The Economic Future of the United States

Since we started this weblog, we’ve often expressed our concern that the US seems intent on losing its economic primacy in the world, and that such a development would have a significantly negative impact on the standard of living that Americans are accustomed to. In recent days, we’ve come across some competing views on the subject from some smart people. Few would argue that the US will remain the world’s sole economic super power indefinitely — the arguments tend to center around the timeframe over which a decline in relative status will occur. We think we’ve found two that are among the best of the bunch, for those interested in reading more about it:

Tony Crescenzi of Miller Tabak argues that the economic, political, and military supremacy of the U.S. has a long time to run, and that this will support the USD and US Treasury debt for some time.

Roger Ehrenberg of Information Arbitrage, borrowing a phrase from Intel founder Andy Grove, believes that the U.S. is at a "strategic inflection point", where soon-to-be-made policy decisions will have a longstanding impact on our position in the world. He makes some interesting points that reflect his background in, among other disciplines, Organizational Psychology.

Both are worth a read as we prepare for the year ahead. In the meantime, we wish everyone a safe, enjoyable New Years Eve, and the very best in 2009. Happy New Year!

URLs:

http://www.cnbc.com/id/28437917 

http://tinyurl.com/ehrenberg

Is a Global Trade War Brewing?

We certainly hope not, but this story, among others, caught our eye (emphasis added):

Many industry representatives are apprehensive about the new year. With unemployment rising, the new Democratic-controlled Congress is expected to be less amenable to new trade agreements than was its predecessor. Public Citizen’s Global Trade Watch says the ranks of trade liberalization opponents had a net gain of 28 votes in the House and six in the Senate, figures business community representatives, such as the National Foreign Trade Council, dispute.

Still, there is little argument over the fact that enthusiasm for further trade expansion along the lines of the agreements pursued by both parties in recent years is at low ebb. A trio of bilateral trade deals with Colombia, Panama and South Korea, continue to idle in Congress. And the Doha Round of global trade talks sputtered to a halt this month when WTO Director General Pascal Lamy opted not to convene a last-ditch negotiating session in Geneva.

The U.S. recession — the economy is shrinking in the fourth quarter by an estimated 4% to 6% — provides a potentially receptive environment for anti-trade measures. "As time goes on and the jobless rate goes up everywhere, we will see a growing trend toward protectionism," says Sung Won Sohn, an economist at California State University.

The Doha Round’s failure also means countries will be free to impose tariffs that could shrink global trade volumes by $728 billion to $1.7 trillion, according to a new report by the International Food Policy Research Institute.

Countries typically apply lower tariffs than are permitted by the last global trade agreement, the Uruguay Round. They could legally increase them at any time.

Other arguments will come into play. Already one prominent U.S. economist, Dani Rodrik, has pointed out on his blog that the Obama administration’s planned economic stimulus would pack a greater punch if the U.S. raised import tariffs to make sure the money is spent here and not on goods from abroad.

Yikes! Rodrik is a renowned skeptic of free trade’s unalloyed benefits. But is he actually urging the next President to start a global trade war? Perhaps not…

But Rodrik also says a coordinated international effort to stimulate spending would be a better option than raising tariffs, which would invite retaliation by other countries and risk a 1930s-style trade war.

Michael Pettis gives a good overview of the dilemma and possible solutions:

Dani Rodrik is saying things that I have been implying in some of my pieces but have been very reluctant to say explicitly, largely because I don’t like the political implications for international trade.

Read more »

Axelrod: Obamanomics to the Rescue

Latest emanations on tax and economic policy from the President-elect’s camp is a bit worrisome. According to the AP:

A top adviser to President-elect Barack Obama said Sunday that the country’s slowing economy won’t keep the new administration from fulfilling its plans for a middle-class tax cut.

This is a bit odd — when would a slowing economy ever cause an administration to consider waiting on implementation of a tax cut? Obviously, the incoming administration is using the term "tax cut" as a code for tax shifting. There may be a net tax cut effect — time will tell — but obviously there’s more to it, given the apparent apprehension about implementing it.

"We feel it’s important that middle-class people get some relief now," Obama adviser David Axelrod said. Middle-class tax cuts will be part of the new administration’s stimulus plan, Axelrod said. "This package will include a portion of that tax cut that will become part of the permanent tax cut that he’ll have in his upcoming budget," Axelrod said.

