I am a top-down analyst. My first instinct is almost always to look at the long term trends and patterns. I’ll go back hundreds of years if I can. Sometimes the easiest way to make money is to grab on to the “one big trend” and ride it.
2009 Annual Outlook (12/08-1/09)
Part I – The Depression’s Long Shadow – The economic policies that were put in place in response to the Great Depression and built upon since that time…promoting housing investment, personal consumption, rising indebtedness, monetary stimulation…have run to their logical conclusion. We are now in the period of transition that will likely lead to the reversal of those trends.
Part II – The Trade Deficit and the US Debt Machine – How periods of tight monetary policy lead to a strong dollar, which leads to large trade deficits leading to a weak dollar policy, leading to foreign intervention which leads to high US indebtedness. The only sustainable way out of our debt problem is to start running a trade balance, or preferably, a trade surplus.
Part III – Shrink the Stimulus, Triple the TARP – Economic crises are always banking crises. The health of the financial system is critical to stabilizing the economy. The Obama stimulus is more of a sideshow. The banking system needs another $1 trillion to properly absorb the projected losses.
Part IV – The Recession’s End is not Near – Given the state of the housing market and high consumer indebtedness, the US consumer is tapped out. Business is in OK shape. The federal government does have capacity to lever up while the consumer pays down debt. The aggressive fiscal and monetary policy response should produce a spurt of growth by early 2010, but it will likely be unsustainable without borrowing more demand from abroad.
2009 – Interim econ posts
Progress on the Financial Rescue (1/29/09)
Shock and Awe from the Feds (3/26/09)
Good News on the Trade Deficit (4/6/09)
Hot and Cold on Obamanomics (5/15/09)
The Economist on the Stress Tests (5/17/09)
Inflation is not a problem (yet) (5/25/09)
More on American Manufacturing (6/4/09)
The Nature of the Economic Recovery (10/28/09)
Assessing the Quality of Q3 GDP Growth (10/30/09)
Government Deficits are Necessary (for now) (11/04/09)
Invest in infrastructure to stimulate jobs (11/20/09)