A Few May Flowers Sprouting from the Giant Manure Pile...

I tried to come up with a poetic title as my first published poem is contained here. What would Shakespeare say about the events of quarter 1 - 2009? How about..."A jump in the stock market doth not a recession end"? Or..."A slowing recession by any other name still stinks"?

Let’s just put all the cards on the table and acknowledge that there are serious issues with the US economy.

1) Unemployment continues to creep higher.

2) For many sectors of the economy the "credit freeze" continues as the performing banks remain mired in a political nightmare.

3) There is a sleeping giant about to rear its ugly head in the commercial real estate market. The government is trying to "save the day" here like they did with houses. I don't think we can afford to be "saved" again.

I am compelled to comment on the stark contrast between my statements above, and the newly developed cliché of 2009 in which experts knowingly state "there are recent signs of green shoots in the economy". "Hey, thanks for the encouragement guys. Does this mean that we can all go back to work?" Unfortunately, it does not. The economy you remember from 2007 is long gone. That is not to say that unfettered optimism will not someday return to this economy; it will, as this is fundamental to human nature to forget the bad times, once we are on the upswing.

However, enough bemusing about the history of capitalism (it's what I do now that I don't occupy my time with developing sales pitches for venture capital firms with hopes of retiring in just four short months. You laugh? You think that's funny? Well, I wasn't the only one.) - what are the implications for TODAY?

Today, a new economy is born. How is it different from the last one? If Dr Seuss and Alan Greenspan co-authored a poem it might read like this:

Companies do not want salesman - they want cost cuts.

Companies do not want sales growth - they want profits.

Companies do not want to increase prices - they want to get paid.

Companies do not want to borrow from banks - they want more cash from stockholders.

Companies do not want to develop new product lines - they want to scale back to what is proven.

Perhaps you have heard the $2 word "deleveraging" lately? Most people and companies need to sell assets and pay down their debt. This has important implications for companies who cannot let profits go down: It means they must generate the same profit with fewer assets. Or get fired. Or go bankrupt. Or get taken over.

Insurance companies and banks are like Robin Hood. Banks take deposits from those with extra cash and give it to worthy borrowers who need it. Insurance companies take cash from policy holders, and then they give it to those who need it. For example, many retirees buy an annuity from a life insurance company. AFLAC will take your cash and pay it out monthly to those who are still left alive (those who aren't left alive don't need it) what a great business! And no complaints from former customers :) Everybody should own some stock in a highly credit rated insurance company.

The most important theme in business success today is the importance of:

A) Your Reputation

B) Your Track Record

C) Your Capability

Let's talk about a poster child of Capability. Sam Zell is the legendary real estate investor who sold huge gobs of commercial real estate in 2007 to the geniuses who were running Wall Street. Today those same properties are worth half. In this day and age, actual ABILITY to run a business matters. Speaking of Sam Zell, he is the top executive of EQR, a REIT which yields 8%. Anybody interested in jumping behind a PROVEN savvy operator? You may want to consider an investment in EQR.