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-   -   theyll do it every time (http://archives2.twoplustwo.com/showthread.php?t=1547)

08-01-2002 10:46 PM

theyll do it every time
 


the fed, govt economists and administration singin the happy tune about economic recovery. all of a sudden we learn yesterday that last years gdp numbers revised down and we had 3 consecutive qtrs of neg gdp growth. 1st qtr gdp revised down to 5% from 6.1%. 2nd qtr gdp growth 1.1%. now given the constant over optimistic numbers from the feds it looks like it might be smart to revise the 1.1% positive growth down to 0% or maybe even negative. well all of a sudden this "recovery" aint lookin all that good certainly not as good as administration, govt economists, and fed making it out to be. greenspan in recent testimony to congress had 3% positive gdp growth in the second half of the year. looking at yesterdays numbers looks like hes way off to me. sometimes i wonder if hes lyin, doesnt have a clue or both. got to reevaluate tonight. i dumped csco early in the week probably sunw and emc tomorrow. i know looking at past numbers is lookin in the rearview mirror but im wonderin if we just need to revise downward because govt gdp numbers are overly optimistic always. im really one teed off investor tonight.

08-01-2002 10:53 PM

and
 


for the record i bought more fb this week. almost too good to be true and thats what worries me. you guys will probably laugh but take a look at AAPL sometime. they got about 4.3 billion in cash, no debt, and a market cap of 5.1 billion. they have positive earnings, 5 billion in sales. business only is valued at .8 billion. im goin to wait on it and see if they drive it lower. not glamorous but cheap.

08-02-2002 01:38 AM

Re: theyll do it every time
 


You are making disjointed assertions here. One is that the economy is going down. Well you are entitled to that opinion, but I doubt that will be the final verdict, but fine. Then you mention all these stocks that you are dumping without regard to why govenrment trickery, as you suspect, makes a difference to your particular stocks. I can see a weak argument that they will suffer a bit if people think the economy is about to head very south, but rememeber these companies are all driven by technology first, business second. These companies are all suffering, IMO, from a lack of new products and reason to upgrade, not so much from economic woes. Its just like for consumers, if are the typical home computer user, what do you need the latest state of the art for if all you will do is surf the web and download music? Focus on that issue before you start focusing on what you picture as incompentence by Greenspan affecting the stocks because once again, don't base your stock market buying decisions based on the past.


As for the economy, why are you "teed off investor"? Government numbers are notorious for this. Besides they will change a few times more. Forget about reductions from last year, they make no difference right now except for people that want to live in the past. The future looks pretty good. Not 6.1% good, but nonetheless positive. Manufacturing is finally not a drag on the economy, the dollar has had an almost perfect devaluation (so far) that has abated right to the safe spot it is in now, and the worst of the recession seems to have passed. Besides compare the US to just about any other economy and you will see things are in far better shape. Only place that is looking better right now is Canada and we win with that too since growth there means additions to the US economy. Whether the stock market sees it with any clarity as I do, well that I can't control. However, to get upset about government revisions to GDP seems about as big a waste of energy as you can get. Only concern I see is a big terrorist act or a drawn out war with Iraq. While either is definitely in the spectrum of the possible, you can't make economic predictions based on them.

08-02-2002 04:32 AM

Re: theyll do it every time
 


what tees me off is greenspans economic assessment and forecasts being so clearly off. is he lyin, is he without a clue or both. hes the number one econ guy, has all the data and is way, way off the mark. i guess ill just ignore greenspan from now on.

08-02-2002 04:50 PM

Re: theyll do it every time
 


During the boom years Greenspan was a god. Now, he's incompetent. I think the reality is much more complex. The US is suffering from an investment boom and bust, something we haven't seen this century. Previously recessions were caused mostly by policy errors(monetary or fiscal) and the remedies were relatively straight forward. Cut interest rates, cut taxes and increase gov't spending.


Things are a lot different this time around. The Fed has cut interest rates dramatically and this has probably prevented a deep recession by keeping the consumer afloat and the housing market intact. Until recently, the economic recovery seemed on track and the ever tumbling stock market was just the unwinding of the bubble. Now, it seems that the recovery is very much in jeopardy. ISM this week was extremely weak as was today's payroll and workweek numbers. GDP at 1.1% is low, but not too bad when you look at the sub components. Both consumer spending and business investment were only marginally weaker than expected... most of it was due to imports and lack of inventory rebuilding, which is a bit puzzling.


Anyways, we've had a downturn in stock markets, which in turn has knocked confidence(both business and consumer) and now it appears that the final leg- business investment and consumer spending might be next. If it happens, we're going back into recession.


Greenspan is in a very tight spot. The economy continues to go south, but just maybe it will pull through this very dangerous time. If the consumer can just hang in there until business spending picks up again, then we will return to trend growth(nothing like the late 90s but reasonbaly strong). Thats why he's trying to talk up the economy... so that consumer confidence, and spending doesn't collapse before business spending recovers.


The alternative is to cut rates again, but there is huge danger in that strategy. The market is already pricing in a 25 cut by year end and today Goldman came out with a 75 bps cut prediction. Having cut so much, Greenspan only has one bullet left before we hit the Japan problem of monetary policy. And if he does cut, he's got to make it count. The risk is that the market views it as sheer desperation and confidence actually falls even more.


So, Greenspan is waiting and will try to talk up the economy, praying that the consumer once again pulls the US economy through.


Should make for an intersting few months.

08-02-2002 05:33 PM

Greenspan was a \"moron\" in 1987
 


Anyway, their error is always thinking stock prices are wrong.


You price them too low, it under-stimulates supply, creating a perpetual shortage, and precipitating a cultural hording phenomenon.


You prop the price up, entrepreneurs keep dumping more stock you than you really need, and you're stuck underwater indefinitely.


