Back to the Future

I never thought I would be channeling Spiro Agnew. After all, didn’t this Nixon V.P. resign disgracefully in the face of tax fraud charges? Yet, he is also known for a few choice turns of phrase. He didn’t mince words calling his administration’s enemies, “hopeless, hysterical hypochondriacs of history” and the anti-war movement, “effete corps of impudent snobs.” As one of the purported “impudent snobs,” I admittedly didn’t like the guy. I believe his best known phrase bears uncanny relevance today: “Nattering nabobs of negativism.”

As noted in a post last November Greenspan suggested, “human beings are either in a state of euphoria or abysmal fear.” This “abysmal fear,” stoked by the headlines of calamity, is the fuel for recessions. In a world of 24 hour news, cable press, internet blogging, YouTube-ing, and thousands of self appointed business and economic experts, the tendency has been to hyperbolize. Today’s information and opinion purveyors have become the nattering nabobs of negativism that good old Spiro called out in 1970. Some have called this our worst economic crisis in fifty years (this despite 50% of economists still not sure we will be in recession). Some have cleverly exploited the “nattering nabobs” to talk-down the Lehman’s of this world while shorting the stock in the process.

Googling “economy” + “gloomy” + “2008” brings 302,000 listings, including the June 3, 2008 article Bernanke: Gloomy on growth. By headlining only his pessimistic remarks, CNN failed to trumpet his comment: “We may see somewhat better economic conditions during the second half of 2008, reflecting the effects of monetary and fiscal stimulus.” The following week, the Wall Street Journal finally did report some optimism, noting that Bernanke signaled as much on June 10. The WSJ reported that “although activity during the current quarter is likely to be weak, the risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.”

Strangely, or not so strangely, the wealth management advisors, economists all, have been consistently more muted. Joseph Carson, US Economist and Director of Global Economic Research for Bernstein, surmises “we expect the Fed to quickly shift its focus back to inflation” from its “tailored monetary policy to stave off recession.” Chief Investment Officer of JP Morgan Private Bank, Michael Cembalest, offers the following:

“Some of the news is not as bad as Friday’s price action might indicate. Earnings revisions and manufacturing surveys look better than they typically do during recessions, and the offshore component of Q1 U.S. profits was up 35% (which we expect to benefit large cap growth stocks). While U.S. producer prices and import prices are rising sharply, their connection to core inflation and unit labor costs is not that tight, explaining why the latter are still in good shape (e.g., low). Even the unemployment news wasn’t as bad as it looked: the number of employed persons hasn’t changed much in the last year, but more people were looking for work (a lot of them teenagers).”

In researching this post, I turned to the article Are we too gloomy? hoping to see an expose of the hype culture. Rather, the article suggested we aren’t gloomy enough!! I suppose time will tell whether the “nattering nabobs of negativism” this time around have gotten it, “too hot,” “too cold” or “just right.”