The Dow Jones Industrial Average (DJINDICES: ^DJI ) is essentially flat over the last 12 years. Median household net worth is down. Inflation-adjusted earnings for most Americans are below where they were a decade ago.
Yet Joseph Dear, chief investment officer of CalPERS, the nation's largest pension fund with nearly a quarter-trillion dollars under management, is optimistic. He thinks we're turning a corner -- housing is coming back, corporations are competitive, and the investment world is too pessimistic.
Here's what Dear told me in an exclusive interview last week (transcript follows):
Morgan Housel: You are the chief investment officer of the largest pension fund in the United States. That gives you a unique perch to view the financial world and the economy. How does the world look to you today?
Joseph Dear: I'm becoming more optimistic. By that I mean both the attitude that I see from deep pessimism and the scarring as a result of the global financial crisis, as well as signs in the economy of improving growth. Now let's put this in perspective. It's not going to be fantastic growth. We're not going to drive the unemployment rate in the United States down to where we'd like to see it, but growth is going to pick up.
Now why do I say that? I think housing is likely to see an upturn next year, and that's going to drive a lot of employment and consumption. I think if you look at U.S. companies, they're incredibly competitive. They're really good values in terms of the U.S., of the global economy. I think Europe is on the way to solving the problem, and I was really very skeptical about Europe for most of 2012, whether the Union would be able to make the difficult decisions they've had to make. And I think the leadership transition in China means they've got more levers to pull in terms of keeping Chinese growth up. So on that picture, better than what we've seen. Not like what we saw before the crash, before the financial crisis, but reason to be more optimistic. And that should just make life a little bit better or all investors.
Morgan Housel: Do you think many people share that view, or do you still see unnecessary pessimism throughout the economy and in the investment world?
Joseph Dear: Well, I think there's growing optimism. I'm not on the leading edge of this, but I still think the mindset is having been bruised so badly with losses and terrorized by fear of a real meltdown in the global economy that pessimism reigns.
There's a great quote by the economist A. C. Pigou that said that the error of optimism in dying gives birth to a new era: error of pessimism, which is born not a baby, but a giant. And we are still working through that pessimism phase.