Phil Anthropy

Pundit Failure: We Are in a Bear Market and This Is a Recession

It would be helpful to have the pundit tool saved in an Excel format that can be read by Excel 97. The current tool blows up Excel 97, and Microsoft's solution is to upgrade it (I don't think so). Those who are fervent about pointing out losers should be equally willing to post lists of winners, because there are many. Although in a classical economy we would be in a recession, we will not have one. This is because we are no longer operating in the usual model. For instance, our deficit spending should have weakened the dollar and raised interest rates years ago, taking us into a recession, and correcting our excesses. Instead, China, Arabia and possibly the Fed have bought our debt and kept interest rates low. When banks begin to fail, sovereign funds and the Fed step the rescue. We are no longer operating in a free market economy. Instead, we are operating in a financial oligopoly. The way to make money in this market is not to narrowly anticipate macroeconomic conditions, but rather to find bloggers or advisers who seem to be correctly predicting this chaotic market through whatever tea leaves they are reading, and follow their advice, both on the upside and the downside, because other than general sector momentum and market trends, individual stocks are fluctuating wildly in both directions in this circus we call the stock market.

Big Ben Panics and Gold Responds

Logical analysis and considered reasoning have long been useless in the U.S. economic model. When their is credit restriction due to lack of liquidity, liquidity is forthcoming, from a variety of sources. When there is consumer purchasing slowdown, government deficit purchasing increases. Once the underlying engine is explained it all makes sense: find the most powerful financial organizations you can, and see what will benefit them the most; that is what will happen.

There is no subprime problem. Depending on state law, people who default on their loans may be in debt for the rest of their lives under the new bankruptcy laws, paying back far more than they ever borrowed, while the houses are reclaimed at a discount by lenders. If banks need credit to cover defaults or sinkholes to unload their worthless debt, they'll get them.

Therefore, the stock market will go up and interest rates will stay about the same (they can't go up, because the Fed has just bought a boatload of bond-like instruments, which would lose value; they can't go down, because the dollar would weaken). So it's business as usual, except that the middle class will have to work longer hours to earn the same quality of life. Who knew?