I hate to see what he writes on Halloween:

WHISTLING PAST THE GRAVEYARD

Some good news from Wall Street:

The improvement in sentiment in Wall Street may be traced almost directly to the encouraging reports which the financial community is receiving from the leading industries of the country, according to investment trust executives. They say that the current rise in security prices is firmly grounded on the improvement in business conditions that began in December.

New York Times
February 14, 1930

Two months later the Dow hit a level it would not see again for about 25 years. Happy Valentine’s Day, pal.

In the Crash of 1929, the Dow lost 48% of its value. Six months later it rallied back 48% (because this was from a starting point half as high, this meant it got back 52% of the loss from the Crash). In 2007 – 2009, the Dow lost 54% of its value. It has now rallied back 54%, or in other words, it has regained 45% of this loss in value.

Japan has gone through a similar process of dealing with an exploded real estate bubble. The Nikkei hit a peak of about 39,000 in 1989. It has moved downwards in a sawtooth pattern for the past 20 years, with big rallies in 95 – 96, 98 – 99 and 03 – 07. Today, 20 years after its peak, the Nikkei is at about 10,000.
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It...seems slightly surreal to me to read newspaper trend stores about people getting bored with the incredible austerity of the past, oh, 10 months. Similarly, political debates around cap-and-trade, health care, entitlements, the $100 billion of new schools spending in the stimulus bill with no obvious prospects for improving reading or math skills, and so on that causally describe reducing U.S. economic output or efficiency in support of some lofty goal strike me as entirely detached from the reality of how harsh the real choices in front of us are likely to be.

In case my recent apologetic post on price inflation left some readers without a rudder, let me be clear: Even though I jumped the gun on my prediction of sharp price increases, I still think: (a) The real economy is going to be in the toilet for years, and (b) We are going to see the worst price inflation in US history. I am open to the possibility that (b) is wrong, but I am as confident in (a) as I could be for a general macroeconomic prediction.

Consequently, I personally am using the extra breathing room as a gift. I am currently carrying a lot more credit card debt than I'd like, and--given my views--I really need to redouble my efforts to get serious and start hacking it away.

If I'm right and we are now in the third bubble of the 2000s--first dot-com, then housing market, now US Treasurys--the eventual bust will be worse, the longer the delusion persists. But on the bright side, it gives those of us who see it coming, longer to protect our own households.

When trying to time a bubble, it's much better to err on the side of leaving too soon.