Forbes: Beware Of A Double-Dip Recession

[JC]

Beware Of A Double-Dip Recession
Nouriel Roubini, 03.11.10, 12:01 AM ET

A slew of poor economic data over the past two weeks suggests that the U.S. economy is headed for a U-shaped recovery–at best–in 2010. The macro news, including data on consumer confidence, home sales, construction and employment, actually suggests a significant downside risk even to the anemic levels of growth which I forecast for H1 (the first half of the year). The U.S. faces continued challenges in H2–particularly as historic levels of fiscal stimulus fade–and appears far too close to the tipping point of a double-dip recession.

This is not the conventional wisdom. Heated debate continues to rage in the U.S. on whether the economic recovery will be V-shaped (with a rapid return to robust growth above potential), U-shaped (slow anemic, subpar, below trend growth for at least the next two years) or W-shaped (a double-dip recession). The V camp includes distinguished research groups and individuals such as Ed Hyman’s ISI, Larry Meyer’s Macroeconomic Advisors, the research group of JP Morgan, Michael Mussa and others.

The U camp includes–among others–Roubini Global Economics, Goldman Sachs’ U.S. economic research group, PIMCO and Ken Rogoff. As early as August 2009 I expressed concern in a Financial Times op-ed about the risk of a double-dip recession, even if my benchmark scenario characterizes the risk of a W as still a low probability event (20% probability) as opposed to a 60% probability for a U-shaped recovery. Others worried about the double-dip risk also include David Rosenberg, Gary Shilling and John Makin.

Ed Hyman and I debated whether the recovery would be U- or V-shaped on a Feb. 22 conference call attended by over 2,200 listeners. Since that call, a slew of new U.S. macro data have come out. They have been almost uniformly poor, if not outright awful. Consumer confidence, based on the Michigan survey, has tanked. On the real estate front, new home sales are collapsing again, existing home sales are also falling sharply and construction activity (both residential and commercial) is sharply down. Durable goods orders are down, and initial claims for unemployment benefits remain stubbornly high (way above the 400,000 mark). Real disposable income for Q4 has been revised downward while real disposable income (before transfers) for January was negative again.

The manufacturing ISM index–while still expanding being above 50–has now fallen a couple of notches, and its production and new orders index levels are falling, too; and global PMIs suggest a loss of momentum in the global economic recovery. Real inventories look unchanged in Q1 relative to Q4; auto sales were at best mediocre; core CPI was falling and core PCE was close to 0%, suggesting anemic demand and economic weakness. Q4 GDP growth was revised upward to 5.9% but most of it (3.9%) was due to inventories; final sales grew at a 1.9% rate while consumption grew at a dismal 1.7% (down from 2.8% in Q3). Q3 growth has been revised from an initial 3.5% to 2.8% to 2.2%, with final sales growing only 1.7%. So, at the time of maximum policy stimulus (H2 of 2009), final sales were growing only at a pathetic 1.8% average rate.

The euro zone debt crisis predisposes Europe to a rising double-dip risk, due to the wave of fiscal austerity sweeping the periphery of the euro zone. Even if the euro zone doesn’t enter a double dip, the growth of domestic demand there will be as or more constrained than in the U.S. This, in turn, will be a drag on the potential for U.S. export growth. The U.S. dollar rally on risk aversion reflects this risk. The U.S. dollar is settling back down, and the threat of a debt crisis is headed off by a stronger Greek fiscal adjustment and potential adjustment package.

But fiscal spending cuts, confidence hits and the looming threat of either rising unemployment or falling wages in the public sector–on top of private sector retrenchment–will remain. A similar retrenchment may well lie ahead in the United Kingdom, given rising fiscal sustainability concerns and the threat of a sterling crisis. Europe then will have great difficulty being a source of demand for U.S. exports and may even provide impetus to faltering global demand growth, contributing to the threat of a wider double dip across high-income countries.

