FSO Visitor Responses on “Is there an economic recovery?”
by Martin Goldberg CMT. October 16, 2003
I live in Renton Washington. This summer the Seattle Times projected an economic recovery for the northwest in 2005 maybe 2006. I'm semi retired and looking for a second carrier. ATT Wireless had eight pages posted for new hires in late July. I looked up ATT Wireless as a whole across the US and they had many positions open across the country. Microsoft recently had ten pages listing positions for a new project they are starting up. These were for highly skilled people, managers, designers, software eng., project managers. All the hospitals are hiring here as well. Back in December through May I couldn't find much of anything in my field. That has all changed.
In my neighborhood people are spending money on their homes like there was no tomorrow. There are five new roofs, three homes have new windows (whole house replacements), three new gas furnaces, one water heater, three sets of garage doors, one has all new appliances, four new vehicles. What gets me is none of this is inexpensive and most didn't refinance their homes as far as I know. The last few summers everyone stayed home over the holidays, this year they were all away on vacation. I might add that the use of DSL and cable modems are up as well. I live in a 750 home development and am only looking at 20 homes in my immediate area. I might also add that home prices are soft here due to Boeing leaving the northwest.
The local stores had trouble for the first three months of the year but now business is good. If the economy was as bad as the media says then I would think that none of this would be happening. In the early nineties no one spent any money in my area. We sort of collectively went out and bought one appliance or some other big ticket item and called it good. Back then we thought we should do something to help the economy. Today I don't hear talk like that.
I'm not sure if this is what you requested but it is real world to me. Your essay was very good and thought provoking.
Here is my outlook on the economy: we are currently on track to live on borrowed time. Many large bills are floating around and not being paid, only paper and accounting entries to cover them over. The Current Account and Trades deficit is alarming. Many people I talk to around East TN are always looking over their shoulder re job cuts.
My area has been buffeted with large job losses and plant closures (John Deere, Levis stitching plants, furniture making plants, tech job losses in Oak Ridge (40 more announced yesterday), hosiery mill in Roane County (TN), and replaced by "calling centers" paying minimum wage are the only hiring firms here. What's happening? That "giant sucking sound" coming from Honduras, Costa Rica, Mexico, Sri Lanka, Indonesia. Today's paper said that Levis is closing ALL its remaining assembly plants in the US and Canada, and moving the work "overseas" which is that sucking sound again. Look at WalMart's product lines, mostly made in China now.
I see and marvel at a lot of $$ still being spent on big ticket consumer goods and homes and cars, but it is borrowed home equity, low % financing, rebates and betting on the come that work will still be here to pay for these bills. Personal bankruptcy is still active and growing.
I am doing well, but no thanks to the above. I just hope this country will start living within its means and soon, or the "bust" will come while many fiddle with fire.
Sorry to sound so pessimistic, but that's like it is here.
I had almost the same conversation with my dentist last week. The only difference was I told him, I was looking for the DOW to go to 7500 again before the end of the year. He had to redo the mold for my crown and it hurt's more then usual................ :-(
He told me he was happy he was only down 50% now instead of 80%. The whole world is a lot off concerning cognitive thinking.
My wife and I invest in sectors. We were a little late getting out of techs in 2001 then to health care until 2002, been in gold since Jan 2002. Usually listen Jim P. & Jim S.
By the way, nice article.
IMO the USA is paying a high cost on the road to 3rd world living status.
Enjoy your addition to the FSO writers.
What I watch - one thing is Cheesecake factory at Fashion Island in Newport Beach. During the mania - any day of the week, between 11:30 and 1 was a long wait for lunch. Starting last year, less wait and even empty tables. My wife and I eat there at least once per week. You can now walk in an noon, even on a Saturday, and find empty tables. We can park anywhere we want because the lots are half full. Tourism is down as well, as the Hyatt Newporter lot is rarely even half full and you can get rates as low as $82.
Bottom line, Newport is like La Jolla - LOTS of money, yet things seem to be slowing considerably.
