A mon­key off my back

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The Keen Walk to Kosciuszko was a fab­u­lous experience—as Matt Car­roll (one of the orga­niz­ers) put it, it was “the best hol­i­day ever”. That’s not to min­i­mize the effort involved: cov­er­ing 235 kilo­me­tres on foot in 8 days is no mean feat. But the com­bi­na­tion of great com­pany, per­sonal suc­cess for all involved in an impres­sive phys­i­cal chal­lenge, lovely scenery, excel­lent weather, and a cause that united a remark­able group of peo­ple, made The Walk far more plea­sure than pain.

(The Walk was also a suc­cess­ful fund-rais­ing ven­ture, gen­er­at­ing over $5000 for Swags For Home­less–enough to give 85 home­less peo­ple a portable bed in which to sleep–see the video fur­ther down. Please con­sider adding to our fundrais­ing tally by click­ing on one of the Swags For Home­less links here)

This wasn’t what was intended of course: The Walk was sup­posed to be a “Walk of Shame”, as sev­eral head­lines termed it , for me being “hope­lessly wrong on house prices” (“Walk of shame for pro­fes­sor who tried to burst house bub­ble”; “Walk of shame for econ­o­mist”). Instead, it turned into a suc­cess­ful protest against the hous­ing bub­ble, whose exis­tence even RBA Gov­er­nor Glenn Stevens recently (and bravely) acknowl­edged on prime time tele­vi­sion (“Rates to rise, prop­erty spec­u­la­tion a ‘mis­take’”).

The Walk had its gen­e­sis in a “Vital Issues Sem­i­nar”, a series run by the Par­lia­men­tary Library to keep politi­cians and their advis­ers abreast of com­pet­ing views on impor­tant issues. Mac­quarie Bank inter­est rate strate­gist Rory Robert­son and I shared the bill on Novem­ber 26th 2008 (the month after the Gov­ern­ment intro­duced what I pre­fer to call the First Home Ven­dors Boost, with the unspo­ken objec­tive of sup­port­ing house prices–see “Res­cu­ing the Econ­omy or the Bub­ble?” and “FHB Boost is Australia’s “Sub-prime Lite””), in what was billed as “Eco­nomic futures: two views”. In the mid­dle of his presentation—and with­out any prior warning—Rory sprang the bet on me in front of 80–100 Par­lia­ment House staffers (and some politi­cians).

Hav­ing been caught by sur­prise, I agreed to it before hav­ing a chance to nego­ti­ate terms. I sub­se­quently found that I had in effect signed a near blank con­tract with a banker, leav­ing him to fill in the details—not some­thing that I rec­om­mend any­one do.

Click to donate to Swags for Home­less

Now that The Walk is over, I can revisit a vital issue of my own: what the bet really was about in the first place. For­tu­nately the debate was recorded, and when Rob Burgess of Busi­ness Spec­ta­tor turned an impar­tial ear to it (Rob came on The Walk to report it for Busi­ness Spec­ta­tor: click here to read the series), his con­clu­sion was that the bet was that:

Keen must walk to Kosciusko if nom­i­nal house prices fall by less than 20 per cent before Octo­ber 2013. (“KEEN’S DEBT MARCH: Rory’s repu­di­a­tion”)

Need­less to say, that’s very dif­fer­ent to how Rory inter­preted it: his ver­sion was sim­ply that the bet was over—and he had won—once prices rose past the peak set in Sep­tem­ber 2008 (the quar­ter before he pulled the bet on me). But Burgess’s sum­mary is an accu­rate inter­pre­ta­tion of our dis­cus­sions that day. If you have the time, you can decide for your­self by lis­ten­ing to the record­ing; if you don’t, here are the rel­e­vant seg­ments, tran­scribed from the one hour debate (the key pas­sages relat­ing to how the bet should be inter­preted are high­lighted in bold).

36:35 sec­onds into the record­ing: Rory: I think some peo­ple here prob­a­bly came today to hear about why house prices are going to fall 40 per­cent, so that’s what you’re most famous for at this stage. So what I was going to do, in the spirit of com­pe­ti­tion or what­ever, Steve’s a bet­ting man, he sold his house.. so what I would say is if, I think it was 40 per­cent on aver­age across Aus­tralia, is that what it was?

