Jim does the annual economic update for the Pacific Northwest Chapter of IMC. Here are a few notes that I took during his presentation on 11/3/2011.
This year he took a different approach. His presentation last year was focused around what to expect in 2010. This year, Jim did a lot of reflecting on 2010 and sharing of lessons you should be learning or have learned. If I had to, I would sum up his presentation with this: balance the balance sheet. No matter what he talked about, it always seemed to come back to this point.
Here are a few specific highlights from his presentation:
- Short-term, the bailout failed. There was short-term gain, but an increase in failures. He is still watching to see how things will play out.
- Jim explained the mathematical equation that is used to manage and assess business cycles.
- Moving forward, the banks will have more and more constraints limiting their options of what they can really do.
- Make sure you are asking the right questions, not just the ones that appear to be right. We shouldn’t be asking “How do we compete with China?” we should be asking “Do we want to compete with China?” This applies to the bailout and the economy as well. Are we asking the right questions that decide how we move forward?
- Our economy is what is considered a “Consumer Based Economy” driving about 70% and that is where we have been focusing the bailout. Should we be? Are we still really a Consumer Based Economy?
- “Monetizing the Debt”—just printing money because the government needs it. This will probably cause problems in the future.
- There will be 800 less banks next year. Banks are now required to have 7% capital (before it was 2%) before they can loan money.
- Balance the balance sheet. Balance the balance sheet. Balance the balance sheet.
- 37% of banks have commercial property on-hand that they cannot service.
- Home foreclosures are 2.3 times the amount of homes for sale.
- We are in denial about the real unemployment rate.
- We have a population of 6 million; 3.5 million are employed currently supporting the rest.
- Personal income is no longer guaranteed. Personal savings is up and seems to correspond with inflation—until now.
- Consumer confidence—Jim feels this will drop but confidence around healthcare will increase.
- Purchasing Manager Index—new orders are down
- We can’t solve the real estate problem until we solve employment problem—Dah!
- Now is the time for leaders. Jim shared a story about Moses.
- We have to be leaders moving forward and not expect or wait for a messiah to appear.
- Jim feels the tax cuts should remain to minimize the gap between the rich and poor. The more of a gap there is the more problems that arise.