Lately, you can’t throw a stone without hitting some finance or business grandee, led by head cheerleader Treasury Secretary Hank Paulson, discussing their optimism about the economy, the worst being over, etc., etc. This is understandable from their perspective, but I say, don’t believe the hype. From my perspective, we are still in the eye of the storm. The recent upward move in the stock market notwithstanding, there are so many fundamental weaknesses in the American economy right now that it’s frightening.
Housing crisis, inflation, credit crunch, consumer debt – you name it. At every turn there is some indicator dragging us down. So despite what you might hear from Lloyd Blankfein or Jamie Dimon, this slowdown will continue and spread. We’re not going to see a real turnaround until, at least, the second year (2010) of the Obama administration. It will take that long just to work off the residue of what has already happened (never mind contending with $200 oil and a downside overshoot on home prices). Until then, buckle your seatbelts, it’s going to be a bumpy ride.
Still skeptical? Here is Irwin Kellner’s spot-on take from MarketWatch.