A "fear-session"

Wells Fargo Economist: Current crisis showing signs of easing

Excerpt:

The current economic crisis is being driven more by fear than facts and should begin to ease in the second half of 2008, an economic forecaster told a group of executives in Houston on Thursday.

Jim Paulsen, chief investment strategist for Wells Fargo Capital Management, offered a new word to describe the current state of affairs in the country. Rather than a recession, Paulsen suggests the country is in a "fear-session" that is not supported by underlying positive signs beginning to bubble up to the surface.

"If we're in a recession, it's the most widely anticipated recession ever," Paulsen said, in an address to oil industry executives sponsored by the Houston-based Wells Fargo Energy Group. "Everyone bought into (a recession) long before it happened, and it really still hasn't happened. This is more a crisis of confidence than a crisis of credit."

Instead, Paulsen suggested that the country is in a "mid-cycle economic slowdown" and sees positive trends beginning to emerge, despite the continued woes of the automobile and housing sectors. The current situation is a normal evolution in a capitalistic society, he added.

Paulsen pointed out that profit margins among non-financial sector U.S. corporations are running at near post-World War II highs, with double-digit profit growth in the fourth quarter of 2007 and first quarter of 2008.

"Yes, things are pretty nasty in housing and the automobile sector," Paulsen said. "But look at what contributes the other 93 percent of the gross domestic product -- and it's up 4 percent this quarter."

In the next 12 months, Paulsen predicts oil prices could slip as the U.S. dollar gains strength against the euro and Canadian dollar.


Comment: Interesting read.