices. The reason is that as mortgage credit becomes harder or more expensive to obtain, the number of households that can afford any given house falls. So prices must fall to clear markets.
I think this pretty much gets it right.
|URL for this articl|
How Well Can We Expect to Understand House Prices? Six Puzzles to Consider
Richard K. Green
New Orleans, LA
January 5, 2008
Five Influences Underlying this Talk
• George Akerloff’s AEA Presidential Address
• Jim Shilling’s AREUEA Presidential Address
• Robert Shiller’s recent writing on house price dynamics
• Bill Wheaton’s out-of-sample forecasts
• The current subprime crisis
Lots of Papers about House Price Dynamics
• Case-Shiller (1989) The Efficiency of the Market for Single Family Homes
• Meese-Wallace (1994) Should I leave my House in San Francisco?
• Green (2002) Can we explain the Santa Clara Housing Market?
• Common theme—parsimonious models (a la Friedman) fail to unlock completely the
mysteries of the housing market
Why do we do so badly?
• Human beings do not seem to maximize the objective function economists would
write down for housing
• Human beings seem to have mis-calibrated expectations
• There appear to be lots of adverse selection problems
• We still don’t understand supply issues well enough
Puzzle One: Tenure Choice and User Cost
• Two anecdotes:
– The Wharton West Story
– The Bangladesh-Barber Story
• More formal evidence
– Meese and Wallace (1994)
– Genesove and Mayer (2001)
– Green (1996)
– Capozza, Green and Hendershott (1996)
Puzzle Two: Expectations about House Prices
• Case-Shiller Surveys
• Implied Expectations from Observing Market Conditions
• Misunderstanding of appreciation (Harding, Rosenthal and Sirmans 2007)
• Just the whole idea that “housing is a good investment” (separate from issue that
owner-occupied housing can be utility maximizing). See Goetzmann for a view on
housing as an investment
Puzzle 3: Borrower Behavior
• A remarkable willingness to take on a large obligation that is not well understood
• For awhile, less than ruthless prepayment
• In the past, less than ruthless default. Is this still true?
– Can we draw inferences about prime borrower behavior from subprime borrowers?
More on that large obligation that is not well understood
• Even for the most straightforward mortgage, disclosures are not very helpful
• APR—the “sticker price”—does not convey accurate price information to borrowers
• Fees are not built into APR, and APR is sensitive to expected duration of the
• Stanton and Wallace (1998): What’s the point?
• For Adjustable Rate Mortgages, even more confusion
Puzzle 4: Why does this state of affairs continue?
• Why don’t borrowers shop for no-cost loans? Would a default product make sense
(see recent paper by Barr, Mullainathan and Shafir 2007)?
• Alternatively, why not have the Guttentag (2007) proposition: everything needs to
get rolled up into rates and/or points
• Why is there not more demand to buy mortgage counseling?
• Is it possible that there are too many products?
Puzzle 5: Lender-Investor behavior
• Lots of adverse selection and moral hazard
• Main difference between conventional conforming market and private-label market:
the conventional conforming market is far more homogeneous in observed
characteristics—and presumably unobserved characteristics as well
• What does that mean about the sort of people who borrow in the private label—and
Subprime Loans Are Far More Heterogeneous (pretty picture)
Puzzle 6: The compensation chain
– incentive to originate
– Fee driven
• Originators—little capital at risk
• Rating agencies
– Backward looking
• Why don’t investors see this? Two common explanations:
– Expectations that house prices would rise forever everywhere
– The world is swimming in cash
Brokers: Controversial Mortgage Terms
Broker channel likely to use instruments that have been the subject of controversy (picture)
– Higher share of loans with prepayment penalty
– Steering more ‘prime’ borrowers with good credit towards subprime and hybrid
Regulated Institutions Originate Fewer Loans with Controversial Features (picture)
Regulated vs. unregulated originator behavior
Low/no doc and 2-year hybrid loans claim a higher share as a percent of total
number of loans securitized by unregulated institutions
• The five neutrality results:
– Consumption from Wealth instead of income
– Natural Rate
– Rational Expectations
– Ricardian Equivalence
• In empirical analysis, they don’t work particularly well
• What do they have in common: expectations.
