This recession has shaken people up, but what will be the lasting effects on consumer behavior? That's one of the key questions as we look forward at the nature of the recovery. I've been arguing for a "return to normalcy," in which people will abandon the exuberance of the boom, [...]
I recommend a recent speech by my old classmate Bill Dudley, now president of the Federal Reserve Bank of New York: More Lessons from the Crisis.
The reading is a little ... assumptive of some familiarity with financial markets. (Some casual readers might call the prose dense, but it's not [...]
OK, you may not think that the capture and public posting of thousands of climate change emails and datasets constitutes "hacking in the public interest." (More on that story in the New York Times.) But the folks who did the hacking apparently believe they are serving the public interest.
You [...]
One of my favorite boat supply online stores has closed, and the story is worth repeating to all business owners. The founder of this company sold the business and took a note as partial payment. The new owners have defaulted on the note, closed down the business, and the old [...]
Rich D'Amaro, Chairman and CEO of Tatum LLC has offered "Six Tips for Business Leaders to Consider as We Emerge from Recession." I especially like his first suggestion:
Identify and Maintain Your Strengths, and Your Best Customers
Many businesses have limited working capital today, but they need to make the sales [...]
There is a surprising amount of new hiring going on. That may seem strange, given the job losses in the economy, but the widely-quoted figures show net job growth. An unemployed person does not need a net new job, he or she just needs a job. Here's an illustration. (Inspired [...]
Business have trimmed inventories significantly--and that's starting to bite them in the sale. Here's the raw data:
There was good reason to cut inventories: sales were falling. This is a recession practice I recommend in Businomics. However, the tight inventories are now limiting sales [...]
I've updated my economic forecast for 2010. Here's a chart showing quarterly growth rates:
Key features: consumer spending on durables dips this quarter (after cash-for-clunkers), then grows at a pace that mixes conservative attitudes with pent-up demand and limited credit availability. I spent more time [...]
Banks have pretty much stopped tightening credit standards, but that doesn't mean they are easing--maybe not, at least. The chart below is based on the Federal Reserve's Survey of Senior Loan Officers. The question asked is whether they tightened or eased credit standards. The chart shows "net percent," which [...]
I've been hard put to recommend an economics book aimed at the layman, because I don't read many of them myself. However, here's a wholehearted recommendation: Russ Roberts's The Price of Everything. The book is written as a novel, though with lots of didactic conversations. The book conveys very [...]
You can watch the interview of Diane Swonk, Shirley Leung and myself. You can also read a transcript.
[...]The numbers for the third quarter look nice, or what passes for nice these days. GDP rose smartly, pretty much confirming the general view that the recession is over (more on that below).
The details surprised me a bit, even though the total growth was in [...]
Betty tried to place an order with her long-standing vendor, but got bad news: the vendor could not deliver within her timeline. She had a firm commitment to her customers, so she had to scramble to find another supplier. (Let's pause to praise that first vendor for honesty. Too many [...]
My blog post with an explanation of securitization has been very popular for over a year now. The website ProPublica has the same concept with a different slant (hat tip to the Big Picture). Their chart includes notes on why the senior CMO holders have different [...]
Huh? Did housing starts rise, or did they drop? Turns out, they effectively did neither. [...]
"Technical debt" does NOT mean, "Technically, we're in debt." Technical debt is what happens when a business puts up an application that isn't perfect, then has to clean up bugs and scale issues in the future. I heard the phrase for the first time in a great discussion on [...]
Even Public Broadcasting has noticed my love of charts, saying
Perhaps the most noticeable feature on the site is its fluent use of colorful charts; Conerly uses them to help explain the data that he discusses on the blog.
Maybe I need an intervention. Check out this clip from How I Met [...]
More interesting information from the IMF's World Economic Outlook:
Before getting to the outlook, note some of the dynamics. The mildest cycle was for agricultural raw materials, followed by beverages (coffee, tea) and food. These are generally materials with rapid supply response to rising [...]
Look for strong growth of our exports and imports in the coming year.
The IMF has an interesting observation in it's latest World Economic Outlook. Talking about total international trade volume around the world, they find:
The survey results suggest that the downturn in trade largely reflected falling demand rather than [...]
