Those familiar with Larry Kudlow know his poor track record in
predicting the economy and stock market. He was predicting the continued
growth of tech stocks until the market crashed in 2001. In December 2007
he wrote a column predicting that the "Bush Boom" would
continue. He criticized those who were predicting recession saying that
they would have egg on their faces. In 2009 he predicted a V-shaped
recovery for the U.S. economy. Then in 2010 he predicted high inflation
and a stock market decline as a result of the Fed's QE2.
His most recent prediction provides a little insight into why his track record is so poor http://tinyurl.com/3gnsdml In May of 2011 the stock market which had been rising since spring 2009 began to decline. It declined about 7% from May 1 through mid-June. Meanwhile negative economic news permeated the airwaves. Economic growth has declined in the first quarter. Disappointing jobs reports. The unemployment rate increased. The housing market had made a double dip.
But on June 14, the Dow Jones Industrial Average increased a little over 100 points. Based on that one day fluctuation Kudlow predicted that the stock market correction was over. He went fishing for some data to support his conclusion. He found that retail sales increased a few tenths of a percent and that retail sales and production in China increased somewhat. So based on that he's predicting a better economy and an end to the recent decline in the stock market.
We've got a slowly growing economy. The unemployment rate has just increased. The number of jobs created is anemic. A large percentage of homes are in some state of foreclosure. An even larger percentage of homes are behind in the mortgage payments and/or underwater. The home construction industry has almost ground to a halt. Plumbers, electricians and carpenters are out of work by the millions. Consumer debt is near its all-time high. And based on a one day fluctuation and one month's worth of retail sales data, Kudlow is predicting a reversal of a two month long stock market decline.
