Recovery? Recession? Ask the Experts, they are everywhere….

After more than 25 years in Banking and the past couple of years doing consulting, I admit to being a rabid reader of all things market and economic related. One thing I know for sure is that there is never a shortage of opinions on any side of an economic argument. My ever supportive wife might ask suggestively “Honey, are you using the Rogaine twice a day?” just as I was thinking things were looking a bit fuller up on top. I can usually find another opinion and did as my 4 year old granddaughter stroked my hair one day while we both sat watching “Hotel for Dogs” for the 10^th time. “She quietly whispered “Papa, your hair looks nice”. Hmmm, There you go, I got the opinion I was looking for.

Finding work has been a very frustrating 7 days a week chore. That alone tells me things about the markets and economy. Watching my favorite pundits on the cable financial channels while following up on job leads on my computer, most were exhorting the positive moves of the S&P index since March 9^th (the hopeful bottom of the hellhole in everyone’s 401k and investment portfolios). “We could be at the beginning of a new Bull Market” was the common refrain. My ears perked up and I listened intently as a contrarian talked about “her view that Unemployment is still going to move much higher”. Living here in California where the Unemployment rate is already above 10% and that does not include hundreds of thousands of people like me whose benefits have expired or who are underemployed, that comment hit like “a low blow”.

As a Bank Executive I would train my Branch Managers to use their common sense to gauge what the “market” was really doing. I would tell them to go down to their local Lowes or Home Depot on a Saturday. If you had to search to find a good parking spot “the market is good”. If you pulled right in and had no trouble parking, (and the aisles were sparse of customers), then the economy was in trouble, big trouble. I would look at my Sunday stop at Costco in similar ways.

Yesterday, June 12 was the wedding anniversary for me and the Mrs. All 3 kids with their kids decided to take us out for dinner. We went to a local spot where several major chains are within a block of each other (Calif. Pizza Kitchen, BJ’s Pub, Macaroni Grill, Cheesecake Factory, Buca di Beppo, and others). The average wait time at 7:30pm on this Friday night ranged from 1 ½ hours at BJ’s to 45 minutes at Cheesecake Factory. I was actually happy to see this. Even balancing the fact that it was Graduation Day for a number of high schools in the area, the fact that people were moving from backyard grad parties to restaurants is a good sign for the economy. 

Are we out of the woods? Hell No!

Is it safe to jump into the market? After a 2000 point run-up without a meaningful correction, probably not!

Are the markets and the economy showing signs of improvement? Most definitely yes? 

Positive trends are in the air, or at least are waiting for a good table on a Friday night.

And my hair looks good too…..so says one of my trusted experts!

Wildfires in Southern California mark the change in seasons for those like myself who were born and raised in the Golden State.  Warm Santa Ana winds common in the fall always blow with the potential for disaster.  I watched the local news on TV with vivid interest on Saturday as fires began popping up across Los Angeles and Orange Counties, knowing that I would be traveling within the hour only a few short miles away from one of the areas ablaze. The camera on one of the news helicopters was focused on a large hillside home.   Most of the home was burning with at least two large fire trucks aiming their hoses on the fire. It was surely a lost cause. Two homes away at the end of the long cul de sac, we could see from the air that smoke was beginning to rise from the far side of another equally large home.    The firemen fighting the fire at the home a short distance away apparently could not see the slow beginning of the new fire. From the birds eye view, I knew it was only a matter of few minutes and that house would be lost as well. But all of the resources in that neighborhood were focused on the first house. I am sure that smoke from that fire obscured the view of the brave men and women on the ground, but it was sad to see resources poured on a lost cause when a nearby home could have been saved with some quick action. There were several properties on fire as the camera panned across this hillside.  So much for armchair firefighting.

Less than an hour later, my wife and I found ourselves traveling on the freeway near the same area I had been watching earlier on TV. I was sure that we would see smoke and distant flames along our journey, but we were truly at the wrong place at the wrong time, as a sudden fast moving firestorm leaped across the freeway right in front of us and began burning up into a residential area. Large red embers flew past my windshield.  It appeared that the forces on the ground did not expect the fire to cross this very large freeway as there was only one firetruck visible on that side.  Unfortunately by the end of the day, more than 200 families lost their homes on that side of the freeway alone.   I did learn firsthand however, that the view on the ground is remarkably different from the one 2000 feet up in the air.

As I continued driving, I couldn’t help but see parallels with the wildfires in California and the economic firestorm that was occurring on Wall Street. Aside from periodic reviews of the smoldering ruins of the majority of IRAs and 401ks, many people like myself were watching the economic carnage from the relative safety of our living rooms or workplaces. I too found it easy to criticize Hank Paulsen and others for changing policy in mid stream or so it seemed at 2000 feet. I began to realize that regardless of how the California or Wall Street fires started, there were real consequences to the choices made on how to fight the fires. Yes, the GSE’s (Freddie and Fannie), some Social Engineers, and others were simply playing with matches, unaware or uncaring of their potential flammable surroundings. But also standing on the side of the road were Central Bankers with accelerants in one hand, and a small fire extinguisher in the other. There were greedy investment bankers seen taking the match heads off matches and creating some spectacular incendiary devices. There are just too many suspects to point to while the hills are ablaze. The 'First Order' of business is to fight the fire. Arson investigators can go to work later.

Now that the Chinese and member of the EU have finally admitted that the trees are indeed on fire after seeing the smoke now for weeks and months, and our own government has activated Smoke Jumpers and everything they have to fight this firestorm, we will eventually see some containment to this out of control fire.