Semiconductor Industry Faces Challenges Despite Recovery
Taiwan’s chip makers, powerful drivers of growth in the nation, may have survived their worst crisis ever, but lackluster sales and new rivals still make these risky times. The local semiconductor industry, the fourth-largest in the world, saw sales soar by a steep margin in the second quarter, but is set to become markedly less feverish in the third quarter, analysts said.
“The slowing pace of growth shows the global recovery may not be as fast as previously anticipated,” said Mars Hsu, a Taipei-based technology analyst with Grand Cathay Securities (大華證券).
In the three months to June, combined revenues of the nation’s chip makers soared 69.2 percent from the previous quarter to NT$136.2 billion (US$4.18 billion), the Taiwan Semiconductor Industry Association (TSIA, 台灣半導體協會) said.
This followed a record 33.7 percent quarter-on-quarter drop in the three months to March for an industry that, more than any other, helped give Taiwan its reputation as a high-tech nation.
The pickup in sales in the second quarter was largely due to unique factors, such as a need among clients to rebuild inventories after the immediate shocks of the worst crisis in decades.
“Clients found their inventories were low as a result of the uncertainty that gripped the market after the crisis last year,” said Peng Mao-jung (彭茂榮), an analyst of the quasi-official Industrial Technology Research Institute (ITRI, 工研院).
Contributing to the fast pace of growth in the second quarter was also another one-off factor — a rush of orders from China after the Chinese government adopted massive stimulus spending to lift its flagging economy.
One-offs do not last long, and analysts suspect that the industry may be losing momentum with Peng forecasting growth of just 17 percent in the third quarter from the second.
The 17 percent growth forecast is shared by United Microelectronics Corp (UMC, 聯電), the world’s No. 2 contract microchip maker.
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The price of a 20-inch LCD monitor could drop by about 3.4 percent in the second half of the month, however, TV panel prices are expected to hold steady
By Lisa Wang
STAFF REPORTER
Monday, Sep 21, 2009, Page 12
Prices for liquid-crystal-display (LCD) panels used in monitors may begin to fall by as much as 3.4 percent in the second half of this month, ending a six-month uptrend as supply and demand reach parity, market researcher DisplaySearch said in its latest report.
Pricing pressure is expected come into play through next month, the Austin, Texas-based research house said in a biweekly report released on Saturday.
The price weakness could be an early sign of a new slowdown, which was originally expected in the final month of next quarter, HSBC Securities projections showed.
Prices for monitor panels are expected to drop the fastest as “monitor panels with 16:9 aspect ratio are reversing to oversupply,” DisplaySearch said. “Monitor brands and original electronics manufacturers are becoming cautious about inventories on concerns about price erosion next quarter.”
A 20-inch LCD monitor with 16:9 aspect ratio may drop US$3, or 3.4 percent, to US$85 per unit in the second half of this month, from US$88 in the first half, DisplaySearch’s statistics showed.
The “slow season for the LCD sector [is] kicking in one to two months earlier, driven by continued negative newsflow on a hard landing for the LCD sector in the fourth quarter,” HSBC Securities analyst Frank Su (蘇�? said in a report issued last week.
The speculation may push panel buyers to trim orders before visibility of sell-though improves, Su said. He originally expected the slow season to begin in December.
The report said panel makers are managing to hold their price quotes for TV screens steady for the next two weeks as they “are seeing increasing demand from Europe,” the world’s biggest LCD TV market, the report said.
Some Chinese TV makers have wrapped up their inventory for the upcoming shopping season, the researcher said.
“Panel price negotiations are expected to be tough for some panel makers,” it said…..
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Deloitte Forecasts Flat Holiday Spending For U.S.
U.S. holiday spending is expected to be flat versus a year ago, as consumers remain cautious and the national unemployment rate hovers at nearly 10 percent, Deloitte said in a forecast released late on Sunday.
Deloitte’s retail group expects total holiday sales to be $810 billion, excluding motor vehicles and gasoline, for the November-through-January period.
A flat result would be an improvement from a year ago when holiday sales fell 2.4 percent, but is hardly the encouraging sign some retailers and investors would hope for.
“Although there are signs that suggest the economy is nearing the end of its darkest days, many consumers remain burdened by restricted credit availability, high unemployment and foreclosures,” said Carl Steidtmann, chief economist with Deloitte Research, a subsidiary of Deloitte Services LP.
