Louisiana’s Economic Outlook
Lance on Jan 11 2008 at 1:31 pm | Filed under: Baton Rouge News, Economics, Housing Market, Louisiana
While the economic outlook for the nation as a whole is pretty murky, Louisiana, and Baton Rouge specifically, may be in a better position:
Peter Ricchiuti, assistant dean of the A.B. Freeman School of Business at Tulane University, said the New Orleans-area economy is countercyclical because of all the energy interests. When high energy prices cause slumps elsewhere in the nation, he said, the money flows into south Louisiana.
“1980, for instance, was a miserable time for the U.S. economy,” Ricchiuti said, “and it was a boom time here because of oil and gas. A lot of times, the national headlines don’t tell the story for us locally.”
He said even the homebuilding industry is doing well here as recovery from the 2005 storms has thrown everything off-kilter.
“The two things that make it a very different picture is the dependence on oil and gas and Katrina,” Ricchiuti said. “We were at a crippling low and we’re coming back. As far as seeing better numbers, I think that’s baked in the cake.”
My guess is that Peter is right. By the way, if you ever have a chance to hear Peter talk, I have never heard anyone in the investment business funnier, and he is running a fantastic program at Tulane. That being said, I have to disagree with this:
“As a point of entrance, now actually looks pretty good,” Ricchiuti said. “You’ve got pretty low prices, considering the level of corporate earnings and interest rates.
We’ll be discussing the reasons behind this in more detail as we go along. The core reason is that comparing corporate earnings yields to interest rates, the “fed model” as it is known, is something I don’t subscribe to. Still, Louisiana and our hometown are likely to do relatively better than the rest of the nation, something for which we can all be thankful.
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