Market analyst foresees 'unusual opportunities'

The chief market strategist for D.A. Davidson said the economy is far from a depression, and even showing signs of recovery, but it will face significant hazards in the near future.

Frederic Dickson was in Kalispell this week to speak with D.A. Davidson investors; he also gave a presentation at a Rotary Club meeting Thursday morning.

Dickson, an Oregon resident who is a frequent guest commentator on the MSNBC and Bloomberg television networks, said he often addresses concerns about the country entering a depression.

"We are in a serious recession, but the facts don't point to a depression of the type we saw in the 1930s," Dickson said.

There are vast differences between now and then, Dickson said.

Most significantly, today's unemployment doesn't come close to the 25 percent unemployment that persisted from 1930 to 1934, the decline in gross domestic product is just a fraction of what it was then, and current monetary policy is directing a massive expansion of money into the economy when it was severely restricted in the 1930s.

Another major difference, he said, is that cash and lending evaporated then and now there is $4 trillion in money-market funds alone.

"We have cash," Dickson said. "But consumers and the average American have become very cautious … There is money available. What is lacking really is a restored sense of confidence in what will happen two to three years out."

Even with government stimulus spending and backing of the country's financial system, there has been a lag in borrowing, lending and investing.

The recent cancellation of construction of new Kohl's and Petsmart retail stores north of Kalispell is a 'sign of the times," Dickson said.

"It will probably be a couple of years before retailers resume normal expansion plans," he said.

But encouraging economic indicators are emerging. Global stock markets surged Thursday, largely because of better-than-expected news on the American housing and manufacturing sectors.

While home sales are still down, housing markets across much of the country are showing signs of stabilizing, Dickson said, noting that home mortgage interest rates are at "rock bottom."

Because of federal bailout assistance, auto loan financing has picked up.

As credit markets begin a return to normalcy, he said, the final ingredient in triggering a recovery is for rising unemployment to level off.

Even then, the U.S. economy will face serious challenges.

For starters, the country will continue to be "dealing with global trading partners that are still mired in recession" and there is what Dickson describes as a "political unknown" - how consumers respond to the day-to-day news from Washington about increased government spending and debt.

Perhaps the most pressing unknown is the threat of inflation in the next few years as a result of the "massive liquidity" resulting from people saving money and the government spending unprecedented amounts of money.

Inflation can lead to a decline in the value of the dollar, and that would make foreign purchasers of American debt scarce.

Proposals for significant taxes on business and industry, such as a pending "cap and trade" plan for curbing carbon emissions, could hobble an economic recovery, he said.

Finally, the manner in which individual states such as California and New York handle vast budget deficits also can turn into drags on recovery.

Dickson said there are reasons to be optimistic about long-term economic growth, not just in the United States but globally.

Investment sectors such as water resource development and distribution, advanced technology, alternative energy and major infrastructure construction will be major economic drivers, Dickson said.

"We are in unusual times," Dickson said. "But unusual times breed unusual opportunities."

Reporter Jim Mann may be reached at 758-4407 or by e-mail at jmann@dailyinterlake.com