Here's a story and another that show how economically beneficial a natural disaster can be. These aren't the only stories of their kind either. I can no longer find them, but before Isabel made landfall there where several articles posted by the major media outlets singing praises over the economic benefits post-Isabel reconstruction would bring.
I really can’tunderstand how they can get away with writing stuff like this. Does this mean we're now supposed to welcome disaster with open arms? Using the same twisted logic, New Yorkers must be happy that they're benefiting from the "stimulus" 9/11 brought to them. Sheesh!
My neighborhood has a euchre club. In October of 2002, one of my neighbors, who has a company that makes electrical control panels for industrial machinery, remarked he was seeing an uptick in business. Very recently, another neighbor who sells cutting oils to machine shops, reported that her customers were thinking about hiring in Q4. I live in Cincinnati. Here in the midwest, we kinda muddle through, avoiding the euphoric peaks and the gut wrenching troughs. Also, whenever an expensive new car comes on the market ($50K+) I will see several within a mile of my home in very short order. Jags and Hummers are a dime-a-dozen. I live in a nationally ranked 98 percentile income area of NE Cincy (not Indian Hill). Wow, I didn't know so many rich folks lived in the mid west.
You received no e-mails because no one who reads your column has any anecdotes to share about the non-existent economic recovery.
Sometimes it's hell being right. I have literally begged numerous friends and relatives to put at least 10% of their portfolios into some kind of precious metals funds, bullion or mining stocks, to no avail. In fact my suggestions are met with scorn and derision. Problem is, I'll probably end up supporting half of these (censored).
Keep up the good work.
Martin, I follow this commentary page, and have noticed something that concerns me. What effect would the donotcall list have with the army of brokers that actively solicit portfolio management via cold calling. Likewise what percent of economic activity stems directly from active solicitation via the phone. I am concerned that there will be a great lack of activity in commerce because of the new list.
Don't know if this qualifies as first hand experience, or not, but just thought I'd pass along something I heard about from my barber.
His shop is next to a local iron foundry, a smaller one. He said a while back that as the foundries go, so goes the economy in about six months. Made sense to me. Figure you can't make the goods without the raw castings.
Needless to say, I get my "barber's report" every time I get trimmed. According to that, recovery is at least six months away. We have 2 small foundries in the area (east central Wisconsin, on the shores of beautiful Lake Michigan), and they both are doing what they can and have to do to stay alive.
I haven't had the time or know how to look into any pattern over the last few years, but it would be interesting to see just how accurate this is.
Good Sir, Dear Martin,
I much enjoy your writings and have been a loyal follower of FSO and JP advocate since late 2000!
I am hoping the Dow can hold 4500, but doubt it; and I see gold >$2000 someday.
That said I am a principal in a 3 yr old community bank that has seen a big rebound in loan demand . 2003 has been better each quarter, in terms of loans, spreads, and less delinquencies. 3Q 2002 we had charge offs that were 2/3 of our 2002 earnings. For 2003 , I expect our assets size to go from $75 Million to $100M by year end. I can't figure it out.
We are truly blessed with some of the best community bankers to reside in Minneapolis, so maybe that is it. Or, is it the easy money spiggot on full blast? And with community banking, there is ALWAYS business to steal from the money centers and regionals with knowledge, speed, and customer attention.
So there is my bullish story. I am the biggest bear on paper assets I know here. Yes, I am an optimist ("With God ALL things are possible") but I know (Austrian Econ) the consequences of easy money.
Our bank went from 14 to 18 employees since Jan 2003 , adding $300K+ in payroll!
I think you are absolutely right on --"Where's the steel? Where's the smoke? " says it all.
I live in Indianapolis. Daimler Chrysler intends to close down its large engine foundry here - 800 high paying jobs will be lost. Arvin-Meritor, an auto parts supplier located in Franklin just 20 miles south of Indy announced it intends to close its plant by December- 800 medium paying jobs lost. Golden Castings, a foundry located near Columbus, Indiana just closed for good this week-over 100 medium paying jobs lost-and this is just in the last week!
A few months ago United Airlines closed its maintenance hub in Indianapolis-over 1000 high paying jobs lost.
There is NO recovery-anyone who says that there is one is either a fool. a liar, or a foolish liar.