“Americans continue to save at historically high rates while also paying down debt, and these factors combined suggest another chilly holiday season for retailers,” Steidtmann said.
He added that stable gas prices, strengthening home values and stock market gains would help support consumer spending during the all-important winter holiday season that starts on the Friday after the U.S. Thanksgiving holiday.
Mixed Signals?
While some data is pointing to an early economic recovery, many experts agree that consumers are not yet out of the woods.
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One of the only measures of stock market valuation that shows a strong tendency toward long-term mean-reversion–the cyclically adjusted PE ratio–suggests stocks are now about 15%-20% overvalued.
This, of course, is nothing new: Stocks were overvalued on this measure for most of the two decades from 1990 to 2007. (They dropped below fair value for a few minutes in 2003, before blasting off to the moon again).
Now, thanks to the S&P’s 58% rise off the bottom, stocks are now trading at 19X Robert Shiller’s cyclically adjusted PE ratio.* This compares to an average of about 16X for the past 130 years.
Keep in mind that this level of over-valuation alone does not herald a near-term reversion to the mean: Last time this PE ratio soared past 20X, for example (in 1992), it stayed above 20X for 16 years. It is also possible that the “average” PE ratio has shifted upwards over the past century and that the “new normal” is something closer to 20X.
Unless we really have hit a new normal, however, the cyclically adjusted PE ratio does suggest that the long-term return on stocks from this level will be less than the long-term average. Specifically, it suggests that stocks will return about 4% real (after adjusting for inflation) over the next decade, versus the 7% average).
* The cyclically adjusted PE ratio (CAPE) averages the past 10 years-worth of earnings to smooth out the impact of the business cycle. Profit margins are mean-reverting, which means that high profit margins tend to fall and low profit margins tend to rise. As a result, a straight one-year PE ratio can give a misleading impression of value. At the peak of the business cycle, when profit margins are high, the PE ratio looks artificially low–and vice versa. Robert Shiller’s cyclically adjusted PE provides a much more stable denominator.
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By Colleen McElroy
Sept. 21 (Bloomberg) — Dell Inc. said it agreed to acquire Perot Systems Corp. in a transaction valued at approximately $3.9 billion. Terms of the agreement were approved yesterday by the boards of directors of both companies.
Dell will commence a tender offer to acquire all of the outstanding Class A common stock of Perot Systems for $30 per share in cash. The transaction is not subject to a financing condition. The transaction, which is subject to customary government approvals and the satisfaction of other customary conditions, is expected to close in Dell’s November-January quarter.
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By Jon Menon and Ben Martin
Sept. 21 (Bloomberg) — Royal Bank of Scotland Group Plc, Britain’s biggest government-controlled bank, is in talks with shareholders to gauge the appetite for a potential rights offering, two people familiar with the talks said.
The bank held the discussions last week, said the people, who declined to be identified because the negotiations are still at an early stage. RBS may raise between 3 billion pounds and 5 billion pounds ($8.1 billion), one of the people said.
“I’d be surprised if they can achieve it. It’s ambitious,” said Julian Chillingworth, chief investment officer at London-based Rathbone Brothers Plc which manages $21 billion, including RBS stock. “There is concern that investors may be faced with quite a lot of cash calls in the sector. I’m not sure RBS shareholders will be that keen to subscribe.”
The government’s stake in the Edinburgh-based lender is set to increase to more than 80 percent under the terms of the Asset Protection Scheme, the U.K.’s toxic asset insurance program. RBS Chief Executive Officer Stephen Hester is seeking to limit that increase by raising cash from investors, one of the people said.
RBS raised 12.3 billion pounds in a rights offer in June 2008 following its purchase of ABN Amro Holding NV by former CEO Fred Goodwin. That acquisition led the bank to report a 24.1 billion-pound loss for 2008, the biggest by a U.K. company, after writedowns surged. Goodwin was ousted last year as the government provided a 20 billion-pound bailout for RBS.
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Europe Trades Lower On Concerns Stocks Have Outpaced Earnings
By Adria Cimino
Sept. 21 (Bloomberg) — European and Asian stocks dropped on speculation a six-month rally in global equities has outpaced the prospects for earnings and economic growth. U.S. index futures declined.
