MR. SUNSHINE: Gary Shilling: Here’s Why House Prices Will Now Drop Another 20%. The homes in my neighborhood that actually sell have dropped that much. But plenty are still on the market at prices above their 2005-06 level. Those need to drop 20% if they’re to sell.

Related: Goldman’s Top Economist Says There Are Only Two Scenarios, Bad And Very Bad. So have we reached the point where there’s irrational negativity, instead of irrational exuberance? Or is that a rosy scenario? And if things are so grim, why has the market gone up lately?

UPDATE: A reader emails:

Glenn, in your comment on Goldman’s “Bad or Very Bad” economic forecast, you asked why the market’s been up lately. The answer is: No one knows. Profits are in the garbage. Insiders are flooding out of the market at absurd ratios (yesterday, insiders sold vs bought at a 2,431 to 1 ratio). Most of trading on the NASDAQ is just people and machines swapping AAPL shares back and forth–and more and more stocks are just correlating with AAPL moves. Real people are flooding out of the market like rats leaving a ship, and all that seems to be left are the high-frequency trading (HFT) machines trading with themselves, somehow driving prices even higher. But then you’ve got to ask if the value is up, or just the nominal price. The dollar is dropping like a stone, and gold is shooting the moon. The Dow right now is worth 8.1 oz of gold. That’s actually down about 20% from 2009, not up. Mises wrote that one of the tricks of inflation is that it makes you think you’re profiting when you’re actually losing, and you don’t realize it until you’re broke.

Yeah, I wish I’d listened to the talk-radio folks and bought more gold. And I kinda wonder if they aren’t doing their best to drive the market up between now and the election.