On the Cusp?

We are the cusp of something very important.

The media is starting to write more positive economic stories and less doom and gloom. I don’t have any facts to back this up except for general observation, but I stand by this statement. For instance, over the weekend I saw two stories about how 2009 might be better than you think and three stories about innovation, intellectual property, and a growing post Katrina New Orleans. This is in addition to the numerous headlines that read along the lines of “Spending Less in 2009” “Credit Card Companies are willing to work with those in debt” and “Investment Opportunities are Many.” If media companies aren’t writing doom and gloom stories then it means the US readership isn’t interested in them anymore. Just like sales of peanut butter and pasta foretell an oncoming recession, positive news stories precede an economic recovery.

The mental recession is over. The worst is in the past.

Not so fast… the Jobs Report on Friday could push everything back into the quicksand. But I don’t expect it to. I expect the number to come in around 500,000 jobs lost (still a huge number) and the revised number for November to be closer to 600,000. What is important is a plateau. The losses need to stop accelerating and start to turn the other way. Once people start to feel good about their situation they will generate efficiencies and innovative solutions. Couple that with the stimulus package and the US will be well on its way back to positive GDP. As I’ve said before, I believe the US can shift from upsizing to downsizing and back very quickly.

Anyway, here is a summary of the stories I ran across that I got a kick out of:

Some Forecasters See a Fast Economic Recovery
by Louis Uchitelle

There is a psychological factor that Robert Shiller, a Yale economist, hopes will come into play.

“If
we have massive infrastructure spending and people feel that it is
working, it could create a sense that we are O.K. and people will go
back to normal,” he said. “The real problem is that we are on hold.
Everyone is.”

The expectation of most forecasters, several
report, is that most of the Obama administration’s stimulus will go for
public works projects and tax cuts.

With this sort of stimulus,
the gross domestic product, the chief measure of the nation’s output,
should begin to rise — if not in the third quarter, then certainly in
the fourth, the forecasters say, and the unemployment rate will finally
peak at 8 to 9 percent by early next year.

“The job insecurity is
very serious; that is the worst aspect of all this,” said Albert
Wojnilower, a consulting forecaster at Craig Drill Capital. “But most
upturns in the economy have begun with upturns in consumption, when
people who still have jobs stop worrying about losing them.”

2009 Could Be Better Than You Think by Alan Murray

I have no crystal ball. But a sense of history, some basic
economics, common sense and just a dash of congenital optimism leave me
convinced that this one won’t be all bad.

Oh, sure, there will be layoffs like we haven’t seen since the Great
Depression. And you can expect to see a proliferation of empty
storefronts and a heap of broken businesses.

But why focus on the negative? Here are five good reasons why 2009
could, if you make the most of it, be good for your financial health.

1 This will be a good year to invest in stocks.

No one can tell you exactly when or where the market will bottom.
But most business-cycle experts agree that the bottom will be found
sometime this year, and that it probably won’t be too far below where
the market is today.

So a smart strategy will be to put some money in the market today,
and keep doing it over the course of the year. If you’re still shaken
over massive losses from last year, this may be hard advice to swallow.
But the biggest mistake you can make as an investor is to ride the
market down, lose faith, pull out and miss the upturn.

Even in the Great Depression, the market bottomed out in 1932, with
the Dow Jones Industrial Average at 41, down from a peak of 381 in
1929. By 1937, it had climbed back to a respectable 194. That didn’t
make investors whole. But for those who stayed in, it certainly soothed
the wounds.

2 It will be a good year to invest in real estate.

3 Americans will learn to live within their means.

4 President Obama will have a historic opportunity to reshape public policy.

Speaking at the Wall Street Journal’s CEO conference in November,
Mr. Obama’s chief-of-staff-designate, Rahm Emanuel, said the words that
have become his team’s rallying cry for 2009: “You never want a serious
crisis to go to waste. This crisis provides the opportunity for us to
do things that you could not do before.”

