Left Coast Bias: What Recovery?11/07/2009 02:00:00 AM Eastern
You'd think I'd be in a good place right now. It's 70 and sunny every single day here, my hometown Minnesota Vikings and this hotshot youngster Brett Favre are easing their way to a Super Bowl appearance, and I continue to strategically outwit the wife's misguided notions about having a third child.
But unfortunately as I write this, I am getting ready to leave for a long weekend in the place where hope goes to die. A place so dreary and soul-crushing that Tony Robbins himself would clap his hands together twice, hold up his palms like a blackjack dealer and give up.
Yes, that's right, I'm headed to the in-laws. You'll have to forgive me if I am writing from a dark place.
Normally, I make a concerted effort across our brand's multiple platforms to keep an eye on overall tone, to make sure we are not being too negative. During this recession and resetting of the media business' model, that can be a challenge, with bad news obviously tending to outweigh the good.
But during these couple of weeks, as earnings reports are getting spun out, I'm afraid I need to give in to the dark impulse and call it as I see it: The speed at which this “recovery” is supposedly taking place has few underlying fundamentals to support it.
The letter “V” may have gotten some buzz in the form of an ABC sci-fi remake, but I can't see how it will define the shape of this recovery.
While it's nice to see the old Dow flirt with five-digit territory, most people I trust agree with me that we're in for a correction at some point. I don't know if it's 10% or 20% or what, but (and pardon the overused expression) this recovery seems to be living on Wall Street and not on Main Street.
Now, damn it Jim, I'm a doctor, not an economist. But I did stay awake in enough of my business school classes to be able to page through a company's financials and read between a headline or two.
There are some pretty basic things to remember as you hear the sounds of smooth running in all of those earnings reports these days. First and foremost, you've got to take a peek under the hood.
First, profitability is a great message to send to Wall Street. But simply cutting your way to get there is not a sustainable strategy, and is usually a false indicator of prospects for growth.
You'll also read a lot about rosy comparisons either to last quarter or last year's numbers at this time, with the latter especially starting to look good in the upcoming quarter. That's when you have to remember what those numbers are being compared to—a period when things may have been at their bleakest.
And finally, keep an eye on the overall unemployment numbers. I'm not that bright, but it seems to me if people don't have jobs, they can't buy stuff, and if people who sell stuff aren't selling more stuff, they can't buy more ads from media companies. Pretty simple when you add all that up.
While I paint a somewhat bleak picture, there is plenty of opportunity in an environment like this. For instance, there are some extremely interesting valuations out there on properties with upside, so companies with vision, patience and deep pockets can make pretty savvy acquisitions in this environment.
But the rest of us schlubs oughta be careful. Last week, I pulled together a meeting of my financial advisory team (because when you are making huge journalistic coin, you clearly need a full team) and reinforced my strategy to “go to the mattresses.” I don't mean the battle cry from The Godfather. I mean take every dollar I have and keep it out of the market and stuffed in mattresses.
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