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Registered Investment Adviser Caleb Lawrence

The major averages enter the final hour about even on little current news as volatility continues to bump along the bottom following the trend of the last 12-months or so.

The Atlanta Fed’s GDPNow formerly the more conservative has switched places of late with the New Yok Fed’s Nowcast. Both estimates show patterns of substantial revisions from initial too final as the quarter progresses. Often at odds with each other despite using similar data points the metrics seem to have more of a cheerleader quality than anything else with initial very optimistic estimates of GDP or Gross Domestic Product growth as the quarter begins, estimates that get quietly revised away over time, much like many other economic metrics.

Following the Dot-Com and Great Financial Crisis of 2007-2009 various pundits and policy wonks including most economists and central bank executive staff members all chimed in and said that bubbles couldn’t be spotted in advance and only became clear in hindsight after they had popped. The Fed went on to state that even if it could see them, it shouldn’t do anything to stop them because it had only “limited policy tools,” and because “the costs of making policy mistakes can be very high.” That said it is apparently ok to use these “limited policy tools” to inflate the greatest bubbles the world has ever seen as we are now on our 3rd consecutive bubble since the millennium began, each dwarfing the size of the one that preceded it. I and many others called pig poop on this pointing out that measuring various asset prices and their relationship to earnings, wages, income, and other metrics while cross referencing the data with historical patterns in fact made bubbles very easy to spot. What’s hard is figuring out when they pop as it has been my experience that things will continue far longer than any sensible and well-informed person thinks possible. Yet ignoring valuations prior to making investments of any type is a dangerous omission with a nasty habit of proving extremely costly if history is any guide.


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