Pragmatic Capitalism

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The economy is replaying the 90s playbook

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I realize you are positing the 90s as an approximation or imperfect and useful model of the current environment and I wanted to ask a few questions on other economic segments. That is, do you “roughly” expect these to replay or is your comment more on the stock indicies
1. Bonds – yield generally fell during the 90s and rose and finally inverted into boom peak
2. USD rose in the late 90s
3. Oil fell during the 90s before bottoming and risingn in the boom
4. Breadth declined late 90s into the bubble while the stock indexes rose
5. Housing steadily rose into the boom

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Posted on 07/14/2017 2:41 PM
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When stocks eventually do crash, they might never fall back to present levels. Instead relying on the effects of inflation to bring valuations down.

Eg. even though the S&P appeared to be in a bubble from 1994 onwards, they only crashed back to 1998 levels. Factoring in dividends, they probably never crashed back to 1999 levels.

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Posted by Furion Lfg
Answered on 07/14/2017 7:35 PM
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    I think there’s a more interesting way to frame this question: what is the structure of the model that Cullen envisions is being repeated. What aspects of the economy is he looking at?

    I find it hard to decode broad prompts such as “USD rose in the late 90s”, and “housing steadily rose into the boom” – actually all 5 items (except maybe the oil price) seem to defy definition as a single metric (USD rose against which currencies, breadth of growth using which segmentation of the economy). Even if I reduce them to some common trope (bonds = Treasuries) the next thought is how to organize all the myriad inputs that are commonly modeled to affect such a metric.

    Maybe it’s easier to see / self-evident what is replaying if we get an idea of what Cullen sees in bond structures / currency risks / asset pricing behavior are the same in 2017 as in 1997?

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    Posted by Jeffrey Yang
    Answered on 07/18/2017 4:35 AM
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