BusinessWeek: The Case for Optimism
I am not sure what to make of this BW cover: It shows an Ostrich, with its head buried in the ground, making the case apparently for Blind Optimism.
Consider the following if you want to think of this as good advice or as a contrary indicator:
-Could this cover have come out in late February or early March?
-Or, does it take a 50% rally to give nerve to the editors who made this decision?”
I suspect it is the latter.
Hence, why this is more likely a contrary indicator than good advice.
Excerpt:
Sure, it has been a harrowing storm. And now is no time to discount the dangers that still exist. But opening your mind to optimism can help you seize the opportunities ahead
The U.S. economy is in such bad shape that the loss of (just) a quarter-million jobs in July was greeted as good news. Long-term unemployment and foreclosures continue to mount in the worst economic downturn since the 1930s. Health-care costs are out of control. An aging population around the globe is driving government spending through the roof. And scientists say we need an expensive crash program to fight global warming or we’ll incinerate ourselves. It’s little wonder that despite some positive news lately, the daily Gallup Poll on U.S. economic conditions as of Aug. 11 found that 53% of Americans think the U.S. economic outlook is getting worse (yes, even worse), vs. 42% who think it is getting better.
But before you assume a purely defensive posture—knees pulled to chest, hands on head—remember this: Just as people become overly exuberant in good times, they tend to get too pessimistic in bad times. While the economy remains deep in a hole, and could indeed get worse, the truth is that nobody really knows what will happen next. Prudence demands that you prepare yourself for all possible outcomes, including some highly positive ones.
Note: My motto is “Hope for the best, prepare for the worst.” No excessive optimism or pessimism required . . .
>
Source:
The Case for Optimism
BusinessWeek, August 24 and 31, 2009
http://www.businessweek.com/magazine/toc/09_34/B4144magazine.htm
See also:
BusinessWeek: ‘Don’t Worry, Be Happy’
The Deal, August 18, 2009
http://www.thedeal.com/dealscape/2009/08/businessweek_optimism_auction.php
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August 19th, 2009 at 7:56 am
At this given time my motto is “Hope for the worst, prepared for the worst.”
August 19th, 2009 at 8:10 am
I don’t think this would have come out early in the year, the word Optimism was not an idea that captured the general social mood in Feb or March and that wouldn’t be good for sales or an eye grabber so I’m with you on this probably being the result of the rally.
No excessive optimism or pessimism required . .
Seems like when you do either one you are more than likely following the herd.
August 19th, 2009 at 8:14 am
When you consider this headline and story, Newsweek’s, and the IMF stating the recession is over, I know the worst is yet to come. The question of course is “When?”
August 19th, 2009 at 8:17 am
Down with cheerleading. This is not a game. We tell clients our job is to focus on the risks because in the market, the rewards seem to take care of themselves and don’t need additional help. Downside cuts much deeper than upside helps. Look at the market now. Massive rally-multi month–and where are the indices vs what they gave up? If you could have avoided the majority of that give up, wouldn’t you need less of the massive rally to start moving up again? Of course! We need more eyes watching for risks and less mouths cheering the rally and pitching lollypops over the plate!
August 19th, 2009 at 8:28 am
@JasRas,
exactly, well said.
August 19th, 2009 at 8:34 am
@JasRas
I concur. I’m not sure if it was BNN or CNBC as I was switching between the two this morning (BNN for an interesting talk on deflation and CNBC on commercials for shock and awe of idiocy) regardless they noted the S&P is still 36% off the record high close of 1565. It puts things in perspective.
August 19th, 2009 at 8:34 am
The word “optimism” is used too loosely in this day and age…(as if the only real meaning or use of the word is as the antonym of “pessimism”)…
Many times, “optimism” is really only a few steps short of expecting something for nothing…
I was a personal trainer for many years. By the time most persons come to a personal trainer, they are filled with optimism (they think they have the courage to do it). You [as a trainer] are bound to understand their motivation, and therefore do everything in your power to keep that flame lit. But alas, many crumble in the face of pain & sacrifice (because simple “optimism” in of itself is FREE and is NOT PAINFUL)…
So many end up shrinking back to the world from where they came (at least with regards to the “fitness” pursuit). It’s not the end for them. When they are back where they started, surely, they find some OTHER goal to be “optimistic” about…
So they manage to go through life swinging from one “optimistic” vine to another, never really accomplishing much along the way…
August 19th, 2009 at 8:35 am
& actually…On the magazine cover… the head is NOT buried in the sand… It’s popping out…
I can’t read the text over the ostrichs’ head tho
August 19th, 2009 at 8:39 am
http://www.marketwatch.com/story/survey-shows-economic-optimism-at-6-year-high-2009-08-19
Tick, tick, tick, tick….
