Nuggets of the FutureOctober 22, 2012 Posted by: Joe Morgan, CFA
Blinded by the light
Revved up like a deuce
Another runner in the night
When making a point of view heard, one wants to stand outfrom the crowd with an original perspective or conclusion that isjustified by the facts. At the same time, one does not want to belabeled as always on one particular side of the issue for severalreasons, the most important of which is that it will be incorrectmuch of the time. In short, never be blinded by the light.
Over the past two years or so, my view of the economy has beenconsistently negative. Relative to others who opine on such things,my outlook has tended to be more cautious or the word I prefer is"realistic."
With the goal of remaining realistic, I'd like to take some time toreview some of the positives we are seeing today and perhaps we'llcontinue to see tomorrow. These so-called "green shoots" are moreappropriately described as core reversals in economic activity.Hopefully, they are indicators that will strengthen as time movesus to the point where we can feel more positive about the future,rather than simply feeling less negative.
First, of course, employment loss is slowing. Though we lost247,000 jobs last month, the positive news is that this is thefirst month of job loss since the Lehman event that wassignificantly lower than the highest month in the last recession.Continued lower job loss figures will help stall the deteriorationof confidence across the board, but we still have the effects ofthese job losses to deal with in coming quarters.
Second, activity indicators across the board seem to be bottoming,though at a very low level. From construction to manufacturing toservices, it seems the slowdown is losing steam. Some of this iscertainly attributable to capacity and inventory management;however, any jump in consumer demand will be quickly magnifiedthroughout these measures, perhaps building confidence along theway.
Third, the Fed and, in particular, Ben Bernanke retain credibilityin the marketplace. Certainly, there are indicators to thecontrary, but the person on the street continues to have someconfidence...Read More