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Remembering “A Thousand Acres”
March 7, 2008

I hesitate every day, when I post to this blog, to write anything negative.  I am not being Pollyanish, I just think you and I are bombarded many times daily with negative business news and don’t need to read more.  I will admit, a fascination with the companies that have gone bankrupt, because I was plying my stockbroker’s trade when many went public.  I also wonder what we can learn from them.  In a word, DEBT, seems to have played a big part in their failures.

 

Remember, “A Thousand Acres” by Jane Smiley.  Everyone knew whose acreage was free and clear and whose had a mortgage.

Acreage and financing were facts as basic as the name and gender in Zebulon County. Harold Clark and my father used to argue at our kitchen table about who should get the Ericson land when they finally lost their mortgage.  

The lesson seems to be that too much leverage places you in a position of “imminent failure.”

Rich Karlgaard, publisher at Forbes has written Four Wrong Reasons for Pessimism claiming the recession theme “For now, I still say the 2008 U.S. recession is oversold.”

I submit there are four false reasons behind the unnecessarily grim outlook for the economy. All of them get a lot of attention. But they can be safely dismissed.

1.    President Bush's unpopularity.  70% disapprove of President Bush and 70% think the economy is on the wrong path, yet 50% are rosy about their own economic futures and 84% report themselves satisfied.

2.    Presidential election year.  If you belong to the out party--this year, the Democrats--your gambit is always to say the economy is in bad shape. You need a justification for change.  In a way, bad news about the economy favors the out party.

3.    Business press incompetence and fear.  The thin talent pool in business journalism combines with two other forces: Journalism is populated by left-of-center people, many of whom are hostile to business; and traditional journalism itself faces threats of disruption from the Internet, leaving business journalists in a fearful mood, which gets projected into their stories.

4.    Trouble with numbers.  …banks have written off about $150 billion in bad loans. Now, $150 billion sounds huge. But it is only 1% of America's annual GDP. It is also less than 1% of the market capitalization of U.S. stocks. In any typically volatile trading day U.S. stocks gain or lose $150 billion every hour. How often does one hear that?

Granted, we may have a lot more to go with bad mortgages, but we also have to look at a low Misery Index, the Unemployment rate (4.9) + Inflation rate (4.28).  President Carter experienced a misery index of over 21, which led to Reagan’s election.  The misery index is telling at 9.18 that things are pretty good in the U.S. 

I hear more and more people say we don't have a problem economy, we have a problem with a negative press.

Thoughts??? Email them to landfair3554@comcast.net

Posted by Mike Landfair on March 7, 2008 | Comments (1)