The incoming administration is considering tax cuts of $1,000 for couples and $500 for individuals that will be delivered by reducing the tax withheld from paychecks. That plan has been estimated to cost about $140 billion over 2009-2010.

A quick aside: describing only the "cost" of a tax relief measure is a real pet peeve of ours. Every tax has costs to some and benefits to others, with net effects that are incredibly complex — and thus every tax relief measure has benefits to some and costs to others. All tax measures should be described in terms of their costs and benefits, and who they are likely to accrue to.

Pet peeves aside, here’s the frightening part of Mr. Axelrod’s comments:

"People need money in their pockets to spend," Axelrod said. "That’ll get our economy going again."

Let’s see…people’s wealth has fallen dramatically, and is set to fall further as unemployment rises, but a one time shot of $500 to $1,000 per household (assuming every household is entitled to it, which is far from certain) is going to "get our economy going again." That’s not just foolish, it’s dangerous. But wait, there’s more!

The slowing economy also means that it’s more important than ever to eliminate President George W. Bush’s tax cuts, Axelrod said. "It’s something we plainly can’t afford moving forward," he said. "Whether it expires or we repeal it a little bit early we’ll determine later but it’s going to go. It has to go."

"It"?!? What is "it"? There were many different pieces to the 2001 and 2003 tax plans, and if the next administration is going to treat them as an amorphous blob that "has to go", without looking at what did and didn’t work, and what it indicates about proper tax policy going forward — i.e., tax policies that will induce private sector hiring and investment — then the U.S. economy will be in for even more trouble than is currently expected. Hopefully they won’t be as abrupt or as foolish as some of Mr. Axelrod’s comments were.

In the meantime, if they don’t rein him in soon, he could undermine the much hoped for "honeymoon rally".

URLs:

http://www.google.com/hostednews/ap/article/ALeqM5ipdn0FNrjQiJHNZhPb8JW5bWWmbQD95BUSV00 

http://elsa.berkeley.edu/~cromer/draft1108.pdf 

More C Suite Pessimism

Another CFO survey shows growing pessimism about the economy, and planned contractions in business expenditures and investments:

The survey of 345 corporate CFOs, by Financial Executives International and Baruch College’s Zicklin School of Business, tracks a quarterly CFO Optimism Index…optimism about the U.S. economy plummeted to an all-time low among CFOs in the fourth quarter…Optimism about the CFOs’ own companies also dipped in Q4…

On top of the crummy state of the economy and most businesses, there’s more pressure from employees and shareholders (and from reports we’ve seen, from banks and creditors)…

Eighty-eight percent of the CFOs feel that the breadth of responsibility and pressure placed on their roles by employees and shareholders is higher compared with this time last year.

…while the pain is going to be shared with employees, vendors, and service providers (and by extension, tax collectors): 

Sixty-eight percent of CFOs identified hiring as an area for cutbacks in 2009, with 65 percent saying they have already implemented labor cutbacks during 2008. Eighty percent of CFOs have scaled back discretionary spending.

As business cycles go, these are run-of-the-mill measures. However, when you consider the extreme financial leverage that was created from 2003-2007, a $1 contraction in economic activity has a much greater impact than normal. And, if you take stock of the kinds of non-productive investments made with many of those financial assets — such as residential real estate and flat screen TVs — it becomes apparent that the economy is in for a long, tough slide.

URLs:

http://www.webcpa.com/article.cfm?articleid=30244&pg=financial&hbxcg=financial_crisis 

IMPORTANT DISCLAIMERS: The foregoing posts are for informational and entertainment purposes only. They do not constitute in any way a recommendation or an offer to buy or sell any security, or to engage in any particular investment strategy. Clients and/or principals of Symmetry Capital Management, LLC may hold long or short interests in any of the securities mentioned. Symmetry Capital Management, LLC, is an Amazon associate. Purchases made from Amazon after clicking through from our site will result in a commission paid to us by Amazon. The purchase price you pay for the product(s) is not impacted by this arrangement.   

Taylor: Permanent, Pervasive, Predictable

Stanford economist John Taylor penned a formidable op-ed for the WSJ back in November, arguing that the "temporary, targeted, and timely" kinds of tax measures favored by the recent Congress are weak medicine compared to tax breaks that are permanent, pervasive, and predictable. It echoes the tax arguments we made back in September, in a piece entitled "It’s the Policy Mix, Stupid!":

What are the implications for a second stimulus early next year? The mantra often heard during debates about the first stimulus was that it should be temporary, targeted and timely. Clearly, that mantra must be replaced. In testimony before the Senate Budget Committee on Nov. 19, I recommended alternative principles: permanent, pervasive and predictable.