A person familiar with bank regulation in Florida just told me a disturbing story. A bank was examined, the rating of the bank was downgraded, and the bank president asked the examiner why he was being dinged. Apparently the bank was in good shape. The examiner could not point to [...]
The International Monetary Fund says, "The global recession is ending."
If you do business overseas, one of the best free information sources is the IMF's semi-annual World Economic Outlook. Although I have not always been a fan of IMF policies, I've found their Outlook to be unbiased. It covers a lot [...]
The way you are managing your sales staff my cost you market share in the recovery.
There are two basic ways to evaluate sales representatives: results or effort. Using results makes sense for experienced sales reps in an average market environment. Many people will manage with effort (counting calls made, visits [...]
I was sitting with a consulting client evaluating their readiness for the economic recovery, using my basic economic consulting process. The client mentioned that he had considered a project to automate one of their manual processes, but it didn't seem to pencil out. It turns out that was three [...]
A reporter needed a sidebar, so I created this checklist for business planning in an economic recovery:
· Sales people—are they making all the calls they can?
· Do you have the inventory needed to serve your most important customers?
· Do you need to ignore peripheral markets to serve your core market?
· Do you have the [...]
This post is for college students who are interested in economics and thinking about graduate school. There's an article aimed at the academic economics profession that you will find insightful. Dave Collander and KimMarie McGoldrick have written The Economics Major and Liberal Education. Here's a key section:
Instead of serving [...]
"The deeper the slump, the zippier the recovery."
That is James Grant's judgment in a nutshell. The conclusion surprised me, not because I disagree, but because I'm used to Grant being pretty bearish. His Wall Street Journal article is illustrated with photos of Roosevelt, Greenspan and Buffett (not Jimmy), as [...]
Paul Merriman and Tom Cock led off with the recession question in their Sept. 18 interview. The Bill Conerly interview starts in the 8th minute (no stoppage time).
One listener asked me to elaborate on my brief remark about the reappointment of the Federal Reserve chairman. More details are in [...]
The Businomics(R) Newsletter for September has been released. Take a look at my free economics newsletter. You can subscribe by scrolling down to the bottom of the charts, or just shoot me an email right now.
[...]Businomics is now available for the Kindle from Amazon. This is the book that helps business leaders understand how to manage their companies in a changing economic environment. For you hard copy folks, more information here.
[...]I'm trying to avoid the health care issue, but it's getting harder and harder. Just getting good, clear information and insights is tough. But the Atlantic (I think they've dropped the Monthly from their name) has a dynamite article by David Goldhill.
The title of the article is stupid, so [...]
My recent post about changing business challenges as the business cycle turns prompted the sales consultant extraordinaire, Kathy Maixner, to send me the questions that sales people should be asking today. My favorite:
What is the toughest thing for my buyer to handle during these challenging times? How can I help [...]
This is a little outside my specialty, but this article from the McKinsey Quarterly strikes me as the most important reading of the day for executives with widely dispersed operations, such as retail, banking, and a variety of other industries.
If you want to implement the ideas here, I can [...]
The China Law Blog offers this great email from an on-the-ground observer:
Just received this email from co-blogger Steve Dickinson:
I do my martial arts workout three mornings a week at the beach here in Qingdao. We have a great view of the entrance to the Qingdao port complex. Vessels intending to use [...]
My post about good economics books has led to a lively discussion about economic theory, Austrian economics, Keynes and Friedman over at Seeking Alpha. If you have an interest in the theoretical, check out the discussion (but skip the algebraic nonsense) and note my response near the bottom.
[...]The economic recovery is coming, but not all businesses will gain from it. Some executives will step outside to smell the sweet aroma of economic growth, only to find that half their market share has been taken from them. More successful managers will enjoy earnings growth hugely disproportionate to their industry’s profits. The difference will be [...]
Prompted by Greg Mankiw's reading list, which I blogged about earlier this week, I did some serious browsing through two of the books.
Nariman Behravesh's Spin-Free Economics is THE book I'll recommend when I'm asked to recommend a book for the layman. It's not too technical, but it covers [...]
Four key people in Intel's recent innovations are profiled in an article in Oregon Business magazine. You don't have to live in Oregon to appreciate it. If you are wondering where the next round of cool ideas will come from, look to people like these folks.