Nouriel Roubini, a professor at the Stern Business School at New York University and chairman of Roubini Global Economics (RGE), writes a weekly column for Forbes.

[danielwis]

From a stock and real-estate investors stand point, a dip would be good. I am purchasing for the long term, and any dip means more shares. Another dip in real estate means I might still get that second home.

That said, for all the people out of work right now, I’m still hoping for a “V” shaped recovery. I’m afraid that might be wishful thinking, however.

[danielwis]

From a stock and real-estate investors stand point, a dip would be good. I am purchasing for the long term, and any dip means more shares. Another dip in real estate means I might still get that second home.

That said, for all the people out of work right now, I’m still hoping for a “V” shaped recovery. I’m afraid that might be wishful thinking, however.

[danielwis]

From a stock and real-estate investors stand point, a dip would be good. I am purchasing for the long term, and any dip means more shares. Another dip in real estate means I might still get that second home.

That said, for all the people out of work right now, I’m still hoping for a “V” shaped recovery. I’m afraid that might be wishful thinking, however.

[danielwis]

From a stock and real-estate investors stand point, a dip would be good. I am purchasing for the long term, and any dip means more shares. Another dip in real estate means I might still get that second home.

That said, for all the people out of work right now, I’m still hoping for a “V” shaped recovery. I’m afraid that might be wishful thinking, however.

[danielwis]

From a stock and real-estate investors stand point, a dip would be good. I am purchasing for the long term, and any dip means more shares. Another dip in real estate means I might still get that second home.

That said, for all the people out of work right now, I’m still hoping for a “V” shaped recovery. I’m afraid that might be wishful thinking, however.

[34f3f3f]

I agree, but I think there is also a case be a little wary of what your wish for. I’d like to see stocks and real estate showing different values, but not if if means a very protracted recession. Life’s too short. Great article BTW.

[34f3f3f]

I agree, but I think there is also a case be a little wary of what your wish for. I’d like to see stocks and real estate showing different values, but not if if means a very protracted recession. Life’s too short. Great article BTW.

[34f3f3f]

I agree, but I think there is also a case be a little wary of what your wish for. I’d like to see stocks and real estate showing different values, but not if if means a very protracted recession. Life’s too short. Great article BTW.

[34f3f3f]

I agree, but I think there is also a case be a little wary of what your wish for. I’d like to see stocks and real estate showing different values, but not if if means a very protracted recession. Life’s too short. Great article BTW.

[34f3f3f]

I agree, but I think there is also a case be a little wary of what your wish for. I’d like to see stocks and real estate showing different values, but not if if means a very protracted recession. Life’s too short. Great article BTW.

[JC]

More on the topic. Nothing surprising, but an interesting read (imho).

Economists’ clashing
predictions sow confusion

Wall Street diviners find themselves divided

The Associated Press • March 13, 2010

NEW YORK — If you’re confused about the outlook
for the economy and stocks one year after the
market hit bottom, then you’ve got good company –
the Wall Street economists and strategists who are
supposed to have this all figured out.

Rarely have the experts seemed so divided about the
future.

We’re either beginning the type of robust recovery
that typically follows a deep recession, or we’re on
the cusp of another contraction, the dreaded double
dip. Prices could climb fast as they did in the U.S.
during the 1970s, or fall to devastating effect as
they did in Japan during the 1990s.

Stocks? We’re on the verge of a long bull market a la
the 1980s. Then again, maybe not. To hear some
tell it, the present is more like the 1930s, when
stocks were viewed less as vehicles to riches and
more as a boring source of dividends.

The collapse we feared last March 9 when the major
stock indices fell to their lowest levels since 1997
never did come to pass. But what replaced it is still
unnerving – bewilderment.

The Dow Jones industrial average returned 61
percent during the past year, up 4,019 points to
10,566.20. The Standard & Poor’s 500 returned 68
percent. The Nasdaq Stock Market did even better,
surging 81 percent. Those gains were largely a
payoff on a correct bet that corporate profits would
surge from their recession lows.