- Permanent. The most obvious lesson learned from the first stimulus is that temporary is not a principle to follow if you want to get the economy moving again. Rather than one- or two-year packages, we should be looking for permanent fiscal changes that turn the economy around in a lasting way.

- Pervasive. One argument in favor of "targeting" the first stimulus package was that, by focusing on people who might consume more, the impact would be larger. But the stimulus was ineffective with such targeting. Moreover, targeting implied that increased tax rates, as currently scheduled, will not be a drag on the economy as long as increased payments to the targeted groups are larger than the higher taxes paid by others. But increasing tax rates on businesses or on investments in the current weak economy would increase unemployment and further weaken the economy. Better to seek an across-the-board approach where both employers and employees benefit.

- Predictable. While timeliness is an admirable attribute, it is only one property of good fiscal policy. More important is that policy should be clear and understandable — that is, predictable — so that individuals and firms know what to expect.

Good stuff, critically important, and in our view, unlikely to be heard until the other stuff is shown wanting — which will require that we experience it, unfortunately.

URLs:

http://online.wsj.com/article/SB122757149157954723.html 

http://www.654advisors.com/idlespeculation/20080925_policy_mix.pdf 

Wall Street Shocker!!! “Buy” Ratings Underperform!!

Interesting opinion piece in Barron’s about a recent study comparing the relative performance of stocks rated Buy, Hold, and Sell by Wall Street analysts:

Results were sobering. The average net performance of Dow Jones Industrial Average stocks with Buy, Hold and Sell ratings was 1.0%, 2.4% and 2.0%, respectively. The results for the S&P 500 technology sector were worse. Statistically, stocks with Buy ratings underperformed stocks with Hold and Sell ratings. The average net performance of stocks with Buy, Hold and Sell ratings was 4.4%, 7.9% and 8.3%, respectively.

Most folks with industry experience won’t be surprised by these results. However, the author’s primary objective is to implement yet more consumer protections for retail investors:

…one may conclude from these findings that, as a whole, the analyst community either has no real stock-picking expertise or they have expertise, but they have been corrupted by conflicts of interest. The Sarbanes-Oxley Act was supposed to deal with conflict of interest issues, but results from this study suggest it has failed. Our analysis examined whether the accuracy of analysts’ predictions improved after Sarbanes-Oxley was passed. At least through the time period of the study, Sarbanes-Oxley had no impact on accuracy. If anything, analyst’s performance deteriorated.

Whoa! From the point of "or they have expertise, but…", the author takes an incredible leap. Are there really only two competing explanations? Of course not, and the alternatives are many. For example, it probably takes an analyst longer to revise a rating based on new information than it takes the market to incorporate that information in prices; another structural issue is the existence of "stale" ratings (I haven’t seen the study, so don’t know whether this was controlled for). It’s also quite likely that basic human behaviors are at work, e.g., the typical analyst might reconsider their view of a stock if the market prices calls it into question, thus "Sell" rating are put on stocks that have already been sold off, and vice versa. It takes a lot of courage to call the market wrong, and most people find herd behavior preferable to loneliness. In my experience, most analysts are skilled at analysis; very few is any are skilled at prediction. Thus, insofar as stock ratings are seen by users as predictions of market behavior, it shouldn’t be surprising to anyone that the average stock rating is less than worthless (again, assuming the authors controlled for important structural inefficiencies like the ones mentioned above).

It’s also my experience that most analysts are good people, and that most firms do not engage in the unethical, even criminal, behavior that the author seems to insinuate. Those behaviors undoubtedy happen (again, basic human behavior), but as in most civilized societies and insitutions, they are the exception and not the rule. 

The author takes none of this into consideration, and instead argues for additional government regulation of the securities industry by bringing securities research under the auspices of the Federal Trade Commission. If you’ve seen a research report in recent years, especially from a large wirehouse, it’s astounding how many pages are dedicated to legal disclaimers. Apparently the author sees room for more. I harbor little doubt that excessive human and financial resources are expended on securities research, or that the odds of success are stacked against most individual investors. However, just as there are many competing explanations for the study’s findings, there are many competing solutions to the problem. I think an important answer lies in education, e.g., through dissemination of study findings like these (hold the conclusions?!?), and more fundamentally, by introducing economics and finance requirements into elementary education. Contrary to prevailing cultural impressions of Wall Street, it isn’t rocket science, and it doesn’t require anything remotely as arduous as medical school. The lack of remedial financial education is one of the most important educational gaps in our system.