BHP Billiton Ltd., the world’s largest mining company, retreated 2 percent in London. K+S AG, Europe’s biggest potash producer, slid 4.7 percent after Potash Corp. of Saskatchewan Inc. cut its profit forecast. Royal Bank of Scotland Group Plc slipped 2.1 percent after two people familiar with the talks said Britain’s largest government-controlled bank is in discussions to gauge the appetite for a potential rights offer.
The MCSI World Index slipped 0.5 percent at 9:34 a.m. in London. The gauge has gained 65 percent since March 9 as results at companies from Roche Holding AG to Goldman Sachs Group Inc. surpassed projections and the German and French economies unexpectedly exited recessions. The index is valued at more than 27 times reported profit, the most expensive level since June 2003, according to weekly data compiled by Bloomberg.
“We’ve had a massive rally,” said Lothar Mentel, chief investment officer at Octopus Investments Ltd. in London, which oversees about $1.8 billion. “Things might start to look expensive. That’s why the market is taking a pause and waiting to see October earnings.”
Europe’s Dow Jones Stoxx 600 Index lost 0.7 percent today as all 19 industry groups declined. The MSCI Asia Pacific excluding Japan Index fell 0.4 percent, led by financial and mining companies. Markets in Japan, Singapore, Malaysia, Indonesia, the Philippines and India are shut for holidays.
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Asian Markets Move Lower on Evaluation Concerns
By Shani Raja
Sept. 21 (Bloomberg) — Most Asian stocks fell, led by finance and mining companies, amid concern a six-month rally has made shares expensive relative to earnings prospects.
BHP Billiton Ltd., the world’s largest mining company, declined 1.2 percent after metal prices slumped in London and New York. Shanghai Pudong Development Bank Co. fell 4.8 percent after winning regulatory approval for a share sale. STX Pan Ocean Co., South Korea’s biggest bulk carrier, climbed 8.2 percent after saying it’s in talks with Vale SA on a contract to transport iron ore.
About five stocks declined for every three that rose on the MSCI Asia Pacific excluding Japan Index, which lost 0.2 percent to 390.77 as of 12:28 p.m. in Hong Kong. The measure swung between gains and losses at least seven times. The gauge that includes Japan has rallied 67 percent from a five-year low on March 9, driving the average price of stocks in the index to 1.6 times book value, the highest level since this year’s trough.
“The path of least resistance for the market right now is up, but it won’t be a straight line up,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $75 billion. “You eventually get to a point where the market superficially looks expensive. We’re at that point now.”
Markets in Japan, Singapore, Malaysia, Indonesia, the Philippines and India are shut for holidays. The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, dropped 1.5 percent on concern new share sales will draw funds away from existing equities.
Australia’s S&P/ASX 200 Index lost 0.4 percent. Harvey Norman Holdings Ltd., the country’s biggest electronics retailer, declined 2.3 percent after it was downgraded at Credit Suisse Group AG. Hong Kong’s Hang Seng Index added 0.2 percent.
Hynix Semiconductor
Metallurgical Corporation of China Ltd., the construction company that helped build Beijing’s Olympic stadium, rose 28 percent on its debut. Hynix Semiconductor Inc., the world’s second-largest maker of computer-memory chips, added 4.4 percent in Seoul after Morgan Stanley upgraded the stock.
Futures on the U.S. Standard & Poor’s 500 Index lost 0.2 percent. The gauge added 0.3 percent on Sept. 18, amid analyst upgrades of companies from Procter & Gamble Co. to SanDisk Corp. and Chevron Corp.
BANGKOK (AP) – Oil prices fell below $72 a barrel Monday in Asia as high crude stockpiles and weak demand tempered enthusiasm about recent signs of improvement in the world’s largest economy.
Benchmark crude for October delivery was down 40 cents at $71.64 a barrel by midday Bangkok time in electronic trading on the New York Mercantile Exchange. The contract gave up 43 cents Friday to settle at $72.04 a barrel.
The recession has sapped American fuel consumption, and U.S. oil stockpiles are 14 percent larger than last year even as recent data suggests the economy is clawing out of recession.
The Energy Information Administration said Wednesday that the country also is sitting on a sea of distillate fuels including heating oil, with stockpiles approaching a 27-year high.
“Most of the macro data from the U.S. over the last month has been supportive of oil prices,” said David Moore, commodity strategist at Commonwealth Bank of Australia in Sydney. “But inventories remain high and demand is weak, so that’s capping prices.”
