Moneynews Insider Wiedemer: Greenspan's Right, 'Economy Definitely Sluggish'

Alan Greenspan offered a mixed assessment of the U.S. economy last week, and Robert Wiedemer, co-author of "Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown," told Newsmax TV that the former Fed chairman got it just about right.

Greenspan told Bloomberg, "The United States is doing better than anybody else, but we're still not doing all that well. We still have a very sluggish economy."

Wiedemer's reaction: "I agree that we are probably the best in the world, but it's definitely sluggish," he told Newsmax TV's "America's Forum" show.

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"We're really not getting that kind of investment we got earlier, we're getting a massive amount of buy back of stock, a massive amount of investment in pumping up asset bubbles," Wiedemer, managing director at MacroView Investment Management and a Moneynews Insider, explained.

In particular, he's concerned about the housing sector. "As much as it has rebounded, keep in mind that dollars spent on housing construction are about half what they were in the peak."

The annual rate of homes constructed in November fell 1.6 percent from October.

And when it comes to real estate, "it's not just housing," Wiedemer cautioned. "Even hospital construction has flattened out. Office construction is still down about 20 to 30 percent. So a lot of those basic elements of the economy aren't doing that well."

Meanwhile, gasoline prices have dropped 34 percent in the last year, with regular gas averaging $2.20 a gallon Monday, as oil prices have dropped to 5 ½-year lows.

"It's all positive, I mean it's not just drivers, but oil is clearly a part of everything we buy in reality," Wiedemer noted. "So low oil prices are a plus."

But it doesn't appear that the oil price plunged had a "huge impact" on consumer spending during the holiday season, he argued. "It doesn't look like holiday shopping was all that strong."

He doesn't believe gas prices will rise any time soon.

"I don't think those gas prices are going to rebound looking forward," Wiedemer stated.

"They might go back up a bit, but it will remain a positive impact on the economy," even though the impact on the retail sector appears to be limited so far.

And what economic indicator worries him the most now?

"Household formation, which is a real fundamental figure, is still lagging tremendously behind where it was before," Wiedemer stressed. "That's such an important driver of buying furniture, buying homes."

The number of U.S. households rose only 476,000 in the year ended in March, far below the 1.3 million average of the previous two years.

When the indicator is strong, it's "a sign that our young people are stepping up in the world and earning more money and feeling more confident and forming households and getting jobs, getting good jobs that can support new households," Wiedemer said.