A well proven leading indicator for economic disaster is when people begin to proclaim “It’s Different This Time” as a way of explaining how a short term movement becomes a long-term trend. Dig up your memories (and your forecasts) of Optical Networking from 1999 and you’ll agree.
I read GaveKal’s “Brave New World“, a treatise on the new economy and thought it was excellent. The authors even poke fun at the fact that they are claiming it is different this time. The GaveKal book is a heavyweight analysis and is excellent reading, particularly their concepts of platform companies.
Oil is over $70 a barrel, Iranâ€™s got nukes, and soon theyâ€™ll price gas per ounce. The Fed has jacked short rates up 15 times. Guys, youâ€™re killing us. The yield curve is as flat as a subsidized Iowa corn field. Thereâ€™s $1 trillion of teaser rate Adjustable Rate Mortgages about to burst all over Southern California and â€™burbs everywhere. Gold is over $600, commodities are roaring, the dollar is dropping again, there are trade deficits as far as the eye can see and GM is on life support. Drunken sailors in D.C. are running a sea of red ink and every time itâ€™s sunny, some antigrowth global warming nutjob wags his finger at your $100-to-fill SUV. It feels like the â€™70s all over again, a blaze of malaise. Except . . .
In order to inoculate myself from what increasingly seems like groupthink I’ve started to read Marc Faber’s “Tomorrows Gold: Asia’s Age of Discovery“. Faber is a really smart guy, more so because of his decision to isolate himself from day-to-day nonsense by living in Thailand. He is the antihesis of the “This Time It’s Different Crowd”.
I think the reality of the situation is best captured in a cartoon posted today at The Big Picture. No one can really explain how virtually every asset class has increased in value over the last three years. It simply makes no sense.