Nobody Catches Major Turns In GDP Forecasting

When I’d argue over forecasting GDP growth and actual growth with my white-haired maximum leader, I’d say, “but, I’m going to be right and you're wrong.” He’d say, “Go be right somewhere else.”

My leader was smarter than yours truly, at that time.  He wanted stocks to single out. “Gimme names, names and more names,” he’d say. 

I’d answer, “I can’t give you names before I get my macros growth projection on the money.” The wiser response is nobody ever gets his GDP numbers on the money. All you’ll hear are the laments on why forecasts go wrong. Remember, during the Cuban missile crisis when our foolishly chattering electromechanical broad tape shut down while running 5 hours late. 

Buffett then was as unshakable then as now. Several of the holds dated back to the early seventies like American Express.

When I checked my long term charts, there’s no definable trend on business cycles except their cyclicity. Pretty much the same for corporate profits. Everyone uses 3 or 4% as a trendline for practically everything because anymore leads to greater error in long range forecasting. 

I’m not ready to bet that Trump throws in the towel on his taxes levied to date. What I’ve done is compress my equity holding to a handful of growth stocks and highly leveraged financial operators like Goldman Sachs and Amazon. Apple is a major position, too. 

Paul Volcker in the early eighties put interest rates into double digits to rid the country of its inflationary binge. Let's see if Trump is brave enough to make sense. 

This chart on growth in GDP, actual vs. consensus shows how divergent the experience is likely to be year to year, cycle to cycle. Buffett’s major holdings during the Cuban Missile Crisis are not much different than today. He owns banks like Wells Fargo, non durables like Coca-Cola and Procter & Gamble. In energy, Exxon Mobil and finally, American Express which I sold around 50 years ago.  

An old professor of mine at NYU, Gene Lerner, used to lecture us that politics leads economics. This was true in the Cuban Missile Crisis, too.  When the market was a big mud puddle. If you could rise above the hysteria and throw your buy orders into the pot, you could get rich overnight. I did that then, but, of course, I had very little capital to play with. Nevertheless, it was a good lesson. Courage is a rarely spoken of trait for a good money manager. 

Think of all the capital that hides behind pie chart investing. Not so strangely, all our chart assets. But, with the wrecking ball practitioner in charge, nobody knows if he comes out whole. 

I’m not ready to shove my chips into the pot. May even take early retirement. I’ll be 94 this August. Wish me luck and pesetas.