Not ready to commit to a BK scenario quite yet, but certainly can't ignore the parallels with 1987.
The economy is still strong overall, but just certain sectors are being tremendously impacted by over-capatalization.
We've been so busy building the information highway, that we forgot to include enough gas stations to fuel the traffic. Thus, the energy sector should do well over the next couple of years and not face the traditional recession related fall-off.
One other analogy I've seen somewhere is that we built this massively huge information superhighway with huge fiber backbones, but the on-ramps and exits are still miniscule capillaries that need to be dilated. That should be good for Cable and DSL (eventually).
And then we have built this information highway primarily to accomdate the young folks driving their silicon "ferraris" with all the bells and whistles, while neglecting the "basic transportation" needs of grandma and grandpa who could never hope to grasp how to drive a MSFT Ferrari, let alone fix it. That should be a bonus to set-top box manufacturers.
So I think the coming economic focus will be on consolidating the technology improvements and creating more demand. The internet certainly isn't going to go away, that's for sure.
Regarding the overall economy the fact remains that if people aren't buying over-valued stocks, they will be buying consumer goods or paying off debt. And since the US is facing demographic constraints as boomers retire, the unemployment rate should remain relatively low.
The biggest problem the US faces is the inability of its foreign competitors to wean themselves away from being export driven economies. Japan and Asia are a basketcase, and if Japan is forced to devalue the yen in order to monetize it's public debt, the ramifications on the rest of the would be high-powered. I'm just having a hard time trying to figure out if such an event would be negative or positive for the US.
On one hand, US inflation would decline as imported goods became cheaper. But there would be cries for protectionism to protect US manufacturing jobs (which would be declining anyway due to boomer retirements).
And then there's the impact on the dollar, which would likely rise, which should permit the FED to lower rates even lower to levels last seen in the 1960s, in order not to created additional upward pressure on the dollar.
I really don't know how to analyze all the data coming in right now. But I'm not yet willing to say "BK!!"
Regards,
Ron |
