Tea Leaves and Sheep

November 11, 2012 Leave a comment

Whether you’re divining from tea leaves or the entrails of sheep, picking up clues as to what’s going on with the economy and where it might be headed is at best an imprecise art.  Here’s a collection of observations from the past few days and weeks.

Last week I was in Dallas.  I found the airport to still be undergoing such a huge construction/ expansion / renovation/make-work project that it’s impossible to get anywhere around it or through it in a reasonable period of time.  The freeways were clogged and the restaurants crowded.  There was no shortage of consumer spending here.  Plus a steakhouse I visited had very recently raised the price on a nice ribeye from $39 to $57 – quite an increase!  But people were paying it.

Speaking of restaurants, no matter which one I visit, I’m finding new menus with higher prices.  Yet these obvious inflationarly increases somehow don’t find themselves reflected in our government’s official inflation figures.  Maybe people don’t notice.  But they keep paying the prices.  I can’t remember the last time I went into a deserted restaurant.  Friday nights are crazy busy.  And it doesn’t stop there.  Other nights are pretty busy, too.

Oh, wait; I can remember the last time I was in a deserted restaurant.  It was back in June at a local Chinese hangout of mine.  I was at one of two tables that were occupied.  Several people were at the other one; I was the only one at mine.  But the restaurant was enjoying a boom evening in take-out traffic – there was a constant flow from the time I arrived until I left.

This week I was in Memphis.  A place there that I’ve seen under construction for years now has a name on it and a paved parking lot out front.  Since 2010, I’ve passed it a number of times and each time it appeared construction had stopped, although once in a while I thought maybe a little bit more had been done.  I figured it for an auto dealership, or a parts store, or even a hardware store if the owners ever found enough money to finish it.  Now it looks like they have and it’s about to open.  And it’s a church.  Go figure.

Memphis has also just about completed it’s huge airport upgrade project.  The new tower looks about done.  The huge new on-site parking garage looks about finished.  But the traffic – well there’s the rub.  It seems that Delta (who bought out Northwest, which had a hub in Memphis) is nailing the city to the wall by cancelling direct flights and raising fares to such heights that the mayor and lots of local businessmen are pleading with Southwest and anyone else who will listen to come in and save them.  Bright shiny new airport – not enough passengers to fill it.  Bad recipe.  Will a growing economy help it?  We’ll see.

And my curious traffic indicator?  I have an update there.  Suddenly, traffic has returned along with congestion and tieups.  Also, counts of 18-wheelers along a specific stretch of interstate at a specific time of day are up quite a bit.

What does it all mean?

I don’t know.  With all the other complicating factors in this economy, it’s hard to divine.

I suspect that the fiscal cliff won’t be one – our politicians will kick that can down the road a bit.

I suspect that the European crisis will get kicked further along as well, with just enough “progress” to stave off a financial meltdown but not enough to keep us from being concerned.  A banking union in the EU without a political union?  Don’t think so.  Britian must be patting itself on the back about now, while staying plenty worried.

I also see this week that China seems to be improving, thanks to government stimulus.  We’ll see where that leads and how long it lasts.  But at least it’s not negative news right now and the markets will like that.

Speaking of the markets, we’re hovering at nearly a 20% correction and the doom-sayers are calling for it to fall to 2009 levels.  That’s probably a great sign.  20% corrections are good things, generally, and pave the way for the market to move higher.  If we can believe the latest government stats, and, I believe, we can, then the U.S. economy seems to be improving.  So that’s good for the markets and the economy.

Will Obama’s reelection damp that improvement?  I doubt it.  But the burden of health care costs could impede business expansion.  If taxes do go up much on businesses, that could lead to continued off-shore hiring where labor is cheap and health care expenses can be avoided.  It could also lead to companies putting expansion dollars in offshore markets vs. the U.S. and that would hurt.  It might also lead to companies “working” the system to avoid having to pay high taxes and high health care costs.  None of these things are good, but they are the reactions that I suspect are most likely if business is punished.

Also beware the U.S. imposing ridiculous tax rates on the wealthy, a la France.  That would be a disaster.  But I don’t think it’ll happen.  We know who controls Congress and the White House and they won’t let it.

So where does that leave us?  Guardedly optimistic, as long as some great big shoe doesn’t drop somewhere.  The market may drift downward another percentage point or three but I think it’s likely to end there.  The fiscal cliff will fade for a while.  Better economic numbers will previal.  The market will rise.

But watch out for the second quarter of 2013!

Filed under The Economy, The Market

Back to School Economics

October 7, 2012 Leave a comment

Every fall as school starts, there’s a pronounced impact on rush hour traffic as patterns and volumes change to match new schedules.  Parents have to drop kids off at school at specific times and that often impacts their arrival times at work.  School busses crowd the highways and neighborhood streets.  And my 25 minute summertime commute grows to 30-35 minutes, sometimes more, as the normally fast-moving interstates and spurs turn into clogged arteries that often bring me to a full stop.

This year the crush was a little worse than last.  The usual ramp-up came right on schedule as vacations ended and secondary schools began sessions.  Two weeks later, when the universities started classes, the roads were clogged, big time, for a full week.  In past years, Monday’s and Tuesday’s were horrific, Wednesday’s a little better, and then Thursday’s and Friday’s not so bad.  Friday’s could sometimes even be light.  This is good, I thought; the economy is getting better.  There are more people on the road than in previous years and that means more people working than before.

Over the past few years, what I’ve been seeing on my local highways seems to reflect what’s going on in the national economy pretty well.  Fall 2012 traffic was worse than 2011.  2011 should have been worse than 2010, but it wasn’t – a reflection of the global economic effects of the Japanese tsunami.  But Fall 2010 traffic was a great deal worse than 2009 as the economy began to recover.  I was heartened to see a lot more traffic on the road than in 2009, a year when it seemed no one needed to go anywhere.

But even though traffic patterns this Fall were worse than last, something funny happened.  It stopped.  After about two weeks, the crush dropped dramatically.  There were only a couple of bad traffic days in the following two weeks.  In past years, this has happened much more slowly; never this fast, and never this significantly.

What does it mean?

Frankly, I’m not sure.

Have drivers simply improved their skill and are therefore causing fewer traffic-tying fender-benders?  I doubt it.  Have drivers become more proficient at finding alternatives to the busy interstates and spurs?  Perhaps, although I doubt this, too.  Are more people suddenly out of work?  That also seems unlikely; cuts substantial enough to cause this phenomenon would make the news, big time, and there has been no such news.   So what, then, is the cause?

Two remaining possibilities come to mind.  One: what if the initial two-week crush was a false signal?  What if, instead of signaling more people working, it simply signaled hopes on the part of parents and students that times were getting better and kids going back to school was the fresh start that non-working parents needed to get back out and look for work.  Maybe parents didn’t find it, and they got disheartened again and are now hunkering down to save gas and have money to pay for junior’s lunches.

Or maybe, after two weeks, students, faculty, parents, and workers quickly figured out ways to carpool.  Maybe that, along with some finding of alternate routes, led to the decrease in traffic on the major thoroughfares.

But that’s a lot of maybes.  And none really satisfy.  So, again, what’s the cause, really?  The truth is, I still don’t know.  But I’ll bet that in a few months the clouds will begin to clear on this issue.

Stay tuned.

Filed under The Economy