In the meantime, Jim Grant is telling us all to keep an open mind…
From Bear to Bull in the Wall Street Journal:
As if they really knew, leading economists predict that recovery from our Great Recession will be plodding, gray and jobless. But they don’t know, and can’t. The future is unfathomable.
Not famously a glass half-full kind of fellow, I am about to propose that the recovery will be a bit of a barn burner. Not that I can really know, either, the future being what it is. However, though I can’t predict, I can guess. No, not “guess.” Let us say infer.
The very best investors don’t even try to forecast the future. Rather, they seize such opportunities as the present affords them. Henry Singleton, chief executive officer of Teledyne Inc. from the 1960s through the 1980s, was one of these enlightened opportunists. The best plan, he believed, was no plan. Better to approach an uncertain world with an open mind.
Not surprisingly, Michael Panzer at financialarmageddon.com doesn’t agree…
To be sure, Mr. Grant rightfully acknowledges the folly of economic forecasting and is careful about pinpointing when we might expect to see his anticipated strong recovery.
Yet by citing the work of the Economic Cycle Research Institute, which has recently been suggesting that a major upswing is on the cards, Mr. Grant seems to make it clear that now is the time for optimism.
Unfortunately, his rationale is weak, if not totally wrong. For the most part, his argument rests on the premise that, historically at least, strong recoveries have followed severe contractions.
Aside from discounting the fact that there are aspects to the current unravelling that are historically unique and extraordinarily unsettling (e.g., total credit market debt relative to gross domestic product is well beyond anything this country has ever witnessed), Mr. Grant makes a number of curious assertions.
For one thing, he assumes that the current downturn is near its nadir, instead of a temporary floor built on a massive stimulus injection and a knee-jerk bout of inventory restocking. Among logicians, such an analytical approach might be described as “begging the question.”…..
If savings rates, debt levels, and the share of the U.S. economy accounted for by consumer spending were to return to, say, pre-Greenspan era norms, then one bomb shelter might not be enough to handle the economic onslaught that is still headed our way.
All that was on September 19th, but things haven’t changed much: at most investment houses a very similar debate rages on.
Interestingly, a recent very informal survey of some of our hedge fund clients found most people pretty much in the middle, with low probabilities assigned to either the “Armageddon” or the “Boom!” scenario for 2010, though most gave the V-shaped version the shortest shrift.
More inclined to fade the extremes, than out and out pessimistic. But no doubt also ready to take whatever opportunities present themselves…
Jonathan Wilmot, chief global strategist at Credit Suisse Investment Bank, is blogging at FT Alphaville for the day.