Don't count the U.S. economy out yet

I'm about to break a cardinal rule of journalism here -- I'm about to
tell you I know next to nothing about a particular subject: Economics.

But, if you're like me, you like to turn to people or trusted sources
of information to keep you apprised of things you personally know little
about. Such is the case when it comes to what is really going on in the
U.S. economy. My "trusted source" is
Stratfor.com, a Texas-based economic
forecasting firm that rarely makes a mistake in projecting the
performance of the American business cycle.

Having said that, last Friday's shockingly bad performance on Wall
Street -- when the Dow lost 617 points (its single-largest one-day loss)
and the Nasdaq fell about 355 points -- is not a signal of the end of
the world as we know it, though Time and Newsweek and a host of other
establishment mags will portray it as such.

Rather, what has happened is what is supposed to happen; as
Stratfor.com "predicted" Feb. 14, the U.S. economy was simply due for a
correction.

TRENDING: Caught red-handed

After detailing a short series of economic events prior to its
Feb. 14
forecast, Stratfor said:

"If what we think is happening is indeed happening, then this is
merely a downturn in an economic expansion that began in 1982, and it
will resume after a few rough quarters. We do believe there is more
serious trouble looming later in the decade, but to paraphrase Redd
Foxx, 'This ain't the big one.'

"If we knew what the stock market was going to do we wouldn't be
working for a living, would we? And the stock market isn't the economy.
Nevertheless, when we lay all the accumulating facts side by side, it is
difficult to avoid the conclusion that some serious problems are
developing. Obviously, the yield curve could correct itself next week,
and all this could go away. But with the Fed policy being what it is, we
find it hard to see how that curve can regain a healthy upward angle.
The more we look at it, the more it appears that it may be time for a
recession. ...

"... Though it would not surprise us to see a sudden, very
frightening downturn in the markets or a short, sharp recession, not
dissimilar to 1987, the basic upturn will continue until at least 2005
and probably for several years hereafter."

Compare that reasoned, well-thought out forecast and analysis with
the panic already permeating the establishment press, written by other
journalists who, like me, obviously have no idea what they're talking
about when it comes to economic forecasting:

"If (the current downward market trend that manifested itself on
Friday) is sustained, this market slump could cause more lasting damage
to consumers' psychology -- and, potentially, to the economy -- than did
the crash of 1987, analysts said, because many more Americans own stock
today -- an estimated four or five out of 10, as compared with two out
of 10 in 1987," wrote the Los Angeles Times on Saturday.

Continuing: "... After weeks of eroding investor confidence caused by
sliding technology stocks, the trigger was pulled on Friday after the
government reported a much higher-than-expected rise in consumer prices
in March. ...

"Inflation has risen periodically since 1982, certainly by as much as
was reported Friday, but then returned to the overall downward trend.
Many economists, however, have warned that price pressures are growing
with the global economy's surge. ...

"Nothing from Friday's market action held out much hope that the
downward pressure on stocks is over. Analysts pointed out that in
previous sell-offs recently, investors have stayed in the market,
jumping from one sector to another. This time, they are pulling out cash
altogether. ...

"Despite strong corporate earnings and a still-healthy economy, the
market now faces the payback for extraordinary levels of speculation
that took Nasdaq to record heights by early March, and stock
price-to-earnings ratios to unheard-of levels. Where that payback ends,
no one can be sure. ..."

Quite a difference, isn't there? Maybe that's because the business
model for these two reporting agencies is different; the Times has to
sell papers today, while Stratfor has to sell itself all year
long.

Nevertheless, it makes you wonder if the kind of "panic" reporting
done by clueless reporters and advanced by irresponsible editors won't,
in some way, worsen the current performance of the market because so
much of the Times' panic stories will reach the public while calmer --
and smarter -- analyses by real pros will not.

But the ultimate point is this: who are you going to trust, some
half-baked news story or a professional economic forecasting firm that
saw Friday's market performance way back in February, before the
Times and other establishment papers dusted off their panic buttons?

For better or for worse, the U.S. economy has matured dramatically
since the days of the Great Depression. Whether Fed Chairman Alan
Greenspan helps guide the economy or whether economy policy is ground
out in Congress or the White House, the fact is there is little
similarity between Wall Street in 2000 and the Wall Street that crashed
in 1929.

Don't jump off a building, for goodness sakes. Relax a bit -- this
economy of ours is holding its own.