Am I still optimistic on the economy?

I would say that my outlook is mixed. I believe that the panic has passed for investors. I believe that there is technical momentum in the market. But I am also concerned about the fundamentals of the economy -- commercial and credit card debt default, unemployment and finally, de-leveraging by households and its negative impact upon consumer spending. The financial marketplace has gone way up, but why? Earnings have exceeded expectations. But I worry about the quality of the earnings, and especially the impact of lower demand will have on declining revenues.

With that said, here are some thoughts on why we might want to be more positive:

1. The 2nd quarter of this year was better than the 1st...in every measure save unemployment.
2. All the data is historical, so the real question is whether we have hit bottom. I think the answer is either yes, or we are very close.
3. The stock market is a barometer for economic activity. The cost-cutting has been aggressive and this has led to profit. Inventories are low. This is why the market has increased 40% since March 2nd.
4. Interest rates are near 0%, and this is good news for consumers -- mortagages, credit cards; and for businesses -- small and large.
5. The big downers are unemployment and job insecurity. But even these figures have been less extreme than expected.
6. We are not Japan -- we have immigration, innovation and vast resources which will keep us from stagnation and deflation.
7. There has been more flexibility in the labor force. Rather than strikes, employees have accepted furlongs and shorter work weeks and unpaid vacations. This has meant that we are sharing the pain more evenly than in the past.
8. Real incomes continue to rise as pay packages are going up for key groups -- education, energy and yes, financials.
9. China is going to do whatever it takes to both succeed itself, and keep its key trading partner (us) moving forward.
10. Brazil and India are doing better than ever before -- they appear to NOT be dependent upon the USA for recovery.
11. The housing market will recover. Our population growth will outstrip even today's excess inventory by 2011. High demand over supply means prices will increase.
12. Foreign investors love us. The dollar is the safe haven. Period. All negative commentaries about the dollar are silly.
13. The black economy is flourishing. Business goes underground in recessions.
14. The non-financial benefits of recession are grand -- waiters are friendly and plumbers are available.
15. Finally, Capitalism works. It is already self correcting and we will be better off for this painful recession.

Comments

Post a Comment

Popular posts from this blog

MEGATHREATS? MAYBE, BUT NOT INEVITABLE I recently read "Megathreats: The Ten Trends That Imperil Our Future, and How to Survive Them" by Nouriel Roubini (made famous as the predictor of the 2008-9 housing crisis). It is purposefully, "alarming. Roubini lists 10 "Megathreats:" The mother of all debt crises -- he points out that public and private debt is 350% of Gross World Product. He forecasts that defaults like Argentina (9 times since 1816 independence) will be commonplace. The bailout trap -- when banks go bad, government bails them out; when autos go bad, government bails them out; when utilities fail...you get the point. The demographic time bomb -- western civilization (and Japan) are rapidly aging. Old people don't produce, and young people don't save. The easy money trap leading to cycles of booms and busts. Stagflation Currency meltdowns Border closings and deglobalization -- immigration into the north from the south has kept labor
Read more

57 Years After the March on Washington, Have MLK’s Dreams been Realized?

I have a dream that one day this nation will rise up and live out the true meaning of its creed: "We hold these truths to be self-evident, that all men are created equal."  – Dr. Martin Luther King, Jr. (August 28, 1963) Fifty-seven years ago, Dr. Martin Luther King, Jr. led the March on Washington D.C., where 250,000 people gathered in one of the largest political rallies in U.S. history. The March is credited with helping pass the landmark Civil Rights Act of 1964, and Dr. King delivered his famous “I Have a Dream” speech from the steps of the Lincoln Memorial. While Dr. King’s speech is rightfully immortalized, fewer remember that the March’s organizers at the time also had very concrete political demands that were as much about economic justice as racial equality. On the recent anniversary of the March, I began to wonder whether or not the March’s “10 Demands” for freedom, education and equality have been realized – and, more importantly, what we still need to do as a nat
Read more

Thinking Of Selling NFTs? Consider These Tech And Legal Factors First

 The buzz around nonfungible tokens (NFTs) is reaching a fever pitch. Enthusiasts claim NFTs will permanently alter how we buy and sell everything from artwork and music to fashion and real estate. Skeptics say they are yet another overhyped bubble destined to burst — the Dutch tulips or Beanie Babies of the 2020s.  It’s too early to tell which camp will prevail, but there’s no denying that NFTs are sparking fascinating conversations about technology, art, culture and authenticity across a wide range of industries. I recently wrote a simple guide to NFTs from a consumer perspective, asking pertinent questions related to legal, financial and even environmental issues. Now let’s look at the other side of the token and explore the considerations for sellers.  How NFTs Work   NFTs are digital assets that exist on a blockchain — usually the cryptocurrency Ethereum blockchain — and are used to represent collectibles, such as videos, images, music and memes. Each NFT has a unique valuation an
Read more