Before the facts are in, we live by anecdotes. I’ve been traveling the country for the past 10 days and see a spotty recovery. Nearly every CEO and high-level manager I’ve talked to is worried. My conclusion is that third-quarter growth in the U.S. was mainly about inventory replenishment. The fourth quarter will slow down, and 2010 will bump along in the 1% to 2% range.
My road show began in Baltimore last Monday with a speech to the International Food Distributors Association. These are the guys who “deliver food and related products to restaurants and institutions--from the local pizzeria or burger shop to your favorite Italian restaurant or white tablecloth establishment, from nursing homes and hospitals to military mess halls and school cafeterias.” Restaurant business is down and likely will reset to lower volume. There will be some robust exceptions, of course. Recessions are never even. In Prescott, Ariz., last week I stopped by my favorite chain rib joint, Texas Roadhouse. As usual, there was a long wait for a table. But other restaurants in the same mall were way off.
Next stop was Orlando, where the airport crowds were thick; a rare good sign. My speech was to the National Business Aviation Association. You can watch a clip of it here. Times are tough in business aviation. Business is down 30% to 40% for most aircraft manufacturers. The used market is flooded with late-model jets and most CEOs, including Cessna’s Jack Pelton, think it will take another three or four years to get back to growth. Even then, the growth will not likely reach 2007 levels. The one outlier is Avantair, which provides fractional ownership of a very fuel-efficient turboprop called the Piaggio Avanti. But look closer and you see Avantair snatching customers who are downsizing from jet ownership. Avantair is essentially a reset play in a reset economy.
From Orlando, I traveled to the beautiful city of Knoxville, Tenn. If I had to live east of the Mississippi, I might choose Knoxville, which lies on the western slope of the Appalachians and resembles the Sierra Nevada foothills. Plus I like the youth and zip of university towns. Knoxville and nearby Oak Ridge have a wealth of technology. The challenge is to convert some of it into commercial enterprises and entrepreneurial start-ups. I was in Knoxville to speak at a conference called Technology 2020, which strives to support entrepreneurs. I liked Knoxville and its people, and I really like the fact that the state of Tennessee has no income tax. Youth, technology and low taxes are a good combination. Knoxville is poised to become the next Research Triangle Park.
From Knoxville, I flew to Phoenix and drove to Prescott to meet up with my wife and kids. The Phoenix airport was jammed, and the security lines were a mile long. I want to believe this is a sign of an improving economy. The problem is, one sees as many airport terminals that look dead.
From Phoenix, it was back to Orlando for another speech, this time to the Construction Management Association of America. The conference attendance was surprisingly good, but the mood was cautious. The most disturbing things I heard had to do with Obama’s stimulus package. One, much of the stimulus money for infrastructure is going into repaving roads instead of long-term projects such as water infrastructure, which is in woeful shape. Two, the stimulus money is increasingly tied to jobs. That sounds good on the face of it. But in reality, the focus on jobs is a disincentive for productivity investments. Jobs are a consequence of productivity, not the other way around. But tell that to a Democrat terrified of facing the 2010 elections with 10% unemployment.
Next stop was New York for a Forbes board meeting. It’s not news to tell you that our business is struggling from the twin hits of recession and Internet disruption. This week has brought a round of layoffs, I’m sad to report. Still, we’re way ahead of competitors like Fortune and BusinessWeek, and the Forbes family is investing for the future. You'll see a host of really neat improvements to Forbes.com in the coming months.
Today and Thursday I’m in Palm Beach where I will moderate some panels at a Forbes conference on marketing. The audience consists of 70 chief marketing officers from companies like IBM, HP and Dell. I like marketing people. They are optimists. Right now America needs a few more optimists.
Post your comments.
“Jobs are a consequence of productivity, not the other way around.” This might be an opportune moment to highlight that a strong dollar also is a consequence of a productive economy, not the other way around – and reflective of the balance of international trade. Therefore, to advocate for a strong dollar policy as is the practice of yourself, Forbes & Malpass is also misguided. The focus should be on how we can export more than we import. Good luck to Forbes in the media business. Interesting roundup of conditions around the country.
