Some Good News For A Change?

Every once in a while, a reader will remark that we here at Invest With An Edge are too gloomy about everything. Chin up, they tell us. The world isn’t ending. To which we usually respond: Easy for you to say! Those of us who spend our days surrounded by market and economic data haven’t seen a lot of positive news in the last year or two.

On the other hand, we must admit that when the data is inconclusive, whether you view the glass as half-empty or half-full is a matter of personal preference. In an attempt to keep our coverage balanced, here are a few green shoots you can ponder.

1. The Federal Reserve’s latest “Beige Book” reports that the pace of economic decline is slowing and/or expectations are improving in most regions. This may not sound like such good news, but maybe it is. Let me illustrate. Suppose you have fallen out of an airplane from 10,000 feet up. You are presently plummeting toward the ground at 100 miles per hour and you are still accelerating. Of course you wish to reduce your speed prior to landing. You must first reduce your rate of acceleration and then begin decelerating to something more reasonable, like two mph. As your rate of descent slows, your expectations should improve. This is what the Fed says is happening in the economy right now.

2. Professor Robert Reich of Berkeley, who was Labor Secretary in the Clinton administration, says we should not be concerned about the rapidly mounting national debt. What we really need is even more debt, though he prefers to call it “economic stimulus.” This will, he says very confidently, work just as well now as it did following the Great Depression. Yippee! Let’s go celebrate.

3. Another professor, Jeremy Siegel of Wharton, says now is the buying opportunity of a lifetime for stocks. This presumes, of course, that you have superhuman patience and don’t mind sitting through lots of ups and downs. “Even in December of 1930, where you were 50 percent down from that all-time high in 1929, your five-year return was more than seven percent after inflation. The world looks different once you’re down as much as we have been down,” Siegel says. OK. Good to know.

4. People still trust the U.S. government with their money. The Treasury managed to pawn off sell $11 billion in 30-year bonds today at a very reasonable interest rate of 4.72%. That only leaves another $3 trillion or so that they need to borrow for the rest of the year. No problem, the experts say.

There you go – four green shoots. This should prove that we are not always pessimists. Thank you for your kind support.