Steve: Yeah, but over a ten to fif­teen year period mate, so…

Rory: so, all right, it’s a long term thing

Steve: but over the long term I’m will­ing to stick to it.

Rory: Well how about this? If Aus­tralian house prices as mea­sured by the Sta­tis­ti­cian fall from peak to trough in nom­i­nal terms by 40 per­cent, I will walk from Can­berra to the top of Kosciuszko, and if in fact Aus­tralian house prices fall by less than 20 per­cent, so if it just turns out you’re less than half right, … I will wear a shirt say­ing “I was hope­lessly wrong” if they fall 40 per­cent, you should wear a shirt say­ing “I was hope­lessly wrong” if it doesn’t…

43:50: Rory: The Aus­tralian mar­ket is down 1.8 per­cent in the third quar­ter basi­cally, so take that as the high point for our bet…

58:10: Steve: I think the tim­ing of what we’re going through is quite dif­fer­ent to Amer­ica. On that point about Aus­tralia not being as irre­spon­si­ble on lend­ing, we didn’t lend to the same peo­ple … irre­spon­si­ble bor­row­ers rather, but we lent as irre­spon­si­bly to the entire nation.

If you look at the house­hold debt to GDP ratio, in Aus­tralia it’s 2 per­cent higher than in Amer­ica right now. The ratio here is 98 per­cent, the Amer­i­can ratio is 96 per­cent. If you go back to the 1990s, we had half the American’s ratio—which of course was lower back then than it is now. So we’ve been lend­ing to a broader part of the com­mu­nity, which is why you haven’t had a col­lapse in the hous­ing mar­ket straight away.

But what will hap­pen when the debt slow­down strikes and peo­ple stop bor­row­ing money, we won’t have the same degree of spend­ing, that will cause a decline both in asset mar­kets and also in employment–in the retail trade in par­tic­u­lar cause house­holds are the ones who’ll cut back on spend­ing this time round. A retail led… well, reces­sion would be a polite word for it, a very extreme drop in retail sales, increase in unem­ploy­ment and then any­one who has a mort­gage and no longer has a job will lose the house, and you will then have a credit crunch com­ing after the event.

So I see the Amer­i­can process as being a hous­ing cri­sis, a credit crunch and then macro­eco­nomic; we’re going to go through macro­eco­nomic, hous­ing and then a credit crunch after that. And I see it tak­ing about five years. When that hits, then we’ll be in the same sit­u­a­tion as the Amer­i­cans.

59:35: Rory: I’m still only going to give Steve five years to get his 40 per­cent. (Ban­ter over the top of each other at this point)… I would say that the debt to income ratio that Steve Cites aren’t nearly as impor­tant as the inter­est pay­ments to income ratio, and the Reserve Bank has just cut them…

60:15: Rory: It’s only just begun, right? They cut by 2 per­cent­age points in three months over 4 meet­ings… The down 2 per cent in Q3 was due to the Reserve Bank’s delib­er­ate effort to crunch the house­hold sec­tor and house prices, and now it’s the Reserve Bank’s delib­er­ate effort to sup­port the econ­omy as much as it can, and the hous­ing mar­ket in par­tic­u­lar.

Steve: The only way that’s going to work how­ever is they actu­ally encour­age Aus­tralians to con­tinue bor­row­ing money, because a large part of the demand’s by increases in the level of debt. Now that’s how we got out of the 1973 down­turn, it’s how we got out of the 1990s down­turn. We started bor­row­ing money again. Do you think Aus­tralians are going to start increas­ing their debt lev­els again? I’m sorry, I don’t. I think we’re reached a sec­u­lar turn­ing point, not just a cycli­cal but a sec­u­lar turn­around.

