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Doug Poretz
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For more than four decades, I have counseled executives on their organization’s communications strategy. Much of my career has focused on investor relations issues for public companies in a wide range of industries, facing numerous issues at various times in their life cycles. I have worked as... More
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    Apr 9, 2009 10:12 AM


    Wall Street has some great maxims.  They are memorable and conveny rational ideas in a very few words.  "Don't try to catch a falling knife."  Perfect.  Also perfect:  "Bears make money; bulls make money; pigs get slaughtered." 

    “The trend is your friend” is a saying that I think is great.  It presents a very simple concept: when something is trending north, the likelihood is that it will continue to go north until it stops, then you’ll see a new trend emerge.  If you can invest with a trend, whether you are buying and selling stocks or the latest fashion or technology, you’re probably going to be a winner.  So you always want to be searching for understanding which way things are going and whether there is any indication that it is going to change directions.  That’s how you find tops and bottoms.  And right now we’re in search of a bottom.  What are the trends saying?


    There are some trends you know without doing a Google search.  You know that unemployment is continuing to grow.  There’s no sign indicating that it is going to start going down anytime soon, and nobody expects that.  So everything that comes with increasing unemployment (decrease in sales, increase in food stamps) is going to increase too. 

    Real estate.  No Google search required.  People looking for glimmers of hope can take some sort of oblique look at what’s happening and try to argue that residential real estate has found a bottom.  Realistically, that’s just not the case (see “Do Not Be Deceived By Home Sales To First Time Buyers”).  In commercial real estate, office rents are going down and step-by-step more and more bad news is emerging for the industry.  Real estate information firm CoStar Group predicts a 28 percent vacancy rate for shopping centers completed this year.  Not a good trend. 

    Store closings:  A survey of 400 city officials by the National League of Cities covered by CNN on March 26, 2009, showed that 57 percent thought the pace of store closings is either “worse or much worse than it was last year.”  And that trend will mean that local tax revenues will be down too.  Another trend still going in the wrong direction.

    When it comes to car sales, the trend becomes difficult to understand.  But generally, it isn’t good.  The problem arises when we start comparing awful months to year-ago awful months, and we see maybe something that could, if you look from the right angle, look like a bottom.  For example, light vehicles sold in the U.S. in March 2009 were down 37% from March 2008, but February sales had been 41% below year-earlier values.  Ah!  Yes!  What we’ve been looking for!  A trend going up.  Don’t get overly optimistic on that one.  As is pointed out in a good debate on the issue at Econbrowser, although Americans bought 168,000 more light vehicles in March than in February, the average February-to-March gain over the last five years has been 247,000 additional units.  So, I’m not ready to say there is a positive trend here.

    Healthcare accounts for about 10 percent of the total employment in the U.S. – that is a big industry.  What are the trends there?  The Federal Reserve Bank of Cleveland just (April 7, 2009) published an “Overview of the Healthcare System.” It’s a comprehensive report.  Here’s a summary statement:  “Thus far healthcare employment has increased 3.2 percent since the start of our current recession while total service employment has fallen by 2.3 percent. Part of the reason healthcare employment has continued to increase is due to increasing demand for healthcare services. Currently, healthcare expenditures make up 18.3 percent of the country’s personal consumption expenditures that equates to roughly 12.8 percent of total GDP. Those numbers are up from 3.5 percent of consumption and 2.3 percent of GDP in 1947.”  How do you evaluate those trends?  And does it really matter because the entire healthcare industry is about to go under its own scalpel, given the political momentum in this nation.

    Let’s get to GDP.  Here is the trend as reported by research analyst Brent Meyer (also Federal Reserve Bank of Cleveland):  “The final estimate of real GDP in the fourth quarter of 2008 came in at −6.3 percent (annualized rate), 0.1 percentage points (pp) lower than the preliminary estimate and whopping 2.5 pp below the advance estimate.”  Well, that trend isn’t very positive.

    I reached out to my friends on Facebook and Twitter:  send me some positive trends.  One, a former tech company CEO, suggested that there are some positive signs in Naples, Florida, where there seems to be a bunch of activity in the real estate market.  Maybe.  I’m on the other side of the state, in the Palm Beach area, and I’ve been to Miami a few times recently.  There may be activity, but it’s all distressed.   

    Another friend suggested that there are several positive trends when it comes to people starting to focus on the right priorities in life – yes, I think that’s happening.  I think that sort of trend is very real and important.  It reminded me of a recent New York Times poll that showed that despite the fact that 70 percent of the respondents were “very” or “somewhat” concerned that someone in their household would lose their job within the next 12 months, “the number of people who said they thought the country was headed in the right direction jumped from 15 percent in mid-January, just before Mr. Obama took office, to 39 percent today, while the number who said it was headed in the wrong direction dropped to 53 percent from 79 percent. That is the highest percentage of Americans who said the country was headed in the right direction since 42 percent said so in February 2005.”

    Expectations getting worse, while confidence is going up.  That’s strange.   

    As I started to think about that phenomenon, I think I came upon a big generic trend:  while virtually every quantifiable trend is going in the wrong direction, qualitative trends on subjective issues are going up.  That leads to a basic question:  Are gut level feelings a precursor to improvements that can be seen – eventually – in quantitative terms?  Probably so.  Then that raises the really critical question:  How long is the lead time before emotions translate into actions that can reverse all the quantitative trends?  I think we’re going to find out, assuming emotions and gut-level feelings keep moving in the same direction (which is, itself, a big “if”).  Place your own bets accordingly.


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