Predictions for a Polite and Mild Recession

Herding together may have been a good instinct back in the days when humans evolved… when they were as frequently prey as hunter. But times change, and the old instincts become enemies. In a financial downturn, the instinct to do what everyone else does is definitely no friend.

So we look to see what everyone else is doing… so we can run in the other direction. Are they selling out? Are they dumping houses and stocks? Are they buying gold?

The answer: no.

A poll of Americans shows that most think that now is a good time to buy a house. They believe that a bottom has been reached in the housing bear market – with prices down only about 12% nationwide.

At the end of 2007, when Barron’s asked market strategists to look ahead to 2008, they opined that stocks would rise 4% during the year.

Not one of the 12 market strategists polled by Barron’s said he saw a recession in 2008. Today, more economists expect a recession – many think it is already here – but nearly every one of them believes it will be mild, and will be followed by a rebound in the second half of the year.

And then, there is Ed Yardeni… whom we put in a class by himself. Yardeni, and Abby Joseph Cohen, typically speak for the most credulous part of the crowd – the part that will believe anything. (At the end of the dotcom bubble, for example, it was Yardeni who had taken Y2K hysteria mainstream, predicting a digitally-inspired recession for 2000. It was he, too, who thought he had identified a whole new subspecies of human being – the Digital Man – who understood how the communications revolution had created a New Era… and left the human race divided between those who ‘got it’ and those who, like your editor, suspected the whole thing was a bubble.)

What does Yardeni think of today’s economy? He has crossed over to the “Dark Side,” he says. He believes the economy fell into an employment-led recession in February.

But don’t worry about it. “Just because I crossed over to the Dark Side on the near-term economic outlook doesn’t mean I can’t have a Light Side outlook for the stock market… blab, blah, blah… that would put the market up 15% to 20%… by the end of this year.”

That’s enough for us. Sell!

And our old friend Marc Faber recalls a similar quotation from R.W. McNeal, a market analyst writing in 1929:

“Some pretty intelligent people are now buying stocks… Unless we are to have a panic – which no one seriously believes – stocks have hit bottom.”

Bill Bonner
Markets and Money

Bill Bonner

Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.
Bill Bonner

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If you really want to have a good laugh, read an actual copy of the New York Times newspaper, the day after the stock market crashed in 1929. There is a little tiny matchbox size article about it. You can read that whole paper page by page online. Also read the same paper in the days and weeks that followed. They had tons of “experts” and economists all saying that it was nothing, and not to worry etc etc.

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