This year the Dow and S&P 500 have lost
momentum, rising 1 percent or less. And the Dow is
still 25 percent off its all time high of 14,164.53 set
in October 2007.

Part of the problem in predicting the future lately is
that the economic signals that drive the market have
been so mixed.

The nation’s gross domestic product grew at a 5.9
percent annual rate in last year’s final quarter, its
best showing in six years. But it’s expected to
expand at a slower rate this year.

Consumer confidence plunged unexpectedly in
February. But last Thursday retailers posted their
biggest sales increase in more than two years. The
so-called fear index, the VIX, which measures
expectations of future stock market volatility, is
hovering at a 1 1/2-year low, suggesting calm seas
ahead. But new home sales have fallen to their
lowest level in nearly five decades.

The experts can’t even agree on what to make of a
single number. Pessimists see bad news in good
news and optimists vice versa.

Encouraged by the Commerce Department report on
March 1 showing a surprising surge in consumer
spending in January? Not so fast, says David
Rosenberg, chief economist at money manager
Gluskin Sheff in Toronto.

He notes in a report that some items bought in great
quantities – books, up 2.1 percent, and sewing
items, up 1.6 percent – suggest a “frugal stay-at-
home” or “do-it-yourself” mood among Americans.
Advertisement

The end is nigh.

Or you can listen to James Paulsen, the chief
strategist at Wells Capital Management in
Minneapolis.

Not even high unemployment can get this man
down. His interpretation of the near double-digit
unemployment rate: All the more reason to buy
shares.

In a report looking back over the past half century
he notes that periods of high unemployment rates –
greater than 6.6 percent – have been great for
stocks, which have generated average annual
returns of 20 percent. One reason, he says, is that
high unemployment often presages big recoveries,
and investors drive the market up in anticipation of
the recovery.

Of course, you can find Wall Street soothsayers
staking out extreme positions in any era. But the
hunt is perhaps never so easy as in the aftermath of
a deep recession.

One reason is the shock of the downturn feeds fears
that the natural corrective forces of the economy
won’t kick in. Barclays Capital economist Dean Maki
calls it the “This Time Is Different” school of
thought. He says such worries were rife after the two
recessions of the early 1980s. Indeed, oldtimers
may recall some investors expected a “triple dip,”
sidelining them during the start of one of the
greatest bull markets in history.

Maki is not mincing words about his view on the
recovery today. The title of one of his reports: “This
Time Is Not Different.” He predicts the U.S. economy
will grow by 3.6 percent this year, a percentage
point higher than the average estimate.

Seth Glickenhaus, who worked on Wall Street as a
trader in the Great Depression, calls the optimist-
pessimist divide now the “big gulf.”

For his part, the 95-year-old Glickenhaus, who still
oversees $1 billion in assets, is siding with the
pessimists. He thinks the Dow Jones industrial
average will flatline, trading no higher than 11,000
for at least another 5 years.

One reason he’s so glum: The unemployment
picture is actually a lot worse than the widely cited
headline number suggests because many people
have stopped looking for work and aren’t counted.
On Friday, the Labor Department reported
unemployment held at 9.7 percent in February. A
broader measure that includes frustrated part-timers
and other discouraged workers was 16.8 percent.

Glickenhaus likens Wall Street optimists to the guys
he used to beat in bridge games as a student at
Harvard in the early 1930s. “They were great
scholars but not necessarily bright,” he says. His
winnings “paid all my tuition, though it wasn’t much
back then.”

The professional bulls today, he says, are “just
stupid.”

But money manager Richard Bernstein, the former
Merrill Lynch strategist who created a stir years ago
with bearish reports, says he’s turned bullish on
stocks now – though it hasn’t been easy.

“People who thought I was so insightful as a bear
think I’m an idiot,” he says.

He adds, wistfully, “Hopefully, I’m still a likable guy.”

