Which Recovery Story Are We to Believe?

Is the economy recovering?  Nowhere is there more confusion on this topic than in the pages of the Wall Street Journal. Anyone scanning just the headlines might think we’re on the cusp of a solid rebound: retail sales are up, home sales are starting to move, and the Fed chairman thinks the worst is behind us. It is only when one burrows into the newspaper, particularly the op-ed pages, that a more sobering picture emerges. The facts well behind the headlines can be pretty blunt, if not so say downright grim. 

  Tabloid-small1

Yesterday, for instance, we read an opinion piece, “The Stimulus Didn’t Work,” by three think-tank heavies. The essay was labeled as opinion, but it got much closer to the truth than anything we’ve seen on the front page. The authors make clear that when income and consumption are plotted on a graph that takes government transfers and rebates into account, the effect of last spring’s stimulus was almost negligible.  Remember those tax credits — $400 for individuals and $800 for many households?  And how about the $250 checks that were mailed out to retirees? Well, they caused barely a blip in consumption. This is true even if you control for the fact that oil and gas prices were higher.

 Keeper of the Flame

The authors would have sounded even more pessimistic if they had examined the effect of the stimulus, not on consumption, but on capital investment; for that is where a true recovery would begin.  Instead, they have taken the stimulus at its political face value, measuring its impact as though higher levels of consumer spending alone would have been a constructive result. This is most surely the premise of all the headline news, and it fits with the Journal’s steady mutation under Rupert Murdoch into a tabloid newspaper.  More and more, the front page wants to tell people what they’d like to hear, while the editorial pages have acted as Keeper of the Flame. It seems clear enough to us which is getting the story right. Is there a sentient reader out there who cannot see this for himself?   

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  • Rich September 18, 2009, 8:21 pm

    Another quiet day reminiscent of trend turns…

    Do we believe the stories of Bill Clinton with Hearing Aids, Heart Disease or Parkinsons?

    Teddy Roosevelt, cousin of FDR, uncle of Eleanor, youngest Square Deal Great White Fleet Panama Canal President, often said Madison Avenue Advertising was his first career choice, but he was ahead of his time.

    No longer, in this age of Big Brother Bioterror False Flag PsyOps.

    Today we sent our fifth big signal email since 11,750.20 Jan 2000, 7197.49 Oct 2002, 14,198.10 Oct 2007, 6469.95 Mar 2009 and now 9854.58 Sep 2009, looking for a 280 S&P500, with the usual caveat we could be wrong.

    Our supermodel picks last Spring were BGU13.95 to 54.91 +293%, DZK 17.49 to 91.75 + 424%, ERX 16.19 to 43.10 +166%, TNA 10.20 to 49.49 +385%. We missed FAS 11.58 to 91.05 +686%, sigh. Nobody’s perfect;

    So here now we post our top supermodels, with the caveat our Seasonal Subscription Letter and AIM portfolios have better LT closely-held dividend discounts:

    BGZ above 20.13, FAZ above 19.29, FXP above 8.44, TWM above 27, TZA above 11.18.

    To be sure, they may be illiquid leveraged low-priced ETFs with geometric progression to zero, reverse splits and time wasting derivatives, but that did not keep us from BAC, CDE and SIRI either.

    Regards*Rich

    http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3251493

  • Edward September 18, 2009, 4:59 am

    Rick wrote:

    Is there a sentient reader out there who cannot see this for himself?

    Well, to bowdlerize Volatire in the service of some less than stellar wordplay, “Common sentience, isn’t so common.”

  • FranSix September 18, 2009, 4:27 am

    Used to be we’ed glance at the genie co-efficient and draw conclusions. Guess it must be out of vogue.

    Out of curiosity, I though to check up on just how the South Korean Won was doing.

    You can set the time scale to ‘monthly’ when the chart comes up, (also, change candlesticks to OHLC bars) and see how the Won fared against the $US in the last three years:

    http://www.tradingeconomics.com/Economics/Currency.aspx?Symbol=KRW

    Also, I had to rummage around to find this story again:

    Park Dae-sung, the South Korean blogger who was arrested in January and accused by the government of spreading false information about the worsening global economy, was found not guilty on Monday,

    http://blogs.wsj.com/digits/2009/04/21/south-korean-blogger-beats-false-information-charge/

    Once, it was all about rumours. You could get arrested for it at one time. Now, its about short sellers. NAKED short sellers.