Of Market Bottoms and Economic Literacy

This past Monday my friend Howard S. Katz has called a market top in gold and commodities and an incipient intermediate term bull market in stocks. This is because, he argues, the recession fears and investment banking losses have caused a primarily psychological market correction and the Fed's injection of large amounts of liquidity (counterfeit paper money) into the economy will stimulate a new stock market bubble. It will likely be of shorter duration than the most recent 5 year run-up, in Howard's view. Howard has gone long on several construction stocks which had quite roller coaster ride. He bought on Monday and the stocks went up 10 to 20% in a single day on Tuesday. On Wednesday they fell a similar amount, on Thursday they rose a similar amount and on Friday they were down slightly. Should Howard's prediction of a bottom this week turn out to be true, these stocks will have risen in the 100% range.

Financial drama aside, my business seminar class today surprised me. Not a single student in the class had heard of David Ricardo's theory of comparative advantage. It is difficult to discuss business, trade and current events when college graduates in business programs lack a modicum of economic literacy. I am curious as to whether the students' lack of knowledge of the most elementary theory of trade is due to ideological bias in their education; their failure to do their homework; or some other cause.