[JC]

More on the topic. Nothing surprising, but an interesting read (imho).

Economists’ clashing
predictions sow confusion

Wall Street diviners find themselves divided

The Associated Press • March 13, 2010

NEW YORK — If you’re confused about the outlook
for the economy and stocks one year after the
market hit bottom, then you’ve got good company –
the Wall Street economists and strategists who are
supposed to have this all figured out.

Rarely have the experts seemed so divided about the
future.

We’re either beginning the type of robust recovery
that typically follows a deep recession, or we’re on
the cusp of another contraction, the dreaded double
dip. Prices could climb fast as they did in the U.S.
during the 1970s, or fall to devastating effect as
they did in Japan during the 1990s.

Stocks? We’re on the verge of a long bull market a la
the 1980s. Then again, maybe not. To hear some
tell it, the present is more like the 1930s, when
stocks were viewed less as vehicles to riches and
more as a boring source of dividends.

The collapse we feared last March 9 when the major
stock indices fell to their lowest levels since 1997
never did come to pass. But what replaced it is still
unnerving – bewilderment.

The Dow Jones industrial average returned 61
percent during the past year, up 4,019 points to
10,566.20. The Standard & Poor’s 500 returned 68
percent. The Nasdaq Stock Market did even better,
surging 81 percent. Those gains were largely a
payoff on a correct bet that corporate profits would
surge from their recession lows.

This year the Dow and S&P 500 have lost
momentum, rising 1 percent or less. And the Dow is
still 25 percent off its all time high of 14,164.53 set
in October 2007.

Part of the problem in predicting the future lately is
that the economic signals that drive the market have
been so mixed.

The nation’s gross domestic product grew at a 5.9
percent annual rate in last year’s final quarter, its
best showing in six years. But it’s expected to
expand at a slower rate this year.

Consumer confidence plunged unexpectedly in
February. But last Thursday retailers posted their
biggest sales increase in more than two years. The
so-called fear index, the VIX, which measures
expectations of future stock market volatility, is
hovering at a 1 1/2-year low, suggesting calm seas
ahead. But new home sales have fallen to their
lowest level in nearly five decades.

The experts can’t even agree on what to make of a
single number. Pessimists see bad news in good
news and optimists vice versa.

Encouraged by the Commerce Department report on
March 1 showing a surprising surge in consumer
spending in January? Not so fast, says David
Rosenberg, chief economist at money manager
Gluskin Sheff in Toronto.

He notes in a report that some items bought in great
quantities – books, up 2.1 percent, and sewing
items, up 1.6 percent – suggest a “frugal stay-at-
home” or “do-it-yourself” mood among Americans.
Advertisement

The end is nigh.

Or you can listen to James Paulsen, the chief
strategist at Wells Capital Management in
Minneapolis.

Not even high unemployment can get this man
down. His interpretation of the near double-digit
unemployment rate: All the more reason to buy
shares.

In a report looking back over the past half century
he notes that periods of high unemployment rates –
greater than 6.6 percent – have been great for
stocks, which have generated average annual
returns of 20 percent. One reason, he says, is that
high unemployment often presages big recoveries,
and investors drive the market up in anticipation of
the recovery.

Of course, you can find Wall Street soothsayers
staking out extreme positions in any era. But the
hunt is perhaps never so easy as in the aftermath of
a deep recession.

One reason is the shock of the downturn feeds fears
that the natural corrective forces of the economy
won’t kick in. Barclays Capital economist Dean Maki
calls it the “This Time Is Different” school of
thought. He says such worries were rife after the two
recessions of the early 1980s. Indeed, oldtimers
may recall some investors expected a “triple dip,”
sidelining them during the start of one of the
greatest bull markets in history.

Maki is not mincing words about his view on the
recovery today. The title of one of his reports: “This
Time Is Not Different.” He predicts the U.S. economy
will grow by 3.6 percent this year, a percentage
point higher than the average estimate.

