Paul Krugman had a nice factoid on his blog today:
I’m detecting a trend in commentary that I find slightly ominous. Some of the economic news lately has been slightly better than expected, which was bound to happen at some point (on average, after all, half the news should be better than expected). Mostly this is in the form of things getting worse more slowly, but it wouldn’t be surprising if we see, say, an uptick in industrial production in a few months, as the inventory cycle runs its course.
If so, that doesn’t mean the worst is over. There was a pause in the plunge in early 1931, and many people started to breathe easier. They were wrong.
So far, there’s nothing pointing to a fundamental turnaround this year, or next, or for that matter as far as the eye can see.
I don’t really understand all the comparisons to the 30’s, but I guess it is the closest thing we can find in our history. Personally, I think the times are very different and that we’re not in a 1930’s type depression (that doesn’t mean our government can’t send us there). Nonetheless, Krugman’s main point is valid: don’t go calling the bottom just because we rallied off a panic low and had a few mildly positive economic reports.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.