The headline risk here, folks, is that if you wait for your central banker to give you insight into ...
The Skies Are Not Cloudy All Day
02/12/2008 12:00 am EST
Gordon Pape, editor and publisher of Internet Wealth Builder, reports that some speakers at last week’s World Money Show had a surprisingly optimistic outlook.
Last Wednesday, the NASDAQ Composite Index officially moved into bear market territory. A decline of 20% is considered to be the crossover point between a correction and a bear market.
[Except for the Russell 2000], none of the other major North American indexes are there yet. But NASDAQ was the first to signal the 2000-2002 bear market, so everyone is going to be watching very closely over the next few weeks.
Despite this ominous sign, many prominent market experts simply don’t believe a full-fledged bear market is looming. I spent last week at the World Money Show in Orlando, a huge event which attracts more than 10,000 people a year and features some of America’s best-known financial commentators.
To hear some of the speakers, you’d think that everything that’s going on is just a minor blip. I didn’t see anyone pick up a guitar and sing “Home on the Range,” but the tone of many of the presentations reminded me of that old cowboy song: “Where never is heard a discouraging word and the skies are not cloudy all day.” (Investors polled by MoneyShow.com had a similarly sunny view on the markets—Editor.)
For example, listen to Steve Forbes, the CEO and editor-in-chief of the magazine that bears his family’s name. “We’re living in a golden age,” he told the audience. “In the past four and a half years, the growth in the US economy—just the growth—exceeded the size of the entire Chinese economy. Corporate balance sheets are in great shape—companies are sitting on $1.5 trillion in cash. US consumer net worth is $29 trillion—Americans have more financial assets than the rest of the world put together.”
Meantime, the Federal Reserve Board is slashing interest rates and pouring money into the system. He predicted a rapid recovery from the current malaise. “The second quarter is going to pick up and by the third quarter we’ll be going strong.”
Steve Forbes wasn’t alone in saying that fears of a recession and a bear market are overdone.
John Dessauer, one of America’s most widely followed investment newsletter editors, spent most of his presentation dismantling the case for a recession point by point. “The facts do not support a doomsday scenario,” he said in his workshop.
The apparently weak fourth-quarter US GDP growth number of 0.6% was actually a product of inflation adjustment, he suggested. It will be back around 2% in the first quarter of this year, he predicted.
Mortgage delinquencies in the third quarter last year were only 5.59%, Dessauer noted, so more than 94% of all US mortgages are being serviced on time. And he cited figures that showed mortgage applications are soaring—up more than 100% since the start of the year and rising weekly.
Actually, last week in Florida the skies weren’t cloudy all day, at least most of the time. Perhaps that was the inspiration for all the optimism! We’ll see how it works out.
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