Oh, To Be An Economist!

[MichaelLewis]

I have in front of me an article form 'thisismoney.com' in which economist Saxon Brettell says 'I feel we are at the top of the market'. The headline is 'House price are sure to plunge'. What makes this article particularly funny is that it is dated 21st May 2001. Amazingly, this person is still earning unseemly amounts of money making other predictions. Ok things MIGHT be finally turning but anyone following this guy's advice would have lost about on amost a 100% increase in property prices.

[Warwickshire Lad]

I have in front of me an article form 'thisismoney.com' in which economist Saxon Brettell says 'I feel we are at the top of the market'.

For some reason there seemed to be more predictions of a crash in 2001 than predictions of one now, when prices are way higher now than they were then.

Presumably it's because everything's OK now, we've had a bubble but Gordon says it's all sorted.

[apom]

Of course its sorted..

You think the debt burden is high now..

Imagine the normal turnover of houses had kept going.. at todays prices..

Now pan forward 10 years.. or even 5..

Now imagine where the debt burden would leave us.

Only it can't happen. Where it is obvious and can't be argued that current prices over the next ten years would have resulted in the economy failing even a part of the way there... Current debt burdens are the cause of the current market failing.. They can't be sustained.

Comon sense never came into play.. The Vested Interests had too large a voice..

Now the economy is doing the job.

It cannot be argued that any economy can only support a certain proportion of personal income to sustain debt.

Inflation marks avaialble money against the cost of goods..

High house prices have not been pegged against inflation.

But the inflation there has decreased available money.. essentially devaluing the worth of salary against the cost of prurchases..

i.e.. your wages go up a bit.. but if your debt burden goes up much more.. you can afford less

Affording less is inflation..

Gordon Brown managed to convince us that inflation was low by removing Houses and Taxes from the equation..

Shame he couldn't convince the Economy of this.

[theChuz]

For some reason there seemed to be more predictions of a crash in 2001 than predictions of one now, when prices are way higher now than they were then.

Presumably it's because everything's OK now, we've had a bubble but Gordon says it's all sorted.

<cynical mode>

Back in 2001 we were set for a recession and HPC, everything was going that way until 9/11. The governments feverishly done everything in thier power to keep it afloat just so it didnt look like the terrorists won. The money injected into the system would of been immense. From lowering rates to acritvly encouraging people to spend. BTL became the hype.

I also think that labour were not intending to get in for a 3rd term, i think that the conservitives deliberatly had a plank (Howard) representing the party because they knew what was comming.

Part of the severity of this bubble / debt problem is that its overdue and has kept growing, so instead of normal recession / slump we will have an exagerated one.

I think reluctance of alot of economists to 'stand up and be counted' comes from predictions made in 2001 when it all _should_ of happend.

</cynical mode>

<rational mode>

yea, these things are hard to predict becuase you never quite know what can be pulled out of the hat. Whether it be financial or psychological.

</rational mode>

Edited September 27, 2005 by theChuz

[LazyDay]

I have in front of me an article form 'thisismoney.com' in which economist Saxon Brettell says 'I feel we are at the top of the market'. The headline is 'House price are sure to plunge'. What makes this article particularly funny is that it is dated 21st May 2001. Amazingly, this person is still earning unseemly amounts of money making other predictions. Ok things MIGHT be finally turning but anyone following this guy's advice would have lost about on amost a 100% increase in property prices.

The most important but difficult business in the prediction of bubble dynamics is to predict the size of the crowd of trend-followers. This is not something that any economic course can teach and thats why the predictions based on economic fundamentals (which economists tend to produce) are usually wrong.

[Fancypants]

<cynical mode>

Back in 2001 we were set for a recession and HPC, everything was going that way until 9/11. The governments feverishly done everything in thier power to keep it afloat just so it didnt look like the terrorists won. The money injected into the system would of been immense. From lowering rates to acritvly encouraging people to spend. BTL became the hype.

BULLSEYE!

although I think the bit about throwing elections is a bit too rich even for my cynical tastes. After all, you can't do favours for your chums if you're in opposition.

are Al-Q wise enough to have figured this out? Hence the timing of the attacks this summer... "try and worm your way out of this one decadent fallen infidel"

(that last bit may have been my tenuous cynical mode surfacing)

[apom]

The economy is doomed..

The debt burden is to high.. the only way to remove the debt would be to enter a period of massive inflation.

I have heard it speculated that the Conservatives did loose on purpose..

When I say doomed...The Economy is strong.. and will find ballence..

But it will do it with unpleasent effects..

We will recover

[Fancypants]

I have heard it speculated that the Conservatives did loose on purpose..

I've speculated it myself. But I don't rationally believe it. However, that's not to say that key elements of the party did not have a strong understanding that it was not a bad election to lose

[theChuz]

BULLSEYE!

although I think the bit about throwing elections is a bit too rich even for my cynical tastes. After all, you can't do favours for your chums if you're in opposition.

are Al-Q wise enough to have figured this out? Hence the timing of the attacks this summer... "try and worm your way out of this one decadent fallen infidel"

(that last bit may have been my tenuous cynical mode surfacing)

hey, when in cynical mode its hard to pull back

[gasket37]

<cynical mode>

I also think that labour were not intending to get in for a 3rd term, i think that the conservitives deliberatly had a plank (Howard) representing the party because they knew what was comming.