No one can accuse you of not earning your keep, Rich. Thanks for the insights.
Knoxville?!? The best place to live East of the Mississippi (if not the entire world) is Naperville.
Many have taken to calling this last two years as the Great Recession, Rich, but perhaps we should follow your lead and call it the Great Reset. With misguided politcal leadership from both sides of the aisle and deepset fears among the populace, we may all have to reset our expectations for growth and prosperity for some time to come.
Its good to see you comment on the misquided leardership on both sides of the aisle…please keep speaking out as you don’t need to raise money by being purchased by pacs to get re-elected to to speak out for things needed beyond the election cycle
Rich: Oh if you only knew the half. Knoxville, home to Regas Restaurant, and the newly resurgent Tennessee football Vols, and Weigel’s Convenience Store milk and Buddy’s Bar-B-Que, and bike paths that wind through the university campus, and a mayor (Haslam) that believes in the people he helps govern, and neighborhoods where you know the first names of the people you pass as you walk the dog. And in October the mountains are just radiant at such places as Metcalf Bottoms, Cades Cove, Mt LeConte and on and on. You don’t have to live here to enjoy it, but it helps.
In April of 2008, Amy Goodman interviewed Eric Lichtblau from the NYTimes, who with James Risen first broke the warrantless wiretapping scandal, talking about how the FBI had something like 250 dosiers on as many peaceful anti-war groups. Apparently Der Fuhrer Dick Cheney, following 9/11, instructed all agencies to adopt the attitude that anyone who so much as speaks out against the war is to be considered a potential threat! Further, all aspects of civil society were to be thrown together, watch lists of who is riding what flight to what destination, watch lists and photos of students or anyone else engaging in social activities not deemed desirable by the fascist-in-chief – whatever, there were no limits. And do not forget the strongarm tactics used during this time period against peaceful protests from New York to Miami, not necessarily even related to protesting the war – use of undercover police and FBI to infiltrate all manner of lawful civil groups and to physically go after them with the intent of disrupting their efforts to peacefully assemble – efforts including mass false arrest, herding protesters into remote fenced-in “camps” out of sight of targeted events, physically blocking access to publicized meeting places with road blocks, targeting and arresting leaders, firing on crowds with rubber bullets and beating people with battons without provocation, spraying pepper spray in the eyes of people who were already in custody under restraint, throwing tear gas canisters into first aid station tents, and so on.
I thank you Firozali A. Mulla
Rich, “The Great Reset”?
That’s not what has happened or happening now.
What’s happening now is the Little Purge. This is the purging of ideologies, dogma, hubris, delusions, recklessness, etc. The purging of the mind, normally a very difficult process, becomes easier when one hits the wall. Thus “Little”.
Then, with luck and a deep breath, the Big Purge might happen 2010-2011.
This is the actual change of practice, implementation of new rules, resetting of resources. Bite the tongue and squeeze blood. Out with the Old Guard. Little or none of these has happened yet at the national level. The political courage still not there, ideologies still polarized, blames still fly around, and the guilty still roam free with what they have plundered from the land. But, if America wishes to fix and build, this must happen. Thus ‘Big”.
If the Big Purge is accomplished, then the nation should be ready for the next phase – the Big Reset, perhaps by 2014. Why then, not now? Because in order to reset one need to know what to reset to. No one knows that now! Or they think they know – like reset to 2005, or 2000, even 1990. I can only laugh at such ideas. One cannot reset to the past, especially one that proven an unmitigated disaster. Which is why I suggest the Big Purges – to wipe the past clean. One would like to reset to something that has a smell of freshness, hope, exciting, good prospect of workable, something worth fighting for.
So Rich, reset to what? Do you know? Blog away!
[PS: I am kinda celebrating one year anniversary away from your blog. A distinct change of tone and mind invites me back. Is Sir P still around?]
if nothing esle can be taken from your excellent observations, it’s the travel anxiety descriptions. I am absolutley certain that as we become funded at Mealer Companies, not only will we give hope to americans across the board, but we will inspire a new set key people to our economic recovery. Both entrepereneurs with real products (not pie in the sky made in China dreams) and worthwhile investors in the form of angels, VCs and hopefully private hedge and other funds.
