Over the weekend, I read numerous magazines and newspapers and was struck with how a unified tone is taking hold. This being, the bad news from leading economic indicators ,to declining employment is a component of every news story. A year ago, despite the humpty dumpty fall of Bear Stearns, the reported economic outlook was still optimistic. Obviously, this was just before the big falls of AIG, Lehman Brothers and others. Now the news has moved to the other extreme, yet the market is acting as if a recovery is underway. Is it?
On March 3rd I listened to Alan Beaulieu of Trend Research. Alan and his team predicted this recession a couple of years ago, anticipated the impact of the subprime 18 months ago and six months ago noted this would be a worldwide recession. Well 3 weeks ago he noted that they were seeing some early signals indicating a recovery might be underway. Although more bad news will emerge in coming weeks and months (which the news will focus on), my thoughts are that a recovery is underway. What is my rational?
- Companies with strong balance sheets are looking at opportunities to acquire undervalued assets. Companies as far reaching as Cisco to Warren Buffet’s Berkshire Hathaway group are stepping up to the plate. This will begin to shore up stock prices and economic sentiment.
- Economic recessions are a catalyst for entrepreneurism. The formation of new businesses out of this recession is underway, and may be more pronounced than in recent recessions.
- The public outcry over bonuses at AIG and others suggests that people are moving from fear to anger - anger can become a transformational tipping point in a recession.
- Inventories over the past 6-months have declined with the market, and it won’t take much upward movement in new demand to make a sustainable impact.
- The talent scarcity of 12-months ago has mostly evaporated. Companies can rebuild their organizations with good talent at a reasonable cost.
Obviously, numerous toxic elements still overhang this marketplace, which will mute any rebound. However just as the recession hit many Without Warning, so too will its rebound.
