Taking the pulse of the press

Readers of establishment media can be forgiven for experiencing wild mood swings of late when it comes to the economy.  Gloom one day, euphoria the next — sometimes the sentiment shifts hour-to-hour.

Our prime example is on page one of today's Wall Strret Journal:

Battered stock and bond markets are sending an increasingly ominous signal that a U.S. recession could be near.

The markets, however, haven't swayed Federal Reserve officials and most private economists from their view that the nation's economy can escape a downturn and get back on a steadier course.

The disparity between those two views of the economy — one growing bleaker, the other remaining sanguine — stood out starkly last week.

Though it rose during Friday's shortened trading day, the Dow Jones Industrial Average — at 12980.88 — is 8.4% below its all-time high, set in October. Safe-haven Treasurys, meanwhile, have rallied as investors have lost confidence in a quick resolution of the U.S. housing slump and mortgage crisis, which are behind many of today's economic worries in both the U.S. and Europe.

But in an economic outlook released by the Fed, the central bank's policy makers said they expected U.S. economic growth to pick up as housing hits bottom and financial markets gradually resume more-normal functioning. Fed officials see the U.S. economy growing between 1.8% and 2.5% next year, according to minutes from their most recent meeting.

The Associated Press, however, is having none of that optimism.  A lenghthy story that starts out with the tale of a man whose ARM was resetting $1500 a month higher (he managed to refinance), is almost entirely doom and gloom:

"We haven't faced a downturn like this since the Depression," said Bill Gross, chief investment officer of PIMCO, the world's biggest bond fund. He's not suggesting anything like those terrible times — but, as an expert on the global credit crisis, he speaks with authority.

"Its effect on consumption, its effect on future lending attitudes, could bring us close to the zero line in terms of economic growth," he said. "It does keep me up at night."…

Some of the nation's leading economic minds lay out a scenario that is frightening. Not only would the next wave of the mortgage crisis force people out of their homes, it might also spiral throughout the economy…

Based on historical models, zero growth in the U.S. gross domestic product would take the current unemployment rate to 6.4 percent. That would wipe out about 3 million jobs from the economy, according to the Washington-based Economic Policy Institute.

By comparison, in the last big downturn between 2001-03 some 2 million jobs were lost, according to the Labor Department. The dot-com bust early this decade decimated the technology sector, while the Sept. 11, 2001, terror attacks hurt the transportation and allied industries. Economists said the country was officially in recession from March to November of 2001, but the aftermath stretched to 2003.

But if that's still too sunny for you, we have a "trends researcher" forecasting the dollar will crater, bringing on a "Panic of 2008:"

A financial crisis will likely send the U.S. dollar into a free fall of as much as 90 percent and gold soaring to $2,000 an ounce, a trends researcher said.

"We are going to see economic times the likes of which no living person has seen," Trends Research Institute Director Gerald Celente said, forecasting a "Panic of 2008."

"The bigger they are, the harder they'll fall," he said in an interview with New York's Hudson Valley Business Journal.

Celente — who forecast the subprime mortgage financial crisis and the dollar's decline a year ago and gold's current rise in May — told the newspaper the subprime mortgage meltdown was just the first "small, high-risk segment of the market" to collapse.

How could somebody so far-seeing have escaped my attention till now?  The guy's website makes him look like a media god, praised by Oprah.  (Hey, that's as close to god-dom as it gets.)

Anyway, all this negativity sets off my contrarian radar.  You know, Business Week declaring "Equities are Dead" at the very start of a secular bull market in stocks.  Is there somewhere, anywhere, in the establishment media where sunny stocks-always-go-up optimism still prevails?  Ah yes, the FT, comparing today to 1973:

I am not, after all, seeking to propound any vulgar fallacies about history repeating itself. The point of such exercises is rather to expand our conception of the possible.

In that spirit, a seasoned stockbroker of my acquaintance dismisses my 1973 comparison. The true parallel, he says, is 1929.

But that, surely, is going too far.

Comforting reassurance, like a cozy blanket in front of a warm fire.  Or a fistful of gold coins.