Yesterday I raised the question “what’s up with the mix signals on the economy?” The economic numbers just didn’t seem to match what the Federal Reserve was saying. I simply couldn’t see how the world is ending mentality gave way to a 6 week market rally and the Fed to say things are fundamentally sound.
Jim Rogers, a one time monster hedge guru, just isn’t buying the economic and stock market recovery:
I am not buying U.S. companies mainly because I think we may have seen a bottom but I don’t think we have seen the bottom. I am skeptical about the rally, the world economy for the next year or two or three. But if stocks go down, I can make money with commodities. In the 1970s, commodities went through the roof even though stocks were a disaster. In the 1930s, commodities rallied first and went up the most long before stocks pulled it together.
Yes, politicians are making mistakes. In Japan, the problem has lasted for 19 years. I hope that it doesn’t last 19 years in the U.S. The approach that works is to let them (U.S. banks and automakers) collapse and clean out the system. The idea that phony accounting is the solution (through changes in mark-to-market rules) is ludicrous. And the idea that a debt problem and an excessive spending problem can be cured with more debt and more spending is ludicrous.
It’s laughable on its face, but politicians think they’ve got to do something. Unfortunately, they are doing the wrong things and they are going to make it worse.
For the record, I do think that mark-to-market rules need to change but they would not solve the problem.
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