Author Topic: Paul Volker And 1982. Why Now Isn’t Then  (Read 154 times)

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Offline Ptarmigan

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Paul Volker And 1982. Why Now Isn’t Then
« on: August 22, 2022, 08:24:17 PM »
Paul Volker And 1982. Why Now Isn’t Then.
https://realinvestmentadvice.com/paul-volker-and-1982-why-now-isnt-then/

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Jerome Powell isn’t Paul Volker, and this isn’t 1982. As of late, market analysts are stumbling all over themselves, trying to outdo each other on the “why this time is different” related to the Federal Reserve’s ongoing inflation fight. One of the more interesting comparisons came from the always uber-bullish Tom Lee of FundStrat.

He argues that the market setup is similar to what investors experienced in August 1982. Then, a strong rally in equity markets took place as the Fed began to pivot away from its inflation fight. In the summer of ’82, the U.S. economy was in recession, and then-Fed Chair Paul Volcker had not yet signaled whether the Fed would ease up in its campaign to slow inflation. ‌In October that year, Volcker signaled the Fed could temper efforts to slow inflation.

“The forces are there that would push the economy toward recovery. I would think that the policy objective should be to sustain that recovery.” ‌

Two months before the pivot, markets sniffed out the Fed’s plans. Over the next four months, the losses from the 22-month bear market that saw the S&P 500 fall by 27% got reversed.



When it comes to the financial markets, Sir John Templeton once said:

“The four most dangerous words in investing are ‘this time is different.'”

While that is a true statement, particularly when it comes to excuses as to why bull markets can continue indefinitely, there are differences in historical comparisons. When an analyst “cherry picks” a random point in market history to base their investment thesis, one should take such with a “heavy dose of salt.” The reason is that “this time is different.” Every period is different due to the differences in the makeup of the economy, markets, consumption, production, debt, and a litany of other domestic and global factors.

To say 2022 is like 1982 is a dangerous statement, particularly when 1982 is taken entirely out of the context of what preceded it.

But, as Paul Harvey used to quip, “in a moment…the rest of the story.”

Jerome Powell is not Paul Volker. 1982 and 2022 are not quite similar. Worth reading.
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Offline Muddling 2

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Re: Paul Volker And 1982. Why Now Isn’t Then
« Reply #1 on: August 31, 2022, 12:53:55 PM »
Paul Volker And 1982. Why Now Isn’t Then.
https://realinvestmentadvice.com/paul-volker-and-1982-why-now-isnt-then/

Jerome Powell is not Paul Volker. 1982 and 2022 are not quite similar. Worth reading.
d

The overall economic pictures are in no way similar.  We've been kiting checks via "quantitative easing" for too long. 
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Offline Eupher

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Re: Paul Volker And 1982. Why Now Isn’t Then
« Reply #2 on: August 31, 2022, 01:58:55 PM »
d

The overall economic pictures are in no way similar.  We've been kiting checks via "quantitative easing" for too long.

Yup. If there is to be a recovery (not entirely sure the whole damned mess isn't going to crash hard), the pain will be orders of magnitude worse than it was in 1982 and the blisteringly-fast 4-month recovery then.
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