Brian Wesbury Is Clueless
Brian Wesbury, Chief Economist at First Trust Advisors and a regular on CNBC, especially The Kudlow Report, has a piece up at Forbes today titled: “The Recession Is Over”:
Now it looks like our V-shaped recovery is underway. When the NBER eventually gets around to declaring the recession end date, we think it will be May 2009.
……
In our view, there are no more shoes to drop.
Wesbury is notable mainly for his ability to get everything wrong. Usually, even bad forecasters get something right, even if it is by accident. Not Wesbury.
Here are some excerpts from an editorial he wrote for The Wall Street Journal on January 28, 2008 titled “The Economy Is Fine (Really)” (subscription required):
It is hard to imagine any time in history when such rampant pessimism about the economy has existed with so little evidence of serious trouble.
……
With housing so weak, the recent softness in production and durable goods orders is understandable. But housing is now a small share of GDP (4.5%). And it has fallen so much already that it is highly unlikely to drive the economy into recession all by itself. Exports are 12% of the economy, and are growing at a 13.6% rate. The boom in exports is overwhelming the loss from housing.
…….
Models based on recent monetary and tax policy suggest real GDP will grow at a 3% to 3.5% rate in 2008, while the probability of recession this year is 10%.
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Yet many believe that a recession has already begun because credit markets have seized up. This pessimistic view argues that losses from the subprime arena are the tip of the iceberg. An economic downturn, combined with a weakened financial system, will result in a perfect storm for the multi-trillion dollar derivatives market. It is feared that cascading problems with inter-connected counterparty risk, swaps and excessive leverage will cause the entire “house of cards,” otherwise known as the U.S. financial system, to collapse. At a minimum, they fear credit will contract, causing a major economic slowdown.
For many, this catastrophic outlook brings back memories of the Great Depression, when bank failures begot more bank failures, money was scarce, credit was impossible to obtain, and economic problems spread like wildfire.
This outlook is both perplexing and worrisome. Perplexing, because it is hard to see how a campfire of a problem can spread to burn down the entire forest. What Federal Reserve Chairman Ben Bernanke recently estimated as a $100 billion loss on subprime loans would represent only 0.1% of the $100 trillion in combined assets of all U.S. households and U.S. non-farm, non-financial corporations. Even if losses ballooned to $300 billion, it would represent less than 0.3% of total U.S. assets.
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Because all debt rests on a foundation of real economic activity, and the real economy is still resilient, the current red alert about a crashing house of cards looks like another false alarm…… Dow 15,000 looks much more likely than Dow 10,000. Keep the faith and stay invested. It’s a wonderful buying opportunity.
He has no credibility and no shame. I don’t dislike Brian Wesbury as he seems like a nice guy. But he should be held accountable for getting everything wrong. And nobody should pay any heed to his forecasts.
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re:Brian Wesbury
There is a fine line between genius and insanity and you young man…are no genius!
And neither is Brian Wesbury based on his track record…..
Hey Greg, it looks like Wesbury was right about the V-shaped recovery. Does that make you wrong and clueless? And now that you have been so wrong should we never listen to you again? How about it? Do you want to provide a mea culpa, and maybe apologize to Wesbury?
Mea Culpa,
It’s way too early for that baby. If I’m wrong, I’ll be the first to say it. But this is just a 5 month stock market move at this point. We won’t know if this is a head fake or not for quite some time.
Greg,
How about 8 months and a 10,000 DJIA? We’ll know whether or not this was a V or a head fake in about 5 years.
Brian believed that in January 2008 the troubles were localized to the financial sector. He might admit that he missed that, but would more likely comment that between FED action and gov’t meddling there was jet fuel thrown to the fire. The truth is probably somewhere between 50 different economic opinions though.
My only problem with your artful coloring of Wesbury is that you and I could pick 10 economist each year and impale them on their asinine predictions and comments. So the ridicule of one in hindsight is rather childish. After all, Roubini correctly predicted this recession in each of the previous 5 years and was seen as a soothsayer last year. Using the blanket comments you covered Wesbury with are irresponsible and really quite puzzling.
Sincerly,
Brian’s Dad - I kid of course
I have no problem with Brian Wesbury as a person. In fact, he seems like a really nice guy.
I just don’t think he’s a good economist.
Unfortunately, we won’t know who is right here for quite some time, but we have to live life and make decisions in the present.
I don’t want to gang up on you but I hope you have now realized who was right and who was wrong and yes- this time Mea Culpa IS in order. He was right when he forecasted the V shape recovery when everyone thought he was crazy, he was right when he turned to the Baltic Dry Freight index, copper charts and vehicle replacement charts to support his notion of the V (unlike the “this is the bottomless recession” you hear from pundits on tv with no empirical proof) and he’s right when he says that blaming capitalism for the recession is not only wrong, but it’s ignorant to do so. (Government’s failure to cease market-to-market accounting is btw)
So I say, TG, if now is not the time for apologies and acknowledging that you were wrong, how high does the market have to get and how high does GDP need to be for you to apologize?
Why are you so anxious to declare winners and losers in this debate? Give it time man. I know you can hear all the voices in this market that see the same things I do and are skeptical. When I say give it time, I’m saying let’s say how this looks at the end of 2010 or some such time frame. It’s 8 months right now. That’s all.
Westbury is a schill for the repubs and Kudlow. I dont think he believes what he writes but he has to say it to get air time which is his job at First Trust
First Trust’s Brian Wesbury is predicting a remarkably positive GDP for the second quarter of 2008 (HT: Mark Perry):
Late next week the government will release initial estimates of real economic activity in the second quarter. Not long ago, in early April, when the quarter was just beginning, the consensus forecast for Q2 2008 real GDP growth was 0.0%, with as many economists predicting contraction as were predicting growth.
Now, three months later, the consensus is up to 2.2%. And no surprise - we are forecasting a 3% growth rate, more bullish than almost any other economist.
HOW about -0.7?????
Brian doesnt even believe his own stuiff but has to curry repub favor to get airtime (Kudlow and WSJ) which is his job at FT