I’m just not sure why the FOMC (Federal Open Market Committee), after having been wrong on multiple assessments of the economy in the not so distant past, would be so quick to say we’re now on the fast -track to recovery when the stats and the history of past crises does not lend us that kind of optimistic conclusion. From Ambrose Evans-Pritchard (Archive):
The pattern after major financial bust-ups is that the rebound rally gives way to another fall of 25pc or so, lasting a year, followed by five years of hard slog as stocks bounce up and down in a trading range, going nowhere. Mr Draaisma suggests taking a close look at the chart of Japan’s Nikkei index from 1991 to 1999. Gains were zero.
We are in uncharted waters, however. Monetary and fiscal stimulus has been unprecedented. Russell Napier at Hong Kong brokers CLSA says a powerful bull market is already taking shape as the American giant reawakens. Perma-bears will be left behind. He said: “It is dangerous to be in cash.”
When the finest minds in the business disagree so starkly, the rest of us can only shake our heads in confusion.
Isn’t that last line the truth? I tend to want to make an assessment based on the history of past crises along with the numbers from private sector economic/capital firms instead of the fake-baked numbers the government/Fed seems bent on presenting us with. What do I mean? Well just check these articles out.
- U.S. Recession Worst Since Great Depression, Revised Data Show (Archive)
- Report: Record Foreclosure Activity in July (Archive)
- Troubled CRE Loans Threaten Banks, Economy (Archive)
- About half of U.S. mortgages seen underwater by 2011 (Archive)
- Biden: ‘We Misread How Bad the Economy Was’ (Archive)
These articles suggest to me that there is 1) more to come and 2) more than meets the eye than what the Labor Department/Fed numbers suggest. Why should we trust their numbers or judgments now and just assume things are going to get better? Their views and numbers will just get revised later … and all this for the sake of perception to get people back in the markets. This is a case where being positive for the sake of being positive simply won’t get us through this recession any faster. In fact, in may just prolong it if we’re not honest with the true state of things.