Tuesday, June 16, 2009

What You Think You Know is Sometimes Precisely What You Don't Know

The perils of predictions:
Here is a chart I was Emailed, but I cannot identify the original source.
The chart shows the Obama administration's predictions at the time the "stimulus" ("ARRA") was going through Congress. The figures reflect the thinking of the best minds that Team Obama could find.
Making predictions about the past is a lot easier than doing so about the future, even the near future.
Many things have changed in the financial world recently, just as they changed in 1979-81 when first Paul Volcker and then Ronald Reagan came to the fore with new strategies for the financial system and the economy. It is not, however, 1982, when it became clear that neither Volcker nor Reagan was "for turning" and when the 16-year bear market in financial assets came to a loud end that was so obvious that the New York Times headlined it when it happened (August, 1982).
What sort of "flations" face us, and in what sequence; and how much like Japan post-bubble will be the U. S. economy's intermediate-term course, are murky. Usually yours truly does NOT believe in much financial diversification; usually trends in motion worth joining appear clear. Not now. Thus the recommendation for overweighting in cash, with the rest of one's funds in high-quality assets that provide a yield, with the exception of gold.
Copyright (C) Long Lake LLC 2009

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