Scare words

[Saniflush]

The president of my company posted this in an e-mail to us this afternoon.  I found it pretty interesting.

I attended a Wells Fargo economic update this morning.  The speaker was James Paulsen, Ph.D., Chief Investment Strategist for Wells Capital Management.  I learned some things.

1. The economic slowdown we are experiencing is mostly fear based so far.  The only segments of the economy that are in trouble are housing and automotive which are down 12%, which is quite severe.  The rest of the economic sectors are continuing to rise at about a 4% pace.

2. Unlike the beginning of most recessions, corporate profits and assets are high, and inventories are low.  With a little less bad news from housing and automotive companies, a lot of money would be freed up for investing.  He seemed to think that the stimulus being provided by Washington is too much and too soon; he thinks it will cause increased inflation.  Interest rates will climb, he thinks.

3. Even though the housing news is really bad, the average cost of a house is still 55% above the average cost in 2004.  I thought that was remarkable.  The increases in housing values lasted an unprecedented 15 years.

4.  There is no slowdown in nonresidential construction yet.  He says there will be one, and I have already seen a slight fall in the Dodge reports of contracts signed for future construction.  However, the rise in spending on nonresidential construction is only 3 years long, so there is no big bubble like in residential construction.   He is worried about retail space and store front construction.  There has been overbuilding there, and buyers are moving to internet purchasing.  The internet may also explain some of the strength in the transportation part of the economy.  He expects public and industrial construction to continue strong since the financial strength of most companies and municipalities is strong.  I suspect health care building will remain strong too.

5. Because of the declining value of the dollar, the balance of trade is reversing for the first time in many years.  Although there is no big increase in exporting, there are a lot of consumers and companies who are buying fewer imports and more domestically produced products.  He expects manufacturing in the US to be booming soon because of this.  If we can sell more to companies involved in manufacturing, it will pay off.  The increase in manufacturing has almost replaced the decline in housing, so that the GNP will go down only slightly.  He doubts there will be enough of a decline to be called a recession.

6. He had a graph of the use of scare words in the Wall Street Journal for the last 20 years.  The frequency of them right now is very high. He compared the scare graph to a graph of the GNP.  Whenever there have been this many scare words in the Wall Street Journal, the economy quickly turned up.  Cute.

Bottom line: Do not take counsel of your fears.  Pursue sales to companies involved in public construction and manufacturing, in addition to traditional customers in commercial construction.

[Lurking Tiger]

I'm passing that along to the folks here who sell to that industry.

Thanks
.

[Tiger Wench]

Houston is booming right now, not just the energy sector but in all areas, including housing - no sign of a slump in H-town.

[Jumbo]

Houston is booming right now, not just the energy sector but in all areas, including housing - no sign of a slump in H-town.

Things are really slow for O-town

[Tarheel]

Excellent post Howard. 

I look forward to circulating it here at work.  After the bitter political and economic arguments I've been participating in with some co-workers here that information ought to put a lot of it to rest.

I can't tell you how many times I've argued with these political bigots about the economy in the last three weeks...how great things were with Bill Clinton; that he is responsible for leaving a "budget surplus" and how horrible things were with Reagan and now Bush; that they've left us with a 9 trillion dollar national debt.  Of course pointing out that they are comparing apples to oranges and that the Congress controls spending not the president and that Newt Gingrich is responsible for the budget surplus during 1997, 1998, and 1999 (by controling spending) and that Tip O'Neill (with the tax and spend Dim-o-crats) was responsible for running up the big deficits during the 80's; and that there was a huge national debt while their sainted Clinton was in office too; falls on deaf (and apparently dumb) ears (DEM-O-CRAT...GOOD!  RE-PUB-LI-CAN...BAD! is the only mantra they know).

Maybe I'll post that knock down drag out on Tiger X one of these days.

[Saniflush]

Excellent post Howard. 

I look forward to circulating it here at work.  After the bitter political and economic arguments I've been participating in with some co-workers here that information ought to put a lot of it to rest.

I can't tell you how many times I've argued with these political bigots about the economy in the last three weeks...how great things were with Bill Clinton; that he is responsible for leaving a "budget surplus" and how horrible things were with Reagan and now Bush; that they've left us with a 9 trillion dollar national debt.  Of course pointing out that they are comparing apples to oranges and that the Congress controls spending not the president and that Newt Gingrich is responsible for the budget surplus during 1997, 1998, and 1999 (by controling spending) and that Tip O'Neill (with the tax and spend Dim-o-crats) was responsible for running up the big deficits during the 80's; and that there was a huge national debt while their sainted Clinton was in office too; falls on deaf (and apparently dumb) ears (DEM-O-CRAT...GOOD!  RE-PUB-LI-CAN...BAD! is the only mantra they know).

Maybe I'll post that knock down drag out on Tiger X one of these days.

I think you should.  I love laughing the idiots.

[AUTailgatingRules]

If you have not figured it out yet, I have seen this happen many times in my life with the media:

The economy:  Things are really bad and everyone should be scared of losing their jobs, houses, etc.  The day a democrat is elected the stories turn to how great the economy is and how revved up the country is with enthusiasm.  By the way they report they are trying to influence the coming elections.

The war:  We had a bomb that killed 6 iraqi's today, the war is a quagmire, we are losing at every turn.  Once a democrat is elected the stories turn to how great we are influencing the reconstuction, no more roadside bomb reporting, we are winning and doing so well that we can start bringing the troops home in a couple of years. 

If people would stop listening to the media and judge their individual circumstances on their own we would be a much stronger country