Unexpectedly Intriguing!
January 29, 2007

Is it really any surprise that goverment officials and bureaucrats who don't respect the private property rights of individuals don't care much about protecting any of their other rights too?.

Every year, when it's Nobel Prize time, a lot of speculation centers on whether or not it finally be the year that a certain New York Times columnist will win the Nobel Prize in economics. Rest assured that it probably won't happen, as it appears his understanding of the subject is somewhat limited....

Speaking of economists with really bad forecasting skills, one of the things we just don't get is the economic analysis that gets lapped up without serious question by the media these days. Here's a prime example from January 14:

Lehman Brothers chief US economist Ethan Harris on Friday boosted his forecast for fourth quarter 2006 growth to an annualized rate of 3.3 percent, a leap from the firm's prior call for just 2.0 percent growth.

"After slowing in November, the economy seems to have regained its stride," Harris said.

"With the last of the major data in, we are now revising fourth quarter GDP to an above-trend 3.3 percent. A wide range of indicators have been stronger than expected. Most important have been the strong consumption data and the surprising improvement in the trade balance."

But, then the analyst in question goes on to say this:

Harris at Lehman Brothers said "a natural question is whether the solid fourth-quarter growth is a fluke."

He said data could be distorted by things such as the introduction of the new Windows Vista operating system, shifts in holiday shopping patterns, problems in the auto sector, the plunge in energy prices and unusually warm winter weather.

Our translation of that statement: "We really have no idea at all what will happen, so let’s throw up a bunch of garbage and see if anything sticks!"

The truth is the economy may be driven a lot more by inertia than anyone really appreciates. In our view, it really takes some kind of government action or some other, more natural, disaster to derail the economy’s growth prospects. But, we guess that kind of commentary doesn't guarantee getting your name published in the news!

As for the U.S. having had a good fourth quarter in 2006, well, we could have predicted that nearly nine months ago (we didn't, at least publicly, until last month when we showed our forecast through 2007-Q2!) We are actually rooting for the numbers to come in as low as are now being forecast, mainly because we don't like that slope in our chart pointed downward from the first quarter of 2007 to the second quarter - we'd rather get to the same point on an upward slope!

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