The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Friday, April 23, 2010

Keen vs. Robertson: The final word...

Macquarie's Rory Robertson had this to say in his proprietary note to clients tonight on the vanquished Associate Professor Steve Keen, aka the human marketing machine (Business Spectator's Rob Burgess has somehow seen fit--pun unintended--to pen daily paens to Keen while out on the road with the old fella; I am not sure whether this tells us more about Keen, Burgess or Business Spectator):

The End of an Error at Mount Kosciuszko

Speaking of extraordinary treks, congratulations to Dr Steve Keen today for completing his 230k run/walk from Canberra to Mount Kosciuszko.

I've tracked his progress and admired from afar the cracking pace he and his team set along the way. Even at my best - 3 hours 40 mins for the 1996 Sydney Marathon – Dr Keen might have left me for dust on this particular course, and more so now that I'm a big fat slob.

Reading from the daily reports on his blog, Dr Keen's nine days on the road with an eclectic group of new mates seem to have been highly enjoyable, a week he will always cherish. So, that’s it: Steve has paid the penalty for losing our one-and-only bet, in full and in good humour.

Transforming what was supposed to be a "Walk of Shame" into a great outdoor holiday - albeit legging-it along a main road for nine days - showed a lot of heart, not to mention organisational skill. I congratulate Steve on a huge effort in wiping clean that particular slate.

As previously noted, the obvious lesson from this episode is that it's usually a bad idea to bet the house on an economist's forecast, no matter how confidently it is presented. “Often wrong, never unsure” is a trait common among those who think they know the future.

In this case, Dr Keen's inglorious career as a high-profile property speculator lasted just one trade: he “shorted” the housing market near its lows in late 2008, and now is substantially underwater with the position unhedged (chart). The record shows that he’s a champion at managing a publicity machine, but not very good at forecasting or risk-management.

For those who are sick of it, I make no apology for having repeatedly rubbished Dr Keen’s analysis as one-dimensional and highly flawed. I’ve felt strongly because Dr Keen recklessly campaigned to convince everyday Australians to sell their homes at what turned out to be the peak of the global financial crisis, and the trough in local house prices. Those who took seriously his unfortunate advice today are much worse off as a result.

The more cautious among us are aware that home-ownership is an ordinary person's biggest buffer against poverty in retirement. That is, you can live on a $671.90-per-fortnight pension only if housing costs are minimal. Way before then, of course, home-ownership provides a sense of personal comfort, security and control over one's life, if only because there no longer can be a landlord threatening to ramp-up the rent or not to renew the lease.

So, next time you hear Dr Keen speaking confidently and pessimistically about our economic future, remember that he didn’t walk to Mt Kosciuszko because he knows what he’s talking about.