We do see a sliver lining in this study, and it’s the finding that Sarbanes-Oxley, in at least one important respect, has not only failed to improve things, but has actually made them worse. It’s completely logical to assume that Sarbox chased talented analysts into positions where their stock ratings were not publicly disseminated. Perhaps the author ought to question his "more is better" approach to regulation.

URLs:

http://online.barrons.com/article/SB122895208808896233.html?mod=djemBF 

IMPORTANT DISCLAIMERS: The foregoing posts are for informational and entertainment purposes only. They do not constitute in any way a recommendation or an offer to buy or sell any security, or to engage in any particular investment strategy. Clients and/or principals of Symmetry Capital Management, LLC may hold long or short interests in any of the securities mentioned. Symmetry Capital Management, LLC, is an Amazon associate. Purchases made from Amazon after clicking through from our site will result in a commission paid to us by Amazon. The purchase price you pay for the product(s) is not impacted by this arrangement.  

CFOs: Economy Will Keep On Stinkin’

A CFO.com/Duke University survey of Chief Financial Officers paints a dismal economic outlook:

Nearly two-thirds of [1,275] top-level executives expect the current recession to last another year, according to…a survey of 1,275 chief financial officers from public and private companies, all of whom were interviewed for Duke University’s CFO Magazine Global Business Outlook Survey.

Last year, CFOs accurately predicted the looming recession…[A]ccording to…John R. Graham, director of the survey and a finance professor at Duke’s Fuqua School of Business…

"Throughout the history of our survey, CFOs have shown remarkable ability to predict future economic conditions," he added. "Therefore, the record pessimism CFOs are currently expressing is ominous," he added…

A record 81% of CFOs from the U.S. are more pessimistic about the economy this quarter than last quarter…

Furthermore, 60% of CFOs say the U.S. will not come out of recession until at least the fourth quarter of 2009…

URLs: 

http://www.cfo.com/article.cfm/12757684?f=alerts 

Obama: Super Cereal on Climate Change

Yesterday, the President elect and Vice President elect met with Al Gore to discuss climate change policy. According to the San Francisco Chronicle:

President-elect Barack Obama…declared “the time for denial is over” on global warming and pledged to retool the U.S. energy grid using new technologies…

“We have the opportunity now to create jobs all across this country in all 50 states to repower America,” Obama said at a news conference after the meeting. “To redesign how we use energy and think about how we are increasing efficiency to make our economy stronger, make us more safe, reduce our dependence on foreign oil.”

…Obama said his “aggressive” efforts to slash greenhouse gas emissions, invest in clean energy alternatives and boost green-collar jobs will include a wide range of stakeholders, from Gore and Washington Republicans to consumers and industry.

Energy and climate policy issues are a real tight rope, and if the government gets them wrong, the social and economic costs could be staggering and long lasting. It could take generations to recover from a large enough misdirection of capital. And it’s also disconcerting to see leaders ready to shepherd us onto that tight rope without any apparent skepticism towards the perceived problems, causes, solutions, and tradeoffs. Tradeoffs are especially important in our view — there doesn’t appear to be any regard whatsoever for the opportunity costs such measures will impose, and the media rarely ever questions claims of ‘creating green collar jobs’. We’re not saying that the global warming crowd will inevitably be proven wrong down the road. We’re just pointing to the fact that they don’t seem to entertain any such possibility. That’s almost always dangerous, especially when making decisions that will affect billions of people.

Obama is still displaying astute leadership ability when he speaks of stakeholders, which provides a modicum of assurance.

Another issue that should be part of the public discourse, but is too often swept under the rug by policymakers and media, is that significant policy measures create vast profit incentives. Most people are conditioned to think of that as ‘capitalism at work’, but that’s just plain wrong. An analogue is the rise of the defense industry in the wake of WWII as a result of the Cold War. Arguments can be made that many of those expenditures were warranted. However, the existence of opportunity costs is undeniable. The threat of conflict with the USSR imposed restrictions on private capital flows. Were those restrictions optimal, or was there enough waste involved to infer that those public-private mandates imposed serious costs on society? For the classical analogy, see Fredric Bastiat’s broken window fallacy.

