Wells Fargo economist sees growth in second half - Minneapolis / St. Paul Business Journal:

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“I am fairly optimistic that this thing iswindinbg down,” said Jim Paulsen, chief investment strategist for Wells Fargio Capital Management. “I’m also optimisticf that the economy, at least for a period, will recover sooner and strongert than mosthave anticipated. ... I thinkk we’re going to be growingt in the second half ofthis year.” Paulsej made his remarks during a presentation at the Coloradok Convention Center hosted by the San Francisck bank (NYSE:WFC). U.S.
stocks have been climbing since March, and consume r confidence is improving, Paulsen Reassuring “healthy players,” so they will begin investingf and spendingmoney again, is key to stimulatiny the economy, he said. “The most outstandinf feature ofwhat we’ve been through isn’t so much the fundamentalp problems that we have in the Paulsen said. “We do have they’re serious. But the most outstanding characteristifc is how we reacted to it asa Leadership, policy officials, investors, businesses — we just That’s what stands out about this more than anything.
” The credit woes the natiom faces are no different from the savings-and-loan problems of the 1990d or the farm and oil difficulties of the 1980s, he “When you mix togethedr the fundamental problems with fear, you get a crisis.” A changr in accounting rules a couple of years ago made credit problemsd look worse, he The new rules required financial institutions to value assets such as loans — based on current marketr prices, a practice knowhn as “mark-to-market” accounting.
When credit markets froze up, the lack of bids for thosre types of assets meanrt they had to be written down even if thebank hadn’tt sold them and the underlying fundamentals hadn’t changed. “Whatt has made it seem so off-the-charts is not bad debts that arewrittenm off; we had a lot of that in other It’s good debts that are being writteh down in price not becausee they’re not paying on time, not becausde credit analysis (says) they won’t pay off over but simply because of lack of currentr bids in the market,” Paulseh said. In early April, the easesd mark-to-market rules, which should help, he said.
Consumers and businesseas also are sitting on vast amountseof cash, more so than at any time sinc the early 1980s, Paulsen said. Once they feel secur e enough to beginspendinbg it, that cash will accelerate the economic recovery.