Danger: Steep drop ahead - September 17, 2007

Danger: Steep drop ahead - September 17, 2007: "Danger: Steep drop ahead Even if the credit crunch passes without a major catastrophe, the prices of stocks, bonds and real estate have a long way to fall. FORTUNE Magazine By Jeremy Grantham, Fortune September 5 2007: 9:27 AM EDT (Fortune Magazine) -- Credit crises have always been painful and unpredictable. The current one is particularly hair-raising because it's occurring amid the first truly global bubble in asset pricing. It is also accompanied by a plethora of new and ingenious financial instruments. These are designed overtly to spread risk around and to sell fee-bearing products that are in great demand. Inadvertently (to be generous), they have been constructed to hide risk and confuse buyers. How this credit crisis works out and what price we end up paying has to be largely unknowable, depending as it does on hundreds of interlocking and often novel factors and how they in turn affect animal spirits. In the end it is, of course, the management of animal spirits that makes and breaks credit crises. house_real_estate_for_sale.03.jpg Grantham: Home prices are well above the normal four times family income and will have to come down. More from FORTUNE Remembering Black Monday The hipster in the gray flannel suit The many faces of Ralph Lauren FORTUNE 500 Current Issue Subscribe to Fortune But even if this crisis is"