Tea Leaf: The Economic 'Doomsayers'

Published: Wednesday, March 7 2012 10:00 a.m. MST

Very bullish views of Dow 15,000, or Dow 17,000, or even Dow 20,000 are starting to appear. Perhaps these overly optimistic views should be rubbed against the “doomsday” view of the few.

Predicting the Great Recession

It is amazing how many economists, and stock market watchers, and people I meet on airplanes, and people who come up to me after I speak, tell me they correctly predicted the timing and the depth of the Great Recession, which officially ran from December 2007 to June 2009. As you know, the Great Recession led to the Dow falling by more than one-half, with an economy losing more than eight million jobs. Housing prices are down 35 percent from the 2006 peak.

I have traditionally been an economist who thinks of myself as “realistic and long-term optimistic.” Yes, we have some very major decisions to make in Washington, D.C., about reining in the growth of government spending and associated damaging budget deficits.

While I live in the Salt Lake City area, one of my banking clients is a top Colorado bank. As a result, I get called frequently by The Denver Post newspaper for quotes or analysis on news stories.

Over the years, the Denver media would many times contrast my reasonably optimistic view against those of the “Duchess of Doom,” a very nice, now largely retired economist whose views were always negative, whose constant forecast was that economic disaster was just around the corner.

She was right — finally — in 2008 and 2009. Without any disrespect intended, even a broken clock is right twice a day.

Back to the “Doomsayers”

While each of the three aforementioned “doom and gloomers” have similar views, their recommendations differ like night and day. Harry Dent says to invest in short-term U.S. Treasury bills, where the current annual return is effectively zero, as well as the U.S. dollar, whose value will benefit from safe-haven cash flows.

Prechter simply says keep your powder dry and buy when things get really bad. No doubt he will let us know when that is, for a princely sum.

Celente’s advice centers on survival. He says buy gold so you don’t lose purchasing power when the U.S. dollar plummets. Buy a gun to protect your family against desperate people in search of food and money. He says plan a getaway to places with more stable finances and governments. Again, such places can most likely be had for a fee. Not sure if the airlines will be running in such devastating times, but maybe he knows something.

Jeff Thredgold is the chief economist for Zions Bank and founder of Thredgold Economic Associates, a professional speaking and economic consulting firm. Visit www.thredgold.com.

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