We don;t need much to create a mass of new US based mfg teams, companies and jobs. From every one mfg job, a minimum of 3 other josb are created. I have a great plan to do this without being some greedy leach wanting to make money off of out of work people… I look at it as if the more americans with good paying jobs, the more MEALER AUTOMOBILES I can sell to them. No, it is not greed… It only makes sense.
JL Mealer Mealer Companies LLC http://mealercompanies.com America’s Next Major Automaker & 100% Self-Regenerative-Fueled High Capacity Electricity Producing Device MFG
LBL is right about the purge, we need to stick our finger down our throat and upheave some nasty pills we’ve been forced to swallow. We’ll be better later but we’ll be sickly until we get it over with.
Now that the government has told us that all is well, we don’t need to rely on Rich’s anecdotes about the economy. The 3.5% GDP growth headline sounds like happy days are here again. Oops. Not so fast. Real disposable income down 3.4%. Hmm. I though the consumer was the key to recovery. Half of the 3.5% growth was due to autos – oops, cash for clunkers has now expired. Plus a couple of the numbers appear to be completely bogus – residential investment up at a 23% annualized rate. I don’t think so.
Karl Denninger is my favorite financial pundit. His take on the numbers? “Nothing in here I like; to the contrary, this report sucks and on a drill-down appears to be full of outright lies.”
Read it and weep here – http://market-ticker.denninger.net/archives/1550-GDP-Is…..-Better-Than-Expected.html
until i see small business pulling permits for buildings and or additions, lease signs coming down and tenants moving in, the 3.5 is just a manipulated and unfortunately not a real #. there will be people eating their dogs this winter.
Spotty? That is a very kind description of a very sick economy.
Knoxville and Nashville are both great cities. Not every good thing is within 100 miles of an ocean.
Rich, Spotty is it for me. My own employer is doing ok (and improving) but the outlook for many small [local] businesses is bleak. (Silicon Valley) The Great Reset? That’s what happens in _every_ recession, no? Meanwhile, Team Obama pursues anti-growth policies and wonders when employment will pick up. At this point I’d be very happy with a federal govt that does nothing as opposed to the one we’ve got which seems compelled to fiddle with anything and everything in sight.
R.
Hey Rich,
“Right now America needs a few more optimists.”
The trouble with unbridled optimism is that it conflicts with reality.
I would love to be optimistic, but that is predicated upon a government which is in touch with the people.
The fact that Democrats are ramming through a $900 Billion dollar entitlement (cutting out the $230 Billion for how we actually pay doctors) is not a good sign. The $1.13 Trillion dollar plan (including Doctor pay) is without *any* Republican support, and that does not lend itself to optimism.
Government needs to listen and stop spending on entitlements that we will NEVER be able to pay for given our current debt.
I’m thing that gives me hope though: The American people are starting to wake up politically, and 2010 should be an interesting election year.
- Paul H
What America desperately needs now more than ever are realists–not optimists! Rapacious optimists raped the financial system blind, concocted CDOs, derivatives, the mortage bubble, the market bubble, the tech bubble, demanded cash for trash, pushed through bogus bail-outs, and demanded that America “invest” record amounts of money borrowed at interest to bail out failing businesses built on market distortion and fraud. Yet Rich has the ball to wonder why the economy still looks “spotty.”
Here is a heavy dose of realism from Ron Paul “Revere” to reign in Rich’s unbridled optimism.
http://www.forbes.com/forbes/2009/1116/opinions-great-depression-economy-on-my-mind.html
Rich praises bubblenomics because he himself lives in a bubble sipping bubbly while popping pills to purge his emaciated conscience and stuptify his senses.
I like the word anecdote. In the real estate appraisal business a lot of our information came in the form of anecdotes. Anecdotes were like Dad’s old stories of WWII. The event happened. The story contained some errors that Dad didn’t know about and then he embellished it to make it even better. And of course there is the old saying, “The plural of anecdote is data.” Remember to discount all “data” for the anecdotes in contains.
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