</cynical mode>

other way around - labour is comprised of thickies like prescott and machine politicians like ex-council leaders and suchlike who have never run anything using their own money.

the tories do have some business people and know what is coming, alright. howard's job was to keep his party together, reduce blair's majority and then handover to someone who still has their own hair and teeth.

Edited September 27, 2005 by gasket37

[Saving For a Space Ship]

The last housing bubble crash was 89/90 to 95/96 so from judging the future by the past the next crash should have been around 2001/2 shouldn't it ? Hence the flurry of predictions

Edited September 27, 2005 by Saving For a Space Ship

[FreeFall]

I've speculated it myself. But I don't rationally believe it. However, that's not to say that key elements of the party did not have a strong understanding that it was not a bad election to lose

Were you thinking what I was thinking?

'cos I was thinking it was a lousy election to try to win. I was thoroughly underwhelmed by the tory campaign. Rationally I believe entirely that they didn't want to win the election at all costs.

The last housing bubble crash was 89/90 to 95/96 so from judging the future by the past the next crash should have been around 2001/2 shouldn't it ? Hence the flurry of predictions

Didn't Bubb work on a 15 year cycle? If this is the case the crash should be 2005-2010. What the effect of better freedom of information will be .v. economy low inflation though I have no idea.

[Fancypants]

Were you thinking what I was thinking?

'cos I was thinking it was a lousy election to try to win. I was thoroughly underwhelmed by the tory campaign. Rationally I believe entirely that they didn't want to win the election at all costs.

yeah, although I think you say it pretty well yourself... "at all costs". I'm sure they'd have taken the win had it been forthcoming. But they're pretty cunning strategists the Tories, much more of an effective political machine than Labour traditionally have been. They probably understood that a win was highly unlikely regardless of how much effort they put in aswell as knowing that the chalice was poisoned somewhat.

I'm just making the distinction between the above and stating that it was a deliberate and conscious "throw". It's a bit more nuanced than that. It's rather like a football team at the end of the season safe from relegation but not in contention for any prizes... they won't throw their games, but there's no incentive for them to bust a gut to win

[dogbox]

The most important but difficult business in the prediction of bubble dynamics is to predict the size of the crowd of trend-followers. This is not something that any economic course can teach and thats why the predictions based on economic fundamentals (which economists tend to produce) are usually wrong.

On Radio 5 (I think), last night they reported a 10 year that study shows that professional researchers working for fund managers, Banks, Brokers and alike, were wrong MOST of the time. When they said sell, stocks almost invariably rose, when they said buy, shares invariably fell.

DR BUBB - Ive asked you before to justify your clunky chart theories (and why fund managers using charts still consistently underperform) yet so far you havent answered.

Im afraid investing is often about gut - feel and hunches, and far less about charts, theories and graphs.

Those of a generally bearish disposition set a lot of stall by charts and stats, mmmmmmmm.

[Fancypants]

On Radio 5 (I think), last night they reported a 10 year that study shows that professional researchers working for fund managers, Banks, Brokers and alike, were wrong MOST of the time. When they said sell, stocks almost invariably rose, when they said buy, shares invariably fell.

DR BUBB - Ive asked you before to justify your clunky chart theories (and why fund managers using charts still consistently underperform) yet so far you havent answered.

Im afraid investing is often about gut - feel and hunches, and far less about charts, theories and graphs.

Those of a generally bearish disposition set a lot of stall by charts and stats, mmmmmmmm.

not me chief. It all comes from the gut. Raw animal instinct. I'm attuned to the complex tapestry of the universe and it allows me to make some pretty startling observations. House prices will fall - no graphs needed, I'm a seer, a prophet if you will

[LazyDay]

On Radio 5 (I think), last night they reported a 10 year that study shows that professional researchers working for fund managers, Banks, Brokers and alike, were wrong MOST of the time. When they said sell, stocks almost invariably rose, when they said buy, shares invariably fell.

What happens is that by the moment a peice of research leaks to the press it is most likely have been used to the full already, so you may be better off betting on the opposite actually.

[New Darker Law]

not me chief. It all comes from the gut. Raw animal instinct. I'm attuned to the complex tapestry of the universe and it allows me to make some pretty startling observations. House prices will fall - no graphs needed, I'm a seer, a prophet if you will

That's a fine avatar fancypants!

NDL

[bobdabuilder]

Calling the top of a market is never easy.

When a bubble grows, a lot of people say watch out for a bang. Then the bubble gets bigger and those saying watch out look stupid. So they shut up. Then it goes bang and everyone tries to blame someone else.

The most interesting thing about this bubble is just how wreckless both lenders and borrowers have been in fuelling it. Nobody could have predicted such idiocy, but the asylum is about to be reclaimed from the lunatics.