Glimmers of hope vs. global meltdown
Filed under: Economy, Investing
General Electric (GE) has started to see the first "glimmers of hope" in the world economy, according to Nani Beccalli, CEO of GE International, which is in charge of all its business outside the United States. George Soros, on the other hand, believes we could end up with a depression unless we handle the current crisis well, saying "the size of the problem is actually bigger than in the 1930s."
It's fascinating to see these two views clash, especially in light of Soros' own investment philosophy of reflexivity, in which people base their decisions on their own perception rather than on reality. Of course, it's difficult to know yet which is the reality, but three things are certain: GE is the world's largest industrial group; we would rather believe we're coming out of this recession soon; and Soros made a ton of money by identifying a disjunction between perception and reality.
As the world's largest industrial group, one cannot dismiss what GE sees. Quite the contrary. If GE says it sees several encouraging bits of economic data around the world that it didn't see two months ago, then there's little doubt it does.
What are these bits? "Signs of life" in the U.S. and European retail sectors, improving profits among European banks, recent rise in the Baltic dry shipping index, which acts as a proxy for global trade, and increasing house sales in the U.S. in February.
Beccalli quickly hedges, though, saying these aren't "the light at the end of the tunnel but rather some little sparkles." And if it was just Beccalli, it might have been easier to dismiss, but it's also others like Cisco's (CSCO) Stefano Pambianchi, who said technology companies were also seeing some rebound in orders.
Indeed, there's a need to believe the economy may soon recover, but one cannot ignore other signs, mostly the rising unemployment in so many parts of the world. It's difficult to see how things can improve as long as the jobs market is in such distress. Aberrations, such as sudden high retail or housing sales can happen and don't make a trend.
As for Soros, he thinks that "events are always exceeding people's understanding." Just like another well-known oracle, Warren Buffett, he believes the "complex financial instruments used by the banks were economic weapons of mass destruction," and he actually expected the tipping point to come much sooner.
Now, he says, the important thing to realize is that "the system that collapsed was flawed," and hence shouldn't be restored, but reformed, yet politicians and bankers alike hadn't realized this yet. He thinks the G-20 meeting in London this Thursday is the last chance to avert disaster, but even before the leaks that a coordinated stimulus plan is not in the cards, he thought it would fail. If the plan fails, he said, then "the global financial and trading system falls apart," and "could push the world into depression." Even if the depression will not happen -- although he thinks chances are quite high it will -- the recession will last a long time.
It's easier to listen Beccaili, and surely his comments are important, but it may be more important to listen to Soros and consider his words (even if he says he has psycho-somatic illnesses that tip him off to changes in the market). The signs are around us; has anyone seen any "sparkles"?
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Reader Comments (Page 1 of 6)
3-30-2009 @ 3:02PM
Gilewicz said...
"It's difficult to see how things can improve as long as the jobs market is in such distress." Assuming you came of age before one or more of previous recessions, can anyone recall the job market not being in distress until after other indications of a recovery were well in hand?
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3-30-2009 @ 4:26PM
Sandy6 said...
If the question is the unemployment rate as the main factor in perceiving an economic recovery then think along the lines of 1st-2nd quarter 2012 as being through the worst of it. I think there will be recovery in some industries a little earlier and others much slower such as low to moderate cost housing will follow upper end housing and commercial construction by perhaps a year while heavy industrial manufacturing will recover much slower except for automobiles and heavy equipt. The projection is another half a million job losses for the next few months with the trough hitting around 10%+ unemployment early next year then stabilization at a high rate for months.
3-30-2009 @ 3:12PM
dave said...
Soros should retire to Miami and play Pinochle all day by the pool.
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3-30-2009 @ 4:31PM
Sandy6 said...
Warren Buffet lost oddles of money last year, Soros didn't. You may not like his politics but the man knows how to call things as he sees them with a high degree of accuracy.
3-30-2009 @ 6:37PM
jessie said...
maybe he should become an American first, and if you want to see alot of what is wrong, look at soros speculation, he is one of the largest speculators out there
3-30-2009 @ 3:20PM
JANE PALMER said...
This old goat has played the world market until he has crude inside and out. He needs to just shut up. No doubt he is after his next several billion with these prognostications.
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3-30-2009 @ 3:22PM
sheldon cohen said...
In the coming thursday international conference China will advocate for a common international currency and the
uks PM Brown will propose a central international oversight of all the banks of ourt global village. This is a good first step in building a new world order. Logon to http://www.realworldnewworld.com and http://www.scohen305.blogspot.com
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3-30-2009 @ 3:31PM
james said...
