Despite ‘R’ word building, stock market advances

Most major print and broadcast outlets, in recent days, increasingly have sprinkled the “R” (for recession) word in business and financial reports, contributing to jittery investors.

Tossing some hot salsa into that mix yesterday was Goldman Sachs’ chief U.S. economist Jan Hatzius who informed clients that “recession has now arrived, or will shortly.”

Two days earlier, Merrill Lynch economists said a recession was “a present-day reality.”

Also yesterday, with an opposite view but getting less media play:  St. Louis Fed President William Poole, told financial planners that he doesn’t see an economic contraction this year and that “the fundamentals of our economy remain strong.”

Joining in that stance is Jeremy J. Siegel, a professor of finance at the Wharton School of the University of Pennsylvania.  “There will be no recession in ’08,” he writes in an investing section column in the February issue of Kiplinger’s Personal Finance.

The crosscurrents certainly make things confusing for investors, observes Grumpy Editor, noting the zig-zagging Dow industrials yesterday closed up 146.24 points to 12735.31.  The Dow added 117.78 points today, closing at 12853.09 --- jumping 264.02 points in two days' trading.

Professor Siegel sees 2008 starting slowly but by the middle of the year “the economy should begin picking up steam,” growing 2 to 3 percent in the second half.

He also sees “the subprime mortgage disaster” easing by June while “the Fed is likely to lower short-term rates several more times in early 2008 and bring its key federal funds rate down to about 3.5 percent by midyear.”