It’s the Economy, Stupid!

Today was the inaugural luncheon meeting of the RTP chapter of the National Funding Association (www.nationalfunding.org).  With about 80 in attendance, it was a rousing success. 

The speaker was John Silvia, Chief Economist at Wells Fargo.  He gave a National Economic Overview, loaded with fancy power point slides, including the following on GDP:

 

John Silvia NFA

 

Basically, he said we are at the tail end of a long and harsh recession (duh!) but also the next 3-5 years will create lots of economic opportunity.

There are, however, a couple of “cultural challenges” that may prevent this recovery from being as strong as prior recoveries (see graph), including continued consumer savings rates at 6% (dang those consumers) and low housing starts that will not return to prior levels (we’re just plain overbuilt). 

On the brighter side, the manufacturing index is up, initial unemployment claims are declining, capital goods orders are up, and corporate profits are trending in the right direction (expect 20-30% profits gains in the next couple years).  Inflation and interest rates should remain very low for at least a year, giving time for many who need it to right their ships.

In other words, an economist forecasting rational behavior.  I wish someone had asked his opinion as to what the next bubble will be.  Any guesses?

— David Bass

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