It's Not as Bad as You Think

BRIAN S. WESBURY is Chief Economist at First Trust Advisors LP, a financial services firm with over $23 billion under management. He writes frequently for the American Spectator magazine, serves as the magazine's Economics Editor, and is often a contributor to the Wall Street Journal editorial page. Wesbury was ranked as the nation's number one forecaster by the Wall Street Journal in 2001, and USA Today ranked him as one of the nation's top ten forecasters in 2004. Wesbury received an MBA from Northwestern University's Kellogg Graduate School of Management and a BA in economics from the University of Montana. His most recent writings can be found at www.ftportfolios.com.

"Compared with most of his peers, Brian Wesbury. . . looks like a raging bull. The economy, he boldly predicts, will grow . . . the stock market remains grossly . . . This is the opportunity of a lifetime for those buying a house. . . The author rightly makes the case that the current financial crisis was totally unnecessary. Its prime cause was the imposition of mark-to-market accounting rules. . . Wesbury also explains that the potential losses from subprime mortgages and exotic financial instruments in 2007 were less threatening to the system than was the banking crisis of some 20 years ago. . . Wesbury deals decisively and persuasively with other misconceptions. The big one: that it was the collapse of the housing bubble that led to panic in the fall of 2008 . . .As for the economy's current growth, Wesbury makes it clear that he doesn't think it's soundly based. In other words, investors have opportunities for big gains, but they'd better be nimble. Expansions fueled by excesses of Fed credit always end badly." —Forbes magazine

• Foreword ixIntroduction 1Chapter 1 Getting the Right Perspective 9Fear and Anger Are Understandable 12History versus Emotion 18Buck Up and Remember History 22Chapter 2 Capitalism Wins (Again) 23Demand versus Supply 24The History of the World 29Inventions and Innovation 32Entrepreneurship 33The Turning Point 35Capitalism Wins—It’s Not Over 36Chapter 3 Creative Destruction 39The Big “X” 41The Industrial Revolution 44The Call for Change 47A Wrong Drift, but a Cool Wind 49Inflation, Creative Destruction, and the Crisis 51Chapter 4 A Government-Sponsored Recession 53The Housing Boom 56The Crisis Begins 57The Acceleration 60Why in the World Were They Doing That? 61So Why Blame Capitalists? 64Chapter 5 Who Makes Your Glasses? 67Are Consumers Rational? 68What Is the Natural Rate of Interest? 70Calculating the Natural Rate 72The Nominal GDP Rule 74Money and the Interest Rates 76The Fed-Induced Bubble 77We’ve Been Here Before 79Stupid Bankers, or Not? 81It Always Ends Badly: Volcker to the Rescue 82Then . . . 84. . . And Now 85Chapter 6 Mark-to-Market Mayhem 87Government Failure versus Market Failure 89Some Mark-to-Market Accounting History 92Mark-to-Market Creates Volatility 93Suspend Mark-to-Market 99A False Feeling of Control 101A Miracle Happened 102Chapter 7 Panic and the Speed of Money 105What Recession? 107The Panic of 2008 110Mark-to-Market Mayhem 115AIG, Credit Default Swaps, and Derivatives 117The V-Shaped Light at the End of the Tunnel 120Chapter 8 It’s Not as Bad as You Think 125Consumer Spending 129Debt 131Growth, Debt, and China 135Deleveraging 138Unemployment 142Savings Rates 143The Economy Will Recover 144Chapter 9 It’s Boom Time Again 147Don’t Fight the Fed 1501975 –1976 Redux? 151Can It Happen Again? 153Panics End 153It Won’t Stay Down Forever 155Undervalued Markets 156Productivity and Profi ts 159But Government Is Growing . . . 161Chapter 10 Investing in the Midst of Mayhem 163The Super-Easy Fed 165Buy U.S. Stocks for the Short to Medium Term 166Stocks for the Long Term: Small Cap, Value, and Momentum 169Infl ation Plays for the Medium and Longer Term 171Foreign Equities 174Fixed Income 176Emotion and Investing 180Chapter 11 The New Normal 183Big Government Hurts 188Keynes and Government 190How Bad Can It Get? 191Roosevelt, Carter, or Clinton 192The Future Still Looks Bright 195Notes 197Acknowledgments 203About the Author 205Index 207