Moore said crude will likely average $64 a barrel in the fourth quarter before rising to average $80 in the October to December period of 2010.
In other Nymex trading, gasoline for October delivery slipped 0.84 cent to $1.8240 a gallon, and heating oil fell 0.86 cent to $1.8193 a gallon. Natural gas fell 4.5 cents to $3.733 per 1,000 cubic feet.
In London, Brent crude fell 41 cents to $70.91 on the ICE Futures exchange.
Associated Press Writer Alex Kennedy contributed to this report from Jakarta.
All Eyes on The Fed This Week For Direction on Economy & Markets
WASHINGTON (AP) – With the economy starting to rebound but still fragile, Federal Reserve policymakers this week are expected to keep emergency programs to encourage spending and borrowing intact. But to avoid unleashing inflation later on, they are likely to consider ways to rein in programs designed to keep mortgage rates down and get banks to lend more freely.
As the economy improves, the Fed will face more pressure to wind down some of its programs. For now, Fed Chairman Ben Bernanke and his colleagues probably will stay the course while striking a more optimistic tone at a two-day meeting that ends Wednesday.
“I think they are feeling more confident about the recovery,” said Christopher Rupkey, economist at Bank of Tokyo-Mitsubishi.
Fed policymakers are all but sure to keep interest rates at a record low near zero to nurture a tentative recovery. And they will probably stick with their goal of buying $1.45 trillion in mortgage-backed securities and debt issued by Fannie Mae and Freddie Mac by year’s end. The program is intended to lower rates on home mortgages and support the housing market.
The real estate industry, which led the country into its worst recession since the 1930s, is starting to heal. Sales are firming. And prices in some markets are edging up after a dizzying plunge.
Still, the housing market is being propped up by the Fed’s programs, and its health remains precarious. Foreclosures are expected to keep climbing. Soured loans will still weigh on banks. More homeowners are expected to go under water, meaning they owe their lender more than their home is worth.
The Fed’s efforts have helped lower mortgage rates. Rates on 30-year loans dipped to 5.04 percent, Freddie Mac reported last week. That was down from 5.07 percent the previous week and 5.78 percent a year earlier.
Given the delicate state of the housing market, Fed policymakers will be loath to make any major changes, economists said.
“Why upset the apple cart and spook the market?” said Mark Zandi, chief economist at Moody’s Economy.com. “The economy and the housing market can still use the help.”……
The Dollar Hovers Over All Time Lows
The dollar finished another dreadful week on a relatively upbeat note Friday, holding its ground versus the surging euro.
Wall Street took a breather following another bull run, and without much economic news to fuel renewed optimism, the dollar put an end to a streak of yearly lows against the euro.
Next week is a pivotal one for the dollar, as further gains in equities could accelerate the pace of its declines against higher-yielding currencies.
The dollar bounced back and forth near the 1.4700 versus the euro. Steady losses over the course of the summer drove the dollar to yesterday’s yearly low of 1.4766.
Similarly, but for different reasons, the dollar has weakened significantly versus the yen. While risk appetite has hurt the buck against the euro, traders still in search of a safe haven amid economic uncertainty have favored the yen of late.
Dollar Bounces Against The Euro & Yen
By Ron Harui
Sept. 21 (Bloomberg) — The dollar advanced against the euro and the yen on speculation U.S. policy makers will this week signal they may withdraw economic stimulus measures, boosting the appeal of the nation’s assets.
The dollar reached a two-week high against the pound and rose versus 13 of the 16 major currencies before a U.S. report economists said will show an index of leading indicators gained a fifth month, backing the case for the Federal Reserve to wean the economy off support. The yen was near a three-week low versus the euro after Finance Minister Hirohisa Fujii edged away from comments last week that were interpreted to mean he would let the yen rise.
“There’s a risk the FOMC will indicate at some point they will start withdrawing their stimulus to the economy,” said Joseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation’s largest lender by assets. “The catalyst for the dollar strengthening on a sustained basis is likely to come from the FOMC.”
While The Dollar is Low Treasury Purchase Stay Strong
By Cordell Eddings and Lukanyo Mnyanda
Sept. 21 (Bloomberg) — International investors are increasing purchases of Treasuries on a bet U.S. inflation will remain subdued, even as the dollar falls to the lowest levels of the year and the budget deficit tops $1 trillion.
