From Cale’s June 2010 letter to Tarpon Folio investors. Find the rest of this series here.
A Qualifier of Sorts
The burden of proof in macroeconomics seems to be, essentially, on those who argue the consensus is wrong. In that light, I should point out two things.
1 – The consensus among the vast majority of professional economists is still that we are in a recovery. So, I am not being particularly subversive or original in any of my previous conclusions.
2 – None of my prior posts should be interpreted as predictions or forecasts of my own design. I review macroeconomic news and opinions to confirm or dispute the implicit assumptions the stock market makes when pricing in that news. If I knew the next recession was to begin tomorrow at 8 a.m., it would not change how I invest in the slightest.
I am in no way qualified to independently and accurately forecast any macroeconomic trends of significance. Fortunately, all I am trying to point out here is that it is highly likely that the market is temporarily confused about the macroeconomic data that has been released lately – and for good reason.
As the fear of a double dip recession begins to diminish, as I believe it soon will, then market prices will move to accurately reflect underlying values. And in the case of our companies, that move should be significant.