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2009 economic forecast: Mixed messages

Terry Savage discusses economy with panel as crowd prepares its own questions during Executives Club Economic Forecast LuncheThursday Chicago.

Terry Savage discusses the economy with the panel as the crowd prepares its own questions during the Executives Club Economic Forecast Luncheon on Thursday in Chicago.

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Updated: May 3, 2013 12:14PM

When the crowd of 1,600 people at the annual Executives Club Economic Forecast Luncheon were asked whether they believed this recession would be over by the end of the year, barely a hand was raised. And when the timing was stretched to the end of 2010, only about 20 percent of the audience thought the economy would be back on track by then.

With that gloomy attitude prevailing, the professional forecasters seemed relatively optimistic by comparison.

Mesirow Financial's Diane Swonk acknowledged that she, along with most economists and the Fed chairman, hadn't recognized the "depth and breadth" of the credit crisis soon enough. Although she predicted rising unemployment and a slow economy for the year ahead, Swonk made it clear that the United States is not heading into a 1930s-style depression. In fact, she said, we should expect positive growth in 2010, and new stock market highs by 2011. Her target investments: U.S. stocks that will benefit from infrastructure spending; financials, and even a possible surviving auto company.

Bob Froelich, chairman of investor strategy for Deutsche Asset Management, was even more optimistic, pointing to the fact there is no inflation in sight, when it comes to housing, food, energy and wages. And bullish for the stock market, retail investors have at least $4 trillion sitting on the sidelines in money market funds earning almost nothing. Froelich advises investing in U.S. stocks because the Fed has been ahead of the rest of the world in pumping liquidity into the economy, even though it will take a while to make an impact. His target investments include infrastructure and the strong financial services firms that will rise out of the current consolidations.

Robert Shiller of Yale laid out a prescription for future avoidance of the twin bubbles we saw in stocks and real estate. Among his ideas: more financial literacy education; new self-adjusting mortgages with monthly payments that would automatically drop in recessions, and better ways to hedge real estate exposure. To that end, his company Macro Markets has created a new NYSE-listed security that will start trading in spring, based on his Case-Shiller National Home Price Index. And while Shiller says his index takes the place of forecasting, he did admit that futures based on the index are pointing to more months of declining home prices.

Having moderated this panel for many years, I can make one prediction for sure: The huge crowd will be back next year to assess these forecasts. And that's The Savage Truth.

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