Seth Glickenhaus, who worked on Wall Street as a
trader in the Great Depression, calls the optimist-
pessimist divide now the “big gulf.”

For his part, the 95-year-old Glickenhaus, who still
oversees $1 billion in assets, is siding with the
pessimists. He thinks the Dow Jones industrial
average will flatline, trading no higher than 11,000
for at least another 5 years.

One reason he’s so glum: The unemployment
picture is actually a lot worse than the widely cited
headline number suggests because many people
have stopped looking for work and aren’t counted.
On Friday, the Labor Department reported
unemployment held at 9.7 percent in February. A
broader measure that includes frustrated part-timers
and other discouraged workers was 16.8 percent.

Glickenhaus likens Wall Street optimists to the guys
he used to beat in bridge games as a student at
Harvard in the early 1930s. “They were great
scholars but not necessarily bright,” he says. His
winnings “paid all my tuition, though it wasn’t much
back then.”

The professional bulls today, he says, are “just
stupid.”

But money manager Richard Bernstein, the former
Merrill Lynch strategist who created a stir years ago
with bearish reports, says he’s turned bullish on
stocks now – though it hasn’t been easy.

“People who thought I was so insightful as a bear
think I’m an idiot,” he says.

He adds, wistfully, “Hopefully, I’m still a likable guy.”

[JC]

More on the topic. Nothing surprising, but an interesting read (imho).

Economists’ clashing
predictions sow confusion

Wall Street diviners find themselves divided

The Associated Press • March 13, 2010

NEW YORK — If you’re confused about the outlook
for the economy and stocks one year after the
market hit bottom, then you’ve got good company –
the Wall Street economists and strategists who are
supposed to have this all figured out.

Rarely have the experts seemed so divided about the
future.

We’re either beginning the type of robust recovery
that typically follows a deep recession, or we’re on
the cusp of another contraction, the dreaded double
dip. Prices could climb fast as they did in the U.S.
during the 1970s, or fall to devastating effect as
they did in Japan during the 1990s.

Stocks? We’re on the verge of a long bull market a la
the 1980s. Then again, maybe not. To hear some
tell it, the present is more like the 1930s, when
stocks were viewed less as vehicles to riches and
more as a boring source of dividends.

The collapse we feared last March 9 when the major
stock indices fell to their lowest levels since 1997
never did come to pass. But what replaced it is still
unnerving – bewilderment.

The Dow Jones industrial average returned 61
percent during the past year, up 4,019 points to
10,566.20. The Standard & Poor’s 500 returned 68
percent. The Nasdaq Stock Market did even better,
surging 81 percent. Those gains were largely a
payoff on a correct bet that corporate profits would
surge from their recession lows.

This year the Dow and S&P 500 have lost
momentum, rising 1 percent or less. And the Dow is
still 25 percent off its all time high of 14,164.53 set
in October 2007.

Part of the problem in predicting the future lately is
that the economic signals that drive the market have
been so mixed.

The nation’s gross domestic product grew at a 5.9
percent annual rate in last year’s final quarter, its
best showing in six years. But it’s expected to
expand at a slower rate this year.

Consumer confidence plunged unexpectedly in
February. But last Thursday retailers posted their
biggest sales increase in more than two years. The
so-called fear index, the VIX, which measures
expectations of future stock market volatility, is
hovering at a 1 1/2-year low, suggesting calm seas
ahead. But new home sales have fallen to their
lowest level in nearly five decades.

The experts can’t even agree on what to make of a
single number. Pessimists see bad news in good
news and optimists vice versa.

Encouraged by the Commerce Department report on
March 1 showing a surprising surge in consumer
spending in January? Not so fast, says David
Rosenberg, chief economist at money manager
Gluskin Sheff in Toronto.

He notes in a report that some items bought in great
quantities – books, up 2.1 percent, and sewing
items, up 1.6 percent – suggest a “frugal stay-at-
home” or “do-it-yourself” mood among Americans.
Advertisement

The end is nigh.

