During the first phase of a bear market the market seems to rise, and it's driven by the fool public with their throwaway money. The pro is forced to trade this kind of market on the long side where previously the pro had to buy and hold.
As for mish, the guy is a patzer, and economically illiterate. I will go through his stuff for the entertainment of it.
2006 will be THE year of the contrarian
Well gee whiz, how can he be wrong? i.e. contrary to what? To whatever doesn't happen?
Following are what I think are the widely held beliefs for 2006.I expect all of them to be proven false, some sooner than others.
* The yield curve does not matter
Well duh, it never did matter. It's only an ambiguous observation of what took place in the past. Short rates can rise above long rates during deflation or inflation, during expansion or recession.
* No recession as far as the eye can see
This is true and there can't be one until FED is forced by the markets to cause one by raising rates sufficiently high. Same old script and the same one that will be played out as long as the fools at FED insist on fixing the cost of money. (They're smart, they look for things.)
* China is now close to self-sustaining
Sufficiently vague to mean anything. China doesn't need ROW. After all, they did ok under communism when they weren't involved with ROW. Maybe China was better off under communism. They were poor, but pure. Now they're turning into dirt bag westerners, the scourge of the modern era.
* Stocks are undervalued and poised for a strong rise
I agree that stocks are actually poised to fall, but never underestimate the stupidity of the public freshly fat from real estate profit looking to get richer. In every early phase of a bear market the market rises and sucks the public in while the pros unload.
* The housing slowdown will be mild
Define mild. Relative to what? Without recession there's no threat to the re market and FED can't allow a recession. That's why they will have to go back to raising rates, maybe after a hiatus! The economy will do whatever it needs to do to force FED to raise rates, and FED will resist fearing the impact to jobs supporting re. This is the same ratcheting process that occurred in the late '70s and it comes because FED fixes the cost of money. I hope you appreciate just what their pretense has wrought. I have tried to explain the process. At FED they always think they can engineer around the problems that their previous engineering has created. Can you see how this is ultimately doomed? AG et al are considered to be geniuses by the Hahvahds. Yet, like mish, they're imbeciles, and you can see it, and you will see how they cause their own demise, and you will conclude that it's all due to their pretense to knowledge by fixing the cost of money.
* Capex spending will pick up
Capex will pick up because utilization is picking up. The problems mentioned above that eventually bring recession are forward in time. The bear is slow to develop.
* Consumer spending slowdown will not matter
Consumer spending is NEVER relevant. By the time one can conclude that spending slowdown matters, it won't matter.
* We are poised for strong wage growth
We will never be so poised because the US is intrinsically anti-capitalist. The US economic motto is, "Socialism can work here".
* Earnings growth will pick up
Definitely.
* Employment will pick up steam
No. This is pure idiot. We're at full employment. So full that any attempt to increase it would actually resurrect Phillips.
* Commodities have a one way ticket up
True.
* The future is inflation not deflation
If the economy attempts to inflate a little, the FED will be forced to raise rates a lot. Therefore, inflation can't go anywhere, but FED can and probably will be forced or erroneously create a recession which will be deflationary. The major deflationary down trend is still strongly in place. We can inflate a little here and there in a last gasp attempt to realize yet another pseudo socialist prosperity, but then...
Mish's Fearless Forecast for 2006
1. There will be a huge slowing of the US economy.
Totally false.
A recession will hit later in the year but it may not be acknowledged until 2007 or even later.
Totally contradictory.
GDP hedonics will be used to mask the start of the recession.
When will these amateurs get rid of this hedo toy? Maybe they should get rid of their righteous indignant hedonism first.
The recession will be so huge that it can not be masked forever.
Is this not a contradiction in terms or is it just so imbecilic that you wonder why you quote this clown or I bother to critique it. (entertainment, you will recall).
The rest of it is a collection of contradictions not worthy of comment. |
