Monday, June 22, 2009

Excessive Cheerleading, Even from the Non-MSM

As noted recently, EBR objects to the cheerleading on the stock market from ECRI, which is part of the main-stream media. We have no problem with ECRI tooting its own horn, especially in view of its stellar forecasting record- but it is an economic cycle forecaster. Economic cycles may not correlate with stock prices; and the argument becomes circular, because the trend of stock prices is itself a predictor of changes in the economy.

This blog is in fact called Econblog Review because it was the blogosphere (plus ECRI, it must be said) rather than the MSM that provided the crucial insights that kept yours truly bearish on the economy and the financial markets all through the tantalizing "buying opportunities" in the winter, spring and summer of 2008.

The good news about the blogs I review is how flexible most of them are. For example, Obama fans have stuck true to the principles that made them anti-Bush, and several are now for the most part anti-Obama on economic/financial policy grounds. That's independence (right or wrong). No cheerleading, therefore credible.

Yves Smith at Naked Capitalism has reported that a reliable source says that the Fed heads are under orders to either cheerlead or keep quiet. It is as if the "Yes we can" theme has been made official policy, so that we can wish ourselves back to prosperity.

Amongst the non-MSM is an under-the-radar group known as Changewave. This organization polls executives and reports on the economy. It was one of the sources that warned me that the economy was really, really bad last fall. Changewave (via Email, no link) is reporting some good news on the second derivative: things are getting worse more slowly. But they tout this as follows: Economy Stabilizes-- Longer Term Outlook Shows Dramatic Improvement. What is its evidence? 44% of respondents project sales will come in below plan for the current quarter, down from 52%. This is the sort of green shoots stuff that is just not great news. Dramatic Improvement? No. Improvement? Yes. In fact, Changewave saw the same sort of improvement in 2001, about 18 months before the economy truly turned up and the stock market saw its final bottom.

Sure, be optimistic in general, but it just seems that too many players are playing ball with the Establishment.

I'd be a lot more bullish on the financial market if the Changewaves and ECRIs of the world were downplaying the second derivative stuff and focusing on the negative- a la all the worry about the jobless recovery in 2003.

Meanwhile, the recent call here that gold was acting heavy is looking good. Deflationism is in for the nonce.

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