Saturday, August 11, 2007

The Sky is Not Falling

A couple of my stockbroker buddies called yesterday, both of them worried the stock market is crashing.

I understand. Customers see their net worth declining, they become frightened and call their brokers. The fear rubs off. The brokers start looking for reassurance, too.

And they know who to call. Me. Forever the optimist, I am always ready to cite the statistics that give them hope. Best second-quarter GDP growth in years. Historically low unemplyment. Low interest rates. Strong worldwide demand for U.S. products thanks to a cheap dollar. And here's one nobody's talking about on television: Despite the current housing slump and the mini-crisis over sub-prime mortgages, more than 98% of all mortgage payments are being paid on time.

Does that sound like the end of the world to you? Of course not. As usual, the current flap revolves around uncertainty. How bad will the housing slump get? How many hedge funds will fail because they took incredible risks trying to carve out a quick profit on derivitive interest-rate products? Will any major banks find themselves sinking because of too many loans in one particular segment of the economy? That happened in housing before. It also happened with oil, and before that, corporate conglomerates that were acquiring firms willy nilly (with borrowed money).

This ebb and flow of winners and losers is the essence of our economy's greatness. Smart is rewarded, dumb is thrashed back into the trash. There are always reasons to be frightened. And the stock market could go a lot lower. But in the long run, betting against the U.S. economy is the surest way I know to lose money.

Hang tough, America. The sky is not falling.


Anonymous said...

Gosh, those words of confidence are inspiring, Austin. I feel better about everything, even my hair.

Scarlett O, who always thinks about things tomorrow

Austin Carr said...

Gee, Scarlett. I like a girl who doesn't think about things until the next day. Are you free for dinner one night this week?

Anonymous said...

I don't think so, Austin. But again thanks for the inspiration. I've decided to go for some red highlights.


Austin Carr said...

Scarlett, you are definitely giving me mixed messages.

Jack Getze said...

Nothing like hidesight, but as we can see now, there ws good reason my friends always call me for optimism. I'm optimistic even when I shouldn't be. No, this maybe is the worst call I've ever made: The houseing slump ws the worst in history; that 98% mortgage paying figure dropped close to 80% (a record by 10 points) and millions of people got forecloased on as housing prices tumbled 30% and more. Yikes. In fall fairness, I must tell I paid for my mistakes. I lost a bunch of money. It's a mistake to think the regular booms and busts of business will look like the past. Each one is new. And housing prices rose so fast in 2005 and 2006, I should have guessed they'd fall even faster.