I will never make a Bookie

One should read both the new Forecast and the News Release given by Eddie Lazear, provided by Greg Mankiw. My own Take on the Forecast is that it is too optimistic, I believing that growth will be present, but only about 1.5% for next year. The basis for my estimate is the fact that the American Consumer is shaken, and plans to pay down some of their Mortgage debt, refinancing more for safe Repayment schedules, rather than for more Spending. A real criteria to watch is the total Finance numbers on new Vehicles; if these numbers start to retreat, even if they are only very marginal, it means that Consumers have altered their Preference practices. The real element of discrimination will probably be the After-Christmas Sales, determined by the Percentage rollback of Product Pricing, conjoined with the total volume of such Sales. Eddie Lazear did an excellent Job in the Press conference, but he might be promoting a Product which will require an excessive amount of Advertising, and still fail.

You can find the major opposition to my Position here, with Lawrence Summers promoting an Activitist policy. I personally believe it is the wrong time to be loosening the Fed control, what with the shaken Dollar and rising Energy and Food Prices. I have always held the supposition that volatile Prices, if they exceed 3% of average Consumer Income, negate any reliance or trust in consistent Core Inflation; the volatile Prices will impact on Consumer Sentiment (maybe the exact Point at which to reset the Inflation rate). I will probably be crucified for this sentiment, but it might be time to Sunset the Bush Tax Cuts; they providing no stimulus–if they ever did, raised Tax revenues will stabilize the Dollar, Production impact will be effectively nil, and both financial markets and Business interests will find it easier to accept Profit Margin Cuts. It is a Mean Call, but Investors never liked me anyway!

I am not a whiz at Math, but I do not understand the equating of this game to Investing. All Investment I have seen possesses a premium for Engagement in the Game. A better formalization would have 4 White balls, 6 Black balls, and freedom to withdraw from the Game at any time. Continuance in play, though, would provide a 4% payment for the balls remaining in the hat, every time a ball was removed from the Hat. At a Dollar per ball, the preference premium under normal Investing was be $.36/removal of the first ball, $.32/removal of the second ball, . . . Initial investment is very profitable if White balls are pulled out, loss is minimized by the premium if black balls are pulled out, while the odds of pulling out White balls increase with every removal of a black ball. I might be wrong in this assessment of the actual functioning of Investment, but I will retain my own ideas, even if proven wrong (Born Loser). lgl