In that case, each 1 per­cent cut by the Reserve Bank reduces the finan­cial bur­den on the econ­omy by about 18 bil­lion dol­lars, which is sub­stan­tial. But if Aus­tralians sta­bilise their debt lev­els, or try to reduce them by 100 bil­lion dol­lars a year, that’s five times the scale of each 1 per­cent­age inter­est rate cut. We can’t cut more than another 5 per­cent.

67:30 to End: Shar­ryn Jack­son MP (Chair­ing): We also wit­nessed of course, the bet, but we might have to clar­ify pre­cisely what… (drowned out by chat­ter).. And I’m sure we’ll all look for­ward to one or both of you wear­ing a T-shirt say­ing “I was hor­ri­bly wrong”…

Burgess arrived at his sum­mary by com­bin­ing my long term pre­dic­tion (that house prices would fall by 40% over 10–15 years) with Rory’s time frame (“I’m still only going to give Steve five years to get his 40 per­cent”). Since Rory set a time frame of 5 years, and my call was for a 40% fall over 10–15 years, a halfway call—that I’d lose the bet if house prices didn’t expe­ri­ence a 20% fall over the five years between Novem­ber 2008 and Octo­ber 2013—is a fair com­pro­mise between our posi­tions.

So why did I walk any­way, over three years before the bet will be up? Because I realised that if I didn’t, Rory and the prop­erty lobby would pil­lory me for hav­ing welshed on the bet as Rory had inter­preted it. So the best tac­tic for me was to under­take The Walk, and turn it into a protest march—after I had Rory agree that, if prices ever did fall by 40%, he would also walk.

In May 2009,  the Rudd Gov­ern­ment extended the First Home Ven­dors Boost for another six months and I felt that prices were now cer­tain to breach the Sep­tem­ber 2008 level. Email cor­re­spon­dence between myself, Rory and Chris Joye in June 2009, evoked agree­ment from Rory that he would walk if there was ever a peak to trough fall of 40%.  Thecor­re­spon­dence on this is repro­duced at the end of this story: ordi­nar­ily I wouldn’t repro­duce such emails, but Rory at one point pub­licly denied that he had any oblig­a­tion to walk—see “Keen the loser walks”. This cor­re­spon­dence there­fore belongs in the pub­lic domain.

Now, cour­tesy of Burgess’s con­sid­ered inter­pre­ta­tion of the bet, if prices fall by 20% or more at any time between now and Octo­ber 2013, Rory should walk.

The Walk

One thing Rory didn’t know when he pulled the bet on me is that, while a lot of peo­ple of my age (57) might have recoiled at the very thought of a 225km walk, it actu­ally appealed to me. I am not in Tony Abbott’s class as an endurance ath­lete, but I have done the odd 1km swim /30km bike ride / 10km run triathalon (includ­ing the now defunct 2DAY-FM series which included a swim across Syd­ney Har­bour), a fair few half-marathons (I’m doing the 2010 one this com­ing week­end) and numer­ous City to Surfs.

Steve Keen’s Debt­watch Pod­cast 

| Open Player in New Win­dow

So I approached the event with a pos­i­tive per­spec­tive, see­ing it as a chance to get back into shape, and also do some­thing that few oth­ers would have done. I also expected that some of the 4,000 mem­bers of my blog (and its roughly 50,000 read­ers each month) would also find the idea attrac­tive.

So it tran­spired: once I put the invi­ta­tions out on the site www.keenwalk.com.au, about 40 peo­ple put their hands up to join me for any­thing from an afternoon’s walk to the whole trek from Par­lia­ment House to Mt Kosciuszko. That turned what could have been a very soli­tary affair into a move­able feast of cama­raderie. Over­all about 40 peo­ple took part in The Walk, includ­ing 8 walk­ers (and sev­eral sup­port crew) who made it all the way.

