Monday, December 22, 2008

Seasonal news---the grim and the hopeful

Seasons Greetings is a positive salutation. It's meant to be an acknowledgment of relationships, a recognition of the holidays and, I think, a positive outlook on what's ahead. The news this year has made the latter a bit more challenging than usual.

Hopefulness and new opportunities are the desired watchwords but who can ignore all of the bad news of recent months. It has not been a "here today gone tomorrow" type of news, it's a "we're going to live with this mess for quite a while" type of news. This grim outlook can be highlighted by the following statement in a Bloomberg story yesterday, "General Motors, Ford, and Chrysler will shutter 59 factories over the next month as sales plunge". The factories will stop, some forever and some until sales pick up, and even if severance payments or union unemployment payments keep many workers solvent for now, the ripple effects are much broader. The parts suppliers, the tax base of communities, the small businesses that serve the workers, and consumer confidence in general will all be hurt. If this example is just a microcosm, and it's not so micro, of the economic distress that 2009 will bring, then hope requires a faith in the future that's not so short term. For many of those directly affected, it may be a time when the only relevant time frame is the short term. In the spirit of the season, however, it's seems appropriate to look for what could go right.

In the financial markets, a successful trip through year end is an important hurdle. Regulators, investors, rating agencies, creditors, and vendors to financial institutions, industrial corporations, and smaller businesses all look at year-end balance sheet numbers as a barometer of viability. In many cases this is not just the function of an important accounting date. It is built into loan agreements and oversight arrangements as a date that will determine the access to credit, the price of credit, the terms of payment, and even the viability of an enterprise. It's important. Liquidity is hoarded even in good years to make sure that no accidents happen. This has not been a good year. The hope is that making it through year end will loosen the credit markets and that there will be a slow but certain easing of tension that will allow investors and lenders to be driven by the hope of opportunity rather than abject fear. That's hope twice in one sentence.

There's also the hope that Madoff and Balgojevich represent defining bottoms in ethics, at least in the United States. One could fear that they are the tip of the iceberg but that's not seasonal thinking. Their actions were extraordinary in their brazen disregard for accepted norms of behavior, even disregard for their own eventual self interest, and have contributed to the sapping of confidence in what lies ahead. They will, however, make greater regulation and oversight inevitable, no debate now. That's more hope.

With the arrival of the Obama presidency there's hope even though there can be no quick or easy solution to the new foundation, foundation liberally used here, of 2008. That said, it does seem that achievement and intelligence will now, for the most part, become a prerequisite for significant responsibility in the executive branch. Congress still remains a big concern but hopefully the Obama administration can strike a balance between urgently needed action and damaging overreaction.

As for now, Seasons Greetings and Best for the New Year.


Anonymous Anonymous said...

Down here in the southside, what happens really doesn't matter too much. We've been getting used to not much money, low wage jobs, and helping each other out for quite a few years now. I mean, this all could end up being good for us, like we're the McDonalds of houses and lifestyle. People priced out of where they are might just come here and bring what supposedly "little" money they have left, which will look like a lot to us.

3:28 PM  

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