• Compares ex ante expectations and ex post results for commercial property
• Finding: investors are always too optimistic about returns
• Implication of this and other results: we need to do a better job of understanding
• Herbert Simon’s point: talking with people is one of the more efficient routes to
fundamentally new ideas.
Calling Daniel Kahneman
• We need to think of how to do experiments on how people make housing decisions
• Three questions I would like to ask everyone who engages in a housing transaction:
– How much do you think house prices will rise in your market?
– Did you make an explicit comparison with the rental market when you bought (and
the converse question for renters)
– What is ownership per se worth to you?
Sunday, January 06, 2008
The broader point, though, is I think that those urban economists--and you know who you are--who think that the best policy would be to give people a cash payment to compensate for relocating to other places are missing something important--NOLA is the rare case of a city that is so special, we almost certainly want to keep it for cultural reasons. As Chris Redfearn said to me when we sat down to eat lunch, in New Orleans you know the city where you are sitting by just looking at the food--gumbo looks different there, and boy does it taste different.
But as an economic place, New Orleans is not a going concern, and wasn't so before the flood. While the ineptness of the government in dealing with the flood certainly made things worse, they were bad enough before: income, education, crime, employment and government services in general have long been at substandard levels, and businesses have long been fleeing Louisiana.
Let's be honest, though, other cities were in similarly dire straights before Katrina: Buffalo, St. Louis, Syracuse, Troy, some of the cities along the Rio Grande, and Charleston, W.VA. come to mind. And yet it would be difficult to make the case that these cities have made the important cultural contribution of a city that gave us our native music, and also gave us an indigenous food, for cajun and creole foods are American creations. So I, as a taxpayer, am willing to pay to restore the city--sooner, rather than later. My problem is that I am not willing to bail out the other cities listed; they have long been dieing, and outside of St. Louis' remarkable literary tradition, they have not made lasting cultural contributions to the country. So how do we write down a program that rebuilds the rare special place but leaves people in other places the resources to fend for themselves, and no more. This is a tough political economy question.
Saturday, January 05, 2008
Value*(r + m - g) = Rent
Where r is the after-tax cost of capital, m is the proportional maintenance/depreciation cost, and g is expected growth in prices. As g gets larger (and it should as supply becomes more contrained), the rent-to-price ratio will fall.
Wednesday, January 02, 2008
From the American Housing Survey, median dwelling size for renters in 1985 and 2005:
Renter 1245 1343
Owner 1712 1856
In case you are wondering, this means ratio of the median size of rental dwellings to the median size of owner dwellings has been essentially flat for 20 years. On the other hand, land area for detached rental housing has dropped around 20 percent, while for detached owner housing it has increased a bit.
Still, this makes the result from Davis, et al. even stronger than I thought. It also told me that before I open my big mouth about something, I should check the data.
Tuesday, January 01, 2008
NYTimes columnist David Brooks says it's important for people who write about events and politics to talk with people actually doing this stuff. Harvard economist and former Bush adviser, Greg Mankiw says economists need to take this advice seriously.
Many economists who write about policy rarely, if ever, encounter actual policymakers. Instead, they prefer to sit in the comfort of their ivory tower offices. (I know I do.) I wonder how different the economics profession would be if economists were expected to do a year of service outside of academia or, at the very least, if hiring committees rewarded a year of real-world experience as the equivalent of, say, a couple of academic publications. My conjecture is that the profession would be less creative but more useful.
I think it's a great New Year's resolution for social scientists across the board.Too many academics actually disdain talking to and engaging with people in the real world. Trust me, I've borne the brunt of it.