His biggest error ever was calling it "irrational exuberance." That was around the same time Tisch was selling like $750 million in S&P's. If Greenspan were a trader he'd... he'd be a commentator.


eLROY

08-02-2002 10:51 PM

Re: theyll do it every time
 


his record is good but its disturbing that he could go testify to two congressional committees a couple of weeks ago stating the he forsaw 3% GDP growth in the second half of the year. he clearly was wrong in his testimony and hes supposed to have the best data thus the best idea. the other thing is that the rosey govt economic projections for 2002 in the 4th qtr of 2001 put the fiscal stimulus package on hold. greenie can only formulate and execute monetary policy. fiscal policy is the baliwick of congress and the oval office.

08-02-2002 11:59 PM

You always go too far
 


First of all, the "clearly wrong" idea is absolutely ridiculous. You are assuming things because of your self-pity or something. How can you say that the economy won't grow 3%? You don't know that just as much as the Fed doesn't know it. They are called projections and at the time that seemed to be the case. You gonna tell me you are smarter and wiser than Greenspan next? Come on, grow up. What is your economic training that makes you the expert here? I marvel at the outright number of economic "geniuses" downturns create. Every guy on the TV thinks he has it figured out. If you step back and look at things from different angles nothing plays out right. Simply put its because the media right now loves to hype this crap up. Stock prices have a very modest effect on the economy. The whole "wealth" effect of the late 90s was overstated to a large degree, history now shows, and yet people want to think there is a negative wealth effect too. As plenty of economists have said, but got drowned out by all the armchair naysayers, 3% average for the year is quite good and what clearly drove the divergent numbers was good winter weather that borrowed a lot of activity from the spring and spent a lot of pent up demand from the recession of 2001.


There are just as many good signs as bad signs out there. The supposedly bad ISM wasn't all that bad, after all the number is over 50 so that means there is still no CONTRACTION as a whole in the manufacturing sector. This was a number that for almost 3 years was showing contraction and now its positive and people are going to call that bad? Personal income is up a whopping 2.5% in real terms, this is a number that you can't just write off as it is extremely rare to have periods of over even 1% for extended times. As most experts will tell you, people say one thing (consumer confidence surveys), but spend another (based on their income). They essential spend what they got and then some. Right now they got a whole lot in general because unemployment isn't unbearable at 5.9% and inflation is pretty much non-existant. I won't be a fool and try to nail the economic growth for the second half of the year, but I will say its 95% likely to be at least 1% and probably about 50/50 to be about 2.5% or better. If you want to believe there is a double dip and that growth is going to flat out stall, well you probably have been watching too much TV because there is no evidence or drivers that are out there to cause that short of war or major terrorism.


As for your fiscal policy piece, I thank whoever is responsible for keeping it from being spent. Government putting more dollars into the economy would be wasteful. The government's contribution to the GDP is already up double digits this year, we don't need any more. The whole tax cut/stimulus arguments are wasting too much energy. Lawmakers are getting too involved in trying to play God for the economy instead of getting out of the way and letting it go its course. Lawmakers have never been able to turn something around once its been going in a certain direction, yet they act like they can do it. Whatever. The economy is doing fine, things are slowly improving and improving at a pace that is sustainable and will not create another quick rise and fall.

08-03-2002 09:13 AM

Re: You always go too far
 


if greenspan cuts rates again at the next meeting then clearly im right and greenspan will have admitted that was in fact wrong in his testimony before congress. having high expectations of a man that one member of congress recently venerated as "the greatest central banker in history" before greenspan testified seem to be justified. many others have venerated him similarly. in my mind you cant say hes a "the greatest central banker in history" or an "economic genius" when he is right and say he is simply fallible human being when he is wrong. im certainly not whining. sorry but i find it troubling that the head honcho at the federal reserve is so far off and apparently has been "behind the curve" for a long time. hes been very upbeat about an economic recovery that to me looks to be very sluggish at the absolute best. apparently holding a view that "the greatest central banker in history" may not be deserving of such praise angers you and causes you to attack one that doesn't share that viewpoint. should greenspan have been so aggressive in his last tightening go round? should greenspan have been more aggressive in his easing policy? i agree that the economic news isnt all bad but isnt all good either. ok greenspan hasnt been proven wrong about his very recent projections for the second half of the year. you want to make a bet that sans further rate cuts the economy doesn't meet with his projectsion of 3.0% gdp growth rate?

08-03-2002 08:45 PM

Re: You always go too far
 


You just showed your lack of intelligence there. You think a fresh rate cut is going to help the economy out in the next 5 months? There you really show your lack of understanding of central bank theory. I don't care what people characterize Greenspan as. He isn't a hero, he just is a very intelligent man. He could have made mistakes, that is certainly part of the job. My point is that you must be some kind of ego to say he is lying or clueless and you have it all figured out. That is ridiculous. I know there are many like you, but its thinking like that which leads to messy bubbles and then their bursting. Greenspan spoke what he thought was the best information to his knowledge. Greenspan has NEVER been a man that would intentionally talk up anything whatsoever. Where is your proof of such a charge??? Every time he "talked" something up in the eyes of the media was because completely lost pundits have gotten the whole situation messed up. There is no signs of recession right now, there is no sky failing at this time, there is no way people should be fretting about economic collapse, but since the media loves to sell that story right now its on the minds of everyone. Take a step back and you will see that things are pretty much neutral. Big growth isn't in the next six months, but neither is a recession. Even if there was one to come, there is no way that it could be "decided" right now by anything Greenspan does or says. The Fed controls the economy in very deliberate ways that take up to years to reach their effect. The Fed can get Wall Street all worked up, but Wall Street is not the economy as a whole and never has been.


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