4 Reasons to be Optimistic about Economy

[KySongDog]

I saw this article and thought "at last SOMEONE is saying something besides the doom and gloom we get from Obama"


http://briansullivan.blogs.foxbusiness.com/2009/02/23/done-with-bad-news-here-are-four-reasons-to-be-optimistic/


Done With Bad News, Here Are Four Reasons To Be Optimistic
By Brian Sullivan

   
"In the face of a nearly daily barrage of bad news, new lows and low spirits, perhaps it is important to smash the news cycle and find a few reasons to be more upbeat regarding the economy and markets.

With that in mind, here are four reasons to be long-term optimistic:

1. Everybody is so negative.   Right now it's practically in vogue to see who can be the most pessimistic, and that extreme negativity is a reason to be bullish for the future.  Just as those who were negative on housing during the peak of the boom (and were ignored or dismissed as crazy), those investors who are able to muster capital and have the ability and guts to ride this out will likely end up the long-term winners.   It is generally the contrarian who wins in the end.   Think billionaire hedge fund manager Paul Tudor Jones in his early days in Chicago going against the conventional wisdom.   Or Warren Buffett recently.   When the panic selling hits - and we are getting close if we aren't there already - there will be solid companies thrown out with the ones who won't survive the downturn.   It may take five or more years, but eventually the overall markets will recover.   Getting back to the Dow's October 2007 highs now means investors at these prices will have doubled their money.

2. Valuations are down, down down.  There will be companies who don't survive this washout.  The S&P 500 may be the S&P 475 before it is all over.  But most of America's biggest companies today will still be America's biggest companies in ten years.   Some names will go, some new ones will grow and deals will get done, but at least 75% of the names topping the market cap list now will be the same in 10 years.   The larger companies have have a greater ability to weather the storm, and the valuations on those companies are coming down.   We're not talking about price-to-earnings ratios, because everyone on Wall Street knows that earnings are going to be abysmal for the next few quarters and the "E" in "P/E" ratio will go down and increase that valuation metric.   However, there are many long-term indicators - such as price-sales and dividend yield  - that suggest stocks are cheap on a multi-year basis and these ratios do not rely on earnings.

3. Money supply is up and interest rates are down.  While it is trendy to compare this economy to the Great Depression, there are major differences in terms of economic policies: money supply is growing and the Fed is cutting, not increasing, interest rates.  While there are critics of the current policies and Fed Chairman Ben Bernanke, the policy response this time is much different and we have much more practical experience dealing with sharp economic dowturns than 80 years ago.  It is unlikely money will simply dry up this time.

4. Despite all the mistakes, we're still here.   As a friend of mine said recently: if the pool is 6 feet deep, it's the short who can't swim who worry when they fall in ... not the pro basketball players whose heads stay above the waterline.   Right now the United States looks like the Boston Celtics compared to the rest of the world.   There is no doubt we are facing a severe economic downturn, one that is unlikely to be solved in just a few quarters.  The rest of the world is suffering mightily too, but unlike America many nations are neophyte capitalists, with governments and populations not as adept at handling the boom and bust cycle that is all too common here.   Countries such as Russia and Argentina are nearing their second debt crisis in a decade.   Tens of millions of angry young men are unemployed in China.   100,000 marched in Dublin recently to protest their once-hot economy gone ice cold (due to a real estate bubble and bust that makes ours look tame).   Is Obama's stimulus plan perfect?   Far from it.   Are we still waiting on all the TARP details?   Yes.   Will some big banks probably be rolled up or rolled over?   Yes.   But even with all the problems, growing government, lack of regulation, dumb borrowing, and everything in between, we are still here and will be generations from now.  America is one of the few countries in the world with the capability to be as insular or as global as we need.   We can feed ourselves.  We are flexible.   Hell, all things being equal we simply work more and more productively than others.

This isn't meant to be jingoistic, just a reminder.   A reminder to think about what we have rather than what we don't.  A reminder to think long-term.   The most common phrase in history must be "this time it's different."  No one reading this was likely even alive during the Depression so for us, personally, it is different.   But not for America as a nation.    And the country will still be here when - 100 years from now - financial journalists are writing about the great water bubble of 2108 and how it really was different that time."

[Hidehunter]

I like it... It seems if people always anticipate the worst, the worst will happen.   

[Bopeye]

When you put it that way, it makes it sound like we will make it in spite of Obama. 

[nastygunz]

I see the Anointed One is starting to get some heat from the press....his honeymoon with them will end some day...another big plant closing in NH...and there aint many to begin with.