No Time for Naysayers

 

 

• This is the Best of all Possible Moments for the Economy

 

• Everything is Poised for the Next Great Bull Market

 

• Stock Prices Still Relatively Low say the Experts

 

I know, I am supposed to drop my suspicions, sell all my gold stocks, get out of commodities and jump into the great bull market of the new millennium.  How can I possibly imagine that the Fed hasn’t been turning all the right knobs and that easy money combined with innate (and superior to the entire world) American ingenuity will do the rest?

 

Buy the momentum, they say, and then just sit back and forget about it!  We live in the best of times!  Or better yet, they show me the long-term charts that prove that you can’t go wrong buying stocks if you hold them long enough.

 

Forget about a lousy war gone bad, they tell me.  It only stimulates the economy.  I am reminded by some of the good old days in the Johnson administration when guns and butter drove one of the great rallies of the 60’s.  The American consumer and Alan Greenspan are the heroes of the moment.  Between 13 interest rate drops, a rising housing market and a plastic spending rush like nothing ever seen in history, we have pulled out of the dip from the Tech Bust and moved to a new plateau.  For some reason –it has nothing to do with the trade deficit, which now means we spend $1.78Billion  a day more than we take in—Face it, I just haven’t got it!

 

Perhaps, spending a few weeks here in Old Europe has turned me into the kind of eurosnob who wants to see his capital evaporate in value (it’s in dollars) like one of those masochists who marched through the Middle Ages with a chain slamming himself on his bloody back every few minutes!

 

But no, I will try to salvage what little of my reputation still remains:  I do have rational reasons for my skepticism and, believe it or not, that have more to do with what I don’t see happening in Silicon Valley and the other tech hotspots than what I do see in New York restaurants where the help wanted signs are starting to be posted in the windows.  Not that I’m implying that ex tech wizards are filling the waiter jobs in Manhattan (I bet there are a few exceptions, though) but I could not help but wonder when I saw the following in today’s New York Times:

 

Restaurant Hiring May Lead the Way to Wider Job Gains
By SHERRI DAY
Restaurants have gone on a hiring spree the last four months, suggesting that broader gains in the job market could be on the way.

 

The tech bust as everyone knows, and especially we who lived through it, was inevitable.  Never, in so short a time had so much excess been gathered in one place.  When someone presents a business plan to a bunch of seasoned pro’s suggesting that the world needs a 16^th web site where they sell pet food on line but get their strategic advantage by selling ads on their delivery trucks and then walk out with a check for several $million in their hand, there’s got to something wrong.  BUT, and this is such a big but that I put it in caps, BUT this kind of exuberance came on top of what was the astounding emergence of a whole new industry that clearly had implications for all the world.  While the rest of the world was busily doing its thing (mainly doing what they already knew how to do) we in Silicon Valley and then in Austin and Reston and even lower New York, were inventing a new world that would take advantage of the greatest interactive communications system ever known.

 

If you are among those skeptics who doubt this, just ask Howard Dean how he has come to the point of nearly sewing up the Democratic nomination even before the first primary vote is cast.  Howard has raised so much money in small donations through use of that mere communications device, the Net that he has, in a swoop, wiped out the Republicans’ advantage in individual donors –the kind who can write $2,000 checks without thinking twice.  Howard –and a whole bunch of stuff I won’t get into-- has vindicated those of us who saw this great shift to what Andy Grove called an epoch-making “disruptive’ moment.

 

The reason I bring this up is not to bore you with stuff many of you already know but to use it as a handle in presenting my deep-seated skepticism on where we are right now in the economic cycle.  Money, talent and brains flowed into Silicon Valley and the rest of the country during the Tech Bubble.  Money was made and taxes collected. Remember that in the last Clinton years we had gone from an enormous deficit –the legacy of the supply-siders whose progeny the present bunch of monkeys claim to be—to running a surplus.

 

Okay, so here’s my point.  America found its way out of the rust-belt downer of the Carter years to the country that everyone in the world wanted to emulate by taking advantage of Moore’s Law.  Don’t kid yourself, the Internet would still be mainly the realm of academia on a bunch of dumb terminals if it weren’t for the dispersion of cheap and powerful PC’s.  The critics are correct in saying that the Internet is just a communication network.  But, it is communication that first got us past the dark days of successive cosmic disasters and it was communication that allowed us to spread across the planet in small, determined groups.

 

My point --yes, I have to interrupt myself to get to that point—is that the US economy lives and dies on the dynamics of its technology-based economy.  And beat me with a stick but I just don’t see any real recovery here.  Sure, there’s consolidation; EBay, Yahoo and Amazon, to name a few, but where are the new companies, the ones that are supposed to be leading the way to the next round of real growth? 

 

Rather, we see Europeans and others pulling their capital out of the US in droves, we see Indian entrepreneurs packing their bags and newly earned riches and heading back to India where there is a natural economic advantage through the large pool of cheap well trained labor that used to head to the US.  The business of the US is intellectual property (I will write about the entertainment industry, the other leg in this picture in another blog).  Even at the height of the last boom, we were already transferring much of the fab and build side of the industry overseas.  But anybody who lived through the gold rush days knows that intellectual property and the power behind it had nothing uniquely to do with a bunch of smart American-born and trained techno-entrepreneurs.  In fact, the cubes and the front offices were full of people from all corners of the world who came to the Valley because people there knew what it took to get a business launched and had the capital to back it.

 

An economy built on spending what you don’t have on things you don’t need: NAHH, you can’t convince me.  

 

Rome  December 10, 2003

 

rmb

 

dymaxionweb@verizon.net

 

Copyright 2003 Richard Mendel-Black All Rights Reserved

 

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