August 19th, 2009 at 8:50 am
@mcHappy
You see? What you just posted reflects another part of the problem in understanding “optimism”
I clicked on the link expecting to find out reasons why people were so happy (all the link says is “survey shows economic optimism at 6 year high). Then, the title of the article talked about FUND MANAGERS.
OK then, so PEOPLE are miserable, but FUND MANAGERS are happy?…or what?
In the internet age, we hall have several home pages where we can click on the most appealing links. The links themselves don’t tell the story (but get your mind moving in a certain way). I clicked on a link the other day that said “Man brings gun to Obama appearance at town hall meeting. I clicked, thinking, “what the hell are these crazy people doing now?”. Turns out the guy was a mile or more away from the meeting, and Arizona law allows people to carry unconcealed weapons. It was just a lawful & peaceful protest about the right to bear arms.
Most people KNOW NOTHING about the economy (not even economists understand the economy). So they simply rely on these TITLES to media articles (to click on or not click on) to TELL them how to think.
Then, they don’t understand when things go all to hell and they all run around in panic mode.
August 19th, 2009 at 8:56 am
cvienne-
i posted on the open thread- locked out!!!!! of the league this morning- tried about 7:30AM or so-
what gives?
August 19th, 2009 at 9:15 am
Hope for the best; prepare for (and expect) the worst.
The B.S. in this article (at least the excerpt cited here) is the kind of crap my dad and other financial/business illiterates are going to forward to me and each other as “research” and “advice”. This thing should be in The Onion.
August 19th, 2009 at 9:19 am
@ahab
I’ll get back to you on the OPEN THREAD itself…
I don’t want to use anything OTHER than the Open Thread to talk about that (for obvious reasons).
August 19th, 2009 at 9:22 am
Optimism/pessimism is a privilege we lost a while ago.
I would have drawn the head coming out of a different hole and titled it responsability.
August 19th, 2009 at 9:28 am
BusinessWeek got optimistic…but there is still some caution here. This is a “stock market correction is beginning” cover…not a “bear market is beginning” cover.
For this to be a “bear market is beginning” cover, the ostrich would have to have put an umbrella in the hole where he once had his head, maybe wearing some shades, and sipping a Corona in a lounge chair.
August 19th, 2009 at 9:33 am
@cvienne
I agree with your statements. I realize fund managers are different that the normal people i.e. consumers. I don’t have the stats to back up this claim however I would feel safe in saying most people still rely on others to invest their money (obviously not those on TBP!). Fund managers and financial advisors are going to feel pressure to be invested during a 50% swing up.
Lines to consider in the article:
“…as money continues to pour into equities…”
“Strong optimism in August represents a big turnaround from the apocalyptic bearishness of March,”
“A net 75% of survey respondents believe the world economy will firm up in the next 12 months, the highest reading since November 2003, while confidence about corporate health is at the highest since January 2004.”
“A net 70% of panel respondents expect global corporate profits to rise in the coming year, up from 51% last month. ” I’d like to know “How?”
“Merrill Lynch’s Risk and Liquidity Indicator, a measure of risk appetite, rose to 41, the highest in two years, with investors clearing preferring an overweight in emerging markets than any other region.” This as China is a fraction of an inch away from a bear market based on close today.
August 19th, 2009 at 9:42 am
That’s funny. I would have considered America pessimistic if more than 75% believed the economy was getting worse.
The old timers have always told me that you know you’re in the trough when everybody has thrown in the towel.
The only ones I’ve been seeing throwing in the towel are the bears!
August 19th, 2009 at 9:48 am
@danm
“The only ones I’ve been seeing throwing in the towel are the bears!”
I think it depends on your DEFINITION of what a bear is.
Prechter, for example, is on record with saying that the 666 low will get taken out to the downside.
Yet he still acknowledges that a move on the S&P to 1,100 or even 1,200 is still possible.
I don’t call that “throwing in the towel”…
August 19th, 2009 at 9:56 am
Those who believe the economy is improving are probably the same people buying purple Brett Favre jerseys this morning.
August 19th, 2009 at 9:56 am
“While the economy remains deep in a hole, and could indeed get worse, the truth is that nobody really knows what will happen next.”
true- does not mean you can’t come up with an educated guess of what will happen- optimism by itself is silly talk- means nothing-
in the end reality wins
August 19th, 2009 at 9:58 am
By the way, heard stories the other day how some restaurants (and likely many other small businesses) have stopped paying their state taxes just to keep the doors open. One restaurant apparently owes over $50K at this point to the state. This is a super-slow motion multi-car, with a train thrown in, accident playing out right in front of us.
August 19th, 2009 at 10:02 am
@ Manny 9:56
Nice!
