

Recession? No, It's a D-process, and It Will Be Long  - zurla
http://online.barrons.com/article/SB123396545910358867.html?mod=djemWR&page=sp

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fiaz
I agree with the fact that we are in a "D-process", but I'm skeptical about
the "long" part. Something new is happening with the widespread availability
of information through multiple channels, and I think because of this our
economic cycles are "compressed".

My prediction is that the rate at which businesses change/modify/adapt
(especially in the financial sector) will be readily reflected in the
information that is spread through multiple channels, resulting in a
compression of the time frames of the current "D-process".

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numair
You are ignoring rule #1 in the financial world: "Past performance may not be
indicative of future results."

Don't worry, the entire financial world ignored this rule as well (which is
precisely why I think this is likely to be a long downturn - rebuilding
financial infrastructure is a long process involving lots of time and social
work; you can't simply legislate it into being).

~~~
fiaz
I'm actually saying that the rule you have stated above holds true even more
so if we take into account the high availability of _actionable_ information.
Take for example that with "TARP 1" all sorts of irritating loopholes were
exposed in a very short period of time (how long did it take for the general
public to be informed of the tax exemption for a specific type of arrow used
by child archers??).

I want to emphasize that what I'm stating is that in the past, when critical
changes took place, it would be some time before all of the
information/knowledge of those changes propagated to everybody and this had an
impact on the economic cycle (how long or short they were). In today's
"Internet Age", the time it takes for changes to propagate is going to be
reduced dramatically.

I should add that a direct consequence (and this is purely hypothetical but
not unreasonable to include) is that the volatility of the economic climate
will increase with the availability of information.

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kingkongrevenge
The accessibility and volume of business data have been accelerating for over
100 years. Downturns have not gotten shorter. I see no basis for your
hypothesis.

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biohacker42
Very interesting interview but I was confused about his predictions for gold
and inflation.

He makes the point that deflation is a serious concern so the Fed will devalue
and gold will be a great investment. But then he says that the devaluation
will barely produce a single digit rate of inflation and stocks will be a
great buy.

So which is it, low inflation and cheap stocks, or gold?

Gold doesn't pay dividends so the only way you make a profit is by it going
up, or you simply preserve your wealth when there's inflation.

But why would you hide in gold with low single digit inflation?

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nostrademons
The inflation rate isn't the only (or even a particularly good) predictor of
gold's value. From 1971-1979, gold shot up from $35-$900/ounce, a 30x
increase, yet cumulative inflation was only 6-8x. Then over the next 5-10
years its price fell from $900 to ~$300, a 3x _decline_ even though cumulative
inflation ran about 150%.

Gold is like any other commodity: its price behaves according to supply and
demand. When there's massive economic uncertainty, people demand it, so its
price shoots up. A bubble, in other words. Economic uncertainty includes
deflation, panic, and social unrest as well as inflation.

~~~
biohacker42
So perhaps what he meant is that gold is a good speculative opportunity, not
so much a way to escape high inflation.

I prefer not to speculate so if deflation or low inflation are on the horizon
I'd rather invest in something that's cheap and pays dividends, and
incidentally, is taxed at a lower rate then commodities.

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cchooper
There's a good article in the FT today on a similar theme: how this recession
is/isn't like past recessions, particularly the Japanese "lost decade".

[http://www.ft.com/cms/s/0/774c0920-fd1d-11dd-a103-000077b076...](http://www.ft.com/cms/s/0/774c0920-fd1d-11dd-a103-000077b07658.html)

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nazgulnarsil
finally someone is pointing to one of the real fundamental issues
[http://s.wsj.net/public/resources/images/OB-
DC115_BATOPC_NS_...](http://s.wsj.net/public/resources/images/OB-
DC115_BATOPC_NS_20090206234459.gif)

when you have huge negative savings for many many years that is unsustainable.
we are now correcting.

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steveplace
When Barrons starts releasing stuff like this, it's time to put your
contrarian hats on.

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kubrick
It seems like everyone's a prophet these days. I understand why, I think -- we
all hate uncertainty. But no one knows the future; this is all too chaotic to
predict. Let's hope that fact actually works to our advantage.

