One of the most fascinating (or annoying depending on your point of view) aspects of financial markets and economics is the diverse range of opinions on any number of issues. Equally amazing is the amount of so-called professionals who consistently get things dead wrong, but who escape criticism for their blunders.
This penchant of market guru's to stuff up multiplies exponentially around major market turns and economic cycle shifts. Don't get me wrong, financial forecasting is not easy, but still, the amount of botched calls makes the mind boggle.
I often watch CNBC and have gotten used to a lot of the guests that frequently appear on the show. One character that sticks in my mind because of his steadfast belief that the US economy is in good shape is Brian Wesbury, Chief Economist for First Trust Advisors in Chicago.
Below are some of Wesbury's comments on CNBC over the last month regarding the US economy and stock market. I have also included the level of the S&P500 on each date.
Brian Westbury on Kudlow and Co, 12/12/2007, “This whole recession is a figment of people’s imagination.” S&P500 1486.6
Brian Westbury on CNBC on, 12/24/2007, “The US Equity market is about 25% undervalued today." S&P500 1496.5
Brian Westbury on CNBC on, 1/22/2008, “There is really no evidence that the economy has turned over”
“Initial unemployment claims were at 301 thousand in the latest reporting week. This is so far from a recessionary level I’m like, I’m shaking my head at anybody who thinks we’re in a recession.” S&P500 1310.5
His latest quote yesterday is quite striking as he seems to have fallen for the same line on unemployment claims that I did. Maybe he should read John Maudlin's timely reminder about the hidden traps in using seasonally adjusted numbers. An increasing number of people are shaking their head at you Brian.
I find it difficult to believe, if Wesbury is in fact an economist, that he doesn't see any signs of serious weakening in the US economy. Hence the question in the title of this post. Is Wesbury on another planet? I think he must be.
Wesbury has the luxury of time, noone can say conclusively say that the US is or isn't currently in recession. However I believe in due course Wesbury will have to eat a little humble pie. It will be interesting to watch Wesbury go from his current state of denial to one of acceptance. The good news for Wesbury is that he will have plenty of company.
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3 Comments:
I think there are two factors at play with these perma-bull so called economists.. in fact three.
1/Misplaced patriotism. Having the extreme misfortune of having grown up in the USA, I experienced first hand the ludicrous conditioning and indoctrination every kid goes through. When I first arrived in Oz, I was disgusted in the lack of (blind) patriotism. Over time I learned that it was I who was wrong. (This is starting to develop in Oz now though, but that's for another time).
This patriotism says that the US is always the good guy, always right, always the best, always the strongest, always the richest. It's a short hop to believe nothing can possibly be wrong with the economy.
2/Intellectual fraud. We all know government statistics are artificially skewed at best, and outright BS at worst. Original thinkers can see straight past this nonsense. We live in the so called "real economy" (a term, by its very existence, exposes the hubris of economic reporting) and know the real story. These "economists" don't see that because of political and educational indoctrination.
3/Education. University educations often result in indoctrinated thought rather than original thought. Modern economic theory has developed in religio-ideological monster that must not be challenged if you want to survive in the these people inhabit.
Austrian economic theory for instance, is looked upon as outright heresy.
Put those three factors together and you get mocking, baying, non-thinking, morally and intellectually corrupt perma-bulls on CNN who have sold out their morality to either Wall St and/or Capitol Hill who actually have collectively sold themselves on their own bunkum.
It's all about managing perceptions. But perception is only reality for so long.
That's my thoughts on it.
I like your point number 3.
Recently, I've read Crisis and Cycles by Wilhelm Röpk. This book was originally written in German and was published in 1936. It is one of the most deeply buried book from the Austrian School of economic thought.
It is after reading this book that I realised how much of today's economics has gone astray today. In Why is the market so easily tossed and turned by dribs and drabs of data?, it quoted some relevant sections of Wilhelm Röpk's book with regards to this question- too long to repeat the point here. But have a read and let me know what you think.
Yeppers. Herd muppetry all this nonsense.
I love old books like that. They often have a wisdom that is missing in todays marketing obsessed, 8 second sound bitten McWorld
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