Of course, I’m a partial and bitter Jets fan
August 19th, 2009 at 10:05 am
I and I find it humorous really… if not tragically sad…
The way all the old cliches come out at the last stages of an impressive move in the tape…
“markets climb a wall of worry”
“hold your nose and get long”
“buy now or you’ll miss the move”
“its a new bull market”
et al.
It really is amazing how the same cycles keep repeating, over and over… and the parallels between that sentiment at the bottoms of moves and the tops of moves is even more amazing when you think about it.
August 19th, 2009 at 10:09 am
cvienne:
When I was looking for a house in 1995 and looking at a lsiting on a storefront window some 50+ man came up to us and discouraged us from buying real estate. It’s the worst investment you can make he told us. We could buy a house for 65$ a square foot and the land came for free. In my mind, it was a no-brianer… as it cost way more to build new! THAT’s what I call a real trough. Even the optimists were bears, you could not tell them apart.
When the stock market tanked a few months ago, just a few weeks later our mailmox was full of investment letters telling us to jump back in and showing nice charts showing us the bounces of the last 20 years. Ironically, I have not seen one recommendation from the financial advisors based on data going farther than1982, the year the rates started to drop.
In my mind, the bears are those who think we could be in GD2. But even the bears are shaking in their shorts, not sure they are right and probably jumping back into stocks.
I just don’t feel the acceptance yet, all I see is the fear, anger and bargaining stages of grief.
August 19th, 2009 at 10:18 am
We shall also see the same cliches on the coming downward slope. The China dip has already given us the first line
“it’s a healthy correction”
Coming soon:
“The China market was overheated”
“The US is in better shape”
“The markets are telling us we’ve dealt with our problems better”
“Who cares, we’ve decoupled from China”
“China Schmina”
“The Chinese retail investor is shorting us into oblivion!”
“It’s all China’s fault!”
“Financial terrorists are destroying us!”
“Support your country and buy some damn stock”
“USA USA USA”
August 19th, 2009 at 10:34 am
mannwich-
once a company starts paying net payroll w/o depositing the necessary taxes- the employees’s payroll taxes- the company will fail- they never recover-
the IRS places a 100% penalty against ALL officers of a corporation or owners of a business who fail deposit payroll taxes-
that means if there are 3 officers/owners- they are all assessed 100% of the totality of the payroll taxes not deposited- so if officer 1 or officer 2 doesn’t have they will collect it 100% against officer # 3- from personal assets- their is zero corporate shield for payroll taxes-
the businesses are ultimately seized by the IRS- auction of equipment and inventory by the IRS- and the officers/owners are assessed hundreds of thousands of dollars in non-paid payroll taxes-
better to shut the business and call it a day before it gets too ugly
August 19th, 2009 at 10:35 am
@Mortimus
Patriotism is the last refuge of scoundrels, it’s only a matter of time.
August 19th, 2009 at 10:36 am
A couple of weeks ago, I was sitting at my daughter’s soccer practice, reading GEB, an Eternal Golden Braid. It’s a pretty heavy book and was having a lot of trouble concentrating as all the parents beside me were engaged in a lively conversation about how tough life is today with all the running around for hockey, soccer, ballet, piano. Finding and keeping a nanny is so stressful because they keep on leaving for better pay or find better work once they get their papers.
Nope, people still haven’t got a clue!
August 19th, 2009 at 10:43 am
Hope for the best, prepare for the worst
————-
You can hedge you bets and manage risks but it is mathematically impossible for 99.9999% of us to financially prepare ouselves for the worst.
OTOH, we can psychologically prepare ourselves for the worst but it is very tough in this epoch of expected optimism.
August 19th, 2009 at 11:50 am
@ahab: Precisely, and I hear this restaurant is also unable to purchase any more alcohol and other necessary items to run their business. I can almost guarantee you that many businesses like these are basically in a similar predicament merely holding on by their fingernails right now. They will start to fail one by one in the coming months/years as nobody bails them out (but, hey, Wall Street doing just fine, thank you very much). A super-slo-mo train wreck indeed.
August 19th, 2009 at 12:06 pm
Sounds like another sales pitch to me. Business Week–look inside and see who their advertisers are. What’s wrong with a little caution, especially with the markets way ahead of themselves, up 40%. No, this is a ploy to get the average joe back in and leave him holding the bag. I’d say a “contrary indicator”
August 19th, 2009 at 5:26 pm
The dragon of great depression II has been slain – and we ended up with the worm of a great ressesion instead. Long live the dragon slayer ;-)
August 19th, 2009 at 9:30 pm
I prefer to follow the advice of an old boss of mine who once opined that
“The worst you can imagine is the best you can hope for.”
August 21st, 2009 at 10:27 pm
“My motto is “Hope for the best, prepare for the worst.” No excessive optimism or pessimism required . . .”
The trick is knowing how to prepare. Many people think that they are taking steps to help them ride out a particular future event only to find that their actions have made things much worse.