Tag Archives: economy

71% Worry About Economy “A Great Deal”

On March 21, Gallup released results from an annual survey in which they gathered information on American’s concerns about 14 major national issues.

The survey responses indicated that the economy was the top-ranking concern, with 71% indicating they worry about the economy “a great deal.”

Here is an excerpt from the Press Release that I find particularly notable:

“Americans’ economic anxiety has not abated over the past year, as 7 in 10 Americans continue to tell Gallup they personally worry a great deal about the economy. This has ranked as Americans’ top concern on this measure since 2008. Healthcare led the list from 2002 through 2007 and remains among the top five today.

This year’s additions reveal that federal spending and the budget deficit worry Americans nearly as much as the economy. The interesting distinction is that all three party groups worry about the economy, while the deficit concerns far more Republicans and independents than Democrats.”

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The Special Note summarizes my overall thoughts about our economic situation

SPX at 1288.71 as this post is written

Warren Buffett – Recent Interview

Here are a couple of links to a recent Warren Buffett interview.  I have not been able to pinpoint a date, but apparently the interview was from a month or so ago:

The video link:

http://pymnts.com/warren-buffett-on-what-s-next-in-the-payments-industry-2

The transcript link:

The first part of the interview deals with his views on the economy.   Although I don’t necessarily agree with his views, I did find the interview to be interesting on various fronts.

 

SPX at 1087.14 as this post is written

Recent ECRI Statements

In this post I would like to highlight ECRI and some of its recent statements, after which I will make comments.

From a recent (7/14/09) Newsweek story, quoting ECRI, found here:

http://www.businesscycle.com/news/press/1481/

“From our vantage point, every week and every month our call is getting stronger, not weaker, including over the last few weeks,” says Achuthan. “The recession is ending somewhere this summer.”

I found the following phrase on this ECRI site link to be interesting:

http://www.businesscycle.com/about/approach/

“The emphasis is on the development of leading indexes that hold up in spite of structural changes…”

And finally, this is interesting from the ECRI website:

http://www.businesscycle.com/

“In fact, over the last 75 years, growth rate cycle upturns during every recession were followed zero to four months later by the end of the recession itself. No exceptions.”

“Actually, there’s been only one solitary exception in the data we have examined, which go back well over a century. This was the growth rate cycle upturn of 1930-31, which gave way to a renewed downturn. But, when this growth rate cycle upturn was beginning at the end of 1930, USLLI growth was turning back down, warning that the firming in growth would soon be reversed, effectively opening the door to depression. That’s not the case today.”

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My comments:  There is a lot I could say regarding my views on ECRI’s methodologies and current views.  

For now, I will say that as previously stated on this blog, I believe (and my analysis indicates) that we are in a “new (economic) environment.”   Whether ECRI’s methodologies yield the correct interpretation of our current economic environment will of course play out with time.  This is something that I plan on watching closely…

As an aside, I’ve been wondering about the following…If a (U.S.) central banker or other main policymaker were to wholeheartedly believe in the methods and long term predictive ability of ECRI’s methodology, wouldn’t it make sense, especially under a very stressful, uncertain economic situation, to try to craft policy in line with that which would promote strong ECRI leading (WLI & USLLI) growth – under the assumption that economic recovery would follow?

SPX at 927.66 as this post is written

 

Copyright 2009 by Ted Kavadas

Various Characteristics of Today’s Economy

I would like to mention an article in today’s Wall Street Journal, titled “The Economy Is Even Worse Than You Think.”

http://online.wsj.com/article/SB124753066246235811.html

I found the article does a good job of highlighting certain characteristics of this period of economic weakness.

These characteristics reinforce a theme mentioned previously on this blog, that we are in a “new (economic) environment.”

