Nothing to Worry About?

On April 24th, 2007, the S&P was trading at 1483 and the Dow Jones was at 13,060.
Minyanville's Kevin Depew recapped the policy makers who said sub-prime mortgages were contained.

"I'm waking up less at night than I was [over the
slowdown in housing]. So far, there's been remarkably little effect
[from housing] on the rest of the economy."--Jannet Yellen

"At this juncture...the impact on the broader economy and financial markets
of the problems in the subprime markets seems likely to be contained." --Ben Bernanke

"The damage from the subprime market has been largely contained."--Richard Fisher

"I don't see (subprime mortgage market troubles) imposing a serious problem. I think it's going to be largely contained."-Hank Paulson

"We do see some stabilization of demand in the housing market ... there is
some indication that the market could be bottoming out."--Frederic Mishkin

These experts said there was nothing to worry about when the bank stocks were 80% higher than current levels.

At what point to you ignore their expert advice and predictions?

Reign of Errors

From the Fortune Sellers by W. Sherden

In autumn 1989, earthquake prognosticator Iben Browning predicted that on December 3, 1990 (plus or minus forty-eight hours), a devastating earthquake would strike New Madrid, Missouri, very near the epicenter of an 1811 earthquake classified as the most severe to strike North America in recorded history. As December 3 approached, the town of New Madrid was seized by mass panic. Schools and factories closed; shopping centers taped up their windows; many residents left town, and others called the American Red Cross in tears of hysteria; and rumors spread that the town's reservoir had dropped fifteen feet (and New Madrid does not even have a reservoir). Radio and television media invaded New Madrid from as far away as Poland to cover the im­pending disaster. But the earthquake never happened. Browning had convinced everyone otherwise, including highly credible media such as the New York Times.

The building of Browning's credibility explains how everyone was fooled. The press referred to him as "Dr. Browning" and described him as a Ph.D. specializing in earthquake prediction, with a great track record. Also, David Stewart, a Ph.D. in geophysics at Southeast Missouri State University's Earthquake Information Center, attested that Brown­ing's prediction was sound and said, "Here's a man who has hit several home runs."

As it turns out, Browning's Ph.D. is in zoology, his stated profession is actually "business consulting," and his backer Stewart is a believer in the use of psychic powers to predict earthquakes.