Item: San Francisco Chronicle business columnist Kathleen Pender noted on July 1st that investors were turning to both gold and bonds, a confluence she’d never seen before.
Item: Interest rates are at historic lows, but according to my colleagues in that segment, there has not been a corresponding increase in mortgage inquiries. For my entire career in mortgage lending, when interest rates went down, the phones would ring like crazy.
Item: The stock market fell below 10,000 again, amid worries that the recession is going to be shaped like a W rather than a V. Unemployment remains high, so consumers are hanging onto their money.
I’m no more prescient than other investors. I see conflicting issues everywhere as well. On the one hand, I see the U.S. moving from a manufacturing economy to one based on technology. The latter not only needs fewer workers, but it can just as easily be replicated overseas with cheaper labor. Even if you factor in our superior intellectual property laws and transaction protections, that kind of paradigm shift always causes problems.
But on the other hand, I’ve also been talking to colleagues who are working with private hedge funds who need to invest somewhere in the neighborhood of $41 billion in order to fulfill their business plans. They want to get in, get out, and count their profits. It’s hard to do that these days (although my sense is that you could buy most of downtown San Francisco for $41 billion right about now).
That may be our current economic dilemma in a nutshell: People with money won’t do anything. People without money can’t do anything. We don’t have answers and we don’t know where to look for them.
I still believe the answer has to start with the housing market. I believe that low interest rates are going to do their part to entice buyers back in, and that may help trigger perhaps just the small avalanche necessary to get us rolling again. In the meantime, something I’m now considering is do we have a business un-friendly administration in power?