Barron’s Alan Abelson lets fly another fusillade this morning. In Parting the Mist, he observes that the White House is "banking on a buoyant economy
to offset the increasing disenchantment with the war and a rash of
And, he adds, that cheery notion "draws sustenance from the recent
bountiful crop of upbeat economic news, from jobs to durable-goods
orders and a pick-up in consumer confidence."
But alas, it grieves him to suggest, that "the prospects for the
economy are not entirely salubrious."
"For one thing, the mounting conviction among professional soothsayers that next year will see GDP growing 4% or more is disturbing. For it reflects not a cool assessment of the outlook, but the deadly tendency of that set of seers to forecast by extrapolation — whatever is, will be. It isn’t that the majority of economists are always wrong. But they’re much more often wrong than right. So all by itself, their bullishness on ’06 makes the contrary view a reasonable bet."
But its not merely his contrary streak that suggests caution is in order; Rather, it’s the actual prospects for the economy:
"More tangibly, the incorrigible optimists, as is their wont, are blithely ignoring the dark clouds plainly visible on the horizon. The great housing bubble is popping and the consequences are shaping up as dire, indeed. Not only is the value of the happy homeowner’s house in jeopardy, but also obviously its ability to finance his free-wheeling spending; the end of the housing boom might even pose a threat to his job. On this score, the Anderson Forecast, conducted under the auspices of UCLA and released last week, bleakly predicts that the decline in housing will run a good several years, in the process reaping a grim toll on jobs — possibly 500,000 in construction and another 300,000 in the financial sector.
Add to that potential sizable hit to both employment and the consumer’s psyche such rather unnerving facts as that Detroit’s in the ditch and hellbent on closing plants and handing out pink slips to its workers, whatever color their collars; that the federal government, on the basis of the first two months, seems a lead-pipe cinch to run up a $500 billion-plus budget deficit this fiscal year; that inflation continues to rear its insidious head, and you can see perhaps why we find it difficult to wax enthusiastic about next year’s economy.
And let’s not, as much as we wish we could, forget about energy. The recent perkier consumer mood and his greater willingness to consume has everything to do with the drop in gasoline prices. But last we looked, crude edged back over $60 a barrel and natural-gas prices shot up to a new all-time high north of $15 per mcf before easing off. Gasoline and heating oil are sure to follow. Sure to follow, too, are furrows and frowns on the consumer’s brow and a desolate waning of the brief revival of his spirits.
Last but not least, gold continues to spiral upward, setting still another 24-year high as it closed in on $530 an ounce. Bullion’s relentless rise, whatever is supplying the impetus, as we’ve lately lamented more than once, likely bodes ill for the economy."
And some of you accuse me of being a curmudgeon . . .
Parting the Mist
UP AND DOWN WALL STREET
By ALAN ABELSON
MONDAY, DECEMBER 12, 2005