What's your Perspective?

Last night I was in a restaurant in Denver, and the server, whom I've know for years, told me that on the previous night an "Economist" patron had said the economy was "doomed" for at least the next eight years. This had made my server very upset. I asked: "how old was this person and where did they come from?" The first answer was that the person was late thirties, maybe forty. The second answer was that the patron was from Southern Florida. Everyone sees the world though his or her own perspective. For someone aged forty, this latest downturn is likely the first that they have had to deal with personally. They have no real personal comparison for measuring this downturn against some other downturn. The second is that the person came from Southern Florida, where housing prices are still dropping, job recovery is abysmal and no end of bad times seems to be in sight. It's no wonder this patron was seeing the dark side of the economy. I asked my server if things were better now than in November of 2008, and were they better than a year ago? The answer to both questions was that things were in fact better. The next question I asked was "do you think things will be better a year from now or worse?" After some thought, the answer was "things will be better!" Perhaps too often we are brought down by the negative thoughts of others without addressing our own perspective on what is happening. A year ago, there was virtually no job growth. Now we are creating about 200,000 jobs a month. A year ago, home sales were almost nonexistent and housing prices were falling all over the country. Now in many places home sales are happening and prices are stabilizing. A year ago, the consumer was barely spending and now spending has picked up. Much of the cash stimulus that the Federal Reserve has pumped into the economy will likely not have its full impact till the end of the third quarter through fourth quarter of this year. I think we as Americans want instant gratification and would like to see the economy back the way it was in early 2007. We have a way to go to beat down unemployment and to see the housing market back to "normal", but we seem to be moving in the right direction, though slowly. At least that is my perspective. Ed Mallon

The Media at Work

I rarely look at TV during the day, but last Friday I walked into a room where a financial news program was the focus of attention. The stock market had been down on the two previous days and it was dropping significantly on Friday. The talking heads called in their various experts, all of whom agreed that the bad news out there meant the market was doomed! One commentator asked: “Is this the start of a big bear market?” to which the “expert” responded, “It sure looks that way!” Sorry, I don’t buy it. On Monday, one of my longstanding clients called in to ask if he should sell his stock positions because the bear market had started. In questioning him, I discovered that he is an avid fan of free financial news programs and owed his depressed state of mind to watching this chatter on television. Because the weather was so fine, I thought he should turn off the TV and go for a nice walk outside. It’s addictive to watch television news programs because, for the sake of ad revenue, they do all they can to keep you watching. Back in March, these same programs were telling us how rosy everything looked. Now we are being told the economy looks awful. I indicated in my April newsletter that I expected a market correction and that this might be the impetus to create more demand and move the market much higher. Well, here we are with a market correction, still in a bull market, and now it’s time for demand to pick up. In the beginning of the year, I indicated that there would be a gradual change in the economy, which is what is taking place. The economy, like the stock market, does not go up in a nice smooth fashion, but rather moves in fits and starts. Being patient pays off in the long run! Ed Mallon