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My bold prediction for this decade


By ¥   Follow   Tue, 25 Jan 2011, 11:01pm   6,364 views   77 comments
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  1. thomas.wong1986


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    1   12:56pm Wed 26 Jan 2011   Share   Quote   Permalink   Like (2)   Dislike  

    joshuatrio says

    APOCALYPSEFUCK says
    It’s looking more like cannibal anarchy all the time.
    Dude - you’re hilarious.
    I was waiting for you to say grow potatoes.

    I dont think MadMax grew potatoes...

  2. ¥


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    2   4:00pm Wed 26 Jan 2011   Share   Quote   Permalink   Like (2)   Dislike  

    It looks to me like we could see high volatility for the next decade

    I just see a leaking boat.

    I felt the same way in 1991-92, but we had some major changes happen to make things happy for a while, some intrinsically good (dotcom money coming in and dotcom innovation going out, rise of big-box one-stop retail), some intrinsically bad (expanding trade deficit with China, temporarily cheap oil -- West Coast domestic oil production has declined 50% since 1995 [1]).

    Reading the financial commission report last night, I learned a new word, "crimogenic". That's the perfect summary of the previous decade, which kinda actually was an echo of the 1980s in some areas (Iran/Contra -> Iraq, S&L -> Housing Bubble).

    Demographically, we're a lot closer to the end of the book in 2011 than we were in 1991, and there's been quite a tide of illegal immigration allowed since then too.

    I see a lot of labor surplus and a crushing need to either start raising taxes to pay for the welfare state, or start scaling back the welfare state.

    The third option, issue more debt, is possible, but with the Republicans for some reason running on "right-sizing government" and general austerianism, I am not entirely sure Congress will pull the trigger on the Japan solution of a truly runaway national debt. (Right now, we're not so bad compared to the rest of the world, but we're moving up fast with these $1.2T/yr deficits).

    All this BS doesn't mean the end of the world, but it is all going to take a bite out of the consumer surplus and increase social friction and bad-feeling.

    We were a poorer people in the 1920s-30s, and we can return to that. Housing was certainly a lot cheaper then.

  3. elliemae


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    3   12:05pm Sun 30 Jan 2011   Share   Quote   Permalink   Like (2)   Dislike  

    According to Troy's graph, in the future:

    - red & green will now make gold when mixed together.
    - all lines will become arrows
    - all graphs end after Jan 2012
    - no more recession!

  4. Patrick


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    4   8:16am Wed 26 Jan 2011   Share   Quote   Permalink   Like (1)   Dislike  

    I agree with that extrapolation. I think prices will probably fall a little each year for a decade or longer, like Japan.

    The Fed can't just print a lot of money without driving up interest rates, which would force housing down even faster.

  5. bg1


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    5   8:35am Wed 26 Jan 2011   Share   Quote   Permalink   Like (1)   Dislike  

    Patrick says

    money without driving up interest rates, which would force housing down even faster.

    I had been thinking they would drop for 3 to 5 years. I was reading some of the housing news that predicted a drop in the first 6 months of this year. I thought, "huh? really? Just the first 6 months?" What magic is going to happen in 6 months?

  6. pkowen


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    6   11:46am Wed 26 Jan 2011   Share   Quote   Permalink   Like (1)   Dislike  

    APOCALYPSEFUCK says

    It’s looking more like cannibal anarchy all the time.
    The people who will live to see their grandkids will teach their kids how to fight and win with nothing but a sharp stick or a rock because when the ammo runs out and the bayonets dull from decades of close order combat, it’s likely that’s all that will be left.
    Prepare for unimaginable horror.

    "I got a shogun, a rifle, and a four wheel drive, and a country boy can survive...."

  7. thomas.wong1986


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    7   12:53pm Wed 26 Jan 2011   Share   Quote   Permalink   Like (1)   Dislike  

    Back to the 90s on the index.... and a few bruises on the way down.

    Patrick says

    I agree with that extrapolation. I think prices will probably fall a little each year for a decade or longer, like Japan.

    I think we may see a much faster drop than most people expect.

  8. burritos


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    8   1:23pm Wed 26 Jan 2011   Share   Quote   Permalink   Like (1)   Dislike  

    I hope you're right.

  9. toothfairy


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    9   6:02pm Wed 26 Jan 2011   Share   Quote   Permalink   Like (1)   Dislike  

    There are enough problem cities that the 20 city composite could be dragged down for a decade.

    that's definitely possible.

  10. Hysteresis


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    10   12:05am Fri 28 Jan 2011   Share   Quote   Permalink   Like (1)   Dislike  

    http://www.businessinsider.com/chart-of-the-day-global-housing-bubbles-2011-1

    this chart, which shows that the housing bubble in the US was mirrored all around the world.

    Thus, any attempt to pin this to The Fed, or Wall Street's control of Washington, or Fannie and Freddie, fails on the ground of the global nature of the crisis.

  11. B.A.C.A.H.


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    11   10:03pm Sat 29 Jan 2011   Share   Quote   Permalink   Like (2)   Dislike (1)  

    Troy says

    $10 cheeseburgers.

    Probably do more for our health than Obamacare.

