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« Blowouts of the Week: An Example for Investors and Traders | Main | ETF Update: The Debate over Health Care »

December 27, 2008



I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.



Chris -- Thanks for the little history lesson. I am old enough to remember those days.


Chris Tinker

Hi Jeff,
Happy New Year to one and all. As someone who trained as a market economist back when you had to examine all parts of the National income statement and reconcile how the individual forecasts for the private sector demand model related to the balance of payments model etc. etc. I think that the biggest challenge for casual observers of the economy is to understand the concept of an interdependent system. Too many people operate at a balance sheet level - start at the top of the page and read down to a conclusion at the end. Back in the 1950's the big thing was the Phillips model - a water model of the economy complete with pipes, sluices and valves to try and physically model thr impact of changes in the policy levers on the economy. It certainly had its problems as a forecasting device, but the principles of interdependence were central to the process - a far cry from the single variable isolation and extrapolation process that seems to dominate the pop economist approach of today.




Thanks Paul.

We live in the same world, with many people looking for sound advice in a time of turmoil.



Highgamma --

Good observation. I would add that there is "pent up supply" when looking at the microeconomics issue. If prices firmed up, there are those who might offer homes.

My main observation was that casual observers do not make this distinction. There is always demand at lower prices and supply above current prices.

There is also micro-behavior, as you wisely note.

Thanks for helping me to sharpen this up.


Paul Nunes

Jeff; This was very insightful and a challenge for those of us in the markets everyday advising clients. Words of wisdom; Thanks!


I feel that the term "pent up demand" typically refers to the fact that the demand curve for housing has an expectations component. Given that people expect housing prices to fall, they are less willing to buy houses now. If these expectations changes (say, by having housing prices stabilize for a while), these consumer may be willing to buy at the current price, leading to a rightward shift of the demand curve.

Voila! Pent up demand.

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