Small Business Resource

I am an optimist by nature, but also a pragmatist.

And so I am still a bear on this market.

While a 25% bear market rally is not unheard of, I think this is simply irrational exuberance gone mad again. Share prices bear no relation to expected future earnings when you still have the likes of Microsoft laying people off.

Also, with US unemployment at 8.9% and rising, the real jobless rate in US is about 16%, according to Labor Dept. today, if you tally those who have stopped looking and those who can only find part-time work.

Almost 6 million people have lost their jobs in USA and house prices are still plunging with foreclosures still rising.

How anyone realistically expects any reasonable return to business profits until 2010 is beyond me.

Further ……

A recession is simply defined as consecutive periods of deflation… it’s an economic observation so it would be hard to challenge it’s existence.

The “End of the world” recession that doomsayers are touting the world over seems a little far-fetched… yes there are people doing it tough, there are countries struggling and companies failing…

But the real question is… at what point will the individual situations of the individuals return to a normal enough state that they will return to predictable patterns of behavior common to consumer societies.

Optimists say the recession is over… WRONG… the recession is not over until the panic subsides. While there is less media coverage, reactionary behaviors are still in place. Lending is down, borrowing is down, there has been an overall tightening in the supply of money (as well as an elimination of a great deal of “virtual wealth”) and people are buying less and spending less.

All this means that from an economic perspective we’re still in a recession (we being the world at large).

This is not to say that it is a bad thing… because as things begin to reach some semblance of normality again, people are behaving in a far more responsible way…

It is essentially a commercial “thinning of the herd”. Businesses which were well thought out and which provided something of value are still as necessary and capable of surviving today as they were this time last year. Businesses who had borrowed unrealistically in an attempt to grow beyond their means or compete in a market in which they could not survive are failing.

The harsh reality of it is… it’s the recession that HAD TO HAPPEN… sure it probably could have happened more cleanly and less painfully… and I personally am saddened by the fact that it is those people who were always struggling who are suffering the most for the failure of others to act responsibly … but the United States has something like a 250% private debt to GDP ratio (Australia is sitting pretty at almost 300%) … people had been too well conditioned to living beyond their means and guess what?

REALITY CHECK…..

It’s not over …. but the worst of it is over for individuals …. those who were going to be burned have been, those of us who have survived the burn should really think about what we are doing to help the people who haven’t.

I’m also going to take the opportunity while I’m on this soapbox to say ….. if this recession didn’t rob you of everything you had …. if you haven’t lost your home, your job and everything you held dear …. and you are thinking about saving now because you don’t know what’s to come …. don’t forget the people who don’t have the luxury of thinking of the future right now, give a little. This isn’t an altruistic attempt to solve the world’s problems …. this is our friends, our neighbours, people we know who need a helping hand to keep them in the game. Help where you can!