Heads, I Win, Tails, You Lose
First Trust Advisors
By Brian Wesbury, Robert Stein
July 30, 2012
Up, down, sideways...it’s all bad, all the time.
Take oil, for example. Between September 2011 and March 2012, oil
prices rose about 20%. This generated all kinds of “sky-is-falling”
stories about consumers having less money to spend. But, recently, as
oil prices headed south in May and June, do you think the negativity
went away? Not! The Pouting Pundits of Pessimism said falling oil was a
bad sign, signaling weak global demand. It’s all bad, all the time. The
glass is always half empty.
How about interest rates? The Fed has been trying to hold down
long-term interest rates to stimulate the economy and lots of economists
But now that the 10-year Treasury yield is below 1.5%, many argue
that the low rates signal economic problems and the US is the new
Japan. They say: look out for long-term stagnation and a double-dip.
And there is another group of analysts who fret about rising
rates. If rates go up it will hurt consumers, lead to less refinancing,
and less business borrowing. Once again, it seems no matter how we look
at it, there is always a pessimistic view that comes to the surface.
The same goes for consumer debt and saving. Until recently, we were
told that the economy was too slow because consumers were
deleveraging. By saving more and borrowing less, the economy was being
But now with consumer debt rising and saving rates trending down,
guess what…this is bad, too. We hear more about spendthrift Americans
who are on the verge of creating another Panic of 2008. Either way, if
consumer debt is rising or falling, we’re told it’s bad.
The latest version of this “heads I win, tails you lose,” economic
logic is being told about housing foreclosures. Remember when a wave of
foreclosures threatened to collapse the housing market all over
again? Well, now a recent TV news story bemoaned the “lack” of
foreclosed homes. This, according to the new analysis, is holding down
home sales because there are fewer homes on the market.
Obviously, the economic glass is not completely full right
now. Real GDP is up only 2.2% in the past year and job growth is
one-fourth of what it has been in recent recoveries. But this “all bad,
all the time” stuff is kinda ridiculous, don’t you think?
information contains forward-looking statements about various economic
trends and strategies. You are cautioned that such forward-looking
statements are subject to significant business, economic and competitive
uncertainties and actual results could be materially different. There
are no guarantees associated with any forecast and the opinions stated
here are subject to change at any time and are the opinion of the
individual strategist. Data comes from the following sources: Census
Bureau, Bureau of Labor Statistics, Bureau of Economic Analysis, the
Federal Reserve Board, and Haver Analytics. Data is taken from sources
generally believed to be reliable but no guarantee is given to its
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