A similar dynamic is brewing in the climate change / green technology domain:

Business leaders, especially those who hope to play a key role in the rise of solar, wind, biofuel and other new energy systems, hope Obama, Gore and others spur a new kind of technology revolution…

On a nationwide level, Obama supports putting 1 million plug-in hybrid cars on U.S. roads in the next seven years, cutting emissions 80 percent by 2050 and setting up a cap-and-trade system. Such programs aim to make burning fossil fuels pricey and reward investment in renewable energy. In general, the system sets limits on carbon dioxide emissions and allows companies to trade carbon credits based on the amount of production.

Cap and trade systems are especially prone to abuse, not to mention inefficiency (few like to talk about the government’s appointment of Enron as mandarin of a sulfur dioxide emissions exchange). If carbon emissions are indeed a significant externality (econo-speak for a cost that is not borne by the responsible party), then a majority of economists would admit that a direct carbon tax works best. Of course, there’s still plenty of agency risk involved in having bureaucrats set the right tax rate. The best way to manage this it to have competing expert opinions produced, and then allow direct referendum to set the ‘right’ level for the tax. Instead, with cap and trade schemes garnering political support, the mandarin hopefuls have been lining up at the door for a couple of years. Unfortunately,

A recent report by the federal National Intelligence Council threw some doubt on the prospects for alternatives, saying, “All current technologies are inadequate for replacing the traditional energy architecture on the scale needed, and new energy technologies probably will not be commercially viable and widespread by 2025.”

Does that worry anyone? Nah…

Cathy Zoi, chief executive of the Alliance for Climate Protection in Palo Alto, which seeks to persuade Americans of the urgent need to slow the use of fossil fuels…..hopes Gore’s Palo Alto group will prompt the administration to make inroads as quickly as possible.

“Early action on all fronts is essential,” she said. “The message to Obama and others is: We need to do this because the scientific imperatives are getting more and more urgent. But we also need this to stimulate the economy at the same time.”

Again, it’s being sold as ‘economic stimulus’, but whether these plans would have a positive or negative net impact is far from certain (and the case for a negative net impact is far easier to make). If they are not well thought out and properly designed, these plans could cause plenty of economic damage. And again, every bit of damage now costs resources in the future. To combine two old adages, time heals, but time is money.

We want to reiterate our belief that the climate change folks could well be right, and if so, that remedial measures are certainly appropriate. But the scope of the issue just seems too wide, and the allocation of resources too significant, to treat this as a partisan issue or to leave it in the hands of (relatively) small cadres of politicians, policymakers, bureaucrats, and lobbyists. Think of it as a ‘highly leveraged’ political initiative.

If you’ve made it this far, you might be wondering about the title of this blog post — it’s taken from an episode of the brilliantly skeptical (and disturbingly irreverent) South Park, in which they parodied Al Gore’s global warming quest. You can read about the episode here:

Man Bear Pig episode – http://en.wikipedia.org/wiki/ManBearPig

And you can watch excerpts here if time allows (we’ve named each video segment for the part of our argument that it most closely relates to):

The Overview – Mr. Gore alerts a school assembly to the urgent Man Bear Pig crisis, and predicts that one day, after he has defeated Man Bear Pig, he will be seen as super awesome. In real life, the Nobel committee did not even wait that long, giving him its super awesome Peace Prize only a year after the episode aired. (http://www.southparkstudios.com/clips/155237)

Agency Risks – Mr. Gore offers to excuse the boys from school to go hunt down Man Bear Pig. Like the organizations now lining up for the privilege of operating a carbon exchange or to obtain public funding, it’s a powerful offer they can’t refuse. (h
ttp://www.southparkstudios.com/clips/155239/?tab=related)

Opportunity Costs – Just as the prospect of climate change produces such a high level of anxiety and discomfort in some people that they are willing to ignore the damage their desires would impose on others, Mr. Gore implores emergency response teams to fill the cavern with hot molten lead in order to ensure Man Bear Pig’s demise…even though rescuers are still searching for survivors. In Mr. Gore’s eyes, they’re already dead. Yikes. (http://www.southparkstudios.com/clips/155242/)

URLs:

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/12/10/MN2H14L3QN.DTL

http://en.wikipedia.org/wiki/Parable_of_the_broken_window

http://en.wikipedia.org/wiki/ManBearPig

http://www.southparkstudios.com/clips/155237

http://www.southparkstudios.com/clips/155239/?tab=related

http://www.southparkstudios.com/clips/155242/?tab=related

IRS: Corporate Base Broadening

The IRS has announced that it will crack down on two important practices — dividend witholding avoidance, and corporate transfer pricing.