I expected the Keen Walk­ers to be an eclec­tic lot, but even I was amazed. There were many IT pro­fes­sion­als and some engi­neers (some­thing I had expected since there are many com­puter pro­gram­mers and engi­neers on the Debt­watch blog), sev­eral peo­ple from the finance indus­try itself, an econ­o­mist, jour­nal­ists, an ex-rocket sci­en­tist, small busi­ness­men, sev­eral RAAF per­son­nel, a train dri­ver, and an ex-real estate agent. As well as hav­ing the inevitable dis­cus­sions about house prices and debt, I found myself engrossed in con­ver­sa­tions about assem­bler-lan­guage pro­gram­ming, Nelson’s vic­to­ries in Egypt and Water­loo, quan­tum mechan­ics, XML cod­ing, impres­sion­ist painting—and fre­quently sim­ply dis­cussing the beau­ti­ful scenery, the phys­i­cal chal­lenges ahead of us, and the inor­di­nately hot weather.

It did seem that the heav­ens were smil­ing on us. I chose late April because I guessed that this would be the best com­pro­mise between scorch­ing Sum­mer heat and unpre­dictable alpine bliz­zards; as it hap­pened, we had eight glo­ri­ous days of sun­shine and only one day—the final one on the Moun­tain itself—of win­try alpine con­di­tions. The heat was so marked that we altered the start time for the morn­ing runs from 10am to as close as we could man­age to 7am.

Each day began with a hearty break­fast with the entire troupe, fol­lowed by a prepara­tory mas­sage for me from our masseur Ania Pawliszak. Then we ran between 12 and 19km depend­ing on the day, cov­er­ing the ter­rain at an aver­age speed of about 10 kilo­me­tres an hour, includ­ing many uphill legs when I slowed to a Cliff Young shuf­fle (as in the video above).

The run leg was also far more social than I had expected. I upped the ante on the bet by run­ning half rather than merely walk­ing, sim­ply because the walk on its own wouldn’t have been chal­leng­ing enough. I expected this would give me a soli­tary morn­ing fol­lowed by a social stroll in the after­noon, but on most days I had four or more co-runners—notably the two Daves (every sec­ond per­son seemed to be called Dave), Adam, John, and my friend and fel­low econ­o­mist Liam. Con­ver­sa­tions con­tin­ued as we huffed and puffed up the many rolling hills on the Monaro High­way.

Then we took between 30 min­utes and 2 hours over lunch at one of the many rest spots on the side of the road. Ania again mas­saged me and any­one else who was hav­ing dif­fi­cul­ties after the morn­ing run, and we set off once more for the after­noon walk.

Except for the first evening, when we walked over 21km out of Can­berra and stopped at the paint­ball facil­ity on Old Tug­ger­a­nong Road, we fin­ished the walk before sun­set and had plenty of time to relax prior to din­ner. Ini­tially we were some­what restrained in evening activ­i­ties, but as the trek wore on and it became appar­ent that every­one was going to fin­ish, the evening’s din­ners became more extended and even more social. I was given a les­son in pool (and pool hus­tling!) by David Hirst one evening; on another we relaxed in the spa at the Best West­ern Marl­bor­ough Motor Inn in Cooma.

The trip was well planned and mar­shalled by Matt Carroll—who is the pub­lic offi­cer for the newly formed Cen­tre for Eco­nomic Stability—and as the days went on, var­i­ous walk­ers would take on addi­tional tasks to make things run more smoothly still. Peter Ren­shaw and his RAAF buddy organ­ised the walk­ers (who nor­mally left an hour or so ahead of the run­ning group each morn­ing so that we’d fin­ish at roughly the same time for lunch); Dave Law­son became de facto cam­era man; and prior to the event, Colin McKay arranged and paid for the print­ing of the T-shirts.

Dun­can even became our de facto “Choice” man for Swags, test­ing set­ting one up and sleep­ing in it overnight (or at least until 3am, when the Jind­abyne Coun­cil sprin­kler sys­tem turned on!).

Steve Keen’s Debt­watch Pod­cast 

| Open Player in New Win­dow

The Walk was a won­der­ful instance of how coop­er­a­tion can turn a poten­tially ardu­ous task into a plea­sure.

Though I’m sure we would have ulti­mately tired of the Walk had it gone on for another week or so, by the final day there was a sad­ness that it would soon be over. The walk­ers set out early, led by Peter Ren­shaw and his RAAF buddy (who prefers to remain nameless—let’s call him Dun­can), and Dave Lind­burg and I set out an hour later for our final run. As usual, Dave beat me to the fin­ish at Charlotte’s Pass; then after a safety brief­ing by Peter and Dun­can, we set out for the 18km return jour­ney to the sum­mit.