[...]Harvard Professor Greg Mankiw has posted his reading list of economics books for a freshman seminar. (Hat tip to Cafe Hayek.) Here it is:
The Worldly Philosophers, by Robert Heilbroner Spin-Free Economics, by Nariman Behravesh Capitalism and Freedom, by Milton Friedman Equality and Efficiency: The Big Tradeoff, by Arthur Okun Nudge, by Richard [...]Fortune Magazine has a good article by Ram Charan mistitled, "My (Recovery) Playbook." It's actually more about bottom of the recession business strategy, and though it's a great article, it comes a bit too late for most companies. The time to start implementing this strategy was six to 12 [...]
The New York Fed has a new website that provides maps of several different credit conditions. It's an easy way to get a sense of where credit problems are worst. You can mouse over your own state or county and see how your neighbors are doing. (Hat tip to [...]
It looks like the President will reappoint Ben Bernanke to the chairmanship of the Federal Reserve. (One story here.)
If it were up to me, I would not have reappointed Chairman Bernanke. Reasons:
he went overboard in his fear that we'd have another great depression on his watch contributed to the sense [...]Oil prices rose today as Fed Chairman Ben Bernanke offered positive thoughts about the economy. Does a strengthening world economy mean higher oil prices in 2010? Not so fast, Bucky.
The argument for higher oil prices in 2010: in the short run, supply is inelastic, meaning that higher demand, leading to [...]
Over at abcInvesting.com, I've posted answers to common questions about 401k plans.
[...]Yesterday I said that the hard evidence for the recession being over was a little soft, with only three of the four main coincident indicators turning up. Today's announcement of industrial production gives us a second indicator that has turned up, at least for one month. Here's how [...]
When the committee that figures this stuff out meets, they emphasize the four coincident indicators of the economy. Before looking at the latest charts, keep in mind that we are mostly looking at data through June (for employment, through July). The Wall Street Journal survey finds that most [...]
You can see my economics newsletter. If you scroll down to the bottom of the page, you can even sign up to receive it my email every month.
[...]The efficient markets hypothesis, the bedrock of modern finance, is under attack due to -- get this -- irrational behavior. Believe it or not, it appears that some market participants behaved irrationally. So where does that evidence leave us?
What is the efficient markets hypothesis? The Wikipedia definition is pretty [...]
John Malone of Liberty Media and Discovery Holding Company spoke at the Wall Street Journal's All Things Digital conference. This is an exceptionally insightful interview, in which Malone explains the underlying economics (without any of my jargon) of video, cable, and digital content in general. (Hat tip to Patrick Galvin [...]
One good indicator of the recession being over is the end of job losses. It's not a perfect measure, but if you only have room in your brain for one measure, then this is it. And July was still of a month of decline. I've been tempted to proclaim the [...]
Starbucks is trying to help its staff members be more efficient. According to a recent Wall Street Journal article, they are using old fashioned time and motion studies. A barista makes a latte, while someone watches with a stopwatch. Early results are positive, but some baristas worry that this [...]
My favorite source for all information retail is Jennifer Black of Jennifer Black & Associates. Here's an interesting comment on July's retail sales:
As consumer spending continues be sluggish there are signs in the economy that the recession may be close to an end as we are seeing improvement in manufacturing, employment [...]
I've updated my forecast for the latest GDP revision. Key positives and negatives were laid out in this post. Here's how my new forecast looks:
That red line is the average growth rate in recovery, assuming that second quarter was the bottom for [...]
The New York Times has a cool interactive chart showing how we spend our time. (Hat tip to the Big Picture blog.) One thing that is apparent is that college graduates spend more time working than high school grads. Think about that the next time you tell your [...]
Yesterday I heard a doom and gloom outlook from a businessman whose attitude derived the weak commercial real estate market. I regularly hear from residential real estate brokers and developers that the economy is terrible, terrible, terrible. And if the stock market has had a bad day, everyone who follows [...]
One question I get in my speeches goes like this:
Think about this a moment. How did we ever get [...]
