Chief Oppenheimer Economist: Investors Should Be Watching For 'Excess'

Benzinga had the chance to speak to Oppenheimer Funds' Chief Economist Jerry Webman this week ahead of the ENGAGE 2015 International Investment Education Symposium being held at Wayne State University starting on March 26. Dr. Webman provided his insight on a wide range of topics in the financial world. Excess is the enemy One of the topics Webman discussed is recession triggers and what investors should be watching for to indicate that a problem could be brewing. Webman told Benzinga 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 happened in real estate and mortgage lending. In 1999 and 2000, there was excess in the fundraising processes of new internet companies. "Often it's too much capital investment," Webman told Benzinga. "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 Webman urged investors to be on the lookout for excess in the market, he 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."