Squeeze play; Expect stagnant growth in the years ahead, UMB investment officer says.

• Author: Cote, Mike

The economic malaise expected to grip the U.S. economy in 2008 led UMB Financial's economic and investment team to dub it the "long, hard slog" when they first presented their forecast in fall 2007.

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Within a few months, however, they were already telling customers it was going to get worse than that. So the "slog" became "hard alee" a command a helmsman will shout to his crew when he wants to change the boat's direction in a radical fashion.

"If you're not really on your toes, and you don't duck, you're probably going to get hit by the boom," said Bill Greiner, UMB's chief investment officer. "We felt the economy was going to make a very vicious, sudden change in direction. We weren't sure it was going to happen in the first quarter sure it was going to happen in the first quarter on second quarter of this year, but we felt it coming."

Greiner was scheduled to present UMB's 2009 economic forecast in October to a group of business executives who traveled to San Francisco for the annual ColoradoBiz Top Company trip. Kansas City-based UMB, which sponsors the trip, has significant banking operations in Colorado.

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But that ended up being the week Wall Street collapsed under the weight of subprime baggage. Greiner had a lot of clients to counsel so his talk had to be rescheduled.

"Actually it wasn't as crazy as it was during the 1987 crash," Greiner recalled a few weeks later. "This has been building up for a while, and we've been talking to our clients about concerns that we have regarding the economy and the markets going back for the better part of a year."

UMB began dumping equities and loading up on cash in client portfolios in November 2007. Greiner may not have gotten hit by the "boom," but that's not to say he wasn't dumbfounded by the magnitude of the crash.

"We were fortunate enough to really foresee this building problem," he said. "I think what we didn't foresee was the viciousness of how this was going to attack the markets."

In the years ahead, Greiner envisions an economy that will continue to shed jobs for a long time-with unemployment hitting 8 percent in the coming year--and an era where 3 percent growth is considered a good year.

Colorado's unemployment rate, which was 5.2 percent in September, is predicted to worsen, due in part to a slowdown in the state's computer and electronic manufacturing industry as the financial meltdown infects other business segments. The Goss Institute...