Day long selling left the major stock indexes lower on Thursday (Feb. 21).
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They were mistaken about whether is would happen. Now they appear just as predictably wrong about how it will unfold.
I'm talking about the economy's southward turn, and the "consensus view" amongst the purveyors of conventional wisdom.
The Wall Street Journal and The New York Times each ran page one stories today about "stagflation" (the Times actually had two stagflation stories). I hardly think that the editors of these two papers planned to match topics on their front pages, which is all the more to conclude that "stagnation fears" is the establishment consensus.
Most of what you need to know is summed up in this quote:
"Lately, many people are hearing an echo — faintly perhaps but distinctly audible — of the stagflation of the 1970s."
Of course, I wasn't among the "many" who picked up on that "faintly audible echo." Then again, I realized that my hearing really is okay once I looked at the chart that that was in the same article as the quote.
Take a good look at those insanely inflationary spikes from 1974 and 1979, and then at the comparatively minor increase of recent months. Does anything about the chart data itself recall the 12% to 15% inflation of the 1970s?? Apart from the WSJ and NYT planting the thought, would the word "stagflation" even come to mind?
And naturally, none of the articles addressed the most conspicuous difference between today's economic trends and those of the 1970s -- namely, home prices. If you owned a home back then, you probably remember very well that the one silver lining to rampant inflation was that home prices mostly kept pace with that trend.
But surprise, surprise: That's not true today. Every indication is that home prices are falling. Can you have "stagflation" -- or even a strong overall inflationary trend -- if home prices are headed in the other direction?
We know the answer to these questions. We also know that the conventional wisdom is dangerously wrong for anyone who follows it.
Come see exactly what we see, right now. The Financial Forecast Service can be on your screen within minutes.