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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: John Vosilla who wrote (241682)3/21/2010 11:07:53 PM
From: neolibRead Replies (1) of 306849
 
Yes, it reminds me of all the people predicting DOW 3000 when we hit the lows well above that. People fail to understand that there are very important temporal components to dynamic systems. If you fail to account for the dynamic behavior you end up misreading overshoots and undershoots for longer term static conditions.

For example people claim the housing bubble was all a result of low interest rates by the FED following the .com bust, but if that were true, why are we not currently in the middle of an even greater housing bubble, because FED rates are even lower now. The difference between then and now is not low FED rates, it is risk aversion on the part of banks, investors, and home buyers.

Conversely, if you understand the dynamics, both long and short term, you can make decisions now that pay off well later.

Or another example: Plotting GDP/debt. They have different temporal lags, so while the long term trend is interesting, the short term fluctuations are simply deluding oneself.
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