  12. ¥


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    12   12:36am Sun 30 Jan 2011   Share   Quote   Permalink   Like (1)   Dislike  

    bubblesitter says

    So you think banks will catch up with that inflation and keep loaning money that high? Will employers boosts their employees salaries?

    This has all happened before. And it will all happen again : )

    Inflation sure got on a rip-roar in the 1970s and 80s. But our debt and demographic situation was all different then.

    We had the boomers aged 13 to 28 in 1975, now they're in their 50s and 60s.

    Total of household debt + gross national debt / GDP was 0.8. Now it's 1.8 and heading to the moon.

    We had more untapped credit capacity I guess in the 1970s and 1980s, but now we're tapped out.

    Just like Japan.

    But just like Japan, they can try helicopter money. The $600B is first dose.

    The CBO released a new, shocking, forecast for the next 10 years, and, they have the optimistic scenario of the national debt DOUBLING to $18T by 2021.

    http://www.zerohedge.com/article/cbos-revised-budget-sees-2011-deficit-rising-500-billion-15-trillion-4-trillion-deficit-thro

    There's a lot of moving parts here but I think it's entirely possible we'll see the national debt TRIPLE by 2022 (partially because the SSTF is now permanently cash-negative), since the CBO numbers are very optimistic about a lot of stuff (+200,000 jobs a month for the next few years).

    With all this debt hitting the economy, money supply simply has to keep on trucking, and inflation simply has to follow. Somehow.

    It is very difficult to see the future though. I want to stick to my position that this is just year 4 of a very long trainwreck.

    Perhaps my living in Japan 1992-2000 is unduly coloring me "negative".

    But I think there's a lot to be negative about, now.

  13. ¥


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    13   3:41pm Thu 2 Feb 2012   Share   Quote   Permalink   Like (1)   Dislike  

    From a year ago:

    vs now:

    Ima jenius

  14. CDon


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    14   8:09am Fri 10 May 2013   Share   Quote   Permalink   Like (1)   Dislike  

    robertoaribas says

    how'd that work out for ya?

    It is interesting to look back and see what the general sentiment was at the time. If anything, it seems like a plurality of posters were dissatisfied with that prediction in that it was not pessimistic enough.

  15. CDon


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    15   8:11am Fri 10 May 2013   Share   Quote   Permalink   Like (1)   Dislike  

    For example...

    thomas.wong1986 says

    Patrick says



    I agree with that extrapolation. I think prices will probably fall a little
    each year for a decade or longer, like Japan.


    I think we may see a much faster drop than most people expect.

  16. toothfairy


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    16   8:34am Fri 10 May 2013   Share   Quote   Permalink   Like (1)   Dislike  

    HousingWatcher says

    There does come a point in which people who think home prices are going to keep declining become just as delusional as those who thought home prices would keep appreciating.

    people got burned on the way up it was inevitable that people would get burned on the way down too. Just feel good if you didn't get stung both directions like the people who bought at the peak and walked away at the bottom.

  17. American in Japan


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    17   11:03pm Tue 25 Jan 2011   Share   Quote   Permalink   Like   Dislike  

    @Troy

    I don't want to get jabbed by that arrow!

  18. Clarence 13X


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    18   11:29pm Tue 25 Jan 2011   Share   Quote   Permalink   Like   Dislike  

    Do you really think the housing pricess will continue to drop for 10 years? Why?

    Would you hold on buying rental properties even where the rent vs buy makes sense?

  19. ¥


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    19   2:02am Wed 26 Jan 2011   Share   Quote   Permalink   Like   Dislike  

    Clarence 13X says

    Do you really think the housing pricess will continue to drop for 10 years? Why?

    The system doing what it can to keep itself together but I suspect the best-case end result will be repeating the Japan experience of a long, slow grind.

    This chart is in real terms, so a mild inflation can turn a flat housing market to look down when adjusted for inflation.

    But I tend to think adjusting housing for inflation now would be an analytical mistake, given that the existing stock of housing doesn't necessarily respond to rising price inputs, and could in fact be negatively correlated with price inflation this decade (eg. food, health insurance, state taxes go up, housing simply has to go down).

    Would you hold on buying rental properties even where the rent vs buy makes sense?

    I don't know. The economy can go 3 directions from here. Up & away (like the 1970s), down & out (like the 1930s), or grinding slowly sideways (like the 1990s).

    I think with all the intervention going on we'll be lucky to repeat the 1990s, and don't see massive wage inflation coming any time soon, but I've never seen anything before it happened anyway so there's that.

    The state's finances are a big unknown. We've got to close $20B or so, and local government also has to make massive cuts everywhere. Things can in fact get a lot more brutal than they are now, at least for many people.

    These deflationary collapses tend to suck in more & more people as they unwind, and Japan shows this widening effect can go on for a very long time, as more and more people are simply taken out of the game.

  20. joshuatrio


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    20   8:06am Wed 26 Jan 2011   Share   Quote   Permalink   Like   Dislike  

    APOCALYPSEFUCK says

    It’s looking more like cannibal anarchy all the time.

    Dude - you're hilarious.

    I was waiting for you to say grow potatoes.

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