Unlike some of the people you see in my HuffPost writings, I am not an economic expert. Like you, I read the financial pages, watch the financial shows, scan some internet sites and try to use my noodle to make sense out of the wildly conflicting and, at times, seemingly insane economic opinions.
That conjures up a great dilemma, though. With more and more economic experts coming out of the woodwork — both on Wall Street and in Washington — who are we supposed to believe?
How about President Obama, who tells us “we are moving in the right direction and the economy is getting stronger by the day?”
Or New York Times columnist Paul Krugman who insists “we’re in early stages of a third depression?”
Or maybe the National Bureau of Economic Research, which recently told the nation the 18-month recession ended in June?
Or should we heed the roar of Wall Street, which is signaling loud and clear that the economy is clearly, but slowly mending by driving up the Dow more than 750 points in the past couple of months?
Then again, maybe Standard & Poor’s thoughtful and perceptive senior economist, David Wyss, has the right idea. “We’re having a half-speed recovery, nothing to get excited about, but it’s better than none,” he tells me.
Or perhaps, Madeline Schnapp, a forward-thinking economist out of West Coast liquidity tracker TrimTabs Research, who says: “We’re still stuck in first gear and haven’t exited the recession yet.”
The answer, judging from these decidedly contrary views, is we seem to be caught in an environment of ‘up in the air economics’. In other words, there’s a thick fog of uncertainty out there, and nobody has the faintest idea when it will evaporate.
It all brings me back to a memorable event that took place on October 26, 1881. That was the infamous day of one of the Old West’s most famous gunfights — a shootout between the Earps — aided by “Doc” Holliday — and the Clantons, at a vacant lot behind the OK Corral in the Tombstone Arizona territory.
Now, nearly 129 years later, a slew of additional gunfights are taking place between the economic bulls and bears at what might appropriately be called the Economics Corral.
One of the more intriguing economic gunmen is a skeptical grizzly of a 34-year-old man named Michael Larson, editor of a monthly newsletter out of Jupiter, Florida, The Safe Money Report
Based on a fair number of highly negative and unpopular, but on-the-money forecasts, Larson has demonstrated he’s lightening fast on the economic trigger, not the kind of guy with whom an economic bull would want to tangle.
Larson’s ability to repeatedly score both financial and economic bulls-eyes is well documented in past interviews I’ve done with him. For example, he was well ahead of the Wall Street herd in forecasting such dreaded events as the credit and housing crises, a major downturn in commercial real estate and a wicked decline in stock prices.
His latest thinking, indicative of much more bloodletting, is spelled out in a brief commentary he just fired off to his newsletter subscribers.
His summation: “The economy is on the ropes, a double-dip recession is all but inevitable, and the rally presents a fantastic selling opportunity.”
Larson contends the latest batch of economic data couldn’t be more clear, pointing in particular to a deceleration in industrial production growth from 0.6% in July to 0.2% in August; likewise, a slump in the New York Fed’s economic index to a 14-month low in September, while the Philadelphia Fed’s index fell below the zero line for the second consecutive month.
Larson also observes that banks repossessed more homes in August than in any month in U.S. history, while companies across the spectrum are either reporting anemic sales and earnings or cutting future targets.
To Larson, it means the handwriting is on the wall, namely a hefty drop in stock prices. For starters, he sees the Dow — currently trading at around 10,812 — wrapping up the year at about 10,000 or possibly in the 9/000s.
It’s worth recalling that in the gunfight at the OK Corral, several people were killed. Financially speaking, Larson is convinced the dragging economy will produce even more fatalities at a similar hot and heavy gunfight now under way at the Economics Corral.
What do you think? E-mail me at Dandordan@aol.com