Investors outside the U.S. bought 43.1 percent of the $1.41 trillion of notes and bonds sold by the Treasury Department this year, compared with 27.1 percent of the $527 billion issued at this point in 2008, government figures show. The Merrill Lynch & Co. Treasury Master Index of U.S. securities returned 1.18 percent in the third quarter after the worst first half on record as demand from the investor group that includes central banks climbed to record levels at Treasury auctions.
The trade-weighted U.S. Dollar Index’s 15 percent decline from its high this year on March 4 has proved no obstacle in Treasury auctions, aiding President Barack Obama’s efforts to sell an unprecedented amount of debt. Fund managers say their money is safe in the U.S. with expectations for inflation as measured by indexed bonds below the five-year average.
Treasuries are “starting to look like even a better value with a weaker dollar,” said Dave Chappell, who manages $90 billion in London at Threadneedle Asset Management Ltd., and has been buying longer maturity U.S. government debt.
The 10-year note yield rose 12 basis points last week, or 0.12 percentage point, to 3.46 percent, according to BGCantor Market Data. That’s the most since gaining 37 basis points in the five days ended Aug. 7. The 3.625 percent security due August 2019 fell 1, or $10 per $1,000 face amount, to 101 11/32.
Treasuries were unchanged today as of 10:01 a.m. in Hong Kong, with trading closed in Japan and Singapore for holidays.
Record Issuance
This week the U.S. will sell $112 billion of 2-, 5- and 7- year notes. The amount will be a record for that combination of maturities, exceeding the $109 billion sold the week of Aug. 24. Treasuries rallied that week, with the yield on the 10-year note falling 12 basis points to 3.45 percent.
Federal Reserve holdings of Treasuries on behalf of foreign accounts rose 16 percent to $2.07 trillion since the March high in the Dollar Index.
China, the biggest foreign owner of Treasuries, added $24.1 billion in July after net sales of $25.1 billion in June, raising its stake in U.S. government debt 3.1 percent to $800.5 billion, Treasury data showed on Sept. 16. The country’s holdings have risen 10 percent this year, after a 52 percent gain in 2008 amid the surge in demand for the safety of U.S. government debt as global credit markets froze.
Little Choice
Foreign governments have little choice than to buy Treasuries because they hold so many dollars. The U.S. dollar accounts for 65 percent for world currency reserves, up from 62.8 percent in mid-2008, according to the International Monetary Fund in Washington…..
SBA Relieves Goodwill Backing Limits on Loans
By EMILY MALTBY
The Small Business Administration, after enduring a backlash from lenders and business appraisers, plans Oct. 1 to modify a restriction it had placed on loans used to finance acquisitions of small companies.
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In March, the SBA, capped the guarantee it was willing to extend on “goodwill” financing, which is the amount of a loan used to purchase an existing business’s intangible assets, such as an established name, brand or customer base. The market price of a small business is based partly on its tangible assets, such as property, equipment and inventory, but often primarily on its goodwill. For some firms for sale, such as professional practices, Internet companies and service firms, the value of intangible assets can range between 55% and 95%.
For years, lenders were free to administer SBA-guaranteed loans with any amount of goodwill financing. But in March, the SBA changed its rules so that guarantees for goodwill financing would be capped at $250,000, or 50% of the loan amount, whichever was lower. The rules were designed in part to prevent sellers from inflating companies’ intangible assets.
SBA-guaranteed loans are a small proportion of small-business loans. But the move didn’t help in a market already taking a beating, business-acquisition specialists said. In March, closed business sales were 33% below the levels seen a year earlier, according to BizBuySell.com, an online marketplace for business acquisitions based in San Francisco.
“It was the antistimulus,” said Ronald Feldman, chief executive of Siegel Financial Group, a consultancy firm for small-to-midsize business acquisitions in Bala Cynwyd, Pa.
Starting in October, the SBA is raising the cap on its guarantee of goodwill financing to $500,000. If the goodwill financing exceeds that amount, the SBA will recommend that lenders consider requiring more equity from the borrower or seller. SBA spokeswoman Hayley Matz said the agency adjusted the cap after collecting data on goodwill financing, and found that the average goodwill amount was close to $400,000. “We want to make sure they have continued access to capital,” Ms. Matz said…..
