Just read this very interesting article by bill gross. http://www.pimcofunds.com/commentary/mgr_billGross02012004.jsp Supports the view that this is a "fake" economy and recovery. If this plays out badly you will want to start hoarding those Saltines.
Just out of curiosity, how many "gloom and doom" predictions by Economists over the past 50 or so years have actually panned out? If they have a good accuracy rate, then I might start putting away a few things for the bad time ahead. DS
I just remember the dot.com bubble warnings, but everyone just loved the bubble so much. I haven't been in the game long enough to answer for the past 50 years, but the biggest predicted fall is still the most recent one, and certainly was not untrue. Sometimes the recent news is so easy to forget.
Gringho, Do you have a cite for a prediction that significantly predated the actual bursting of that bubble? My recollection is yes there were some predictions of failures of the dot.coms, some predicting it would be like many other "new technologies" (lots of startups, a shakeout of the weak followed by consolidation of the survivors), and others saying it would be great forever and ever. But most of the predictions of the bubble bursting were made while or shortly before it happened. Trouble is when you look for predictions, where do you look as usually all bases are covered and someone will be right. What I'm trying to learn is how to figure out which of the many predictions to believe and what is the rationale behind making the selection of the correct or most accurate variant of the opinions that cover the spectrum. As a last point, did the dot com bubble really burst? Sure a lot of the dumb, empty shells of ideas posing as companies are gone, but a lot of solid, profitable companies remain and in many cases they are growing stronger, eg-EBAY, Amazon, Yahoo, online trading companies. Is what happened not a bubble bursting but a normal shakeout in a new industry, like we had in computers. When the PC first came out, dozens of companies made them and now we are down to a handfull of successfull companies who sell more units per year than the many did in the early days. IMO, this is similar to what is happening with dot coms. If what you mean by a bubble bursting, is market forces removing the weak and poorly conceived companies, then I agree. But in total, I think the relatively few remaining dot com's are pretty strong and growing. I DS DS
There were too many to count, and not only in the beginning of the bubble's extreme growth in valuations (P/E-mania ). Warren Buffet was one who always praised fundamentals, and never retracted his views. Yes, predictions are all over the place, the same goes for research and analysis. I think you should consider the quality of the predictions just like you consider and rate analysis and research - it's mostly wrong, and the more ambitious ones trying to predict exact values are most commonly the most wrong. The market is full of people with continously varying goals and strategies, trying to predict the movement is perhaps possible in light of economic policies, but I guess it's really hard. Some warning signs are always good for some concerns or vice versa for growth/expansion signals. I guess you should follow Warren Buffet and the like if you want to be right on the long haul. He's shorting USD etc.
At one point every "e-" and internet-based company was red hot, and it didn't matter if they would ever make money, as long as you could get it to IPO, or sell it as a promising prospect. One example was my own sector - IT consultants - where some valuations were at around USD 3 mn per head in the company (I'm sure there were even crazier valuations, though). I sold out on the peak in mid 1999, so I'm not complaining. I was riding the success and enjoying it, by all means. However, it just didn't really make sense; like the AOL Time Warner idiotic merger. The market hadn't a clue about valuations at that point, and it was even discussing if P/E-based valuations really were right, because there was no history of this "new economy" - e.g. client base was important, not earnings. That has changed back to more fundamental views, for sure.
"Economists" ? You mean the clowns employed by Wall Street brokers and bankers you read everyday in your "news" paper that pretend to have that title and are paid to say what they are asked to say exactly like the "analysts" ? Sorry I don't consider them as true economists but rather as intellectual prostitutes ! The true economists are among Milton Friedman or Galbraith for example. Although at opposite politically they are saying exactly the same thing: THE BIG PROBLEM is the FEDERAL RESERVE, the GREATEST ECONOMIC FRAUD, FRAUD is the term even used by Galbraith Milton Friedman, who is a Republican Economist said: "You know, people have the image, have the idea, that somehow "we the people" are speaking through the government. That is nonsense." Here's his interview at federal reserve of Mineapolis http://minneapolisfed.org/pubs/region/92-06/int926.cfm Friedman: One unsolved economic problem of the day is how to get rid of the Federal Reserve. The most unresolved problem of the day is precisely the problem that concerned the founders of this nation: how to limit the scope and power of government. Tyranny, restrictions on human freedom, come primarily from governmental institutions that we ourselves set up. Abraham Lincoln talked about a government of the people, by the people, for the people. Today, we have a government of the people, by the bureaucrats, for the bureaucrats, including in the bureaucrats the elected members of Congress because that has become a bureaucracy too. He also looks at the Federal Reserve System, "our most prestigious form of fraud, our most elegant escape from reality." As for Galbraith http://www.amazon.com/exec/obidos/t...=sr_1_18/104-5456782-4337553?v=glance&s=books The Economics of Innocent Fraud by John Kenneth Galbraith (Author) Kenneth Galbraith has been at the center of the American economy since before the First World War. In this his new book, he offers a distillation of these years in both the public and the private sectors, the academy and the government, and explains where we are and how we got there. Galbraith argues that inherent in our economic system is a continuing divergence between reality and "conventional wisdom," or as he puts it self-serving belief and contrived nonsense, or "fraud." He contends that we observe the current state of the nation in a cloud of myth, believing that stockholders and owners run our corporate world. In reality, it is the management of giant corporations that controls not only the private sector, but also the public sector, too, from politicians, to the Federal Reserve Bank, to the Pentagon. In a work filled with provocative ideas that come from his years as an astute observer, Galbraith looks at today's economy and America's military actions in Iraq and sees that the gap between myth and reality has never been wider.
The bubble is financed by credit of the FED (http://www.financialsense.com/stormwatch/images/2003/0111/m32000_2002.gif). It's like Jesus dividing bread except that there is a big difference between Jesus and Greenspan: Greenspan only faint to be Jesus and can't really do miracle just illusion (It could be anybody than Greenspan who is just applying his employer's will). When illusion will burst after 2010... people will pretend that they have been fooled whereas when they have been warned before by many honest analysts, they just don't want to believe what their eyes should tell them. Of course eyes just broadcast light intensities and colors if there is no brain to interpret that may explain they still don't flash any significance to what they see Also people seem to believe that this credit is "free", it is not free the interest goes to the Bankers that control the FED totally. And the bankers that control the FED are INTERNATIONAL Bankers who make believe that America's hegemony is for the grandeur & profit of the nation whereas they work for apatrids who pumps real money and substitute them with credit to hide during the necessary period until they don't need to any more then they will reveal the fact as "unexpected" sudden crisis. When will people realise that the FED is not optimising OUR economy but the economy of THEIR CONTROLLERS ??? Since when MORAL has conducted the behavior of those who can abuse their power especially when it is purely PRIVATE because don't forget that the FED is not even a governemental agency (It won't change fundamentally if it was in fact since the crooks can go into gov as easily as in private it is just more easy to see the farce) ! What fooled them is that interest is payed indirectly through tax and spending (like war spending) that just pumped real money of the people or differed tax, inflation, more poverty on next generation so that it can even create hyperinflation and world war when the bubble has extended on half a century.