If the slope of the curve going up this time had been the same as the slope of the late ’80s I’d agree that this downslope would resemble the pace of that downslope. For the first half of this upleg the slope was similar, but the second half of the slope was much more steep.
The upleg of the ’80s lasted less than 5 years; the upleg this time lasted 10 years. The ’80s upleg stretched about 25% above the trendline; the upleg this time stretched 65%+ above the trendline. This indicates to the use of a different slope for this downleg than the one from the 1980s.
First of all there’s the length of time – it’s possible that this downleg could last longer than the one from the early ’90s, which lasted longer than the upleg that preceded it.
Then there’s the slope – if we applied the reverse slope from the upleg to this downleg it woud indicate to relatively sharp decreases during the first half followed by more moderate decreases before the downleg bottoms out and the new cycle starts.
If 2006 demonstrated a 8% decline and the first half of this downleg does turn out to be 4 years, that would indicate to a 32% or so first half and perhaps another 14% – 16% for the second half. And we’d be looking at a recovery after 2015, not 2011.
We’d better hope it is different (better) this time.
