On Being a Contrarian

by Laura Ehrenberg-Chesler on September 17, 2009

in Economic Indicators,Employment,Investment Strategies

Our favorite economist Ed Yardeni recently said “Everyone wants to be a contrarian”.  In the investment business it is often considered more productive to go against the consensus.

However, it is hard to judge just what the consensus is exactly, because it is subjective, and filled with nuance.

From our perspective, the professional crowd seems to be worried about the sustainability of any recovery once the stimulus money runs out.

One school of thought that seems to go against the professional consensus is one that supports the idea of a positive feedback loop.  This would occur when signs of economic improvement lead to increased confidence which leads to a rise in employment, which leads to a more confident consumer which in turn leads to greater improvement in the economy.

If the economy were to grow 4% next year that would only be half the growth of a normal strong recovery after a recession.  GDP growth of 4%  would be at least double the growth number that most economists are discussing.  Now that would be contrarian.

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