Hot topics in today's finances
Headline negativity
Am I the only guy in Australia who believes that the only thing to fear is fear itself, and what the media can do with a fearsome headline? The answer is no as I have met small business people who are positive as well and are as mad as hell at my media mates always playing up the negative.
Unexpected response
Only last week a delightful young radio journalist wanted me to comment on the scary IMF headline in one of our great metropolitan newspapers.
Her first question was something like, should we be concerned about the IMF warnings? My answer shocked her: "I'm not worried about these IMF predictions as this body, as forecasters, have been a team of nincompoops. They have been getting it wrong for a year and so I would not get too jumpy about what their crystal ball says."
To this the young journo came up with a reply that explains how the media is driven: "So, this isn't a story we should be covering?"
And to that I responded: "No, to the contrary, that is the story!" I hope I gave her a valuable lesson about journalism. We are in the business of trying to find the truth of a matter within the context of news.
Wildfire
At the moment the only stories that attract the big headlines are negative ones. If Access Economics comes out with a press release saying it has raised its forecasts on unemployment, this becomes news for all radio bulletins on just about every radio station. It finds its way into newspapers and television and it's just an opinion.
I have always loved the line: "Opinions are like arseholes - everyone has got one!"
Access could be proved right in the fullness of time as they are a credible forecasting outfit, but hells bells they could be right, they could be wrong or they could be crazy.
Not so crazy
Many thought I was crazy early last year when I railed against rising interest rates. There weren't many economists or economics commentators castigating the Reserve Bank in those times.
In fact, the negative story line carried by media outlets then was to be afraid of inflation, and interest rates that were about to rise again and again. It lead to a long queue of people who fixed their interest rates and now have missed out on the 4% of rate cuts that have happened since September last year.
Balancing act
I'm not arguing for good news stories only, I'm arguing for balance and given the year-long commitment to negative stories, media outlets might actually do themselves a favour by looking for some positive news.
A few weeks ago a weekend newspaper warned about a deep recession and 9% or more unemployment, however, when I looked more closely at the survey of the 18 economists who drove the story, I found only three out of the 18 have unemployment topping 9%!
Positive forecasts
I recently did a speech with CommSec's Craig James, who shared his forecast with a small business audience, and this is what he came up with:
- Economic Growth for 2009 @ 0.5%
- Economic Growth for 2010 @ 1.5-2%
- Unemployment for 2009 @ 6-6.5%
- Unemployment for 2010 @ 5.75-6.25%!
These are the most optimistic forecasts I have seen and therefore are just as newsworthy as someone who thinks unemployment could go to double-digit levels, as it was reported someone has tipped.
The right conditions
Lots of stars might have to align to make all of this happen, and some already have. These include: China must grow better than doomsday merchants were predicting late last year. That has happened.
Wall Street needs to rally and resist falling to the lows we saw on March 9 and this has happened.
The US banks have to convince the market that they can get through this and see their share price head up. This has happened too.
Better than expected
Let me be objective, I worry about the details of the US stress tests for US banks and the question marks over European banks. These could produce a new Bear Stearns or Lehman Brothers, which could spook the market, but so far so good.
In the USA, the most recent company reports on profits were better than expected and this means the analysts were more negative than they needed to be. And that would have been because economists were more negative than they needed to be.
Lately US consumer confidence readings have been better than expected and global performance manufacturing indexes have improved. We seem to be getting better faster than expected and that's despite the best efforts of the media to keep scaring the pants of consumers and small business.
We understand
Adding to the worry warts are the Prime Minister Kevin Rudd and Treasurer Wayne Swan, who have done a great job in stimulating the economy along with the Reserve Bank, but lately have been emphasising how we are dependent on the global economy and it looks like it's getting worse.
They are trying to implant in your brains before the next election that this recession and unemployment is not down to them. All I say is this: Yes, we get it, it's not your fault but if you keep playing the negative messenger you might become an accessory after the fact!
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