Went to visit s company in Boston a few weeks ago. Met with CFO and a few other executives. This is a company with $3 billion in revenues and likely to see an increase of 50-75% in revenues over the next two years. And when I asked if they were going to add personnel...I was told maybe a few sales people "here and there". As for additional support - I was told we have "one or two people TOO MANY NOW". How's that for an economic recovery!
I wish I could give you some evidence of recovery here in Cedar Rapids, Iowa but I can not. Sorry, but keep trying!
I enjoy your Observations. You wanted some anecdotal evidence of a rebound? Well, I guess I must be an old stick in the mud, but I don't see much in the way of a recovery. (Especially not the type of recovery they are gushing about on CNBC) I guess the best I can do is tell you my husband still has his current high tech. job after being laid off from his previous job for 6 months.
Unlike your dentist I think Gold and Silver are the only prudent investments at this time.
P.S. You might consider finding a new dentist. Anyone as emotional as this guy is about stocks may pull the wrong tooth, while in a fit, when his tech. stocks crash.
Here in Austin there are new commercial buildings going up all over. Must be at least half a dozen large down-town building projects (and down-town is small). (Just part of the larger real estate lending bubble that's kept unemployment tame?)
Also, air traffic into Austin's airport has increased substantially in the last several months. (They dropped maybe a trillion dollars or so from the helicopters this last time?)
There.... now you have more than 1 email.
I work for a power company in the state of Texas TXU. The industry has been under pressure for the past couple of years due to over investment in infrastructure and general indebt related to building power plants. A few weeks ago Mirant, a spin-off of Southern Company back in the day when credit in this sector was cheap, declared bankruptcy. Apparently they were very upset in the executive suites at Mirant when the NYSE delisted them to the pink sheets. Now it's making new financing and debt issuance a lot harder to sell to Wall st. and today we heard in the market that they are letting go 48 of 100 of their East Coast team. I see as another example of the party being over and once the illusion of profits are gone the trappings of jobs and benefits are pretty close behind. I can't find this layoff on any websites by the way. I guess these jobs weren't as important as lay-offs at semi-solvent, listed companies. Anyway keep up the good work at Financialsense. I really enjoy the content you guys provide.
Significant healthcare layoffs continue as the government cuts reimbursement and many institutions historically dependent upon investment returns from endowments and trusts continue to suffer from progressively reduced returns. The healthcare staff that I work with remains very discretionary in their spending habits since they are 'threatened' by layoffs, reduced work weeks, furloughs, etc. IMO, this will worsen before it gets better...but one doesn't hear much detail in the lay press regarding the severity of this worsening trend in the healthcare services sector. Hospitals are generally suffering proportionately with few exceptions. Malpractice rates are up 50% this year despite the recent passage of proposition 12 here in Texas.
Let me know if I can address any specific questions and thanks for your participation in the great service provided through the Financial Sense site.
I am a dentist and my son plays soccer. Just because your misguided dentist friend won't follow your advice shouldn't mean you won't follow his.....at least where flossing is concerned. If you add flossing to your daily nighttime brushing you can dramatically prevent problems with your teeth. I see this everyday. I give patients I like a quick demo of flossing and show them that I can thoroughly floss my teeth once per day and it takes about a minute.
That was a very nice chart of the dow.....Query: would 2 touch points on the downtrend line make it more solid? Perhaps this is currently happening?
Realizing that improved employment data takes time to compile and I will have to believe it when it gets published, I made a few calls to friends in the trucking industry. If we are in a full-scale recovery, more things should be moving by truck, right? Well, my calls to people I respect in the industry revealed that nothing earth shattering is happening. I remain 100% in cash. Too bad I can’tshort an IRA account.
Let's see if I can dig for some signs here:
1) I'm in the software business and my current position as Technical Manager, is to move US based consulting jobs to India. My company is buying airline tickets (mostly from US based airlines) to send me back and forth to India. How's that for corporate spending?