Congress Will Not Allow Attorney Client Privilege on BAC & MER Deal
WASHINGTON (Reuters) – A House of Representatives panel has told Bank of America Corp that it cannot use attorney-client privilege to withhold from Congress details on its purchase of Merrill Lynch, The New York Times reported on Monday.
The chairman of the House Committee on Oversight and Government Reform, Representative Edolphus Towns, has given the bank a deadline of noon EDT on Monday to provide answers and relevant legal documents about the merger, the Times said.
The bank late on Saturday asked Towns for a delay until after Tuesday. But a spokesman for Towns said on Sunday that he was sticking to the deadline, the newspaper reported.
Compliance with the panel’s request would force Bank of America to reveal information that would affect a range of other investigations into the merger, according to the paper.
In a sternly worded letter on Friday, Towns, a Democrat, said the bank must divulge when it became aware of the enormous losses at Merrill last year, when it received a commitment from the federal government for a second round of bailout money and what legal advice its management received about whether it had to disclose those developments to the bank’s shareholders, the Times reported.
Bank of America has been subject to a wave of civil litigation since it purchased Merrill Lynch on January 1.
The Securities and Exchange Commission and the attorneys general of New York and North Carolina are investigating whether Bank of America failed to disclose to shareholders Merrill Lynch’s operating losses and bonus payments before the merger was approved.
G20 Set To Meet in PA. With Obama Urging A Rethink of the Global Economy
By Jeff Mason and Dave Graham
WASHINGTON/BERLIN (Reuters) – U.S. President Barack Obama said on Sunday he would push world leaders this week for a reshaping of the global economy in response to the deepest financial crisis in decades.
In Europe, officials kept up pressure for a deal to curb bankers’ pay and bonuses at a two-day summit of leaders from the Group of 20 countries, which begins on Thursday.
The summit will be held in the former steelmaking center of Pittsburgh, Pennsylvania, marking the third time in less than a year that leaders of countries accounting for about 85 percent of the world economy will have met to coordinate their responses to the crisis.
The United States is proposing a broad new economic framework that it hopes the G20 will adopt, according to a letter by a top White House adviser.
Obama said the U.S. economy was recovering, even if unemployment remained high, and now was the time to rebalance the global economy after decades of U.S. over-consumption.
“We can’t go back to the era where the Chinese or the Germans or other countries just are selling everything to us, we’re taking out a bunch of credit card debt or home equity loans, but we’re not selling anything to them,” Obama said in an interview with CNN television.
For years before the financial crisis erupted in 2007, economists had warned of the dangers of imbalances in the global economy — namely huge trade surpluses and currency reserves built up by exporters like China, and similarly big deficits in the United States and other economies.
With U.S. consumers now holding back on spending after house prices plunged and as unemployment climbs, Washington wants other countries to become engines of growth.
“That’s part of what the G20 meeting in Pittsburgh is going to be about, making sure that there’s a more balanced economy,” Obama told CNN…..
Some Argue A V Shaped Recovery is Not Happening
Well, well.It’s suddenly become very hip to believe in a V-shaped recovery, and to slam the pessimists for not knowing their history. As Jim Grant argued yesterday in the Wall Street Journal, the severity of the slump predicts the severity of the recovery — it’s just like physics!
But economics isn’t physics. And don’t worry about not knowing your history, because economics isn’t history either.
Here’s why we’re not in for a v-shaped recovery.
First, the pax economica that preceded the current slump was artificial. Large swaths of the economy had stopped doing anything productive, while the rest of the economy was buoyed by rising home values that allowed for spending on a level that was disconnected from what people were actually bringing in via income. Of course, you know this part of the story, but the key is that this is meaningfully different than the situation heading into previous economic slumps.
The other reason why we’re not in for a “V” is that the economy, even without the credit-collapse, is still in the midst of violent changes in the economy. New technology and new business models are uprooting old businesses (whether it’s media, manufacturing, or commercial real estate), throwing labor and capital into disarray. Ultimately the transition will be good, but in the meantime, displaced workers will face an unusual amount of lag in finding new work, if only because the industries that were they yesterday have gone and disappeared, requiring extensive levels of retraining.
There are other aspects too, such as the size of government and demographics that look increasingly unfavorable.
Curiously, Jim Grant’s admonition to remember history only mentions past slumps in the US. We don’t see the word “Japan” mentioned once in the whole article? But unless the laws of economics are different there than they are here, then we can certainly point to examples of bad busts that weren’t followed by a quick snap back.
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