Market Uncertainty Over Greece and France

Markets decline over French and Greek voter rejection of austerity measures.

With Europe, the largest economy in the world, effectively in recession, and with voters rejecting more austerity measures (Sarkozy is the 11th European leader ousted since 2008), markets around the world have tumbled. 


Previous good news about increased U.S. demand for goods has been shrugged off by investors.

Canadian Manufacturing Exports Improve

Purchasing Managers Index

Increased U.S. demand is helping drive Canadian exports, which is good news for manufacturers.

New hiring continued although at a slower pace.  There is cautious optimism in the manufacturing sectors with an increase in new contracts with (primarily) U.S. clients.

While the news is good, manufacturers are not out of the woods yet and must remain focused on cost management while sales begin a slow (but not steady) increase.

What it Takes to Be an Entrepreneur

Many people fantasize about running their own business. The idea of being your own boss, setting your own hours, doing what you love and, hopefully, making a lot of money, is hard to resist. Of course, the reality of not only leaving a current (likely safe) job, setting up a business, and actually succeeding is quite different.

Leaving the security of a job to strike out on one's own is not for the faint of heart. The more you have to risk, the more you have to lose. It's no surprise that many people begin running their own businesses when young and with relatively limited assets.

As I note in the Blooberg article (see link - click title): If you have been thinking about starting your own business for years but have never taken the leap "you may have to face the reality that you aren’t cut out for entrepreneurship."

Tough Year Ahead

To no one's surprise, 2012 is predicted to be a difficult year. Unemployment is up, deficits are huge and political dithering over austerity measures in Europe is likely to continue.

Few are holding their breath that the U.S. can get unemployment down or reduce the deficit by any meaningful amount. Factor in the continuing crisis in Greece and Italy and it is going to be a rough year for everyone.

Even Canada, which has weathered the storm relatively well, is not likely to escape unscathed. Prime Minister Harper has warned that 2012 will require 'tough economic choices'.

The economic recovery is looking less like a recovery and more like a Global Recession.

The L-Shaped Economic Recovery

Last month the White House indicated that, due to policy mistakes, the U.S. is in an L-Shaped economic recovery instead of a V-shaped economic recovery.

I had indicated in April 2009 in a comment on a Wall Street Journal article that we might be facing an L-shaped recovery rather than a U or V Shaped recovery.

http://blogs.wsj.com/economics/2009/04/23/green-shoots-dont-come-cheap/tab/comments/

In response to an initial comment regarding the economy and how we were facing a U-Shaped economic recovery as opposed to a V-Shaped economic recovery I stated:

The real concern should not be whether it is a U shape or a V shape, but whether or not it is a L shape. Note the IIF mentions the concerns about the high debts and deficits of many governments (not to mention many corporations). Concerns about recovery in the medium term might mean slow growth for years as governments struggle with a mountain of debt.

2 and a half years later it looks like my statement is bang on. I'll admit I did use the word 'might' but overall, this is correct today as acknowledged by the White House last month.

Does S&P Lack Credibility?

With the news of the recent loss of the U.S.' coveted AAA credit rating, stock markets went into a tailspin. All three major U.S. stock markets fell between 5% and 7% since the announcement by S&P.

The downgrade was a result of political disputes on how to handle the mounting debt. S&P delivered a sharp rebuke to the political class of the U.S.

Investors obviously panicked and decided to sell and ask questions later. However, some analysts are questioning the credibility of S&P in particular and rating agencies in general. S&P, along with Moody's Investors Service and Fitch Ratings were the same agencies that gave AAA ratings to subprime mortgage instruments that were, for the most part, junk.

Add in that S&P made a slight mathematical error when they first submitted their report to the Treasury Department: S&P, due to a computational error, overstated the debt problem by $2 trillion!

Nevertheless, even though this was pointed out, S&P still downgraded the U.S. rating.

The U.S. is definitely in trouble, but S&P lacks the credibility necessary to be the ones to point this out.

A Double Dip Recession?

Are we heading for another recession? Based upon the most recent headlines, some experts say yes. Still, it's far from a certainty and may simply be a minor correction before the economy begins a slow recovery.

It is possible that the worst is over in terms of housing prices, job losses and the hit to savings and retirement funds. On the other hand, few economists predicted the housing crisis or the worldwide fallout or the subprime mortgage crisis, so one can be forgiven for being skeptical about claims about 'market corrections'.

Given the US debt crisis, the EU debt crisis, the weakening US dollar and the fall in the stock markets, many are speculating another Great Depression. Along with calls to move back to the Gold Standard, is it any wonder than many fear another global meltdown?

Whether this will happen is anyone's guess but with the US debt at over $12 trillion and with record consumer debt, it may appear inevitable that the modest gains in the economy will be rolled back.

Nevertheless, it is likely that we will narrowly avoid dipping into another recession, but it is clear that we are not out of the woods yet.