Saturday, September 10, 2005

Overconfidence

The problem with forecasting
Let me speculate, despite the fact that the first part of this letter was about the uselessness of forecasts and speculation. I think the Fed is going to increase rates until the rampant speculation (no pun intended) in the housing market goes away. They are going to raise rates until housing slows down. Of course, since 40% of new jobs in the last 4 years have come from the new housing sector, and since a great deal of the increase in new consumer spending has come from cash out financing, this is likely to slow the economy as well. They are prepared for that.
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