10 Reasons To Be Cheerful (About The Macroeconomic Outlook) August 31, 2010Posted by bernardlunn in capital markets, Predictions.
I made my 2010 Predictions in Dec 2009 and half year update in June 2010. My predictions were gloomy on the macro picture but positive on tech and online media. In June I turned more positive on the macro picture. Here is why;
1. Bull Markets “climb a wall of worry”. They always have and always will.
2. Too many commentators are bearish, much of it crazy doomster talk that sells blog page views (and is good for canned food, Montana cabins and guns). I am not simply being a “knee jerk contrarian” by pointing out that this consensus pessimism is positive. When all the commentary is negative, traders/investors move to cash. And cash needs to get a return somewhere, so people will invest and some of that investment will lead to great companies and good jobs.
3. Most commentators are US centric and so are reporting from where this recession originated.
4. This recession hit the “chattering class” worse than usual. The old saw applies, “it is a recession when your neighbor loses his job and a depression when you lose your job”". So the chattering class, often blogging for free or peanuts, will tend to talk about depression a bit more.
5. GDP and other macroeconomic statistics miss all the free agent and entrepreneurial activity, particularly in the most dynamic job market – America.
6. The global rebalancing is happening. This means that global demand is no longer dependent on the American “consumer of last resort” (who was actually just using their house as an ATM). Wages are rising in China and India (“Chindia”). The labor arbitrage is narrowing and a that means jobs will return to Western economies. The higher wages in Chindia means that Western firms will have a couple more billion consumers to sell to.
7. The American rebalancing is happening. This is shifting investment from property (fundamentally dead money other than construction jobs) to investment in business (when I read about a “seed financing bubble” I get optimistic).
8. People follow trends beyond reason. When things are going up they exaggerate how far it can go up. When things are going down they exaggerate how far it can go down. We are clearly in that latter phase.
9. This point is deliberately left blank. Most people miss the downside surprise. But equally most people miss the upside surprise.
10. We are animals and need our animal spirits, so we will work, trade, invest and shop our way through problems. Cheers mate!
In case you think I am a “perma-bull”, here is one example of my gloomy view and advice from Oct 2007..