Monday, December 31, 2007

Kevin Hassett sees bullishness looking back at 2007

I'll summarize his points, and provide a typical retort from a bitter bear:
1) Equity markets posted solid gains and price multiples are still low. How can you trust corporate earnings reports? It's all rigged!

2) Households are wealthier. My household is poorer than it's ever been!

3) Congress did nothing. Congress should get us back on the gold standard!

4) The Federal Reserve did something. The Fed is just creating hyperinflation, like it's been doing for decades!

5) The world economy had another blow-out year. Foreign economic statistics are even more suspect than ours!

6) The trade deficit declined. All government statistics cannot be trusted; only my conspiracy theories are worthy of your trust!

7) Even in the face of the housing-market bust, economic growth was solid. (See .2.)

8) Job creation was robust. (See .6.)

9) The federal budget deficit declined. (See .6.)

10) Inflation risk is low. (See .4. and .6.)
I agree with the bears that government statistics are full of known and unknown errors. But they can never point me to a more accurate source of data. Therein lies the problem with me ever being a long-term bear. Being bearish 2 months a year and 2 years a decade is fine, but foolish in perpetuity.

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