I was pleased to be joined for this stage by Peter Mar­tin, the Eco­nom­ics Cor­re­spon­dent for The Age. Peter was also there for the start of The Walk at Par­lia­ment House, but the 9km from Charlotte’s to Kosciuszko gave us far more time for a detailed con­ver­sa­tion about why neo­clas­si­cal economics—the dom­i­nant school of thought that, until the GFC occurred, did not believe that such events could occur—was so badly flawed.

The weather was mild at the start of the day, and turned severe as only alpine regions can. As we walked towards the peak, we found our­selves inside a cloud with wind speeds approach­ing 50 km/hr, and the wind chill fac­tor drove the effec­tive tem­per­a­ture well below zero. The warm weather gear I’d bought for The Walk—running gloves, a gor­tex jacket and run­ning skins– finally came in handy, as did the cold weather gear that has got me through sev­eral win­ters in Nor­way and Roma­nia. I reached the peak look­ing like more arc­tic explorer than jog­ger.

Unfor­tu­nately that meant my “I was hope­lessly wrong” T-shirt was buried beneath sev­eral lay­ers of cloth­ing. I began to take them both off for the sake of the pho­to­graphic proof that I wore the T-shirt all the way, as required by the bet, but once again, the self-organ­i­sa­tion of the group saved the day. Dave Lind­berg had realised this might hap­pen, and had car­ried a spare T-shirt just in case. We pulled it over my head with frozen fin­gers in a gale, and the final pho­tos on the peak were taken.

We then waited for every­one else to arrive—including Nina Shedrin, at 59 the old­est mem­ber of the group and the only woman (apart from Ania) to cover the entire dis­tance. All touched the pil­lar of stones that marksS the country’s high­est spot. I finally sat down to enjoy the feel­ing of hav­ing fin­ished a sub­stan­tial task—and to get out of the bloody wind.
Then we downed the rations that our RAAF con­tin­gent and Peter had brought with them, and finally, after too long in the wind, started the 9km jour­ney back to Charlotte’s Pass.
Part of the way there, Peter Mar­tin and his two pho­tog­ra­phers peeled off to stay in the Kosciuszko Hut and file their story—Peter noted on the way that he was look­ing for­ward to fil­ing an eco­nom­ics story with the byline of “Peter Mar­tin, Kosciuszko”). The rest of us walked on, and then waited until all were accounted for before dri­ving back to Jind­abyne (Matt Car­roll eschewed the car to enjoy free­wheel­ing Australia’s longest down­hill run).

That night we had our final very fine din­ner at the Jour­ney Wine Bar, after which sev­eral mem­bers of the party took to late night swim­ming in the lake, and some woke up the next morn­ing hav­ing not sobered up from the night before.

I can’t fin­ish this story any bet­ter than did Rob Burgess in his per­sonal post on www.keenwalk.com.au, so I won’t try. In Rob’s words:

Which brings me back to where I began – that this walk was about much more than house prices. The world is in an extra­or­di­nary state of flux, as if some reck­less per­former were spin­ning too many plates before a daz­zled, fright­ened audi­ence. Most of us see at least one of those plates falling soon (China, Greece, hous­ing, sov­er­eign debt, the stretched bios­phere, myr­iad forms of social dis­in­te­gra­tion, the stock mar­ket – take your pick), but if we are to pre­vent the rest crash­ing down around us, and start rebuild­ing, we’ll need plenty of good-hearted and intel­li­gent peo­ple to stand up and act – not just to pas­sively say “the system’s bro­ken”, but to throw all their tal­ents into answer­ing the ques­tions “What’s bet­ter?” and ”What’s next?”

