Donald Luskin Reclaims His Title
“”It was the worst of times, and it was the worst of times.”
I imagine that’s what Charles Dickens would conclude about the current condition of the U.S. economy, based on the relentless drumbeat of pessimism in the media and on the campaign trail. In the past two months, this newspaper alone has written no fewer than nine times, in news stories, columns and op-eds, that key elements of the economy are the worst they’ve been “since the Great Depression.” That diagnosis has been applied twice to the housing “slump” and once to the housing “crisis,” to the “severe” decline in home prices, to the “spike” in mortgage foreclosures, to the “change” in the mortgage market and the “turmoil” in debt markets, and to the “crisis” or “meltdown” in financial markets.
It’s a virus — and it’s spreading. Do a Google News search for “since the Great Depression,” and you come up with more than 4,500 examples of the phrase’s use in just the past month.
But that doesn’t make any of it true. Things today just aren’t that bad. Sure, there are trouble spots in the economy, as the government takeover of mortgage giants Fannie Mae and Freddie Mac, and jitters about Wall Street firm Lehman Brothers, amply demonstrate. And unemployment figures are up a bit, too. None of this, however, is cause for depression — or exaggerated Depression comparisons.”
He then presents a bunch of data — last quarter, he tells us, real GDP was up 3.3%. (He somehow fails to mention that the quarter before, it was 0.9%, and the quarter before that, -0.2%.) All sorts of things are really very good. So why don’t people recognize that? He blames Obama. (Really. Obama, he says, is “Patient zero in this epidemic”.) His conclusion?
“Whatever the political outcome this year, hopefully this will prove to be yet another instance of that iron law of economics and markets: The sentiment of the majority is always wrong at key turning points. And the majority is plenty pessimistic right now. That suggests that we’re on the brink not of recession, but of accelerating prosperity.
Maybe this will turn out to be the best of times — at least since the Great Depression.”
* “So what words are left to describe a really big down day like Thursday? How about, “Stocks became a better bargain than ever!”” — July 27, 2007 (DJIA closed at 13,265.47, 1843.47 points higher than Friday’s close.)
* “If you see any financial stocks that have gotten run over by a bus in the last couple months — and then the bus backed up and ran over them again — you might want to consider taking a flier, and putting some money down by expecting the unexpected.” — Oct. 26. 2007 (see a chart of financials over the past year here, and tell me whether you think Luskin was right. Best I can tell, they’ve lost about a third of their value, on average.)
* “THE BOTTOM IS IN. Yes, I know I’ve been too early in saying to buy stocks during the correction from the October highs. But all the classic signals of a durable bottom are in place now. Let me count the ways.” — Nov. 30, 2007 (DJIA closed 13371.42, 1949.43 points above Friday)
* “On Wall Street, vultures don’t go after dead things. They go after things that are alive and very cheap. And right now, they’re going after troubled financial stocks in a big way, which means it’s time to move in.” — Dec. 7, 2007 (see chart described above. Buy now, and you’ve only lost about 25%, on average, as of Friday.)
Just ten days ago, he truly outdid himself with a column called — I am not making this up — “GOP’s Palin Could Be Savior of Stock Market“.
But here’s the truly scary part of Luskin’s op-ed: “Full disclosure: I’m an adviser to John McCain’s campaign”.
I just hope he’s their investment advisor.