Robert Schiller: Double Dip a Substantial Probability

I disagree with a lot of Robert Schiller's theoretical work, but when he simply looks at the data, he is pretty good. Here he is commenting on the housing sector during the Charlie Rose Show:

Rose: You said on Bloomberg Television yesterday that there is a 50-50 chance of a double dip in housing.

Schiller: I am really going out on a limb to say it's as high as 50-50. Double dips are rare. You know, I have a forecasting model that I used to use years ago when we were doing forecasts for The Wall Street Journal in the late 1990s, and that model emphasized momentum before anything else. When prices go up, they tend to go up for years. That's history. Whereas if they start going down, they'll go down for years. We saw home prices decline between 2006 and 2009—three years of decline. And now that [the market is trending] up, you know, it's perfectly plausible to think we'll have three years or more of increases. But I'm not so sure. We don't know how much of this is transitory because of the government support. We're in such an unusual economy now that [a double dip] has substantial probability.

Obviously, what Schiller is picking up in the data, and he notes this, is the government manipulation in the housing market. The economy was simply not allowed to drop and current itself, this time, from a Fed money printing inspired distorted capital structure, which leads one to believe that there are going to be some awfully unusual moves in the economy once the Fed tries to pull back from its current propping up activities. This takes us to the most important part of Schiller's comment:

We don't know how much of this is transitory because of the government support. We're in such an unusual economy now that [a double dip] has substantial probability