If you had talked to me about my business in the late 1990's, you'd have thought I was a real pessimist. Then again, I was paying out 40% of gross profits in interest and principle payments on my debts at the time, so pessimism was called for. As soon as I got the debt paid off, everything changed.
If you'd talked to me about housing in mid-2000's you'd have thought I was a real doomster about the economy. The housing bubble was so clear to me, that I dug down and prepared for the coming collapse.
But you know what? Actually, I'm kind of an optimist most times. I just think that I don't try to kid myself when things are bad.
Anyway, my overall feeling about the economy is that we're moving more and more away from the 'end of the world' scenarios.
Look -- our economy is a mess. Always was and always will be. You will have no problem at all finding evidence for that.
But is it more likely to keep trundling along or to completely collapse?
My instinct is that we're back to trundling along, which is the 'reverting to mean' position we're in 90% of the time.
Not great, not bad. Just there.
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The guys I follow (ITR), who have a very high rate of accuracy in predicting the impact of business cycle changes are calling for a small recession, starting late 2013 or early 2014 and continuing for that year. I believe they are saying this will affect or be related to consumer spending - so something to be aware of. They are seeing their leading indicator trends support this now. Beyond that there are longer term issues - tied to the US debt situation and entitlements that will cause a significant downturn if not properly addressed and even if addressed will have an impact as it will take dollars out of the hands of spenders - but we have a while until that really hits. Recent trends in US energy production are encouraging and helpful. John
I think we'll see a boost in the short term but the long run looks tragic. I think we'll see new highs for the DOW & S&P but that in itself should be a warning. We're within a rally or four of all time highs and those were in 2007. We all know how 08-09 worked out. Reality will be back at some point. If you can't apply sound accounting practices to the economy, it's not real. If you ran your store like that, you'd be on a cash only basis with your vendors. The good news in energy production is largely based on natural gas production that's destroying the land and people around it and oil production that's yet to happen.
Trundling along is probably about right but I don't think that's something to be overly excited about. Lots of hopium being passed around in the MSM right now but I'd be real careful as it's only a distraction. The FED blamed the recent GDP news on the weather while the white house blamed it on the republicans getting in the way of important military spending. Reality is a deflationary death spiral that is being fought off by central bank money printing.
The dark clouds aren't going away, the wind has just shifted for a short while.
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