Sunday, April 12, 2009

Another Data Hound That Doesn't Get the Business Cycle

Forbes publisher Rich Karlgaard writes:

I have a hunch that the second quarter of 2009 could pull off a big upset and show positive growth. The shock value will be the equivalent of the Kansas City Royals winning the pennant.

The signs of a recovery are everywhere.

Stocks are up, retail sales are up, airline travel and hotel occupancy are up ... ditto housing starts, durable goods orders, consumer sentiment ... all are up. The mainstream media prefers to badmouth the economy. Sophisticates don't want to talk about a recovery and risk appearing gullible. Heck, Jon Stewart might call. Better to adopt a cynical pose, the fashion of the day.
Recovery is on the way.

He is right, but there no mention by Karlgaard in hs commentary of the money supply printing that is fueling this "recovery". As I mentioned when I discussed Paul Krugman commenting on the economy turning around, the data hounds like Krugman, and apparently Karlgaard, see the clear signs of economic data turning around. However, since they don't understand business cycle theory, they will be clueless as to the roller coaster recovery this is going to be--starting with a rocket ship climb upward, which has clearly already begun.

The volatility will mean the potential for huge profits, but you will have to be quick and nimble. Sorry, Fed money manipulation means that no investment will always be safe--not even gold.

Stay tuned to EPJ, though, I got you covered.


  1. I'm not challenging you, but I'm not sure what you mean about gold. Are you saying if Volcker comes in for a repeat performance then gold will collapse (again)?

  2. Yeah, Bob something like that.

    Obviously, with the money printing we have seen, gold looks like it is headed much higher, but given that price inflationary scenario, it is possible that even Bernanke might shut down the presses for awhile at some point down the road.

    I'm not saying this will absolutely occur, but something that we just have to be on alert for.

    It was a comment made just to wake people up who think that gold is a guarnteed 100% safe investment. When Volcker came in and slowed inflation in the early 80's many people lost 50% on their gold investments or more.

  3. Further Bob,

    I don't thnk any of us understand Bernanke personalty wise to predict what he is going to do under different circumstances.

    My best guess is that he is using the economy as some sort of lab experiment. Could he spot price iinflation heating up and say, "Hmm now that I have flooded the economy wit money let me see what tools I can create to drain money?" I'm not saying this will happen but it can not be ruled out.