25 june 2011, let’s hear it for the bear

Being a bear is bad for business. No-one really wants negative news, and so being the one forever bringing it doesn't exactly make repeat calls more likely (doom and gloom). Messengers did really used to get shot. Yet, if bad is on the way, surely it's better to know it than not. And after one bad prediction, nouriel roubini has been economist du jour for years now. My broad view on the economy is that central bankers have worked marvels these last years to slow the need for deleveraging and keep the western economies afloat, but views that private investment and consumer spending are going to pick up the baton and race ahead are flatly wrong. The first will wait and see, and eventually work out there are better places to invest, the second is under sustained attack that will reduce spending power and job security for a long time to come, with no new asset value (like house price rises) or easy lines of credit to take the strain even if confidence did bloom. Which it won't. Which is another reason to hate the bears, as so much depends on that magic of confidence opening up our corporate and personal purses. There may be a little more monetary stimulus to come, but it's at the heavy long term cost of embedding inflation, and somewhere that overly-cheap money is flowing into a whole new bubble. I'm a fan of the q ratio, which shows that shares have been overpriced for a good long time now; the same thing other indices tell us about house prices, still. So, whilst most shoot or ignore the bears, they are probably still right. Whatever tactics we may yet employ, it's the strategists that have it in the end. Denise williams was on to something.