Monday, June 28, 2010

Recovery: Economic and Personal

When will the economic recovery begin? That is the question asked of me by students and associates almost every day. My answer, the recovery has begun but very, very slowly and it depends on what your individual place is in the economy.

A widespread recovery is under way among many companies. Since January, 136 companies in the Standard & Poor’s 500-stock index have either increased their payouts or initiated new dividends, increasing dividend payments by $11 billion this year. This resumption of dividend payments can be seen as a sign of improved financial strength and confidence. Board of Directors won’t declare dividends or increase them if they feel that the companies need those resources for other purposes (working capital, product development, etc.).

As corporations have tried to cut debt (laying off workers or not hiring) and improve their finances, they have been accumulating a great amount of cash. This is where the downside of our current recovery is; unemployment. Many companies will wait until they see consistent growth and recovery until the hiring process heats up or they now realize they can manage their businesses with fewer people. So count on unemployment to remain high well into 2011. What this all means, well if you are an investor dividend return will grow but public confidence will remain shallow until unemployment decreases, thus stock prices will flounder. For the consumer, debt must remain low and saving must remain high. The recession is not over but there are positive signs for new growth but not until the third quarter of 2011.

Many people believe the Federal Government must continue to create stimulus packages to give the economy a kick start. But as we have stated here in the past can we realistically assume any more debt? The recovery now should be driven by corporate capital and consumer spending. Policy and actions will be debated in the months to come. This leads us into our next topic for the week; should we go on a vacation this summer, where to go and how much to spend?

The answer is definitely yes for going on a vacation. We all need time to get away from work, freeways, Facebook and Larry King. The main question for this writer is where to go, because that will determine how much to spend.

The age old question, a family vacation or go someplace cool. Someplace cool: go watch the Space Shuttle launch before the program closes; go to that cabin or cottage in the middle of nowhere and tell no one; go to a golf academy for a week and finally really learn how to play this stupid game; or just go to a far away beach and do nothing. Well like many things in our lives compromise comes with the territory, so family it is. But down deep that is not a bad thing anyway, because without family all the cool things would no longer be cool.

World Cup Final Picks – Argentina vs. Portugal

Next week: Independence Day and a mid-summer nights dream.

Until next Monday, Au Revoir.

Claremont, CA
June 28, 2010

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