 |
The James Dines vs.
Wall Street Face-off!
Once again, James Dines takes the financial media to task on many of their predictions and recommendations. Mr Dines devotes space in every issue of The Dines Letter to face-offs with the media, and they’ve become one of its most popular features. (For a look at how the “experts” have fared against Mr Dines in previous matches, click here.)
The Financial Media: “Gold has lost much of its appeal. The recent surge in gold prices has delighted ‘gold bugs.’ But it may be too soon to celebrate…there are strong reasons to doubt gold will ever return to the heady levels last seen in the 1980s, and recent gains in gold-mining stocks, as well as the underlying metal, could prove fleeting…gold has lost much of its appeal to private investors. Even
gold jewelry may be losing its allure. Without new and sustained demand, it seems unlikely that gold will regain its former price levels—or its status—and may be confirmed as simply another commodity metal such as copper or aluminum. John Maynard Keynes, who branded gold as a ‘barbarous relic’ in
the 1930s, may yet be proved right.”
|
—The Financial Times (London) February 8, 2002 (at a gold bottom!) |
Mr Dines’ response: “Skepticism is a classic new bull market syndrome. We disagree totally…as for ‘gold jewelry losing its allure,’ try giving her copper or aluminum and see what you get back. Finally, Keynes was a socialist moron.”
The Financial Media: “The fight for price stability has
been won. Since 1979, when Paul A. Volker took the helm at the Federal Reserve, the mission of the central bank has been clear: to beat inflation down by repeated clubbings with the monetary policy truncheon. It’s time to celebrate the Fed’s success. By its own definition, the long fight for price stability has been won, no sign of either an inflationary surge or deflationary spiral. There’s no sign of runaway prices. The era of price stability is likely to be here for a while.”
|
—Business Week, March 4, 2002
|
Mr Dines’ response: “Deflation has already begun in Japan. Since 1980, The Dines Letter has been predicting a long drift down from the rate of inflation toward a deflationary spiral in America—already begun in Japan—regardless of whatever Fedhead Greenspan did.”
The Financial Media: “[Economists are] surprised at the resiliency of consumer spending. Many economists are lifting their near-term forecasts for economic growth. Just a few weeks ago, many economic forecasters expected consumer spending to fall during the first three months of this year, and they expected the overall economy, as measured by the Gross National Product, to scrape together growth of less than 1%. However, many forecasters now say that real GDP…looks set to grow at more than a 2.5% annual rate in the
current quarter. If they’re right, it would be the fastest rate of growth for this lumbering economy in more than two years.”
|
—The Wall Street Journal, February 21, 2002
|
Mr Dines’ response: “[Consumers] are sinking further into debt. The public is unwilling to let go of its go-go lifestyle, and instead is sinking further into debt.”
The Financial Media: “Investors are betting on an economic recovery. Investors continue to bet on a coming economic recovery. Many money managers believe this year will mark a turnaround from the last two, in which the indexes stage consecutive declines for the first time since the 1970s. Overall, stocks have recouped $2.25 trillion in market value since having bottomed out at $10.24 trillion on September 21…[US stocks are] still $4.47 trillion off their high of $16.96 trillion,
hit on March 24, 2000.”
|
—The Wall Street Journal, January 4, 2002
|
Mr Dines’ response: “A bullish majority is a negative omen.
Note that the total market is down 40% even though the Dow is down only 13%. A deception?” The Financial Media: “Brokerage houses reward optimism more than accuracy. Bullish analysts are more likely to be promoted. An academic study finds that brokerage houses may reward optimism more than accuracy in stock forecasts. A new study by two leading financial economists has added further credibility to the claims that analysts who produce optimistic earnings forecasts are more likely to be promoted.”
|
—The Financial Times, February 1, 2002
|
Mr Dines’ response: “Pessimistic forecasts don’t pay.” (On this one, he agrees!) “The truth is that pessimistic forecasts don’t pay because they upset the public and, if wrong, are never forgiven. But if an optimist is wrong, he or she would be forgiven. So nearly all advisors stay bullish nearly all the time. The Dines Letter has no need to be liked and is unafraid to be bearish—or—bullish when appropriate, such as during the 1990s.”
The Financial Media: “The…economy may have evolved to where its general direction is upward. This recession is probably on the way out. The housing market has been charging to new heights in the midst of the recession, thanks to low mortgage interest rates and, so far, low unemployment. The services-dominated US economy may well have evolved to the point where its general direction is invariably upward—recessions
are far less frequent and severe than they were 100 or even 30 years ago.”
|
—Fortune, January 21, 2002
|
Mr Dines’ response: “This buying binge will lead to economic distress. Ultra-low interest rates indeed get people to buy, but they get deeper into debt. And when this buying binge runs its course and jobs get lost, there will be economic distress. Finally, the phrase ‘invariably upward’ is a phrase that will be looked back on someday.” The Financial Media: “Consumers in Silicon Valley are confident economic conditions will improve. Silicon Valley has suffered more than its share of plunging profits, bankruptcies and layoffs in recent months, but most consumers there are confident that economic conditions will improve this year, a new survey indicates.”
|
—The San Francisco Chronicle, January 12, 2002
|
Mr Dines’ response: “This is what denial looks like. They
admit awareness that unemployment will rise, but incautiously refuse to let go
of spending habits.” For a clear and extensive critique of mass media, subscribe to The Dines Letter.
|
|
