It's Not as Bad as You Think

An upbeat antidote to the gloom and doom forecasts of the financial future Just about everyone is worried about the economy and markets. And the fear is that they will stay down for a long time. But a few brave voices say that the gloom and doom forecasts are just too pessimistic. Reality is that entrepreneurs don't give up. History is pretty clear, every time the economy is thought to be done, worn out, finished, it bounces back and heads to new highs. In fact, the economy and the markets-counter to conventional wisdom-have started to improve in the first half of 2009. Even housing is showing some signs of life. With It's Not as Bad as You Think, Brian Wesbury, ranked as one of the top economic forecasters by the Wall Street Journal and USA Today, shows you that while the financial future may be hard to predict, it will ultimately be profitable over the long haul. In this easy-to-follow and engaging forecast of the future, Wesbury takes a look at the good, the bad, and the ugly-and debunks the pouting pundits of pessimism to show you how to prosper now and in the future. An optimistic look at the economy and the markets written by one of today's foremost financial forecasters Presents a roadmap to seek opportunities in all the panic Shows you how to analyze economic indicators and government policy to grow your wealth so you don't lose by hiding under the bed A breath of fresh air, Wesbury's objectivity and optimism provide welcome relief to the daily bad news stories, as he sets us all up to capitalize on tomorrow's great possibilities.

Foreword ix Introduction 1 Chapter 1 Getting the Right Perspective 9 Fear and Anger Are Understandable 12 History versus Emotion 18 Buck Up and Remember History 22 Chapter 2 Capitalism Wins (Again) 23 Demand versus Supply 24 The History of the World 29 Inventions and Innovation 32 Entrepreneurship 33 The Turning Point 35 Capitalism Wins—It’s Not Over 36 Chapter 3 Creative Destruction 39 The Big “X” 41 The Industrial Revolution 44 The Call for Change 47 A Wrong Drift, but a Cool Wind 49 Inflation, Creative Destruction, and the Crisis 51 Chapter 4 A Government-Sponsored Recession 53 The Housing Boom 56 The Crisis Begins 57 The Acceleration 60 Why in the World Were They Doing That? 61 So Why Blame Capitalists? 64 Chapter 5 Who Makes Your Glasses? 67 Are Consumers Rational? 68 What Is the Natural Rate of Interest? 70 Calculating the Natural Rate 72 The Nominal GDP Rule 74 Money and the Interest Rates 76 The Fed-Induced Bubble 77 We’ve Been Here Before 79 Stupid Bankers, or Not? 81 It Always Ends Badly: Volcker to the Rescue 82 Then . . . 84 . . . And Now 85 Chapter 6 Mark-to-Market Mayhem 87 Government Failure versus Market Failure 89 Some Mark-to-Market Accounting History 92 Mark-to-Market Creates Volatility 93 Suspend Mark-to-Market 99 A False Feeling of Control 101 A Miracle Happened 102 Chapter 7 Panic and the Speed of Money 105 What Recession? 107 The Panic of 2008 110 Mark-to-Market Mayhem 115 AIG, Credit Default Swaps, and Derivatives 117 The V-Shaped Light at the End of the Tunnel 120 Chapter 8 It’s Not as Bad as You Think 125 Consumer Spending 129 Debt 131 Growth, Debt, and China 135 Deleveraging 138 Unemployment 142 Savings Rates 143 The Economy Will Recover 144 Chapter 9 It’s Boom Time Again 147 Don’t Fight the Fed 150 1975 –1976 Redux? 151 Can It Happen Again? 153 Panics End 153 It Won’t Stay Down Forever 155 Undervalued Markets 156 Productivity and Profi ts 159 But Government Is Growing . . . 161 Chapter 10 Investing in the Midst of Mayhem 163 The Super-Easy Fed 165 Buy U.S. Stocks for the Short to Medium Term 166 Stocks for the Long Term: Small Cap, Value, and Momentum 169 Infl ation Plays for the Medium and Longer Term 171 Foreign Equities 174 Fixed Income 176 Emotion and Investing 180 Chapter 11 The New Normal 183 Big Government Hurts 188 Keynes and Government 190 How Bad Can It Get? 191 Roosevelt, Carter, or Clinton 192 The Future Still Looks Bright 195 Notes 197 Acknowledgments 203 About the Author 205 Index 207