Monday, January 28, 2008

Don't Panic

I am amazed at how glum the media are about the economic situation in America. I say that things are really pretty good. Yes, the housing bubble caused by cheap loans has burst. That is not really a bad thing for the overall economic situation.

Here is what the Wall Street Journal has to say.

The good news is that the U.S. financial system is not as fragile as many pundits suggest. Nor is the economy showing anything other than normal signs of stress. Assuming a 1.5% annualized growth rate in the fourth quarter, real GDP will have grown by 2.8% in the year ending in December 2007 and 3.2% in the second half during the height of the so-called credit crunch. Initial unemployment claims, a very consistent canary in the coal mine for recessions, are nowhere near a level of concern.

Because all debt rests on a foundation of real economic activity, and the real economy is still resilient, the current red alert about a crashing house of cards looks like another false alarm. Warren Buffett, Wilbur Ross and Bank of America are buying, and there is still $1.1 trillion in corporate cash on the books. The bench of potential buyers on the sidelines is deep and strong. Dow 15,000 looks much more likely than Dow 10,000. Keep the faith and stay invested. It's a wonderful buying opportunity.

Mr. Wesbury is chief economist for First Trust Portfolios, L.P.
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1 comment:

paula clare said...

Hi Gary,
I have been accused of being "Pollyanna" when it comes to my take on the current state of the economy...but I have come to believe that the economy (like the War in Iraq) has become just so much "fodder" for the "spin" of the current liberal media and the equally liberal political candidates. It REEEEEEEEALLY makes me angry to think that...what?!?! There aren't enough REAL issues looming that we have to go down THIS rabbit trail? What about the REAL issues? Poverty? The global lack of water and food? I'm afraid it doesn't speak very well of us Americans to many of the third world countries who ALREADY believe we are beyond hyper-focused when it comes to money and buying what we are able to "afford."