The first one appears to be aimed primarily at offshore tax treatment for hedge funds, although it’s part of a larger, concerted effort to restrict the use of offshore havens to avoid taxes. We don’t believe that the hedge fund industry needs or deserves sympathy, but it is notable that this measure piles on at an already extraordinarily difficult time for those folks. More importantly is how far these kinds of measures go, and whether they’ll have a negative impact on (a) future capital formation and (b) human capital allocation and migration.

The second one is more of a concern because, in a sense, it aims to broaden the corporate tax base in the U.S., at a time when profits are under severe pressure, and — as far as we know — there is little or no discussion of lowering the nominal corporate tax burden. If these kinds of measures get traction and start to snowball, it would be very bearish.

URLs:

http://www.webcpa.com/article.cfm?ARTICLEID=30085 

Congress: No Tax Break for Foreign Banks

Another piece of evidence to support our thesis that, although the current crisis is not marked by all-out trade wars as in the 1930s, there are still some important and varied aspects of it that are ‘inward facing’.

The latest news is that several members of Congress, who are already trying to do away with a tax break created by Treasury that allows an acquiring bank to write off the tax losses carried by an acquired bank, are expressing their strong opposition to extending ts s benefit to foreign banks:

A group of Democratic representatives from the House Ways and Means Committee wrote a sternly worded letter to Treasury Secretary Henry Paulson warning him against expanding a controversial IRS Notice that allows banks to write off the tax losses of other banks they acquire.

The letter from Lloyd Doggett, D-Texas (pictured), and eight other representatives, cautioned Paulson against expanding the tax guidance to allow foreign banks to also write off the built-in losses of banks they acquire in the U.S.

This is yet another incredible example of economic illiteracy among our elected representatives. In a time when — thanks in no small part to past errors of public policymakers — the financial sector desperately needs willing buyers to shore up struggling institutions and assets, a measure that allows existing tax losses to be written off by an acquirer will have a significant impact in helping the process along. First off, it immediately raises the value of the assets being acquired, thus making such deals more likely to get done. Furthermore, those tax loss assets have the greatest value to the strongest and most profitable operators, thereby helping to reward — rather than punish — effective corporate performance. Second, in today’s world, some of the healthiest financial institutions, who are best positioned to absorb struggling firms and assets, are headquartered abroad. That means that any policy measures which would increase the value of domestic firms to healthy foreign acquirers must be considered. To do otherwise means punishing the private sector of the U.S. economy.

Apparently, there is a group in Congress who believe that tax measures aimed at performing much of the heavy lifting that is required to repair the U.S. financial sector are nothing more than "loopholes" and "backdoor bailouts", and that such measures are even more distasteful when extended to firms that are situated outside the U.S.:

We understand that you may receive requests to expand the scope of your guidance to other sectors; however, we strongly believe that you have already overstepped your authority in issuing the original guidance and urge you not to compound this mistake by further widening this illegal loophole. At a time when we should be working together to identify and limit tax loopholes, not creating – and then expanding them – this backdoor bailout is precisely the wrong approach.

Unbelievable.

This may have nothing to do with the noise and illiteracy that sometimes emanates from D.C. (then again it may), but WebCPA is also reporting that Grant Thornton’s survey of business leader optimism has plunged dramatically since August:

Business optimism among U.S. business leaders has plummeted to its lowest level yet, according to a survey by Grant Thornton.

The firm’s quarterly Business Optimism Index dropped to 35.6 in November 2008 from 57.3 in August 2008. The drastic drop pushed the index almost 20 points beneath the previous low of 54.7, setting a new record since the index’s inception in 2002.

The survey found…57 percent in November feeling pessimistic about their company’s growth over the next six months, compared to 19 percent who expressed pessimism back in August. The proportion who said that they have plans to decrease staffing in the next six months increased from 9 percent to 43 percent.

Only 15 percent now say they plan to increase staff, compared to 37 percent last quarter. Only 44 percent are now optimistic about their own businesses, compared to 81 percent last quarter.

URLs:

http://www.webcpa.com/article.cfm?ARTICLEID=30033 

http://www.webcpa.com/article.cfm?ARTICLEID=30035