-What has gotten much attention lately is who predicted what and when. Resulting in the most obvious question (not really resolved, in my opinion) of who has gotten it right and should be listened to going forward. My personal take is that any theory of how to proceed that lacks a robust explanation of how we got here should have points deducted. Conversely, anyone who thinks he was correct on the front end, but has been making bad predictions now, should also spend some time in the penalty box. In relating this dichotomy to actual players, not surprisingly, I am referring primarily to the words and forecasts of economists and politicians -- as compared to investors, that stand to lose lots of money if they're too proud and stubborn to adjust as circumstances change.
Let me take you through an example. The Keynesian thinkers believe that not enough has been done in the realm of fiscal and monetary stimulus. So far, their view that interest rates would not rise, even with great expansion of the money supply, has been correct. Nevertheless, given the proclivity to prioritize the short-term over the long term, it is incredibly premature to claim victory. I say this, in part, because they lack a substantial coherence, to my thinking, in why we are in a recession / depression in the first place (I leave it to the reader to pick his preferred term), suggesting their remedies could cause more of the same problems again. In addition, I find it hard to argue that the general thrust of policy responses has not more closely resembled a Keynesian solution than one that calls for austerity, even if the Keynesians belly-ache that not enough is being done. It also is not terribly difficult to find evidence of these guys undecided as late as 2007 about whether a recession was coming. By contrast, the Austrian thinkers have a decent explanation of how the manipulation of interest rates and expansion of easy money caused the crisis, but they seem to lack any pro-active remedy (much to the chagrin of the mainstream) and have been woefully off in their call for hyper-inflation, much less an upward trend in interest rates.
My takeaway, as I continue to become more and more disenchanted with economics, or really economists, is that they seem to be playing a game of timing over accuracy. One guy's right now, the other guy will probably be right later. And what did either of them teach us along the way?
-Just got my copy of Fortune in the mail. It's the "Investor's Guide 2012" edition. To quote: "And commodities -- well, when you see gold being marketed everywhere, the game's pretty much over." Another year of upside guaranteed now :) They also say to stay away from treasuries. I agree, but not in the same way. I think yields will continue the move down as the Europe situation deteriorates. But that is far from a long-term endorsement -- in other words, they might make sense to rent, but certainly not to buy.
