Posts filed under “Really, really bad calls”

Bernanke Says Recession Over; Should You Care?

Ben Bernanke has declared the recession over.

This leads to one simple question: Why should you care what his recession forecasts are?

Based on his track record as a forecaster and his acumen in identifying economic problems before they exploded, his views on starts and finishes of recessions are, to be blunt, irrelevant.

Recall it was Mr. Bernanke who described the sub-prime situation as “Contained;” it was he who believed Housing would not spill over to the broader economy; and it was he who somehow thought the Bear Stearns situation was a one-off.

I don’t wish to single out Mr. Bernanke; After all, he is an economist, and if you were paying attention, you will note that the entire profession missed the oncoming recession, credit crisis and market collapse. You may also find it helpful to ignore what the profession that cannot forecast yesterday thinks about tomorrow.

Even now, the Federal Reserve Chairman said the recession was “very likely over” as consumers showed some of the first tangible signs of spending again. Never mind that all this retail activity has been driven by government subsidies.

Now, as an investor, you do want to be mindful of the Fed Chief’s economic views, particularly how they pertain to his interest rate policies. The ed has made it clear rates are staying low for the foreseeable future, so this becomes a non-issue in this context.

But his economic forecasts? Don’t bother.

Note that I have not been a particularly harsh critic of the Fed Chair. While he may not be Paul Volcker, he is also (thankfully) not Alan Greenspan.  And we could have done much worse than having a student of the Great Depression, who is also  an out-of-the-box thinker as Fed Chief.

But as a prognosticator? He is no better than his predeccessor . . .

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Sources:
Bernanke: Recession ‘Likely Over’
SARA MURRAY and ANN ZIMMERMAN
WSJ, SEPTEMBER 16, 2009

http://online.wsj.com/article/SB125301730771311713.html

Fed Chief Says Recession Is ‘Very Likely Over’
STEPHEN LABATON
NYT, SEPTEMBER 15, 2009

http://www.nytimes.com/2009/09/16/business/economy/16bernanke.html

Category: Economy, Federal Reserve, Really, really bad calls

Happy Anniversary !

While everyone is so focused on the anniversary of Lehman Brothers (9/15) and AIG (9/16), today is a different sort of anniversary: Its been exactly one year months since the single dumbest column ever published in The Washington Post appeared: Quit Doling Out That Bad-Economy Line. Breathtaking in its ignorance, shocking in its fallibility, astonishing…Read More

Category: Really, really bad calls

Myths of the Collapse

Here it is, one year later, and we continue to hear an enormous amount of misinformation about the Credit Crisis: What were the actual causes, what could have been done, what should have been done. Lets consider the most widely held myths as the the cause of the crisis (skipping discredited nonsense). Here is a…Read More

Category: Bailouts, Really, really bad calls

Missing Radical Deregulation As a Cause of Crisis

Tyler Cowen’s NYT column today,  Where Politics Don’t Belong, comes perilously close to the mark in identifying the key problems of the bailouts: They encourage a reliance on special Government dispensation, regulatory exemptions and taxpayer handouts: “FOR years now, many businesses and individuals in the United States have been relying on the power of government,…Read More

Category: Bailouts, Really, really bad calls

Dumb Analysis of the Day: Bank Profits May Drop on Regulations

This has to be the single dumbest thing I have read in months: Investment Bank Profits May Drop on Regulations, JPMorgan Says.  (Note: I am referencing the analyst report, not the Bloomberg story) Here’s a news flash: With the least amount of regulatory oversight in generations in the 1990s and 2000s, bank profits were less…Read More

Category: Credit, Earnings, Really, really bad calls, Regulation

How Economists Got It Wrong

In keeping with our theme of beating the mainstream press by months and sometimes years — I always try to beat the Noble Laurelates by at least 6 months — I wanted to point to both the massive Krugman piece in the Sunday Times Magazine, as well as referencing similar themes we’ve hit upon over…Read More

Category: Financial Press, Really, really bad calls

1930: “Money on the Sidelines”

This is from “News from 1930” website “There’s a large amount of money on sidelines waiting for investment opportunities; this should be felt in market when “cheerful sentiment is more firmly intrenched.” Economists point out that banks and insurance companies “never before had so much money lying idle.” -August 28:, 1930 The more things change…Read More

Category: Financial Press, Really, really bad calls

Barron’s Bad Book Recommendations

I try to follow the advice “Never pick a fight with people who buy ink by the barrel full,” but every now and again, I simply cannot help myself. Today is one such an instance. Like all human beings, I am wrong on a regular basis (my wife can read you chapter and verse). However,…Read More

Category: Really, really bad calls

Defining Recessions; Mis-defining NBER

Here’s another of those articles that look so embarrassing one year later: Can you imagine an article that insinuates that the government, not an independent academic commission, was the more objective arbiter of data? That argued we should let the pols decide when recessions start and end? Insane, right? Let’s go to our WTF were…Read More

Category: Economy, Really, really bad calls

FLASHBACK: No Housing Collapse Ahead…

Blast from the past: Turmoil in the housing market has led to fears that home prices will drop precipitously, particularly if foreclosures force large numbers of homes onto the market in the coming year. Recently, these fears have driven financial stocks down and led to the government rescue of Fannie Mae and Freddie Mac. But…Read More

Category: Real Estate, Really, really bad calls