Newspaper article THE JOURNAL RECORD

Shock from Events Result from High Hopes

Newspaper article THE JOURNAL RECORD

Shock from Events Result from High Hopes

Article excerpt

A shock a day seems to send quivers through the world of business and economics of late, and the surprising thing about it is that none of them should be a shock at all.

The White House announcement that the budget deficit might be bigger than anticipated was almost in the nature of things - it has happened just about every year in the past 20, but it was widely referred to as a shock.

``It should have come as no surprise to anyone,'' said economist William Dunkelberg, ``except for recent arrivals from Mars.''

Similarly, presidents have a long tradition of promising to keep a rein on taxes, but few succeed. Still, millions were surprised when President Bush reversed himself and said he might consider a tax increase.

Judging by the reaction of stock market analysts, one of the most violent shocks in recent weeks was the slide in corporate profits, although that slide has been underway for well over a year, and extensively documented.

Perhaps equally or even more shocking is that the evidence of a downturn was ignored by so many people who claim to have a deep understanding of corporate finances.

Did their hopes suffocate their intellect? Perhaps.

There even remains some residual dismay about the downturn of building and real estate in some parts of the country, although there has never been a time this century when these areas of the economy were not subject to cycles.

The economy and its parts oscillate. Seldom do they draw a straight line up or down for very long, and one of the more pronounced up-down cycles is in real estate. It's there to be seen in the charts and graphs.

Equally pronounced are cycles in securities markets, but you'd never have guessed it from the public display of shock when stocks took a dive on Monday, July 23. …

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