For Mark Hirschey, Professor of Business at the University of Kansas, much of the negative press on the U.S. economy is "significantly overblown." Hirschey is the co-author of Investments: Analysis and Behavior (McGraw-Hill, 2008), a textbook on behavioral finance with an introduction to the field of investments. This KU economics research expert has written hundreds of other scholarly economics publications. Hirschey advances several contrarian perspectives on gloomy economic headlines:
On the Stock Market: "On average, stocks go up." His historic view of U.S. equities is that they advance slowly and steady, but every so often these markets experience a drastic, unpredictable decline. He claims those events are exceptional, infrequent, and relatively short-lived. The 2008 decline represents the ninth such event in the last 50 years. He expects prices to be much higher 18 months from that dip's start.
On Housing Price Declines: The bust in home prices is "not uniform across the United States." Prices have been little changed in 34 of 50 states. That fact is rarely highlighted in news of the current housing price slump. The largest price declines occurred in California, Nevada, Arizona, and Florida, but nationwide prices are only off by nine to ten percent from their highs. In those markets hardest hit, some homeowners have seen 25 to 30 erosion in their equity. In fact prices are now rising again in one fifth of the major housing markets.
On The 1920s and 30s: “The Great Depression and the current economic situation have very little in common." In most areas we see unemployment rates in the six to seven percent range and most agree that eight percent will be the maximum rate during this dip. From 1929-1933, unemployment in the U.S. increased dramatically from four percent to 25 percent.
On The Timing of a Recovery: "The typical recession lasts less than 18 months." Again using history as a guide, Hirsch sees this downturn ending sometime between now and Independence Day.
Thanks for the Good News Professor!