2) I went to Quizno's today and I was paying for my sandwich by Amex. The guy ringing me up said something like "Amex, are they the ones with high interest rates?" My reply was that I had no idea. He then returned it by say, "yeah, who really pays attention to that" as if I carry a balance from month to month and everyone owes on their credit cards. (BTW, I never carry a balance)
3) I have a friend who works for an underwriting company in the Software Sector. They are starting to take companies public again. He's making money, I'm sure to the loss of the idiots buying.
4) There are new Harleys and Mercedes in the parking lot where I work. I happen to be back in the US for about a week and saw some new toys that people have been buying. Go consumer!
5) A relative of mine has bought 29 houses with no money down in Florida over the past 2 years. I hope he knows what he's doing. Another relative of mine who bought houses back in the eighties wouldn't touch anything, he's trying his hardest to dump them.
I guess I really don't see strong signs or real hiring strength. I see layoffs except if you are in the business of offshoring work. Interestingly, I feel pretty marketable now with my experience as managing transitions. I know that I will never write code again, there just won't be the $$$ in it unless your are the best of the best. I also see debt everywhere. My wife is getting pretty tired at me asking "how the heck can they afford that?". There are a lot folks buying a lot of stuff.
On the flip side, my dad owns a company delivering dust suppression and gas cooling systems to power plants (coal fired) and cement plants. He's doing real well this past couple years. Actually, he's doing so great that I am thinking about joining him if he doesn't get a good enough offer to buy the company.
So far, my observations are in line with a lot of what you guys say over and over again. The only real strength is in "things", hard goods and energy.
Taking this thought to heart has curtailed my financial outlay for discretionary purchases significantly. Even when the sticker price looks good, I just double it and it then gets very easy to walk away. It is another example of the loss in value of our fiat currency.
I have discussed this with friends and associates with mixed results. Some folks are thoughtful and realize what I'm getting at. Others are complacent. I'm doing my best to convince others.
I do realize that this is a little game I play with prices and that it is not so cut and dry. We do get the benefits of health care, public education, etc for our tax dollars. However, as time goes on and looking at what we are getting for those tax dollars, it just seems to be less and less and of questionable quality.
Thank-you for taking the time to review my feedback. I'm looking forward to more of your great articles on Financial Sense.
I'm from Germany.
There is no economic recovery. Only positive expectations.
Prices are going up for all daily necessities and salaries stay flat while job unsecurity is rising.
I'm a senior software developer in Michigan. My current company has about a thousand employees, and my town -- Ann Arbor -- has always been a good breeding ground for tech start-ups.
I'm sorry to say that, while I feel that I may be seeing some signs of Spring -- it feels like a Spring that will be long delayed.
Do you know that acorns are planted in the autumn, and that they begin to put down their taproot immediately. It's like that.
Signs of future growth do not always mean that Spring is right around the corner.
My current company has had three "layoffs" in the last twelve months. My colleagues who lost their jobs are having trouble finding another after several months of looking. There are very few positions advertised, and the positions that are filled are discovered by word of mouth. Connections.
If Spring is coming, I feel like it will only be after a very long and hard Winter.
But! I see an interesting parallel in my world to the financial world's rising interest in objective money -- gold and silver.
I believe that I detect the beginning of a new turning in my field, away from silly fluffy bubble-tech companies -- like web site companies that help you make a web site company, or help you find a job in the web-industry -- and toward hard-tech real industry: like machines that can see to assist in manufacturing, or in driving vehicles. Like making propulsion systems that can take us to new places. It is companies like these that I see capturing the imagination of my colleagues now, while the communication-centric technology of the bubble leaves them bored and cold.
But those start-ups are little acorns putting down roots, while the mighty Oaks are losing leaves and worse. Spring is coming, but this is only the Autumn. If there is good economic news now, its just the harvest.
My first hand experience of an economic recovery?
I'm thinking....still thinking...hmmm..:
To be honest, other than the statistics I hear and read about (marginally lower jobless claims, slightly increased GDP) I'm not seeing it. I see water coming into the bathtub from the faucet but I see it is still going down the drain faster.
Seeing how you are asking your readers to email you with comments, I figured I'd join the fray.
