In today’s Q1 GDP revision, consumer activity was revised lower. We all now know that consumer activity was hit by higher food costs, but especially by higher gasoline prices.
Early Q4 the Street/financial media had the consumer going nowhere. We advised instead (a crowd of one) that the consumer would come alive into 2011. Sure enough. Thus by mid Q1, the Street/ financial media had the consumer at full stream ahead. We advised instead (a crowd of one) that consumer activity would be slowed substantially by higher gasoline prices. We predicted then that most economists would eventually catch on. They did. In a few weeks they cut their GDP estimates by an average of about 1 ½%, having been twice snakebit in five month's time.
Herein lies a lesson in observation. It is this: Market observers, almost without fail, overreact, tearing off in one direction, willfully blind until they go off the cliff. Scratching their way back up, off they go in the other direction, to soon again be converted to crow bait.
And so it was with analysts and the consumer. Missing the turn just ahead in early Q4 and not wanting to be burned again, economists wholly embraced the consumer, jettisoning all caution at the same time. Heedless of the osprey overhead, like trout, they keyed in, failing to account for gasoline just as the frenzied trout fails to account for the osprey. Again analysts were flattened.
This cycle will repeat, always. To understand this dynamic is to be well armed.
Robert Craven
Early Q4 the Street/financial media had the consumer going nowhere. We advised instead (a crowd of one) that the consumer would come alive into 2011. Sure enough. Thus by mid Q1, the Street/ financial media had the consumer at full stream ahead. We advised instead (a crowd of one) that consumer activity would be slowed substantially by higher gasoline prices. We predicted then that most economists would eventually catch on. They did. In a few weeks they cut their GDP estimates by an average of about 1 ½%, having been twice snakebit in five month's time.
Herein lies a lesson in observation. It is this: Market observers, almost without fail, overreact, tearing off in one direction, willfully blind until they go off the cliff. Scratching their way back up, off they go in the other direction, to soon again be converted to crow bait.
And so it was with analysts and the consumer. Missing the turn just ahead in early Q4 and not wanting to be burned again, economists wholly embraced the consumer, jettisoning all caution at the same time. Heedless of the osprey overhead, like trout, they keyed in, failing to account for gasoline just as the frenzied trout fails to account for the osprey. Again analysts were flattened.
This cycle will repeat, always. To understand this dynamic is to be well armed.
Robert Craven
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