Thursday, February 21, 2008

Searching for the Silver Lining

Irwin Stelzer apparently believes, as I do, that those calling a recession may be jumping the gun:

We know three things, or think we do. The first is that credit is more difficult to come by, both for businesses and consumers. Not because interest rates are unattractive to borrowers, but because lenders have gotten pickier about whose IOUs they are prepared to accept. Second, we know that the housing sector is in almost terminal disarray, with foreclosures and inventories of unsold units rising, and prices falling. Finally, we know that the U.S. economy is, at minimum, slowing, and possibly already in recession. Hence the investment bankers' demands for "more": Ben Bernanke must cut interest rates, and the president must meet the demands of Senate Democrats to enhance the $168 billion stimulus package he signed last week.

Really? Consider each of those certainties in turn. To those who moan about a credit crisis, Warren Buffett, the legendary sage of Omaha, has this to say, "Money is available and it's really quite cheap." What he calls the "dumb money" might have stopped chasing risky investments, but cash is readily available for sound deals and to sound creditors.

He cites a few people who should know about the health of the economy - actual business people rather than Wall Street gurus and economists:

But who are we to believe--the economists and pundits who see gloom and doom, or the businessmen on the sharp end of the economy, producing and selling things? Jurgen Hambrecht is CEO of BASF, a giant manufacturer with 90,000 employees and sales of well over €50 billion, garnered by selling hundreds of thousands of products to a wide variety of industries. He tells the press that he does not foresee a U.S. recession, and that "I am glad to say that business in general does not show the panicking approach of the financial industry. . . . I am sleeping well at night." Hambrecht is not alone. Executives at General Electric, Honeywell, Procter & Gamble, Kraft Foods and the owner of this publication, News Corp, are among the many who claim that their businesses have never been better, that sales and profits are up, and that bookings are strong. The more cautious add, "so far."

Read the whole thing. He's also got a piece in there about why home prices may not be falling as much as some believe.

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