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Friday, June 20, 2003

Prof. Krugman Gazes Into His Crystal Ball

I used to like him when he was shrill and partisan, but now he is just doing market forecasts.

In his latest column, titled "Who Are You Gonna Believe, Me Or Your Lying Eyes?", Prof. Krugman explains why the current stock market rally is fool's gold. He does not explain why this is important in June of 2003, with the election sixteen months away. Yes, the rising stock market has buoyed Republican hopes, and one can hear the teeth gnashing in Princeton, but how many academic economists make (or risk) their reputation trying to second-guess the stock market? Not many, for a reason. Well, maybe this column has no partisan motivation whatsoever. That's certainly a possibility.

Now, I really, really, REALLY am going on vacation. But before I race out the door, I can do my own forecast of the excerpts that will provide the laugh lines for the Krug-critics:

Or, to put it another way: it's hard to find any real news to justify the market's leap.

Neither the quick war nor the tax bill were real.

...Instead, investors seem to be buying stocks because they are rising — which is pretty much the definition of a bubble.

Emphasis added.

...What's clear, however, is that investors' big move back into the market has been driven not by careful comparison of returns, but by the fact that stocks are rising...

Oh, so now it is clear! That just took a few paragraphs to get from "seem to" to "clear". I hope it is not puzzling again by the Big Finish.

In short, the current surge in stocks looks like another bubble, one that will eventually burst.

Time will tell! We will put this on the watchlist with some other classic bits of futurology from the Earnest Prof:

June 7, 2002: Mr. Cheney — who ridiculed conservation and price controls, which in the end were what saved California — remains in charge of energy policy. And that scares me more than terrorism.

...Osama bin Laden can't destroy Western civilization. Carbon dioxide can.

Jan. 29, 2002: I predict that in the years ahead Enron, not Sept. 11, will come to be seen as the greater turning point in U.S. society.

Sorry, out of time. The news that he refinanced his mortgage was delivered on March 3, 2003. From Yahoo, I see that their Treasury index did rise after that shrewd move, but has since fallen to a level below that of March 3. So far, it was a good trade, but a bit early as a long term play.

UPDATE: The man Sans Q is not on vacation.

And it looks like I do need a vacation, or maybe I should read my spam e-mails more carefully. Apparently I am having trouble keeping it up.

THIS IS IT: They can see no reasons 'cause there are no reasons, what reason do you need to be told?

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