My day is always happy when Merle Hazard releases a new song. (Hat tip to Calculated Risk.) Here's his latest, Bailout:
Bank loans to businesses for commercial and industrial (C&I) purposes continue to decline. That by itself does not prove that we are in a credit crunch.
Credit crunch definition: "When credit is rationed by non-price means in a way not typical for that type of credit at that time of the [...]
I'll be updating my economic forecast in early August, taking a little longer than usual because of a major revision in the GDP statistics and their underlying components. (Data wonks read this.) However, it's never too soon to think about the strengths and weaknesses of the recovery. Before getting [...]
Earlier this week I spoke to the National Speakers Association annual convention about how the recession was impacting the speaking business, and more importantly, how it was changing the needs that our clients have. For example, many companies feel that they don't need "sale training" right now, because after downsizing, [...]
Just installed a cool little Firefox application called Cloudlet. Here's what happened when I googled myself:
Question: if you know me or my work, what other tags should Google have found? Leave a comment.
[...]These guys who write newspaper headlines are getting me down. Here's the Wall Street Journal's online head: "Housing Starts Jumped in June."
Bloomberg proclaims: "Housing Starts in U.S. Unexpectedly Climb to Highest Level in Seven Months"
The Christian Science Monitor says:"US home construction recovering."
With that preparation, [...]
Businesses cut inventories again, according to the latest data released here. Inventory swings are tremendously destabilizing. I'm actually kind of proud of the explanation of this that I wrote in Businomics. (If you are adamant not to buy the book, take a look through Amazon's Look Inside feature, [...]
No leading indicator is perfect, but initial claims for unemployment insurance is fairly good. Here's the latest chart (data available here):
It looks like the worst is behind us, but that the improvement has been very, very mild. In other words, consistent with [...]
Back in February, Congress passed and the President signed a $787 billion stimulus package. But the economy is still weakening. Does that prove we need another, bigger stimulus package? Not so fast, bucky.
Here's some information on timing courtesy of Business Week:
Certainly, based on key numbers, it looks as if [...]The most beautiful music of the day (HT to Mark Perry at Carpe Diem)
[...]The measures of financial stress based on short-term markets are looking much better, though bond-market related measures are slow to improve. The most popular measure of stress is the TED spread, which is the difference between interest rates on inter-bank loans (LIBOR) and Treasury Bills.
[...]
In my spare time I've been working on a start-up business in investment education, initially focusing on helping employees learn about their 401k plans. Our new website is now up and running: www.abcInvesting.com. (Some features are not yet operational.) Take a look and let me know what you think. [...]
One common proposal for the new financial regime is regulation of credit default swaps. A CDS is like life insurance on a bond. (Here's my simple explanation, and my view of what went wrong with CDSs.) A good example of a call for regulation is an article [...]
In the midst of the banking crisis, the Obama administration is considering sweeping financial regulations. But before fixing problems with a sledgehammer, let’s assess which of these problems have fixed themselves. It turns out that many of the private sector errors that helped trigger the financial crisis are not going [...]
I've been saying that consumer spending would soon increase. It has not happened yet, but consumers are now in position to get going. The key concept is that consumers have not been income constrained, as a group. In the aggregate, they are simply scared. They have the income to spend [...]
Some friends have been debating the role of housing prices in consumer spending, stimulated by two recent articles in the Wall Street Journal's Real Time Economics blog. First, Charles Calomiris, Stanley Longhofer and William Miles wrote that effect of housing wealth on consumption is about zero. Then, Atif Mian [...]
With the current news about Ponzi schemes and crooked investment managers, people are asking me how they can avoid being Bernie Madoff'ed. I've been in the investment management business (but no more), and I've read the stories, and I think I can offer some good tips.
As you have no doubt [...]
I heard a presentation by Jean Chatzky about her new book, The Difference. It sounds like a good book on personal finance, but one item in particular caught my ear. She said that instead of focusing on doing what you love, you could focus on loving what you do.
I've [...]
I don't pretend to be an expert on the subject, but there is a good summary of this topic by Richard S. J. Tol in the Journal of Economic Perspectives (available only to members of the American Economics Association). Here are my notes:
What is the economic impact of climate [...]
