Tuesday 14 April 2009

Green shoots; in your dreams Obama

Obama says he sees the green shoots of recovery. it is nothing of the sort, what we are seeing now is the levelling out of the crash phase of the recession.

Now if there were green shoots, it would be into a strong bounce. The stock market is in a nice rally, that is about it. Rallies have a habit of petering out this decade in the US stock market.

As for everything else, the case-shiller index is still looking bad, company credit is bad. The only thing recovering are the banks and they have been bailed out with more money than it took to beat Hitler and Tojo.

Why talk about Obama? Well he is a model for our own Cameron. Obama's Presidency is unlikely to go down as a great success as people tire of the depression. Instead he will slowly lose credibility; partly by constantly saying things are getting better when reality says they are not.

I hope our own Tories have learned the two key lessons here:

1) (Unlike Major and Lamont) Don't spy green shoots that don't exist, it grates on the electorate
2) Don't push Brown out now, let him deal with the coming year of fall and stagnation.

To this end, the UK electoral cycle is more in favour of Cameron than the US is for Obama. Unless Guido gets his way of course....


Sebastian Weetabix said...

Life is interesting in the electronics assembly business right now. We have experienced a 7 month long period of massively reduced orders as the industry has de-stocked. Since most of the things we sell are shelf-life items, & typically have a shelf-life of 6 months, we would expect to see things pick up a bit. And I'm happy to report our sales in March were 15% better than February. Great, huh? Except if you do a YTD comparison with last year we're still down more than 60% year on year.

The thing that is really baffling me is that even after all this time one of the key industry metrics (inventory days of electronic components) is still increasing - unlike the last big downturn in the business in 2001.

In my humble opinion, in the manufacturing sector the so-called green shoots are just a pause as companies are forced to re-order some items, but I think this will prove to be a dead-cat bounce. The next wave will be lots of company failures, possibly including ours. Receivables are mounting up as people are slow (or unable) to pay, and if the present conditions carry on for another 2 quarters we will have most likely consumed our cash pile.

We started off this downturn very optimistic we would ride it out - and even find opportunities for sensible low cost acquisitions - because we assumed we would see a 35-30% contraction in sales for 6-9 months or so. But sales have been down >60% for 7 months now & we don't see it really picking up for another 9 months. We've already been through the lay-off phase & there is nothing left to cut now.

If only we were bankers! In the meantime, as Rutherford said when trying to split the atom, "there is no more money, therefore we must think."

Anonymous said...

Any thoughts on this lads?


Newmania said...

I think you are right an i also think that New Labour have decided now is the perfect time to have asort out out of power.
That is why there are quite so many ready to turn on Brown , apart from personal loathing that is

roym said...

there isnt a cat in hells chance that brown will leave early.

i realise what you're saying about the economic and political cycles, but do people not think that brown being flushed away with the rest of the rubbish is part of the road road to recovery?

Demetrius said...

I regret that because of the fixation with London few realise just how difficult it is getting out there for very many people, and just what can happen. Click on to see one of the really bad developments in paying the cost.

CityUnslicker said...

SW - A most ineteresting perspective. it woul dbe nice to have a guest post from you sometime, expaling the course of the recession and how it has affected your business. Feel free to email one in if you ever get the time. If you want the airtime for the business, feel free to name it too.

Newms - Hmm, i think brown will ride it out myself and just as well for the Tories.

ROym - agreed.

Newmania said...

Agreed CU , you see GUido is down . Wonder why ,...

Sebastian Weetabix said...

Thanks CU - I may take you up on that some time. I think I'll stay under the radar when it comes to company name checks though; I wouldn't want competitors (or customers for that matter) to get unfettered insight into our doings!