So far this year, the Plow Horse US economy has accelerated a little bit from 2010-2012, the S&P 500 is up 16%, interest rates have risen, and gold is off 17%. As our readers know, this is exactly what we’ve been forecasting.

 
Despite this success, we have had one big miss: inflation. Consumer prices – including food and energy – are up a mere 1.1% from a year ago. We’ve never been in the hyperinflation camp – that’s why we’ve been bearish on gold these past few years – but, we …

As the Chicago Blackhawks started their seven game conference championship (final four) series with the Los Angeles Kings, the national sports punditry had decided it was going to be hard for the Hawks to advance to the final round of Stanley Cup play.
LA is just too big and punishing, they said. In Biblical terms (as in Numbers 13), the punditry had crossed over into the Promised Land, taken one look at the giants over there and decided it was too scary to go fight them.
 

 
In the more mundane world of …

The current US recovery is probably the most ridiculed and disrespected we have seen in 31 years of economic forecasting. Conventional wisdom calls it a “sugar high,” it has evidently not reached “escape velocity” yet, and every piece of weaker than expected data is supposedly the beginning of the dreaded “double dip recession.”

 
Of course, none of this is true, but it fits a narrative – one that works for both sides of the aisle. Conservatives want to paint Obama as an economic fiasco. Liberals want to argue that “austerity” is …

Like Rip Van Winkle, imagine you went to sleep on October 9, 2007 and didn’t wake up until yesterday. On 10/9/2007, equities were at record highs: 14,165 for the Dow Jones Industrial Average and 1,565 for the S&P 500.
You slept right through a housing bust, a financial panic, the deepest recession since the Great Depression, the passing (and upholding) of Obamacare, multiple bouts of debt-limit brinksmanship, two fiscal cliffs, the European financial “crisis,” a tsunami in Japan, the BP oil fiasco, and a long list of other media-obsessions over the …

Certain things, like the sun rising, or the tides shifting, can be counted on. It’s also true that when government shrinks as a share of GDP, things start to pick up.
For the past three years, gridlock in Washington has held total spending by the federal government basically flat. This means federal spending has fallen from more than 25% of GDP to 22%, creating more room for the private sector.

 
Contrary to popular Keynesian thinking, this means entrepreneurship will have a more pronounced, and positive, economic impact on the economy. In other …

The higher the stock market goes, the more the bears argue that it’s all about easy money from the Federal Reserve. The “QE-xcuse” – says Wall Street is flying high on a wave of new money from Quantitative Easing.
But, this explanation is getting long in the tooth. The S&P 500 and the Dow Jones Industrial Average both reached all-time record highs last Friday, up 161% and 156%, respectively, from their lows of four years ago.

 
The last time stocks had such sharp and sustained gains near these levels was in the …

Real GDP grew at a 2.5% annual rate in the first quarter, according to Friday’s initial estimate. But the way it was reported in some places, you’d think we were on the verge of another recession.

The overall economy lagged expectations of 3% growth and it would have been better if less of the growth came from inventories.  However, excluding government purchases, real GDP grew at a 4% annual rate in Q1, the fastest pace since late 2011. Excluding both governmentand inventories, real GDP was up at a 2.7% rate.

In other words, this was …

The first quarter has come and gone and lots of data have been released. Still, there are pieces of data missing and these missing data points make forecasting GDP treacherous.
Nonetheless, the data we are confident about are consumer spending, business investment, and home building, which appear to have expanded at an annualized real rate of 3.8% in Q1 – the fastest combined pace of growth for these portions of GDP since 2010. In other words, the economy appears to be bouncing back from its weaker Q4. The plow horse economy …

No, just because retail sales fell 0.4% in March does not mean Keynes was right. Sequestration did not cause the decline. Nor did the end of the temporary 2% payroll tax cut, back in January, cause it either.
As you can probably guess, we find these arguments without merit. Early last week we posted on our blog an analysis showing that the last three times Easter was so early and occurred in March, the actual report on retail sales has come in well below what our models were projecting. (Link) As …

Last week, The New York Times published former Reagan OMB Director David Stockman’s “sky is falling” critique of the current economy and financial markets. State Wrecked: The Corruption of Capitalism in America. Stockman says the US is broke – “fiscally, morally, intellectually” – and says “When the latest bubble pops, there will be nothing to stop the collapse….” He says investors should sit in cash.
 

 
The piece instantly achieved rock-star status. “What do you think of Stockman’s piece? He’s not a liberal…he’s a conservative…so, isn’t this something I should take seriously? …