Will The Inventory Recovery Be Bubblicious?

John Hempton has some interesting thoughts on the size of the boost to GDP from an inventory rebuild:

Whilst there are inventory shortages in far more important industries (see this story from the WSJ about auto-dealer inventory shortages) they won’t quite be of the scale of Brunswick. But the risks to the inventory driven manufacturing economy are in my view (and quite surprisingly) to the upside.
Whether Professor Krugman is right – and the inventory bounce is followed by a double-dip – on that I will reserve judgement. But he is right such a large proportion of the time that when the euphoria of the inventory bounce is upon us I will be very nervous..
That’s the conclusion of the post. Read the entire thing to get a sense for how much Brunswick has cut back on its production of power boats. As always his analysis is thorough. If he’s right there might be short-term trading opportunities on the long side but as he says be very, very careful about the euphoria.
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