> And I don't understand either of your objections. You and Patrick seem to
> be objecting that R&R is being pollyannish because they don't think there
> is going to be a big downturn. But that's the whole point of R&R's paper.
Not me. I have no objection to the claims made by R&R, which they present rather modestly. In part, they have to understate their case because you have to take this kind of evidence with a grain of salt. But I'm sure that they believe the U.S. economy is set for a serious crisis. Not having much of a reputation as a sage to safeguard, I'm more reckless in stating that such is my belief as well.
> They think a big downturn is coming because when they compare it to what
> they consider similar crises in the past, they were all followed by big
> downturns. And compared to them, we haven't barely started our downturn
> yet. And compared to them we went farther off course in the first place,
> which usually indicates a bigger downturn.
Right.
> Doug made a similar argument in his article "After the Bubble" in LBO 116.
> At the bottom of page 4, column one, he says, using similar rough, back of
> the envelope chartist logic:
>
> <quote>
>
> Speculative markets are about time as well as price, and the recent bubble
> has no peers on longevity. AS the table on p. 7 shows, prices rose for
> almost 12 years. Its closest rival was the 1980s boom, which lasted 7
> years. The earlier busts on that chart lasted almost as long as their
> preceding booms, and gave back around half the upwave's gains.
Thanks for this. I hadn't read it before. My fault. (I'm ashamed to admit that I'm not a subscriber.)
> If you add that statement to the chart on page 7 (I'm sure you're all
> following at home because I'm sure you're all subscribers) that's a pretty
> stunningly gloomy suggestion. It suggests that we'll be in bust *for nigh
> on a dozen years* since this bust is only a year old according to his
> chart, starting in the fourth quarter of 2006. And since we gained 74.5%
> between 1995 first quarter and 2006 fourth quarter, *and we only gave back
> 1.3% in the first two quarters of 2006* (when his article was written)
> that suggests that by far most of the damage was yet (and is still yet) to
> come.
Although I hadn't read this, again, I thought I had noticed that Doug was shifting his expectations. Perhaps I wasn't clear enough, but that's what I tried to tell Patrick in my posting -- that Doug appears to be more bearish now than he was a few months ago.
> And IMHO a similar feeling of vertigo is induced by looking at the R&R
> chart on p. 6.
>
> So I have no idea what either of you guys are talking about. It sounds to
> me like you won't take yes for an answer.
>
> Sorry I brought it up!
No, no. I appreciate that you did. And what I had in mind was a couple of exchanges in PEN-L a little while ago.