Economic Outlook: A Change of Seasons

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The surest sign of continuing dollar strength is the professed determination of major Western governments to keep the dollar down.

A Change of Seasons

It’s been quite a long time since we’ve been able to offer arty rays of hope in this column. However, as anyone who’s seen a television stews program or read a paper or magazine in the past few months certainly knows, the United States has clearly experienced art economic recovery of sorts. The reasons for this turnaround are marry and varied (and include happenings on the internal and external political fronts as well as more specific economic actions arid its endurance is open to speculation. Still, it does offer each of us a number of opportunities that were nowhere to be found a few short months ago . . . and the manner in which we take advantage of those offerings may well determine how we all, as individuals and as families, fare in the years to come. However, before we carry that particular thought arty further, let’s take advantage of the expertise of some very wise individuals . . . by — oncemore — gleaning the views presented by a group of respected writers from the exclusive economic newsletter industry.

“My gut feeling (for what it’s worth) is that this is not the beginning of a bear market. My guess is that we are in a secondary correction of undeterminable severity, and that when the correction has run its course the market will head up again toward and then over the highs. But that will take time. Remember, this market has been climbing skyward for eleven straight months without anything like a worthwhile correction. And the market is tired. But to say that it’s all over is something else again. The odds are always against a change in the primary trend, and my feeling is that this is not the time to get hysterical. One can be cautious here — but nothing has been proved yet.”

Richard Russell’s Dow Theory Letters, Inc., August 10, 1983 (26 issues per year for $225, Dept. TMEN, P.O. Box 1759, La Jolla, California 92038)

“The surest sign of continuing dollar strength is the professed determination of major Western governments to keep the dollar down. Last week, with carefully arranged publicity, the central banks of the U.S., Japan, Germany, Switzerland, and France sold perhaps $2 billion for yen, German marks, Swiss francs, and French francs in a concerted effort to take some of the steam out of the dollar’s rise. After a brief sell off, the dollar rapidly rebounded to a 9 1/2 year high of above 2.68 German marks, and to above 2.17 Swiss francs and 244 yen.”

International Money line Weekly, August 8, 1983, Julian Snyder ($282 per year, Dept. TMEN, 25 Broad Street, New York, New York 10004)

“The large international business and banking interests to whom a sudden drop in the price of oil would be disastrous have power. That power most surely is being exerted to stabilize the oil price. A deflationary accident is most likely to occur in the trough of the business cycle. Not only are we past the time of greatest danger in this cycle . . . Congress has given the Federal Reserve unlimited powers to cope with monetary crises.”

Newsletter Digest, August 15, 1983, Al Owen, M.D. ($75 per year, Dept. TMEN, 2335 Pansy Street, Huntsville, Alabama 35801) “This is the greatest bull market of our generation. We think it will become far and away the greatest bull market of all time.”

International Money line Weekly, August 29, 1983, Julian Snyder

“The disinflationary trend continues in full force. The small increase in the consumer price index (0.4 percent July) placed the annual rate of inflation for the last twelve months at 2.4 percent. Not in 17 years had we seen disinflation on this scale.

“This seems to give great encouragement to Wall Street. In their shallow view it means that since inflation has been the dread of the economy, the death of inflation would spell out great renewed, economic health.

“Unfortunately, that is a superficial analysis. Inflation in its early stages causes great prosperity. But as inflation retreats it is accompanied by the result of a disinflation causing lower prices, higher unemployment, elimination of jobs, static real estate, reduced capital spending. All of these conditions are prominently with us.”

Myers Finance & Energy, August 26, 1983, C.V. Myers (14 issues for $200, Dept. TMEN, Suite 310, Peyton Building, Spokane, Washington 99201) “Jerry Buss is a multimillionaire Californian who owns the LA Lakers, the NHL Kings and the LA Forum. Buss made his millions in real estate, but he seems well informed on a subject that I have pounded into the heads of my subscribers. The subject I am referring to is the `magic’ of compound interest. Said Buss recently, when asked about the road to riches: `Get a parttime job on Saturday and do it for ten years. Then take your money and invest it at 12 percent and wait ten years more, and you’re a millionaire.’ “

Richard Russell’s Dow Theory Letters Inc., August 24, 1983

As you can see, the prevailing mood could reasonably be said to vary between caution and optimism. For our own part, we view the current economic situation in termsof the harvest season. Most ofyou, not long ago, found that your gardens (or local farmers’ markets) offered you an almost overwhelming abundance of delicious — and very economical — food. Of course, it would be a foolish individual indeed who’d take the fact that the harvest season did arrive as proof that those same crops would keep on producing at their peak rate through the foreseeable future. No, the harvest brings with it rewards and responsibilities . . . we have to work to preserve same of nature’s offerings, because we know that a stark winter is sure to follow this temporary abundance.

In the same manner, now’s the time to take advantage of this recovery — perhaps to pick up a second job if one is available near you, to use the slowing of inflation to get ahead on mortgage payments with the aim of wiping out the debt more rapidly, or ever: just to stock up on tools and other necessities — because, regardless of what the establishment media might have us believe, the recent recovery has beers fueled by another dose ofprinted money that’s backed by nothing but promises . . . and that influx of bills will have to be paid for sooner or later in the form ofrenewed inflation, or worse.

After all, if the harvest has come in, can winter be far behind?