The third party service that hosts my blog has been down for a couple of days, so I am only now posting items from last week's Annual Meeting in Davos. The mood was a bit somber despite sunny weather in the Alps. One commentator observed that the Fat Cats who attend Davos are always in a good mood because they do well in up or down markets, while "normal" people fear for their jobs. There is unfortunately some truth to this, but I think it under-estimates the sincerity of many of the attendees to tackle issues larger than where their next paycheck will come from.
I noted that it was distinctly unfashionable to be optimistic this year, but I think this is attributable in part to the natural tendency of CEOs and other leaders to not want to come off as naive or out of touch. So, for example, everyone remembers the ill-timed proclamation last summer by Chuck Prince, the ex- CEO of Citicorp, that his institution was "still dancing" as the financial services world was about to tumble into the nasty sub-prime crisis.
I think the danger here is that a recession will become a self-fulfilling prophecy. Ever since Bretton Woods and the abandonment of the gold standard, currencies and economies have relied on trust that the little pieces of paper they printed actually stood for value. The mood of a nation often determines how much it will spend, and hence the health of its economy. This is perhaps why there are so many consumer and ceo confidence studies.
What happens at events like Davos is that microphones are thrust in front of business and other leaders, and they are asked their views concerning the health and direction of the economy. I think it is of little surprise that the answer is often quite negative these days. Just consider the rewards. If one is a little too conservative and the economy turns out to be better, no one will complain about the out-performance. On the other hand, if one paints an overly rosy picture (no matter how fact-based at the time), one will be described as being "out of touch" or "not in control" of the business.
Thus, I believe that the payoff matrix is skewed in favor of being overly negative, even if actual signs of a recession have not yet shown up in the figures. My suggested response is to listen carefully to the facts recited, but not to assume everything is as negative as leaders will say publicly at an event like Davos. Value of course lies where the herd fears to roam.