Prudent Bear
prudentbear.com
Who do you believe? John Templeton is maximum bearish on the housing market. Jim Rogers expects a long, deep decline in the dollar. Warren Buffett is negative on stocks, bonds, and the dollar. George Soros foresees a bond market rout. Bill Gross expects a recession at least as deep as in the early 1980s. On the other hand, President Bush and the U.S. Congress are certain we're only one good employment report away from everlasting prosperity. It must be true because Alan Greenspan said so.
Clearly, we have a difference of opinion here. Templeton, Rogers, Buffett, Soros, and Gross versus Bush, Congress, and everyone else in Washington, D.C. This is a hard call. One group wants return on capital and interest on principal. The other group is interested in returning to the capital and has no principles. Nevertheless, conventional wisdom is that politics trumps economics.
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The inevitable bottom line is that in an economy addicted to easy credit, cheap credit, and excess credit, there is no way that increasing interest rates can be other than excruciating. Greenspan is hoping that some smooth and slow deflation of the multiple bubbles in the economy can be brought about by a very gradual, very well-telegraphed increase in rates when the time comes. Financial history says otherwise. For President Bush Jr. and Congress, financial history is limited to the belief that Greenspan cost President Bush Sr. the election in 1992 by increasing interest rates. Any actual economic factors in play at that time are of no concern to them. Then there are the big-money traders – men who actually have to take responsibility for their financial decisions – like Templeton, Rogers, Buffett, Soros, and Gross. Their reading of financial history leaves them very, very worried. Who do you believe? |