The Obama team is busily preparing a stimulus package that, when all
is said and done, will total between $750 billion and $1 trillion —
far larger than any fiscal stimulus in the history of the world. And
with the economy still sliding downward, it’s a good bet few
politicians will want to stand in the way.

That will give the new president an opportunity to do things his
predecessors could only dream about. Roads will be rebuilt, schools
will be refurbished, medical records will be computerized, and
windmills will be constructed, all across the land.

Will some of that money be wasted? Of course. But the sums involved
are so huge that there’s a good chance someone, somewhere, will benefit.

5 Your (federal) taxes won’t rise.

This, too, is unsustainable. A reckoning will come. But that’s a problem for 2010 and beyond.

In the meantime, enjoy the new year!

Dreamers and Doers by John Schwartz

“Any school can teach entrepreneurship,” he says, “but at Babson, we live entrepreneurship.”

Now,
let’s not get carried away: as a reporter and as a parent, I find
myself on plenty of college campuses these days, and many of the
students I meet are indistinguishable from the dull-eyed slackers I
went to college with (when dinosaurs roamed the Earth and Pluto was
still a planet). But then there are those who have this . . . THING,
this go-getting excitement to start something, make something. They
want money, sure. But the overwhelming desire seems to be to carve out
something of their own.

Today’s students have grown up hearing
more about Bill Gates than F.D.R., and they live in a world where
startling innovations are commonplace. The current crop of
18-year-olds, after all, were 8 when Google was ­founded by two
students at Stanford; Mark Zuckerberg founded Facebook in 2004 while he
was at Harvard and they were entering high school. Having “grown up
digital” (to borrow the title of Don Tapscott’s recent book on the Net
Generation), they are impatient to get on with life.

“They’re great collaborators, with friends, online, at work,” Mr. Tapscott wrote. “They thrive on speed. They love to innovate.”

Innovation Should Mean More Jobs, Not Less by Janet Rae-Dupree

The problem, as they see it, is a centuries-old misconception that
innovation is synonymous with automation, which in turn leads to the
elimination of jobs.

“If you invest in a technology that makes
something more efficient, the fear is that people will be put out of
work,” says Kevin Efrusy, the venture capitalist whose firm Accel
Partners is the lead funder of several important Silicon Valley
start-ups, including Facebook.
“But it’s just the opposite. When anything becomes cheaper, we consume
a lot more of it. The overall economic effect is, you create and expand
entire new industries and employment goes up.”

“Innovation is the lifeblood of the American economy,” says Jim Hock, a
spokesman for TechNet. “We’re only as good as our next innovation.
TechNet believes we shouldn’t be picking and choosing technologies to
back with a tax credit. We should be technology-neutral and create an
atmosphere of innovation that will let a thousand flowers bloom.”

“America is probably the best culture in the world at failing,” he
said. “We’re willing to navigate in a fog and keep moving forward. Our
competitive advantage tends to be at the fuzzy front end of things when
you’re still finding your way. Once the way has been found, we’re back
at a disadvantage. So, yes, investing in innovation is critical.”

Still Waiting For the Recession in New Orleans by Steven Gray

What’s more, the region’s (New Orleans) housing market remains relatively robust,
mainly because post-Katrina demand for suitable housing remains strong
and local banks haven’t engaged in the sort of risky mortgages that
have caused problems elsewhere in the country.

Researchers predict the region’s economic recovery will last at
least seven years — far beyond the expected end of the national
recession sometime in 2010. Even so, there will be some downward pull
from the U.S. economic slump. In 2009, for instance, they expect some
8,000 jobs to be added here, a figure that will drop to 6,500 jobs in
2010. “While the rest of the United States is in a deeper recession
than anyone expected, we’re certainly in a better place — we are an
economy that’s still looking for workers,” says Janet Speyrer,
associate dean for research at the University of New Orleans and an
author of the report.

That optimism, however, feels as fragile and uneven as this region’s recovery. Huge swaths of the city, particularly the Lower Ninth Ward,
New Orleans East and the city’s heart, appear as they did in the months
immediately following Katrina: there are scores of vacant homes,
potential magnets for crime.