On this walk I saw a bunch of peo­ple with all the tools required to get to work on this mam­moth task. We may not do this together, but the choices we make in our respec­tive walks of life will, I hope, be sus­tained by the mem­ory of this epic walk – or bet­ter still by keep­ing in touch with and encour­ag­ing one another as this dif­fi­cult phase of his­tory unfolds.
As I dropped Nina off at her south Mel­bourne flat late on Sat­ur­day night, I told her what I’d said to every other mem­ber of the party as we said good­bye: “Let’s all meet and climb that moun­tain again in ten years’ time.”

Nina shook her head. “No,” she said, “That’s too long. Make it five.”

Thanks to all of you for giv­ing me an expe­ri­ence to trea­sure, and a wealth of ideas and inspi­ra­tion to take into the future. Keep in touch. And keep walk­ing…

Indeed! As Burgess also observed in his post on the bet itself, “Oh dear. I hope Macquarie’s Rory Robert­son hasn’t thrown out his walk­ing boots… There’s no doubt the bet is still on – still for the tak­ing. Yet the thought of Keen win­ning this bet remains a ter­ri­fy­ing prospect.”

Click to donate to Swags for Home­less

Thanks again to every­one who took part, and to every­one who made it a suc­cess­ful fund-rais­ing ven­ture for Swags for Home­less too. And it’s not too late to make a dona­tion… every $60 raised will give one home­less per­son a portable bed to make home­less­ness some­what more bear­able.

Staminade

Thanks also to Sta­mi­nade for donat­ing their sports drink to The Walk. I had already decided to use Sta­mi­nade rather than any of its com­peti­tors because it is the only one to include Mag­ne­sium as well as Potas­sium in its mix­ture; the fact that is an Aus­tralian owned com­pany man­u­fac­tur­ing its prod­uct here was an added bonus.

That’s not a knife”: email correspondence about the bet in June 2009

From: Rory Robert­son [mailto:Rory.Robertson@macquarie.com]
Sent: Wed 6/3/2009 4:41 PM
To: Steve Keen
Cc: Christopher.Joye@rismark.com.au
Sub­ject: RE: That’s not a knife…
I saw rp data ceo going to spon­sor your (even­tual) walk…maybe CJoye will put his hand into his deep pock­ets as well.
All good fun.
Rgds,
rory
—–Orig­i­nal Mes­sage—–
From: Steve Keen [mailto:S.Keen@uws.edu.au]
Sent: Wednes­day, 3 June 2009 4:22 PM
To: Rory Robert­son; Christo­pher Joye
Sub­ject: RE: That’s not a knife…
Yes whoops, 40% or more (78.6 or below) is you, 20% or less is me (104.8 or above). I wrote too quickly before­hand.
With the prospect that we both might get some alpine exer­cise agreed, I’m happy with the terms. Chris’s ideas and the RP-Data web­site etc. could all be car­ried out as well.
Cheers, Steve
________________________________
From: Rory Robert­son [mailto:Rory.Robertson@macquarie.com]
Sent: Wed 3/06/2009 4:12 PM
To: Steve Keen; Christo­pher Joye
Sub­ject: RE: That’s not a knife…
Steve…please check your calculations…40% drop from 131 peak is 78.6 on abs index…that’s when I would walk.
If that 131 level is regained in any period of time after a fall of less than 20%…doesn’t touch as low as 104.8… then you have com­mit­ted to walk.
recall that down 20% to down 40% is no-man’s land…
writ­ing “I’m will­ing to gam­ble that 131 was the peak” seems bizarre to me…it’s a mat­ter of fact that 131 was the peak…the obvi­ous and only peak that matters..we now are bet­ting on the trough that follows…you say 78.6 or lower, I say higher than 104.8…
talk about what might hap­pen AFTER 131 regained short time or long time is beside the point (per­haps “a triv­ial peak to peak with a minor trough”)…
hav­ing said that…if abs or chris’s index ever falls 40% from its peak level in 2008 — over any num­ber of decades — I will walk…
rdgs,
rory
—–Orig­i­nal Mes­sage—–
From: Steve Keen [mailto:S.Keen@uws.edu.au]
Sent: Wednes­day, 3 June 2009 3:50 PM
To: Rory Robert­son; Christo­pher Joye
Sub­ject: That’s not a knife…
Dear Chris and Rory,
There is a def­i­n­i­tional issue for a trough. The bet was peak to trough, and you need sub­stan­tial top and bot­tom inflex­ion points to iden­tify both–one blip at either end won’t do. But nor do we have to wait until the old peak is restored to iden­tify a trough, which is the way Rory defined it below.
There is there­fore a need to define this more pre­cisely, but I’ll start by say­ing that if the index (ABS 641601, “Price Index of Estab­lished Homes ; Weighted Aver­age of 8 Cap­i­tal Cities ;”) is above 131 by the end of this year then I will walk. But if it falls below 104.8 at any time in the next ten years, Rory walks as well.
If on the other hand it falls to say 100 and then there’s a full year of ris­ing read­ings, then Rory is off the hook.
I’m will­ing to gam­ble that 131 was the peak, but it’s pos­si­ble that the First Home Ven­dors Boost could push it up past that level before the end of the year, only to see it fall again a lot more after then. My expec­ta­tion of a very large fall over 10–15 years would then be vin­di­cated, and if it’s half as big as I nom­i­nated (40%), the Rory walks–even if I have already walked before­hand.
In other words, we’ve got a Croc­o­dile Dundee sit­u­a­tion here: there could eas­ily be a tem­po­rary boom–especially but not solely the FHVB, and if the bet was whether house prices would be above the March 2008 level in the next two years, I wouldn’t have accepted it. But I’m talk­ing a large scale rever­sal over sub­stan­tial time period. We could have a triv­ial peak to peak with a minor trough, fol­lowed by a “Now this is a knife” peak to trough after­wards.
Cheers, Steve
________________________________
From: Rory Robert­son [mailto:Rory.Robertson@macquarie.com]
Sent: Wed 3/06/2009 11:00 AM
To: Christo­pher Joye; Steve Keen
Sub­ject: RE: Web­site
chris and steve…i’m sur­prised there’s talk of con­fu­sion on basic peak-to-trough detail of bet…after all, the size of any peak-to-trough fall is set in con­crete when series in ques­tion touches old high…it’s def­i­n­i­tional…
peak was last year…whenever price series hits that old high again, whether after 2 years or 20 years, the size of the peak-to-trough fall is set­tled. only issue then will be whether the fall is big enough (-40%) to make me walk or small enough (less than –20%) to make steve walk.

