Further to my posting about the length of the current recession, here is a private reply and my response to it:
At 11:03 23/01/02 -0700, you wrote: >Keith, > >Your numbers don't go back far enough. The problem with taking an >average of p/e's is that it is unlikely to be representative of the time >with which you are comparing it. You need to compare it with p/e's >at the start of a long wave boom. The most recent period to compare >with is 1949 - 1951, when GDP growth was in double digits. P/e's >discount future earnings. You can see where I am going. Yes, but the post-war period had a more extreme (and frequent) boom-bust pattern because of stock-, as well as investment-, overhangs at the end of the booms due to the higher manufacturing content of GDP (typically 35-45% of developed economies cf 15-25% as now). But I don't have p/e figures for that period. >This recession has been very mild (as ws the 1949 recession, at least in >North America). > >It is the same with debt ratios. They are high at the beginning of a long >wave boom because real interest rates are so low and earnings growth is >so high. Well, we'll have to see. The present recession is rather more similar to the immediate post-war recessions than those of 1970 onwards which I quoted because of the stock overhang of thousands of miles of optic fibre cables. Because of their immense information capacity much of this fibre may never be "lit" for 20 or 30 years -- or even longer over some routes. But I don't know what the proportion of "lost" investment is compared with GDP. Keith Hudson __________________________________________________________ �Writers used to write because they had something to say; now they write in order to discover if they have something to say.� John D. Barrow _________________________________________________ Keith Hudson, Bath, England; e-mail: [EMAIL PROTECTED] _________________________________________________
