Optimistic Pessimist Brian Wesbury and I will be appearing together at the ACG Corporate Network Summit in Chicago today. As most of you know, Brian is the consummate economic and stock bull.
I'm more of an optimistic pessimist.
I believe that the stock market and economy will continue to rebound from catastrophic levels, but at a serious cost. We are creating a massive fiscal hole that generations may have to pay for eventually. We are also creating a flood of US dollars that already is creating a dollar "crisis" and may lead to the greenback losing it's special reserve status. (Already, countries are shifting away to other currencies and commodities.) It's these two overwhelming realties of stimulative fiscal and super stimulative monetary policy that are driving stock prices higher and the US dollar lower. Short term positive, long term crisis. This is why there is such divergence of opinion on the markets. Just yesterday on CNBC, Pimco's Bill Gross gave his negative assessment of the US stock market and Blackrock's Bob Doll gave a more optimistic view point. This debate in the markets is all about the time frame.
As BB King sings,
Hey, everybody, lets have some fun
You only live but once
And when you're dead you're done, so
Let the good times roll, let the good times roll
I don't care if you're young or old
Get together, let the good times roll
Until there is a major change in the current structures, the good times will roll.
This is why there is so much focus on exit strategies.
Today and tomorrow, we'll have the US Federal Reserve meet to discuss monetary policy and to discuss when to leave quantitative monetary easing. The G20 is going to be discussing and debating when countries should exit fiscal easing. For the markets to experience a shift in sentiment and direction, we will have to hear/feel/experience a shift in these policies. So far, it hasn't happened but they are talking about it. You can't experience near financial death without it changing your policies. The policies that were put in place were to deal with this cataclysm. Everyone knows these policies have to shift or they will ruin the recovery. The longer they go on, the bigger the problem will be.
Your Money on CNBC.com
- Slideshow: Biggest Holders of US Gov't Debt
- The World's Best Banks 2009
- Slideshow: How Your Tax Dollars Are Spent
- Read Guest Blogs on CNBC.com