Benzinga had the chance to speak to Oppenheimer Funds’ Chief Economist Jerry Webman this week, ahead of the ENGAGE 2015 International Investment Education Symposium to be held at Wayne State University.
Webman provided his insight on a wide range of topics in the financial world.
Excess Is The Enemy
One of the topics Webman discussed was recession triggers, and what investors should be watching out for as an indication that a problem could be brewing. Webman said that excess, in some form or another, is at the heart of all economic downturns and cyclical bear markets.
During the most recent recession, the excess took place in real estate and mortgage lending, while in 1999 and 2000 there was excess in the fundraising processes of new Internet companies.
“Often it’s too much capital investment,” Webman added. “Businesses assume demand is just going to keep growing, so they lay on too much production capacity, they hire too many people and they put on too much inventory.”
Easier Said Than Done
While he urged investors to be on the lookout for excess in the market, Webman also explained that identifying the excess in real time can be difficult.
“It’s hard to know what the next source of excess will be. We usually will get it wrong, and we will explain why: ‘Oh, that doesn’t really matter-that’s not the kind of excess I’m talking about,’ as people were saying about housing in 2007.”
Short-Term Threats To The U.S. Economy
Webman said that economists are watching many aspects of the U.S. economy, looking for signs of excess. Whatever the next source of excess will be, will likely become the next significant threat to economic stability.
“In some place, we’re going to do too much of something. I don’t have the foresight right now to know what that is,” said Webman.
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