Or you can listen to James Paulsen, the chief
strategist at Wells Capital Management in
Minneapolis.

Not even high unemployment can get this man
down. His interpretation of the near double-digit
unemployment rate: All the more reason to buy
shares.

In a report looking back over the past half century
he notes that periods of high unemployment rates –
greater than 6.6 percent – have been great for
stocks, which have generated average annual
returns of 20 percent. One reason, he says, is that
high unemployment often presages big recoveries,
and investors drive the market up in anticipation of
the recovery.

Of course, you can find Wall Street soothsayers
staking out extreme positions in any era. But the
hunt is perhaps never so easy as in the aftermath of
a deep recession.

One reason is the shock of the downturn feeds fears
that the natural corrective forces of the economy
won’t kick in. Barclays Capital economist Dean Maki
calls it the “This Time Is Different” school of
thought. He says such worries were rife after the two
recessions of the early 1980s. Indeed, oldtimers
may recall some investors expected a “triple dip,”
sidelining them during the start of one of the
greatest bull markets in history.

Maki is not mincing words about his view on the
recovery today. The title of one of his reports: “This
Time Is Not Different.” He predicts the U.S. economy
will grow by 3.6 percent this year, a percentage
point higher than the average estimate.

Seth Glickenhaus, who worked on Wall Street as a
trader in the Great Depression, calls the optimist-
pessimist divide now the “big gulf.”

For his part, the 95-year-old Glickenhaus, who still
oversees $1 billion in assets, is siding with the
pessimists. He thinks the Dow Jones industrial
average will flatline, trading no higher than 11,000
for at least another 5 years.

One reason he’s so glum: The unemployment
picture is actually a lot worse than the widely cited
headline number suggests because many people
have stopped looking for work and aren’t counted.
On Friday, the Labor Department reported
unemployment held at 9.7 percent in February. A
broader measure that includes frustrated part-timers
and other discouraged workers was 16.8 percent.

Glickenhaus likens Wall Street optimists to the guys
he used to beat in bridge games as a student at
Harvard in the early 1930s. “They were great
scholars but not necessarily bright,” he says. His
winnings “paid all my tuition, though it wasn’t much
back then.”

The professional bulls today, he says, are “just
stupid.”

But money manager Richard Bernstein, the former
Merrill Lynch strategist who created a stir years ago
with bearish reports, says he’s turned bullish on
stocks now – though it hasn’t been easy.

“People who thought I was so insightful as a bear
think I’m an idiot,” he says.

He adds, wistfully, “Hopefully, I’m still a likable guy.”

[JC]

More on the topic. Nothing surprising, but an interesting read (imho).

Economists’ clashing
predictions sow confusion

Wall Street diviners find themselves divided

The Associated Press • March 13, 2010

NEW YORK — If you’re confused about the outlook
for the economy and stocks one year after the
market hit bottom, then you’ve got good company –
the Wall Street economists and strategists who are
supposed to have this all figured out.

Rarely have the experts seemed so divided about the
future.

We’re either beginning the type of robust recovery
that typically follows a deep recession, or we’re on
the cusp of another contraction, the dreaded double
dip. Prices could climb fast as they did in the U.S.
during the 1970s, or fall to devastating effect as
they did in Japan during the 1990s.

Stocks? We’re on the verge of a long bull market a la
the 1980s. Then again, maybe not. To hear some
tell it, the present is more like the 1930s, when
stocks were viewed less as vehicles to riches and
more as a boring source of dividends.

The collapse we feared last March 9 when the major
stock indices fell to their lowest levels since 1997
never did come to pass. But what replaced it is still
unnerving – bewilderment.

The Dow Jones industrial average returned 61
percent during the past year, up 4,019 points to
10,566.20. The Standard & Poor’s 500 returned 68
percent. The Nasdaq Stock Market did even better,
surging 81 percent. Those gains were largely a
payoff on a correct bet that corporate profits would
surge from their recession lows.

