Kneale: The Only Thing We Have to Fear..?

...Is fear itself. I always forget whether it was FDR or Churchill who said that, but whoever it was, he would have been a great market forecaster for the times we now face. (It was President Roosevelt, turns out.)

Fear may be the single biggest obstacle holding back this stock market from the rise it truly deserves. Fear of a second market meltdown, fear of Recession Redux, fear of a collapse in commercial real estate and another wave of defaults in housing; fear of deep deficits, new taxes and a surge in government spending, even fear of the-fear-of-inflation.

It is an after-effect of the near-death experience we endured and the stun-gun reanimation that followed. Washington is moving to correct the lapses that led to the Fall of the Fall of ’08. But you can’t regulate fear.

Fear is why upwards of $9 trillion today still sits in fraidycat accounts in cash, money market funds, checking and savings accounts and America’s mattresses. It languishes in lost opportunity while stocks continue to trickle up on small and meek volume.

Some brilliant and articulate Eeyores on Wall Street make a fortune forecasting fear: Nouriel Roubini, David Tice of Federated Investors, Peter Schiff of EuroPacific, author Harry Dent.

In the face of hopeful signs—strong chain-store sales posted, surging GDP growth, strengthening earnings, slashed corporate costs, consumers spending again, higher demand for government bonds, no-show inflation, billions in TARP bailout profits for the feds—these Debbie Downers continue selling the doom.

And, for now, they continue to be wrong. Take a look at what David Tice said on Tuesday on CNBC, as he predicted a big tumble in U.S. equities, perhaps as much as 40 percent—“and I don’t like those odds.”

Just one problem, guys: Tice was peddling the same doom a year ago.

He went on CNBC on May 26, 2009. The S&P 500 stock index was at 910 on that day—“dramatically too high,” he called it, predicting a further, devastating plunge to below the 400 level within months. Never happened. The index kept on climbing and lately is flirting with 1200.

(See for yourself — Watch the Tice segment from that day last May.)

Peter Schiff is a disturbingly convincing doomsayer. A year ago the bearish forecaster mopped up the floor with me in couple of debates on the markets’ direction. In late June last year, on CNBC in prime time, I called the Great Recession over, and on my show on June 26, Schiff quipped: “The good news is your record of inaccurate forecasting looks like it’s gonna be safe.” Good one!

He said he heard so much about “green shoots” on CNBC he thought he was watching the “gardening channel.” Two weeks later Schiff came back on the 8pm show I anchored and declared: “Those green shoots are gonna wither and die.” The date was June 26, 2009, and the S&P 500 was at 905; it’s now up another 30% since our face-off.

The intent here isn’t to gloat—these guys are gifted money men and their advice is worth what it costs. (So is mine, given that it comes free of charge). And holding on to hope can make you look like a naïve fool on the way down. I have personal experience on that front.

My bigger point is, the best way to build real wealth, over the long haul, isn’t to trade in the overabundant currency of fear. The best way to build wealth is to bet on hope, searching out the right reasons and the resurgent sectors that can justify it.

Now weigh in with your wisdom rather than your vitriol ...

More Kneale ...