SPX at 901.06 as this post is written

 

Copyright 2009 by Ted Kavadas

Some Corporate Views On The Economy

Here are some recent articles in which corporations opine about the economy.  In general, in these articles it is seen that these corporations agree with the current economist consensus that “the worst is over”:

U.S. Economy: Manufacturing Shrank Least Since August (Update1)

“Car Makers See End to Sales Slide”

“FedEx Sees Signs of a Turnaround”

 
SPX at 879.13 as this post is written
 
 
Copyright 2009 by Ted Kavadas

The Importance of Scenario Planning to Businesses

The Wall Street Journal ran a story yesterday titled, “Pendulum is Swinging Back on ‘Scenario Planning.'”  Perhaps most interesting is the history of scenario planning.  Here is the link:

http://online.wsj.com/article/SB124683295589397615.html

As I have written about previously on this blog:

https://www.economicgreenfield.com/2009/06/18/businesses-and-economic-stress/

those who own or manage a business will likely continue to find themselves in a very challenging economic and business environment.  As I’ve discussed in the following article:

https://www.economicgreenfield.com/prosperitybypencom-directory/the-value-of-business-analysis-during-this-economic-malaise/

there are quite a few things that businesses can do to mitigate and/or avoid the potential damage this economic weakness can cause.

Of course, it is unwise to generalize advice for all businesses, especially in an economic environment like that we currently have.  However, scenario planning (and the associated modeling) can be a very valuable tool in helping businesses understand their specific situation (options, vulnerabilities, opportunities, etc) over a range of economic scenarios.  It is paramount in effective business planning.

At this point, based upon the statistics I have seen, it would appear as if businesses in general are underutilizing scenario planning.  I think this is very unfortunate, as it exposes businesses to risks and uncertainty that may be avoidable.

Should this economy continue to deteriorate, as I have discussed extensively on this blog, businesses could face a very difficult and tricky environment that may well be unpredictable.  In such an unpredictable environment, scenario planning increases in value.

SPX at 892.56 as this post is written  

 

Copyright 2009 by Ted Kavadas

 

Article of Note

I would like to call attention to an article written a few months ago by Scott S. Powell titled “‘The Road to Sefdom’ – Revisited.”  Although I don’t entirely agree with all of its points, it presents several themes and points that I believe to be very important and worthy of serious contemplation.

Here is the link:

http://www.washingtontimes.com/news/2009/mar/26/the-road-to-serfdom-revisited/

SPX at 906.45 as this post is written

“Opportunity of a Lifetime”?

One phrase that I have heard mentioned a few times is that the economic and market declines of 2008-early2009 created a “Opportunity of a Lifetime” to buy stocks, businesses, and other assets.

I am not sure what reasoning is used to justify the “Opportunity of a Lifetime” phrase (and no reasoning has been provided).  It would seem, however, that for this to be true, one would have to believe that the severe market and economic declines experienced in 2008 and early 2009 were transitory and presumably represented some inexplicable downdraft that will have no ongoing significance.  In other words, now things are getting back to “normal,” and the trends we have seen from 2002-2007 (if not earlier) will return…i.e. strong markets for assets and strong corporate performances.

Readers of this blog know that I am not of that opinion.  I believe that we are in a completely “new environment,” and that, as such, it is dangerous to rely on historical trends for forecasting or valuation purposes. 

For those who are skeptical of this “new environment” classification, I could (and have) provided various arguments; however, one point in particular I would highlight is never before have we had such pervasive (and large scale)government intervention and “guarantees” in existence in various markets.   In my opinion, this alone indicates we are in a “new environment.”

SPX at 929.02 as this post is written

Bernanke’s June 3 testimony

Ben Bernanke testified before a House committee on June 3.  Although it doesn’t appear as if he said anything new or different from his previous public statements, I found one statement to be significant.  It is bolded below:

“We continue to expect overall economic activity to bottom out, and then to turn up later this year….An important caveat is that our forecast also assumes continuing gradual repair of the financial system and an associated improvement in credit conditions; a relapse in the financial sector would be a significant drag on economic activity and could cause the incipient recovery to stall.

He has stated this “caveat” in various ways recently.  I find it to be interesting, if not a little puzzling.  In my opinion, it is almost like saying, “It will be sunny tommorrow, unless it rains.” 

I’m not sure as to his reason for including this phrase, but I think it significant nonetheless…

SPX at 930.96 as this post is written