Time to Short Gloom

So after this last week, the one piece of data that came as no surprise is that we’re all depressed about the economy.   A McClatchy Marist poll says 68% of Americans think the worst is yet to come in terms of the economy.  Boy, I hope this is a time when the man on the street is wrong.   Small business owners are split according to an American Express poll in terms of their feeling that their business prospects are about to improve.  The Economist / Financial Times poll of executives at large companies finds less than a quarter of them expect things to get better. 

I mostly talk to small business owners these days.  While I don’t see a statistically significant group, I will tell you the folks I talk to are managing to keep their heads above water.  I guess if you’re still in business after the 2008 crash you’re either really lucky or really smart.  (OK maybe a little of both).  Still, the idea that keeps coming up that makes me relatively optimistic (not a hard spot to find right now) is the ongoing theme of innovation. 

Productivity is down, after having a long stretch of improving.  That means net net employers have to pay more to get output in this economy with lots of unemployment.  Sooner or later that has to translate into either hiring more, or doing things differently.  Which is just another of way of saying innovation.  A Financial Advisor Benchmarking survey shows assets under management by Registered Investment Advisors were up by 20% at the end of 2010.  Now it may be that all those gains are gone after this last week – but the fact is, these advisors can’t let their clients invest in Treasuries with negative yield forever.  The crowd that is stowing cash under the mattress clearly isn’t growing, so sooner or later that capital has to be put to work. 

I don’t want to be too much of a Pollyanna, but necessity is the mother of invention, and it seems the need to figure out a better way has to be at an all time high for most businesses.  That should mean better times are not far away.  I know this has been a long slog, but watching to see businesses that are doing things differently has to be a better use of time than picking where the VIX will be next week.