I was patient enough to watch the Democratic debate last night, and found it funny that you did not mention it in your article. Not one candidate mentioned the overleveraging of derivatives, the debt mountain, the M3 money supply, the trade deficit, etc. Of course these aren't the most popular subjects, but worth mentioning. No one candidate was solid on how we are going to get out of this mess. Does it seem that despite which candidate win ( Dem or Rep ) we are still headed down the same path?
As I sit 19th floors above Fifth Ave, Midtown Manhattan as part of the corporate machine, I try to balance comments from the bear and bull side. Interestingly enough, both arguments are convincing and equally alarming. Does an investor go 50/50, and be a bearish bull, or a bullish bear? It seems that our economic policy is a freight train running in the dark. Gold, Silver, is anything really safe? For 95% of America, as I call it "the Wal-mart Contingent", they will continue to be medicated by ever-lower-priced Chinese goods, for which our precious dollars are handed over willingly. HA! But I am a stock holder of Walmart, so I don't want to get too negative, right?
We are definitely in a Bear market, which one you may ask? Bonds? Stocks? Precious Minerals? No.
We are in the Great Bear Market of Truth. Most Americans want to know less about the challenges we face. They pull back when the trade deficit is mentioned. How many know what a trade deficit is, or how it affects us, or how it puts the value of US Dollar at risk. They pull back when they hear the budget deficit. No one believes that the US Government printed more money in the past 6 years than it had in 36 years. Check the numbers, I may be misestimating, but it would be interesting to know.
Then parts of me ask myself that is there a way out of this demonic spin we are in, can we right our ship and set sails with hope and faith that we will, by the Grace of God, get out of this mess. Historically, I think we have done so in the past when the stakes were even higher, not without damage to the hull of course!
I recall my mother asking me what we should do with a Gold high school graduation ring of my grandfather. She asked "How much is it worth?" I said, "400 or 500 maybe....", and she remarked "500 what?" I responded, "That's the precisely the problem!"
Ok, enough of my ranting.
A very good article indeed, Keep up the good work!
Your articles in the Financial Sense website are very good and much appreciated.
I have been a technical and executive recruiter in the Twin Cities since 1989. I worked with a consulting firm (Keane, Inc.) until 1996, joined a dot.com software firm (Information Advantage) from 1996-1998, and worked on my own from 1998 until this year. I joined Korn/Ferry for 8 months, and recently joined another IT consulting firm, My viewpoint is from a hiring perspective and in a position that exists on business spending.
When the software market began dying in 2001 it was very surprising. I doubted it at first, but accepted the fact that things were fundamentally different early in 2002. That is about when I began studying why it happened and preparing myself to carry on in the new market reality. I found the Financial Sense website about one year ago after reading Robert Prechter's book, Conquer the Crash.
I do see a small recovery in business spending and have a stronger feel for remaining viable as a recruiter for the short term (maybe 6 months?). Because of my longevity in the field I have actually survived fairly well, and have still made over $100K every year so far, 2003 included (I hope).
However, everything about this recovery, anybody's job, and business spending remains shaky. There is a real feel that any obtained business is precious, and any deal could fall apart very rapidly. I do question people in sales and management positions all the time (I interview people for a living) and while there is more business to discuss, each separate piece is low-percentage. As a whole, there definitely is more business spending to discuss. Individually, the deals are potentially suspect. With further thought and analysis, there is still an "if only" quality to the business, and it does not feel solid to me. There is nothing fundamentally better about business spending right now that could provide a logical argument that it will not fall apart, as it did in 2001 and 2002.
Recruiting has been a very valuable field because you have to listen to so many people. I hear their stories and interview people at all points of the success chain. Over time you can see why some people are successful and others are not. If you have any brains at all, you learn from their stories and copy the successful people and avoid mistakes that unsuccessful people tell you they made. In the big-earning years I paid off everything and have lived way under my means, primarily because of the stories I have heard over time.
Sorry to done on like that, but thought you may want some backdrop to my take on the current "economic recovery". Good luck with your business, and thanks again for the insight.
