Sustainable Land Development Today - February 2008 - (Page 6) OUR VOICE Like a Gorilla on a Balance Beam It’s no headline. We are in the midst of a serious economic downturn. Many knowledgable, highly skilled members of our industry will face severe challenges and potential ruin due in large part to circumstances beyond their control. How severe the downturn will be is anybody’s guess, and for most that’s exactly it…a guess. How will it come together and when will we start economic growth again? Nobody really knows the combined impact of the subprime mortgage debacle arriving at a time of housing-market decline, coupled with record-high oil prices, and the weakened U.S. dollar countered by the power of consumer spending, a strong stock market, adjustments in monetary policy, and growing international markets. Nobody knows. A primary reason for that lack of accurate predictability is the unpredictable nature of consumer confidence, which drives as much as two-thirds of the U.S. economy. Like a 500 lb. gorilla on a balance beam, it can dip, lean or fall in any direction to drive the outcome. As it goes, so goes the nation and much of the world. Throughout the year, we will hear reports about this indicator and that index, from this economic prognosticator and that analyst, on how the economy has been doing and where we are in the current economic cycle. Those reports will have a significant impact on how the media reports on the economy. A constant dose of doom and gloom will return more of the same as consumers duck for cover with a “stockade mentality.” They’ll slow their spending, pull out their investment dollars and essentially take their foot off the economy accelerator. On the other hand, a regular diet of feel-good stories will likely create positive growth spurts. As in the past, we will hear both and probably a healthier dose of the doom-and-gloom variety. With the plethora of media, from mainstream news services to personal blogs, there will be no shortage of perspectives put forth. Through the fog, some long-time observers of the economy offer sage advice. Don’t put too much credence in shortterm indicators. They go up and down, conflict with one another and generally confuse the masses. A better read on the economy can be taken by longer term indexes, such as those that cover a 12month period or longer. A case in point; many financial advisors encourage their clients to make their investments and then leave them alone rather than constantly buying and selling. They produce reports on suggested investment products that show earning trends over one year, five year and longer periods. A more reliable trend can be seen. A graph that drives home the point further is the one that charts the growth of the U.S. stock market. The Great Depression, which bankrupted tens of thousands of individuals and impacted the economy over much of a decade, is its most predominant drop, yet the line has always trended upward over the long run. The bottom line is that as much as we all want to know immediately the depth and breadth of the economic downturn, the short term readings that will get a lot of the headlines will not likely be the best indicators. But such readings viewed in a series going back a year or more can offer a better sense for trends. Further, a stockade mentality will not help the consumer or our industry dig out of the economic downturn. However, it will get worse before it gets better. There will need to be a downward correction in order to build a sustainable base for the next upward moves in the economy. Therefore, "hope for the best, but prepare for the worst" is the best advice. A clear eye and objective observation of reliable information will be key in the months ahead. Rob Kundert, Senior Editor “The mission of Sustainable Land Development Today is to be the leading forum for the exchange of ideas to advance the principles of sustainability--balancing the needs of people, planet and profit. In fulfilling that role, divergent beliefs and perspectives will at times result in debate which we believe will produce the solutions required to address the ever-changing challenges of the industry into the future. 6 February 2008 Sustainable Land Development Today
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