chris, i’m happy for you to track/promote the bet using your measures…promoting your prod­uct by say­ing abs mea­sure even­tu­ally will catch up with real­ity. but for me it’s nei­ther here nor there which series we use.…growth in abs and rpdrm series never will dif­fer by more than 5pp… if steve wants to walk sooner (via rpd-rm mea­sure) rather than later (abs mea­sure) that’s fine with me, but i feel no need to fine-tune details of bet.
rdgs,
rory
________________________________
From: Christo­pher Joye [mailto:Christopher.Joye@rismark.com.au]
Sent: Wednes­day, 3 June 2009 10:15 AM
To: Rory Robert­son; S.Keen@uws.edu.au
Sub­ject: Web­site
Steve/Rory,
Hav­ing spo­ken to you both, this is what I pro­pose to do (under­stand­ing that you reserve the right to dis­agree!):
1) Steve is keen for us to use an inde­pen­dent index that cap­tures all prop­er­ties and is happy to use the RP Data indices on the basis that I have dis­cussed with him;
2) Rory is happy for RP Data to track the bet using their indices, but, as he noted, is also com­fort­able rely­ing on the ABS mea­sure;
3) RP Data have agreed to build for free a web-page with graph­ics etc that is explic­itly designed to track the bet using RP Data’s indices;
4) RP Data will donate $1,000 to the bet’s win­ner assum­ing that there is agree­ment on when the bet is won/lost;
5) RP Data will also assist with a fund-rais­ing cam­paign for the loser to assist them raise money for char­ity for their hike up Mt K;
6) I will have you each per­son­ally approve/sign-off on the web­site con­tent before it is for­mally uploaded.
Kind regards,
Chris

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