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Who’ll profit when economy snaps back

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mwkruse
in ,

Philadelphia Inquirer: Who'll profit when economy snaps back

A look at companies in several sectors that are poised to soar once the rebound starts.

NEW YORK – Economic cycles are Darwinian, picking off weak companies and leaving survivors stronger.

A year into the recession, solid retailers have their pick of mall space. Respected banks are getting an influx of deposits. Tech companies with money to spend are having an easier time hiring.

It has been a year of brutal losses. More than 1.2 million jobs have vanished. The broadest measure of the stock market, the Wilshire 5000, is down more than $7 trillion, a 40 percent slide.

Corporate survivors, however, should benefit as competitors disappear.

Retailer Bed Bath & Beyond Inc. will not have to contend with Linens 'n Things Inc., which is in liquidation. Best Buy Co. Inc. may not be fighting price wars with Circuit City Stores Inc., which is reorganizing in Chapter 11 bankruptcy. FedEx Corp. will not scrap for market share against DHL Express, a German-owned company that is leaving the United States. …

I don't know if Darwinian survival of the fittest is the best analogy. I tend to think of this more as the occasional forest fire that sweeps out the underbrush and leaves the remaining forest life in a healthier, more fertile condition. It is a natural process of the business cycle. 

We've had a great relationship with a plumbing, heating, and cooling company. They provide excellent service, great follow-up, and at reasonable prices. They just installed our new heat-pump system a couple of weeks ago. I asked how business was going. The guy told me they were doing great. They're hiring people. A couple of local firms that became too loaded with debt and provided less quality service are likely to go under next year, and this firm believes they will be able to buy these firms out, giving them access to their client base. Firms that behave responsibly consistently may not catch as much of the big boom upswing, but they are the ones who generally survive and even thrive in the downswings, snatching up opportunities.

I have other business owner friends who have very optimistic long-term (more than a year) views. Down business cycles are not entirely bad things, but that doesn't mean they aren't painful.

Comments

2 responses to “Who’ll profit when economy snaps back”

  1. Edward J. Dodson Avatar
    Edward J. Dodson

    This downturn in the so-called business cycle is accompanied by a chain of crises not present since the Great Depression. The U.S. government debt is at a level that no economy has ever endured without runaway inflation. The measures required to stabilize the economic system are not even seriously under consideration because they require removal of entrenched privilege from powerful vested interests.
    There is no natural business cycle. What we think of as a business cycle has at its base an 18-20 year land market cycle directly caused by manmade laws that cause land markets to be inherently dysfunctional.
    The sad thing is that political economists from the days of Adam Smith understood this to be the case and what needed to be done about it, which was to remove from taxation all goods and commerce and income derived from producing goods or providing services. The natural and just source of public revenue was and is “ground rent” (i.e., the annual rental value of locations in our cities and towns, of natural resource-laden lands, the broadcast spectrum, rights of way in the air or on land or the seas — just to name the primary sources of “rent”).
    Doing what needs to be done, however, is almost impossible in a nation where land speculation is accepted as one of our natural rights!
    So, we are already headed into another Great Depression that may last longer than what we experienced in the 1930s. We ought to remember that it was only the full employment associated with the Second World War that brought us out of that last depression.

    Reply
  2. vanskaamper Avatar
    vanskaamper

    Good post, Edward.
    remove from taxation all goods and commerce and income derived from producing goods or providing services
    Pity that this idea isn’t getting much traction in our nation’s capitol…

    Reply

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