This year the Dow and S&P 500 have lost
momentum, rising 1 percent or less. And the Dow is
still 25 percent off its all time high of 14,164.53 set
in October 2007.

Part of the problem in predicting the future lately is
that the economic signals that drive the market have
been so mixed.

The nation’s gross domestic product grew at a 5.9
percent annual rate in last year’s final quarter, its
best showing in six years. But it’s expected to
expand at a slower rate this year.

Consumer confidence plunged unexpectedly in
February. But last Thursday retailers posted their
biggest sales increase in more than two years. The
so-called fear index, the VIX, which measures
expectations of future stock market volatility, is
hovering at a 1 1/2-year low, suggesting calm seas
ahead. But new home sales have fallen to their
lowest level in nearly five decades.

The experts can’t even agree on what to make of a
single number. Pessimists see bad news in good
news and optimists vice versa.

Encouraged by the Commerce Department report on
March 1 showing a surprising surge in consumer
spending in January? Not so fast, says David
Rosenberg, chief economist at money manager
Gluskin Sheff in Toronto.

He notes in a report that some items bought in great
quantities – books, up 2.1 percent, and sewing
items, up 1.6 percent – suggest a “frugal stay-at-
home” or “do-it-yourself” mood among Americans.
Advertisement

The end is nigh.

Or you can listen to James Paulsen, the chief
strategist at Wells Capital Management in
Minneapolis.

Not even high unemployment can get this man
down. His interpretation of the near double-digit
unemployment rate: All the more reason to buy
shares.

In a report looking back over the past half century
he notes that periods of high unemployment rates –
greater than 6.6 percent – have been great for
stocks, which have generated average annual
returns of 20 percent. One reason, he says, is that
high unemployment often presages big recoveries,
and investors drive the market up in anticipation of
the recovery.

Of course, you can find Wall Street soothsayers
staking out extreme positions in any era. But the
hunt is perhaps never so easy as in the aftermath of
a deep recession.

One reason is the shock of the downturn feeds fears
that the natural corrective forces of the economy
won’t kick in. Barclays Capital economist Dean Maki
calls it the “This Time Is Different” school of
thought. He says such worries were rife after the two
recessions of the early 1980s. Indeed, oldtimers
may recall some investors expected a “triple dip,”
sidelining them during the start of one of the
greatest bull markets in history.

Maki is not mincing words about his view on the
recovery today. The title of one of his reports: “This
Time Is Not Different.” He predicts the U.S. economy
will grow by 3.6 percent this year, a percentage
point higher than the average estimate.

Seth Glickenhaus, who worked on Wall Street as a
trader in the Great Depression, calls the optimist-
pessimist divide now the “big gulf.”

For his part, the 95-year-old Glickenhaus, who still
oversees $1 billion in assets, is siding with the
pessimists. He thinks the Dow Jones industrial
average will flatline, trading no higher than 11,000
for at least another 5 years.

One reason he’s so glum: The unemployment
picture is actually a lot worse than the widely cited
headline number suggests because many people
have stopped looking for work and aren’t counted.
On Friday, the Labor Department reported
unemployment held at 9.7 percent in February. A
broader measure that includes frustrated part-timers
and other discouraged workers was 16.8 percent.

Glickenhaus likens Wall Street optimists to the guys
he used to beat in bridge games as a student at
Harvard in the early 1930s. “They were great
scholars but not necessarily bright,” he says. His
winnings “paid all my tuition, though it wasn’t much
back then.”

The professional bulls today, he says, are “just
stupid.”

But money manager Richard Bernstein, the former
Merrill Lynch strategist who created a stir years ago
with bearish reports, says he’s turned bullish on
stocks now – though it hasn’t been easy.

“People who thought I was so insightful as a bear
think I’m an idiot,” he says.

He adds, wistfully, “Hopefully, I’m still a likable guy.”

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