The economy is still headed down. The best monthly look at the economy's current state involves the four coincident indicators. These tend to move up and down as the overall economy moves up or down. Consequently, the folks who determine business cycle beginnings and ends look carefully at these [...]
You can view online here: [www.conerlyconsulting.com]
Groundswell: Winning in a World Transformed by Social Technologies is an unusual thing: a great business book.
First, it contains valuable insights that are not obvious.
Second, it has information for all parts of the business world: sales and marketing, production, finance, R&D.
Third, it give realistic advice rather than encouraging everyone to [...]
Along with a number of other indicators, the attitudes of CEOs are improving, according to data from Chief Executive magazine.
This survey matches lots of other indicators: steep decline last fall, an apparent bottom in the first quarter, and a mild recovery--maybe--in recent months. [...]
Consumers continue to increase their savings. Here's the recent behavior. (Note that the first spike, in mid-2008, came from the stimulus checks.)
Is the recent run-up of savings the new trend? Let's look at more history.
The latest [...]
The New York Times has an article about quantitative analysis coming to the advertising industry. In the old days, ad agencies labored for months to create the perfect ad--perfect being totally subjective. They only had the vaguest idea of whether an ad sold products. Maybe the cute VW commercials [...]
Oregon Business Magazine quoted me in its article about two subsidies, one that clearly failed and one that, they say, worked. If you think these things ever work, here are the facts cited in the article regarding the "good" subsidy. Genentech received over $32 million of incentives, in exchange [...]
I've seen plenty of bad presentations, but the good news is that we have plenty of resources for better PowerPoint presentations. Here's a good lesson from presentation expert Dave Paradi:
Dave has more great tips on his website, www.ThinkOutsideTheSlide.com.
[...]My friends are telling me I'm an idiot. I was quoted in the local newspaper last week saying that our high unemployment rate was a bit of a mystery. Both friends and strangers have told me that it's simple: our state has high unemployment because of bad policy, such [...]
Breathe a sigh of relief. Bank earnings are not strong, but they are positive. Red ink seems to be so 2008:
It seems the farther we get from the fall of 2009 and the Lehman bankruptcy, the better things look. Although I do not forecast [...]
Today's report on consumer confidence lends credence to economic forecasts that call for a recovery soon.
This is a big enough improvement in consumer attitudes that I'm confident it's not just a temporary blip. Although consumer confidence isn't the only thing to worry about, recall that [...]
Take 20 minutes and watch this wonderful Ted Talk by Alex Tabarrok of George Mason University. He's a professor but he speaks English. Much of what he says will be familiar to those of you who have heard my presentation, Freedom and Prosperity: The Case for Optimism. Like [...]
One of the most useful measures of the economy is initial claims for unemployment insurance. Although the concept is somewhat narrow, it turns out that the correlation with other, broader series is very strong. We get new data weekly, so we can see turning points in this data series sooner [...]
A new consensus economic forecast is out, courtesy of the Philadelphia Fed, and it's not too much different from before, except that Q3 of 2009 is noticeably weaker. Here's the forecast of GDP growth:
The economy is contracting slightly this quarter, according to the [...]
If you, like me, love to find cool facts, you absolutely need to know about Wolfram Alpha.
As an example type in "zip code" followed by your zip code.
An excellent Wall Street Journal article, "Clarity is Missing Link in Supply Chain," accentuates a point made in my favorite economics book, that inventory swings are tremendously destabilizing. Here's a stunning macroeconomic impact:
In March, Best Buy Co. said it could have sold more electronics equipment in the three months ended [...]An audience member at one of my recent speeches asks how much of a drop in economic activity will occur due to de-leveraging and the end of stimulus programs. Can we expect a double dip recession?
Good question. I'm not expecting a really strong economic performance in the 2011 and 2012, [...]
Financial markets are not nearly as skittish as they were last autumn, but they are still a good bit worse than normal in terms of risk spreads. In simple terms: risk is priced 4x normal, but that's down from 16x normal back when Paulson and Geithner were trying scare the [...]
Foreign trade, both imports and exports, fell sharply in the second half of last year, but the numbers are starting to level out. We see this pattern in many, many indicators: retail sales, car sales, consumer confidence, existing home sales, capital goods orders, non-residential construction, oil prices, and the stock [...]
