RECOVERY JITTERS
Investors in today’s market would do well to keep mindful the lyric from the song “Cool” by Stephen Sondheim (music by Leonard Bernstein) in the legendary Broadway show ‘West Side Story: “Boy, boy crazy boy / Get cool boy / Got a rocket in your pocket/ Keep coolie cool boy.” Patience, calm and caution are the watchwords of the day.
The economy is at a crossroads and may take a number of directions according to a recent Wall Street Journal commentary:
1. Another Great Depression. Thanks to the Obama stimulus plan this scenario is considered most unlikely at this stage of the U.S. recession although entirely possible in Europe where the central bank has been more tentative in employing direct fiscal intervention.
2. A Quick Rebound recovery. This is akin to the rebound effect of a Bongi jump when at the lowest point of the fall tension causes an opposite upward reaction. The tension in economic metrics is found in tax incentives, direct government spending and lean inventories that eventually are restocked as pent up consumer demand restarts production. With so much wealth having evaporated and consumer habits perhaps changed for some time to come, however, a quick rebound also seems unlikely.
3. A Lost Decade. The International Monetary Fund observed recently that recoveries from global recessions due to financial crises are typically slower. The U.S. economy could... Read More »
