Fed Chairman Ben Bernanke has recently commented that the recession shows signs of being over. It looks like the green shoots are becoming more imminent signs of reforestation. For those believing in the omniscience of the Federal Reserve chairman consider the following:
- Summer 2005 - Bernanke was asked to comment on the possibility of a housing bubble. While admitting that prices had risen strongly, he also asserted that a strong economy and other fundamentals supported strong housing prices.
- July 2005 - In another interview that summer he dismissed the idea that a decline in housing prices would adversely affect the economy since US housing prices were highly unlikely to decline. Rather he forecasted a gradual easing of the rate of price increases.
- November 2006 - he comments that US auto production showed signs of strengthening. He also said housing inventory would gradually decrease.
- February 2007 - he indicated the Fed was watching the subprime market but seemed unconcerned.
- July 2007 - acknowledged some pressure on housing prices but indicated pricing pressure would ease with a growing economy and stronger employment. He also predicted growth in the economy for the 2nd half of the year.
His record of forecasting success has proven spectacularly incorrect. Should we really accept his pronouncement about an economic recovery?
The video compiling these predictions is at this link: http://www.youtube.com/watch?v=HQ79Pt2GNJo&feature=player_embedded
What about the Fed chairman's investing prowess? It appears the chairman's assets dropped by 29% as revealed in official disclosure documents.
http://www.bloomberg.com/apps/news?pid=20601084&sid=a_poidTIKT8E
The economic recovery touted by Bernanke and as reflected by the recent stock market run will not materialize. A more detailed explanation of our current economic state and investment strategies is available on my web site.
Jim Mosquera is the author of The Sentinel Economic and Financial Newsletter (http://www.TheSentinel.biz).