We HAVE to be on the verge of an economic recovery. The reason being-- every time I talk to my friends at work and in drinking establishments, and the subject of econ. comes up, people always tell me that we're in a new era, or that it'll be better soon, or look where we are after the last few months.
When the talk turns to gold, well, it must be a fluke. As one guy says at work, " I don't believe in gold. That's for the doom and gloomers." Another guy says, after laughing heartily, that "gold will never go over $400." I even have a bet with this one cat. He says that gold is going back down to $300 by the end of the year. This is big- a case of Sam Adams is on the line.
I also have a bet with a very intelligent woman who works at the C.B.O.T. making the big bucks. She says that "this is a new era, that the computer age has changed the world and the market, and would you like to bet $100,
big boy, on your belief that the market's going down?" Of course I bet her. Now, you tell me, just in my limited scope of friends and co workers, they ALL say we're heading up. Can they all be wrong? Am I the only one stupid enough to buy bear funds, put options on the indices, and gold and silver stocks? YES.
So you see, the market will continue to rise, gold is just a fluke, the dollar will be the world's favorite currency forever, Maria Bartiromo will be nominated for an Emmy next year, the NAZ will break 3000 this year, there will never be another terrorist attack, and Alan Greenspan IS GOD!
Whiting, IN (Jim Puplava's hometown!)
P.S.-Keep up the good work. I know how you feel when you talked about your dentist. Also-F.S.O. market wrap-up is the first thing I look at when I log on.
There is no recovery. It's all smoke and mirrors.
Dear Mr. Goldberg,
Here's the 2nd email you receive. Regarding your dentist's approach to the market-timing, I found the same thing here in Italy. ALL my friends (who are not traders) are thinking there's another strong upleg to reach...new highs. The most astounding thing is they've been doing that from June till now. As I usually trade as a contrarian I guess the top is in (or almost).
Thank you for your articles.
Everyone is bearish on everything.
2) Unemployment (true) is high
3) Debt levels are down to historical norms
(From a Real Estate Agent)
Here is my story of the economy and housing market. I'm representing a buyer who works at General Dynamics. For the past month we have been trying to find her a house in the 170's price range. Wednesday we found the perfect house that had been on the market two days. Thursday we went to present an offer and it was sold. This is not the first time this has happened. It is the third. Homes in Chandler, Mesa, Gilbert below $200,000. are selling like hotcakes on a Sunday morning.
My sister; a business major with 4 plus years experience in networking has been unemployed for 5 months. Last week she finally was called for two positions and landed one!!! She is working from her home doing customer service for a doll manufacturer and making $9.00 and hour.
Isn't that super.
Perhaps you didn't get any emails because there is no good news.
While the export of jobs continue on a daily basis, portfolio managers still more worried about missing a run-up in the stock market and getting left behind than they are worried about preserving capital, and in the back ground of resurrected day trading rooms the preaching "second-half recovery" mantra from CNBC, CNNFN and Bloomberg, can be heard from every monitor. While most small investors hold the view that the market somehow owes them the money that they lost back.
Here in London's financial district, hiring has picked up again, and most of the long-term (6-18 months) unemployed IT people I know have found jobs again in the last month.
Well, I'm counting my days as an American software engineer.
Anyway, I usually take things to this cabinetmaker to get fixed and get them back in a few days. Yesterday he told me the wait would be 3 months! Also the traffic around town is very heavy since March, I have heard that traffic levels are a good indication of economic activity. I went to Atlanta and the interstate traffic was ridiculous. Could be partly due to people not wanting to fly. There seems to be a lot more people at the stores, and prices of food have begun to rise even faster than before. Even a real miser like myself has seen his spending increase quite a bit the last 6 months: its almost like the flu. Spending is very contagious, even if you don't want to catch it. No wonder there is tremendous momentum in the stock market: once things get moving they tend to keep moving. Anyway, good luck and hopefully we'll get some good cheap stocks in the near future.
Hi Martin, if your daughter's dentist is bullish and A FLOSS ADVOCATE - this
does not mean that floss does not make sense for bears like you and me.
Floss is just a habit. Like taking a shower. And you will need less gold for
your teeth... Regards,
© 2003 Martin Goldberg