Business Week: The case for optimism

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This is a guest post by Barry Ritholtz, editor of The Big Picture Blog and author of the popular book, Bailout Nation.

businessweek-optimism1

I am not sure what to make of this Business Week cover: It shows an ostrich, with its head buried in the ground, making the case apparently for blind optimism.

Consider the following if you want to think of this as good advice or as a contrary indicator:

• Could this cover have come out in late February or early March?
• Or, does it take a 50% rally to give nerve to the editors who made this decision?

I suspect it is the latter. Hence, why this is more likely a contrary indicator than good advice.

Excerpt:

“Sure, it has been a harrowing storm. And now is no time to discount the dangers that still exist. But opening your mind to optimism can help you seize the opportunities ahead

“The US economy is in such bad shape that the loss of (just) a quarter-million jobs in July was greeted as good news. Long-term unemployment and foreclosures continue to mount in the worst economic downturn since the 1930s. Health-care costs are out of control. An aging population around the globe is driving government spending through the roof. And scientists say we need an expensive crash program to fight global warming or we’ll incinerate ourselves. It’s little wonder that despite some positive news lately, the daily Gallup Poll on US economic conditions as of August 11 found that 53% of Americans think the US economic outlook is getting worse (yes, even worse), versus 42% who think it is getting better.

“But before you assume a purely defensive posture – knees pulled to chest, hands on head – remember this: Just as people become overly exuberant in good times, they tend to get too pessimistic in bad times. While the economy remains deep in a hole, and could indeed get worse, the truth is that nobody really knows what will happen next. Prudence demands that you prepare yourself for all possible outcomes, including some highly positive ones.”

Note: My motto is “Hope for the best, prepare for the worst.” No excessive optimism or pessimism required .

Sources: Barry Ritholtz, The Big Picture, August 19, 2009 and Peter Coy, Business Week, August 13, 2009.

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