Skip to main content
No. of Recommendations: 2
Great article in the WSJ on the economy.

The Economy Is Fine (Really)

...


It is most likely that this recent weakness is a payback for previous strength. Real GDP surged at a 4.9% annual rate in the third quarter, while retail sales jumped 1.1% in November. A one-month drop in retail sales is not unusual. In each of the past five years, retail sales have reported at least three negative months. These declines are part of the normal volatility of the data, caused by wild swings in oil prices, seasonal adjustments, or weather. Over-reacting is a mistake.

A year ago, most economic data looked much worse than they do today. Industrial production fell 1.1% during the six months ending February 2007, while new orders for durable goods fell 3.9% at an annual rate during the six months ending in November 2006. Real GDP grew just 0.6% in the first quarter of 2007 and retail sales fell in January and again in April. But the economy came back and roared in the middle of the year -- real GDP expanded 4.4% at an annual rate between April and September.

With housing so weak, the recent softness in production and durable goods orders is understandable. But housing is now a small share of GDP (4.5%). And it has fallen so much already that it is highly unlikely to drive the economy into recession all by itself. Exports are 12% of the economy, and are growing at a 13.6% rate. The boom in exports is overwhelming the loss from housing.

...

Which brings up an interesting thought: If the U.S. financial system is really as fragile as many people say, why should we go to such lengths to save it? If a $100 billion, or even $300 billion, loss in the subprime loan world can cause the entire system to collapse, maybe we should be working hard to build a better system that is stronger and more reliable.

...

The irony is almost too much to take. Yesterday everyone was worried about excessive consumer spending, a lack of saving, exploding debt levels, and federal budget deficits. Today, our government is doing just about everything in its power to help consumers borrow more at low rates, while it is running up the budget deficit to get people to spend more. This is the tyranny of the urgent in an election year and it's the development that investors should really worry about. It reads just like the 1970s.

http://online.wsj.com/article/SB120147855494820719.html

Best article I've read in awhile. Like I've said before, I think our problems are more long-term than short-term. It's important to look at the overall economy (something the media stinks at) before jumping to conclusions. Exports will likely continue to have a strong run with the weak dollar, and productivity here should also see a nice increase from its already record levels. I think there are too many strong and growing areas in the economy today to have the economy slip into recession this year. With productivity rising unemployment should stay fairly steady at these current levels (even it rises a bit higher it'd still be a historically good level), and that should keep the overall economy in decent shape as well.

Anyway, the article is an interesting read and I recommend taking a look.

David K
Print the post Back To Top
No. of Recommendations: 0
It is most likely that this recent weakness is a payback for previous strength. Real GDP surged at a 4.9% annual rate in the third quarter, while retail sales jumped 1.1% in November. A one-month drop in retail sales is not unusual. In each of the past five years, retail sales have reported at least three negative months. These declines are part of the normal volatility of the data, caused by wild swings in oil prices, seasonal adjustments, or weather. Over-reacting is a mistake.

It is most likely that this recent weakness is a payback for previous strength. Real GDP surged at a 4.9% annual rate in the third quarter, while retail sales jumped 1.1% in November. A one-month drop in retail sales is not unusual. In each of the past five years, retail sales have reported at least three negative months. These declines are part of the normal volatility of the data, caused by wild swings in oil prices, seasonal adjustments, or weather. Over-reacting is a mistake.

The second paragraph is easier to read, yes?

Here's how to make long quotes easier for everyone to read:

Instead of < i > and < /i > (without the spaces)

Use < tt > and < /tt > (without the spaces)

Desert (eyes getting old) Dave
Print the post Back To Top
No. of Recommendations: 2
This is the tyranny of the urgent in an election year and it's the development that investors should really worry about. It reads just like the 1970s.

Contrast this to 1992. I remember the way Bush 41 was crucified leading up to the election for standing idly by while the economy became "the worst in 50 years" (or so the sloganeering went). I've always thought that our supercharged economy throughout the 90's was due in large part to that very government inaction (far better than government in action) during the '91 recession. We had gotten the government out of the business of directing investment with the 1986 Tax Reform Act and the end of the Soviet Empire threw a lot of defense employees into the private sector where they were able to create things we might actually find more useful in everyday life than a guided missile (that human capital was the real "peace dividend").

Anyway, enough about the past. The panderers are on the loose, and no one is going to let a little healthy economic pain get in the way of their reelection. Economic displacement is an important part of economic progress, and too often efforts to prevent that displacement end up impeding long-term progress (which dovetails with David's view of our problems being long-term). All we end up doing is delaying, and possibly magnifying, the day of reckoning.

But I'm still an optimist at heart, if only because the people remain smarter than the people who govern them.

Paul (with an out-of-character rant)
Print the post Back To Top
No. of Recommendations: 0
Dave, I have old eyes too, and the italics are far easier to read than that tiny type is.
Print the post Back To Top
No. of Recommendations: 0
Dave, I have old eyes too, and the italics are far easier to read than that tiny type is.

It must be a setting on your computer tt = typewriter type and should be the same font (size) as the italics.

Anybody else notice a difference in size here?
Print the post Back To Top
No. of Recommendations: 0
Anybody else notice a difference in size here?

Very much so specially if you have the Fool set to Serif. The italic is not only larger but the strokes are thicker making for more contrast.

Denny Schlesinger
Print the post Back To Top
No. of Recommendations: 0
Very much so specially if you have the Fool set to Serif. The italic is not only larger but the strokes are thicker making for more contrast.

Denny, it must be a monitor setting. On my monitor the font size is the same and my TMF setting is for serif.
Print the post Back To Top