Danger: Steep drop ahead - September 17, 2007

Danger: Steep drop ahead - September 17, 2007: "(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 10 investments poised to soar The many faces of Ralph Lauren Selling P&G FORTUNE 500 Current Issue Subscribe to Fortune But even if this crisis is contained, we are facing some near certainties that should be understood. First, house prices may move on euphoria in the short term, but long term they depend on family income - the ability to pay mortgages and"