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Yelnick, If we have reached the turning point (SPX, $), would you please revisit your long-term outlook (as I recall, a triangle flat which would end somewhere around 2014)? In particular, how would an SPX top here (or by Jan.) fit into the election cycle you have often discussed?
Nice post, Yelnick; thank you.
Yelnick, Please re-read what I wrote, which was: in most recessions, consumer spending barely declines if at all (e.g. '94-75); the entire recession can be measured in investment. The GD was an exception, since investment was not "the" swing variable (consumer spending declined over 25% during 1930-33). Secondly, I didn't express optimism, I merely pointed out that Mauldin has his head up his posterior re the notion that gov't spending (in today's economy) is or will crowd out private investment.
Toggle Commented Oct 18, 2009 on The New Normal at Planet Yelnick
Yelnick, Historically (with the 1930s as an exception), private investment is /the/ swing variable in recessions. Consumer spending just does not vary enough to precipitate recessions. Read Modigliani or Friedman re "life cycle hypothesis" to understand how consumers smooth out debt/spending, and do /not/ react to transitory events - e.g. 1987 market crash (after which NYT, WSJ and Prechter all forecast a recession which never arrived). The "shadow banking system" (securitization) fed corporate American and consumers - it came to a grinding halt. So, of course investment cratered. Re debt: read Robert Barro (ca 1975) why gov't debt is /not/ net debt (i.e. we owe it to ourselves): how we as an economy fund investment (debt v equity) is not all that important. What you should focus on (imvho etc etc) is are two facts, which you have discussed: (1) the "eternal money machine" (real estate, fed by tax & other subsidies) may have broken. IF so (and I think "yes"), the consumer is in for a long period of retrenchment, and GDP growth will not be very high. (2) the "monkey in the system" (dodgy accounting, outright fraud), often seen after long periods of credit expansion. Again, a retrenchment follows in consumer spending/investment. An example of #2: when will the Eurotrash regulators force Deutsche Bank (etc) to mark to market their insolvent mortgage loans in Spain and eastern Europe? Answer that (I cannot), and you will know when the dollar soars past parity. ;-)
Toggle Commented Oct 18, 2009 on The New Normal at Planet Yelnick
Yelnick, Mauldin can write whatever he wants; he has the advantage of not being burdened by any education in economics. As Friedman and Stiglitz have written (two quite polar political opposites), /how/ the gov't funds its spending is irrelevant, 'cept at two extremes: full employment, and a recession. In the latter (which, you /have/ noticed, is where we are today), gov't spending does not crowd out private investment.
Toggle Commented Oct 18, 2009 on The New Normal at Planet Yelnick
Yelnick, You wrote "Taxes should go up first in 2010 with the Bush cuts expiring..." Au contraire, the Bush tax cuts extend through the end of 2010, so taxes rise in 2011 (not 2010).
Toggle Commented Oct 18, 2009 on The New Normal at Planet Yelnick
Virginia Jim: It is (at best) delusional for you to describe criticism of Prechter and Carolan as "penis envy", or to call Michael's quite accurate summary as "defamation". Yelnick is more tolerant than I ever imagined. The ability of a person or system (Carolan's, for example) to catch a given turning point precisely may reflect value or just randomness: If you make enough forecasts, or throw out "alternate counts" (i.e. "up or down") or if you forecast "turning points" (direction unspecified), then of course some will look brilliant with hindsight, simply by chance...or obfuscation. The test of value is accuracy over time, and during the years I read Carolan's newsletter his recommendations were quite unprofitable. Similarly, anyone who followed Prechter's quite specific trade recommendations during the late 1980s and early 1990s would have gone bankrupt several times over. From what Michael posted, that is true recently as well.
Min: Prechter went to Yale, not Princeton.
Yelnick, Perhaps it's worth mentioning that Carolan is one of the few people on this planet whose record makes Prechter look good?