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%.
……
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.
……
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
Greg, You said - “I just don’t think he’s a good economist. [Wesbury]” tell us why you don’t think he’s a good economist. you take his words from early 2008 when he said the economy was just fine…but if you look at the economic numbers through Sept. 2008 (outside of the housing market) and the economy was still growing. it only stopped growing after the panic that ensued when Lehman’s failed, that the economy went into a “v” shaped recession and then has promptly rebounded. — so, what evidence do you have for saying he’s a bad economist? If you know anything about being aMacro-economist (which Brian identifies himself as) you’ll understand that no one knows how millions, if not billions, of people will act at any given time. And your forecasts are only as good as the current information you have, so…again, why is Brian a bad economist? Better or worse than other economist…and if he’s so bad, who is better?
I love arm chair quarterbacks…they can see the past so clearly…but then Greg isn’t willing to take the risk of giving us his forecast…(just it’s going to be bad…I don’t know how bad, but bad) you tell us to wait and see about the future. Greg, keep waiting for the review mirror. it’s coming around again. Thanks for your insightful critique of a professional ecomists’ real-world forecasts.
Come on Dogsan. Now that you’re getting scared that I might be right, you go after me?
My prediction, as I forecast in the Client Note last week, is a range bound market within the context of an overall secular bear market. We will go much lower but maybe not this year.
Westbury does seem like a hack to me.
Now he is stating that we are likely to have a housing shortage in 2011? (see attached link to Forbes article)
http://realestate.msn.com/article.aspx?cp-documentid=23505825
Guys like him keeps on swinging for the fences…and every now and then, he gets hold of one. Probably most of the times, he totally gets it wrong. But he hopes that most people won’t remember, and he’ll get enough right that he continues to stay relevant (in terms of the publications, and uninformed investors).
Its a strange profession…probably the only profession(other than athletics) where you screw up more than half of your efforts…but you still get paid well… Maybe, this is how we should view econmists like him…entertainment.
Dogsan says “… but if you look at the economic numbers through Sept. 2008 (outside of the housing market) and the economy was still growing”
The numbers peaked in August 2007. Dogsan gives us foolery.
If you don’t get the Efficiency of Money, you can’t get economics, which is the art of exchanging the claim of one right for another.
Brain Wesbury has one quality going for him. He’s a free-choice, regulation-free markets guy.
Brian Wesbury,
Afte reading that WSJ editoria it is obvious that Wesbury is unmoored from reality.
Today’s comment that the unemployment numbers increased because more people are now looking for work, not more people are unemployed requires that you were born yesterday or at least sometime after the media started spinning bad news into a surging economy.
V shaped recovery? Tell that to the people who remain unemployed.
That stock market you are crowing about, keep believing that treasury money has not been injected into it to make pwesident OlympDick look good.
Oops. Looks like he was right. We are in a “V” shaped recovery, yet nobody wants to believe it. Thankfully, I’ve been following Brian and have had a tremendous recovery for my clients. Brian should most likely get economist of the year for 2009, as no other economist has come close to his predictions. I think Bloomberg gave him “top economist” honors recently.
Of course the perma-bulls look good when the economy and stock market roar like they have over the past year.
Let’s see how things look a year from now.
“Oops. Looks like he was right. ”
Huh? Right about what? What V are you talking about? He made those comment on Jan 28 2008 when the SPY was 138-ish unemployment was sub-7%. You invested on his advice and puke up 20%.
In February of 2008, he said the following to Human Events:
“We should be buying stocks, and I say that for two reasons: Number One, the market basically today is priced for almost the end of the world.”
Clearly wrong.
“The other thing is, if you look back at the last 230 years of U.S. history, there has really hardly ever been a bad time to buy stocks — especially if you are holding them for the long run.”
This is a fallacy proved wrong time and again.
“we are not in a recession and we are not even headed for one”
Wrong.
“we have become very politically oriented in our economic policy. In other words, we are doing things today because we are in an election year or because of some political expediency.”
Absolutely right. Good one Brian. Maybe he should have been a political scientist?
How about this chestnut: “The biggest one is this whole subprime lending issue. At its worst, and this is using the worst assumptions that I can make, it’ll be about a $250 billion problem. I don’t even think that we’ll get to that level; that’s the worst I can make it.”
“we’d need to fix is our tax code. It is a system that is broken. It is inefficient. It is causing us to lose competitiveness in the world.”
He actually may have something as a political scientist here . . .
So, Brian may have excellent political insights, but as a macro economist he is incompetent to the point of danger.
A good rule of thumb with Economists is that less you hear of them the better they are. Banks charge for economic analysis and customers get pissed when they here Mr. or Mrs. Blah Blah on the TV giving up information that they pay for.
Lets give Mr. Wesbury his due… He is a brilliant contrarian indicator. He just said we should all be buying stocks… I will run to the exits with what little money I have left in equities. Thanks for the headsup Brian.