I disagree with Mankiw on the "creative" part. Economics and social science would benefit enormously on the creative side from more real world exposure and interaction. Carnegie Mellon Nobelist, Herbert Simon long said that talking with people was one of the more efficient routes to fundamentally new ideas. His theory of bounded rationality came out of his studies of actual decision-making. He liked to say creative insight comes from inductive research, as opposed to deductive research. Jane Jacobs told me the same thing: Talk to people, observe. Her theory of urbanism and economic growth was built from actually observing her neighborhood and people interacting in cities.
I have issues with them both on other matters, but I think they nail it here. My 15 months at Freddie Mac helped me develop insights for both teaching and research that I never would have received in the absence of the experience. And I am currently working on a presidential campaign where I am learning how I must persuade (rather than lecture)a group of smart people who come at issues from a different perspective from my own. And World Bank consulting has been among the most satisfying and edifying thing I have ever done professionally, even though it brings along with it its own frustrations. The point is that professors need to get out of their rooms if they really want to influence the world.
Frederic Rzewski (especially when played by Stephen Drury)
Ludwig von Beethoven (Check out the late quartets and piano sonatas)
If more people listen to this stuff, it would show up in the concert hall more often. To me, listening to a relatively new piece is much more exciting than hearing a run-through of Mozart (and I love Mozart). And if you ever get a chance to hear Steve Drury in recital, do it--he plays this stuff as well as anyone, and as a bone to the audience, will throw in something less etherial like the Liszt Sonata from time-to-time.
It gives indexes of quality adjusted rents across American metropolitan areas. I am discussing the paper at the ASSA meetings this week; the authors finds a method for constructing hedonic price indexes for rent for MSAs and rural areas. They then compare costs for a typical, constant quality unit across MSAs. This is a very useful exercise--I will speak on issues involved with index construction, but my criticisms will be more quibbles than anything else.
The data they produce are fun to play with. The graph to the left is a scatter plot of rent against per capita income for 90 cities. The relationship is pretty tight, the correlation coefficient being about .55. Not bad for one variable.
If we look at another scatter plot between population and rent, we find a rather non linear relationship: there seems to be a critical population above which rents rise quite dramatically. These findings are rather good news for those of us who think the standard urban model gives us insight into systems of cities.
A regression using both income and population to explain rent produces an equation where an increase of 1 million population adds 2 percent to rent; while an income change of $1000 produces also a 2 percent change in cross section. Highest household income in the data was 22000 more than the lowest, meaning that income could explain a 44% difference in rent.
Still, one of the striking things about the CEO data is how little variation in rental costs there are in the US relative to house prices. This is the puzzle that is worth substantial examination.
This may or may not be correct; it is also beside the point.
First, in the markets where prices got really out of hand relative to fundamentals (Florida, Arizona, Inland California, etc.), prices have a long way to drop until the long-term price-to-income ratio returns to "normal." Second, and more important, household income is not the key fundamental to focus on--rents and inventories are. Until inventories drop to roughly the six month range (they are now in excess of ten months), it is hard to see where a house price turnaround will come from.
Morris Davis, Andreas Lehnert, and Robert F. Martin Get Us Closer to the True Rent-to-Price Ratio for Housing
This is a careful analysis, and implies that house prices need to fall a lot for the real PE ratio to return to historical norms (the long run norm seems to be about 5 percent, and we are currently around 3.5 percent--turned around, the PE ratio has risen from about 20 to a little under 30).
A couple of issues worth considering, though. First, land use regulation is surely more binding now than it was 20 years ago, meaning higher expected long-term growth rates in prices may not be unreasonable. Using their benchmark analysis, expectations about growth need to be 1.5-2 percent higher now than they were in the past in order to get equilibrium. This is certainly possible, if not likely.
Second, owner occupied housing has improved in a variety of characteristics not measured in the decennial census. Most important, AHS data show owner-occupied housing is getting relatively larger in terms of square footage. The data reported in the census (number of rooms) is not as reliable an indicator of quality as living area. Vintage will to some degree pick this up, but the omission of living area from the census creates an important problem. One could say the same thing about building materials and finishes.
That said, the paper is well worth reading--and should leave us a little more frightened than we were before.