I cannot believe it is 2009. I've made it to about 1978 on my own personal to-do list. I'm running just a little bit behind.

Time comes at you like a freight train, but it is bad form not to smile and wave as it screeches by. So here's to 2009, which I am told is the number of the current year.

Some pundits now suggest it was obvious that 2008 would collapse suddenly into 2009. 2008 was not sustainable, they say. It was a bubble, and as a matter of simple arithmetic, 2009 was sure to follow. It was inevitable, they say, like a Kondratieff winter.

Readers of Interfluidity are not so gullible as to fall for that kind of rear-view forecasting. It was always improbable that 2009 would attach itself to any year present or past. After all, 1984 is eternally the number of a dystopian future, and logically the present can be no later than the future. We have not found babies on Jupiter, an event that would be past in any year subsequent to 2001. Sure, strictly speaking, this kind of reasoning should have ruled out 2008 too. But what are the odds that a rent in the fabric of Keynes-Einstein space-time would endure for half a femtosecond, let alone for a whole 'nother year? No. The smart money expected a correction back to 1931, or 1974, or 1982. 2009 wasn't even in the running. But here we are. Anybody got a road map?

Who knows. Maybe this peculiar dimension will turn out not to be so bad. Here's hoping. May it be all sparkly and strange for you. Perhaps we will encounter a benevolent and impossibly advanced alien race, and then discover at the last moment that the comm-screen through which we speak with them is actually a mirror.

I want to take a moment to thank Interfluidity's commenters, who continually amaze me. This is one of those websites where the quality of comments almost always exceeds that of the headline posts. I'm off in some sunny place right now. I just had a read of the comments attached to my previous, kind of crappy post. Wow. Amazing. Thank you.

Steve Randy Waldman — Thursday January 1, 2009 at 10:06pm permalink
Thomas Barker (www):
Just out of interest, which city are we all from and roughly how old are we?

Me: London, 20s.
1.2.2009 7:18am
100 year old man (mail) (www):
Me: Chicago area, 60's

I comment with trepidation because I'm a humanities guy just trying to keep up with you very sharp finance people. (The hook is you all write so well.)

What's worse is that I have presumed to create a website that a) argues for the importance of including SRW and forty other prescient finance writers in the search for solutions to the financial crisis (no problem here) and that b) shows how the general public can and, in an Obama presidency, SHOULD be involved in this search via a CIVIC MEDIA.

Problem here? I am saying that the most educated among us can communicate with the least educated. This means that key ideas expressed at Interfluidity can be meaningfully communicated to residents of the south and west sides of Chicago, where I have taught and worked. And these residents can talk back, meaningfully. The task of mediating, moderating and managing such communication, I believe, will be CENTRAL to the success of an Obama presidency, for the man has promised again and again a government that listens to the people and learns from them.

This site is called Weathering the Storm.
1.2.2009 12:05pm
RueTheDay (mail):
Me: New Jersey, 35.

I'm becoming increasingly worried that things are going to get worse, much worse. I recently started a blog to discuss preparedness: De-Grid in a non-lunatic sort of way. It's only over the last few months that the crisis has started to progress from the financial markets to the real economy, and what we're seeing now is just the tip of the iceberg. We also haven't seen much in the way of geopolitical implications yet, but they're almost certainly coming. China is witnessing demand for their industrial output plummet causing unemployment to take off, they can only tolerate so much of this. And Russia cutting off natural gas to the Ukraine? This is not going to end well.

I only hope that Steve posts more frequently in 2009. I look forward to each and every one.
1.2.2009 3:29pm
Richard H. Serlin (mail) (www):
A good sign for stock investors this year, take a look at Yale Professor Robert Shiller's excellent free data. Here he has the 10 year average inflation adjusted P-E for every year from 1881 to 2007. If you highlight that whole column in Excel, and then look at the info bar at the bottom of the screen, you will see that the average is 16.25.

Here he has the data for August 2007 to December 2008. The December 2008, 10 year P/E is just 15.39, significantly below the historical average, and the lowest since 1989 (except for a 15.20 in November).

According to Jeremy Siegel of Wharton (amongst others), the inverse of the P/E, the earnings yield, is a good estimate of the long term real return. In this case it's about 6.5%, not bad at all since the expected long-term U.S. bond real return I think is negative. Nonetheless, while the long-term U.S. stock return looks good now, that doesn't mean stocks might not still go down in the short-run.

What P/E to use in forecasting long-run stock returns, and how the P/E might be adjusted, is an area of discussion. For more on this see here.
1.2.2009 5:37pm
Richard H. Serlin (mail) (www):
Also, regarding P/E's and long term earnings forcasts see here and here.
1.2.2009 6:18pm
Happy New Year!... to Steve and all. 2008 was "very interesting...but stupid" as Wolfgang(Rowan and Martin's Laugh In)use to say.

Let's hope 2009 is a transition year from "the madness of crowds" to "the wisdom of crowds"..it WILL be interesting.
1.3.2009 10:50am
Don (mail) (www):
Terre Haute, IN Mid 30s

I'm not sure if we're going to wind up in 1931, 1937, 1972, or if we are going to pass though an Assiti Shards event and wind up in Tokyo 1991. Or we may just find that we haven't been here before.

Great Blog, check it pretty much daily.
1.3.2009 12:21pm
Benign Brodwicz (mail):

Steve, thanks for being such a good host. I understand that you are working a day job, as I am, which leaves you with enough time to put up thought-provoking posts to help us all work out our issues in the forum. Some of the other financial blogs are clearly income-generating operations with big ad revenues and employees--where your posts, if you bother to make any, sink to the bottom of the Internet instantly. This forum is so much more collegial, almost like being back in college or grad school (I am a Ph.D. economist, toiling in happy obscurity in industry, and no longer have the gratification of hearing myself talk ad nauseam in front of a lecture hall, although my kids do suffer at the dinner table from time to time).

Suggested topic: theories of hyperinflation. What does it take to set all this tinder ablaze?

Also, the dangers of densely connected networks in economic policy making (Gene Stanley has a nice post about this at http://polymer.bu.edu/hes/articles/s08a.pdf ). My intuition is that we're in for even greater instability....

Peace, all.
1.3.2009 1:39pm
wentontiema (mail) (www):
I think you are thinking like sukrat, but I think you should cover the other side of the topic in the post too...
1.19.2009 5:54pm
Note: You don't have to register to comment! Just use the pull-down menu to comment as "Guest".

Post as: [Register] [Log In]

Remember info?