Thoughts from the Frontline

Premise #2: The Muddle Through Era

By John Mauldin

October 15, 2004

Premise #2 - The Muddle Through Era
The Perfect Economic Environment
Headwind #1: The Next Recession
Headwind #3: Consumer Spending Will Slow Down
Headwind #4: Stall Speed on Employment
Headwind #9: The Shakeout from the Information Age
And Why I am a Long Term Optimist
A Short Break, Stanford, and Points Beyond

We are doing a series on my basic investment premises: the themes which drive my overall investment strategies. Last week we looked at some of the reasons why I think we are in a secular bear market. This week we look at my Major Premise #2: We are in a long-term Muddle Through Economy.

A few years ago, many readers thought I was far too optimistic thinking things would not get worse than Muddle Through. Now I seem like some troglodyte bear as the economy is doing well (see more optimism below). But I think the case for my Muddle Through scenario is stronger than ever. This week's letter will be the basis for my speech next week at George Gilder's Telecosm. George, that unrepentant bull, has asked me to make the case for a Muddle Through Economy. It may not be the most receptive of venues, but it should be a lot of fun.

But a little history first. A reader sent me a note a few years ago, asking if I had seen what George said about one of my recent letters discussing the poor quality of earnings in the NASDAQ 100 after you account for options expense. Not surprisingly, he disagreed. But he started the letter with what is my favorite and may be the best back-handed compliment I have ever received.

"I have…

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