Of course Soros is predicting a depression! He is just another far left loon invested in America's demise. Can anyone give us an example of the last time Soros said something positive about America. His hate of this country and closed minded leftist ignorance are deplorable!!
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3-30-2009 @ 9:09PM
clares said...
Really. And you think that the right has done so very well by us in term of finance? And what do you think socialism is? The police? Fire department? Schools? Public vaccination programs? Public roads? All socialist. The right simply knee jerks and promulgates fear. Like the 60 million Americans without health insurance? Like the fact that a quarter of all bankruptcies are caused by outrageous medical bills? What is it that you want? That's a real question, and conservatives don't have any real answers.
3-30-2009 @ 3:26PM
janskor said...
How can things get better? Obama gave money to the states to help unemployment removing tax on unemployment as well. The states are doing what they please with the money and it is not trickling down to the people. Rhode island has decided to continue to tax unemployment and has one of highest income taxes, put more tax on gasoline and cigarettes-an extra dollar in taxes. The governor, I swear, has dimentia. It's insane. How can we survive with the governor hoarding the money for his fat cat friends in big jobs with big pays and benefits. No extra money to cities and towns for education and services.The Federal Govt should investigate to see if the stimulus money is being used appropriately. I bet it isn't!!!
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3-30-2009 @ 5:05PM
Ron said...
Not enough stipulation and legislative over sight on the stimulous. It was just ram rodded through and was never meant to reach us or it would have been given to the common people as a tax break or check. the working class is just expected to pick up the multi trillion dollar tab in the form of taxes. You have not seen any thing yet !
3-30-2009 @ 3:27PM
John said...
George - if Chuckie Schumer ever retires, I hope you run for his office. He can turn a silk purse into a sow's ear.
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3-30-2009 @ 3:28PM
Robert Kiejdan said...
Surprise, surprise George the puppeter is a work. The man who spent hundered of millions of dollars on Obamahs presidential campain is going short now.
Maybe he destroy our dollar as he did the Tiawan's?
Please John Galt save us?
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3-30-2009 @ 7:33PM
c said...
I've thought the same thing re John Galt, and more than once! Obama seems to be following that philosophy, from each according to their ability to each according to their need. Big question, who decides each's need?
3-30-2009 @ 3:28PM
Kurt Koehler said...
Isn't Soros the person who financed the rise of Nancy Pelosi and Obama? If so, then he is directly responsbilie to a large degree for the recent move to ever greater socialism. Please point out throughout world history when socialism has produced a country that is a leader in anything? The result is today's Europe: a very high unemployment rate, stagnation, no innovation, and mediocrity. I will place my faith in GE instead of in a person who is using this recession as an excuse to aggressively pursue ever greater power accreting to the governement financed by money we don't have that will never be paid back which therefore will lead us to bankruptcy.
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3-30-2009 @ 3:38PM
nofuturescommodities said...
YEA, LOOK AT ALL THOSE DAYTHUMPERS DUMPING THAT CRUDE....DUMP IT NOW BABY IT'S TANKING ...SELL...SELL...SELL CALL MY BROKER
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3-30-2009 @ 3:42PM
Mark said...
The economy is heading toward a depression that will last more than a decade. To think that its down turn will be over in a year is optimistic but not based in reality. This crisis is twenty five years in the making and I reason that it will take at least half this time to correct our economic woes. Unemployment will hit 13-15.5 % within the next two years. One would take heed of Soro's prediction.
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3-30-2009 @ 3:49PM
Sonny said...
George Soros, the biggest contributor to the Democratic party, bragged about making over a Billion dollars during our economic downturn. He knows what Obama is doing regarding the economy (bailouts and handouts), will lead us to a depression. By talking depression, he is giving Obama more power to keep doing what he is doing(anything to save our economy). Just the fear that our economy is going into a depression, gives Obama the power to do all these crazy things. Soros is no better than a two bit pimp.
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3-30-2009 @ 3:57PM
MIMI said...
I COULD CARE LESS WHAT THIS AMERICAN HATER HAS TO SAY.HE MADE A LOT OF MONEY IN AMERICA, THEM HE PUTS US DOWN.I SAY SOROS GO TO HELL AND BURN.HE HELP PUT THIS MORON PRESIDENT IN ,AND THEY ARE TAKING OUR MONEY.HE WANTS AMERICA TO HAVE SOCIALISM. GO TO HELLLL !!!!!!
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3-30-2009 @ 3:57PM
jprpfan58 said...
The media is just making things worse by publishing all this horse crap on a daily basis.
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