The depths of incredulity the economics “profession” will go extended further yesterday, as local pundit Stephen Koukalas called out “clown” Andrew Roberts at RBS for his “sell everything” call:
And has now backed that up with a potential Laffer bet – $AUD10,000 wager across 10 or so variables (actually just asset market price levels) that he contends wont be breached by the end of calendar year 2016, published at his website.
Whats the Laffer bet? Its an infamous “one penny” bet that market economist Art Laffer – inventor of the failed Laffer Curve – made at the height of the GFC against Austrian economist doomsayer, Peter Schiff:
Ten grand is a bit more than a penny, but the concept and arrogance behind it is the same.
Meanwhile from Yahoo comes a change in tune for his very bullish domestic interest rate outlook:
For anyone invested in the stock market, it has been a horror start to the year…It is interesting to see that the bulk of the hard economic data in the major economies has been good or very good.
In the US, the pace of job growth remains very strong and with that, the unemployment rate is low. In the Eurozone, business sentiment indicators and the labour market are improving.
Here in Australia, the early signs for 2016 suggest a continuation of reasonable economic expansion.
Australian retail sales are growing at a healthy five per cent annual pace, business expectations for the economy remain firm, even if they not strong.
While the housing market is clearly off the boil, at this stage all we are seeing for house prices is a stalling in the rate of increase, not generalised price falls, while the 2014 and 2015 surge in apartment building has come to an end with a glut of supply in several major cities driving new building approvals a little lower.
…In Australia, policy makers are likely to sit tight and view global market moves with interest and some concern.
They will be ready to act if the worst happens.
For now, with the economy still rolling along, the best bet is probably to think the RBA will be on hold for many months to come and that the Budget in May will be framed around election economics which just might happen to stimulate the economy.
Many months on hold is not what Kouk said in November, from Bloomberg:
Koukoulas forecasts the central bank will raise rates by a quarter point to 2.25 percent in the third quarter of 2016…He expects another increase in the final quarter of 2016.
As H&H has made clear, the next rates move is clearly down, sooner rather than later, as the impact of the Mining GFC rolls in and the need to prop up the real estate bubbles on the East Coast becomes paramount.
Economists should deal with risk management variables, not absolutes.