This Week in Summary 10/7/2022

Oct 7, 2022 | Bubble Monitor, No Bull Economics

Bubble monitor Chart
Bubble Monitor Chart

It is a common practice of economists and policymakers to use forecasts to assess the prospects of everything from the economy to climate change, to public health. In a recent post, we examined the challenges of confusing fact-based scientific discovery with the unreliable ART of forecasting. In the real world, economic forecasts were used to justify the Fed’s purchase of trillions of dollars of bonds to ease both the Great Recession and the economic collapse caused by the covid lockdowns. Apparently, these same models failed to forecast the current bond bubble which is disrupting both the bond and stock markets as the Fed unwinds its past excesses with aggressive rate hikes during a recession that is made further evident by a recent BLS report that August job openings decreased -6.2% m/m to 10.1MM (representing the biggest one-month decline since April 2020 in the early days of covid). We suggest that a focus on continual process tweaks is superior to implementing monumental forecast-driven policy decisions. For instance, the US needs a sensible strategy today to offset OPEC+’s potential plan to cut oil production to push prices back above $100/bbl. An important long-term process improvement would be to consider more practical, cost-effective ways to extend the US life expectancy. Fortunately, a great deal of economic resiliency is provided by well-run US companies that help offset many of the monumental blunders that policymakers could otherwise avoid by shifting from a reliance on unpredictable forecasts to a focus on process improvement. This is exactly how US blue chips like Costco can generate such strong results in this challenging economic environment while the government drowns in debt. Imagine what the US government might look like if we let Costco have a try at steering the ship?       

Publications

What Does Pfizer Have to Say About Fossil Fuels and Disease?

Why is it so Dangerous to Forecast a Crisis?

Bursting Bond Bubble

What is Costco’s Key to Success in 4Q22?

The Cost of an Extra 10 Years

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