U.S. & Global Economic Perspectives
By Sheila Cottringer
                 
Economics. It's anybody's guess. But when the Rotary Club of Charlotte brings in a speaker like John Silva, PhD, everybody listens.
  
John has been the chief economist with Wachovia since 2002. Past experience included work on Capitol Hill with the U.S. Senate Joint Economic Committee and the U.S. Banking, Housing and Urban Affairs Committee. He currently serves as a member of the Blue Chip Panel of Economic Forecasters. He is the director of the National Association of Business Economics and has been involved on both a state and local level in an advisory and board member capacity in an assortment of committees, organizations and clubs.
  
Certainly, John has been around the block a time or two and has a good understanding of what is going on in our global, statewide and regional economy. But this Baby Boomer likened current conditions to being a hunter with a new rifle; in new territory not knowing the target. No books on banking and economics prepared him for what he now faces. There is no "White Knight coming in to rescue a company."
  
There is a certain unquenchable thirst for any information that might explain when and how we will begin to see a positive change. John referred to a recent article covering the North Carolina economy in the Jan. 9 edition of the Wall Street Journal. The article said the outlook for North Carolina in 2009 is not good. John also explained that most of today's middle managers have no experience with this kind of recession. We have seen nothing like it since 1981 and 1982. This recession is expected to be worse and that is why many of today's middle managers and junior managers have no idea how to deal with it.
  
So what are the answers? John said there are five key economic elements to consider:
 
1) Growth. What are your expectations for growth? We must define what we can and cannot do. Look at the short-term but do not expect much. Focus on the long-term goals in order to make your decisions.
2) Inflation. The year-over-year consumer price index is expected to be a negative. Companies will have very little pricing power for business. A company will not be able to raise prices to make up for lagging sales. Consumers will not buy it and that strategy will not work in today's economy.
3) Interest Rates. Short-term interest rates are not expected to change for the next six months to a year. The Treasury owns assets they have never owned before. The outlook is pretty ugly and will be for some time.
4) Profits. And, from John's perspective, the outlook for profits will continue to be miserable. The bright side is that history tells us that when we experience this kind of downturn and profits suffer, profits soar within the first two years of recovery.
5) The Dollar. Know where you are importing and exporting and understand that each currency should be considered independently.
 
On a local level, the state budget shortfall will have an impact on funding, according to John. There will be no quick fix. He anticipates that North Carolina will be under pressure for the next two years. It will be important for employers to understand the framework for growth. He expects the unemployment rate to rise to 9% or greater before year-end and explains that we must take responsibility for educating our young people about the need for education. There is currently a 3% unemployment rate for college graduates. For high-school graduates it is about 5%. For a high-school dropout, it rises to 20% and if you are a black high-school dropout, that rate is 30%. In 2008, CMS reported a six-year high dropout rate. The state reported more than 23,000 dropouts.
  
Other perspectives from John included comments regarding the housing market. He expects housing to continue to struggle for at least another six months. Housing and certain consumer durable goods were once the driving force for the economy. They will not be the driving force of tomorrow's economy. The driving forces will center on government, infrastructure spending, alternative energy and exports.
  
Our time flew as John gave us as much information as we could take in during our short hour together. There was time for a few questions and the questions ranged from "When will we get out of this thing?", "What should I have in my portfolio?" to "What about all this bailout money and where it's being used?"
 
The bottom line is we have never been here before so it is hard to say when we will come out of this. It will not last forever and there is light at the end of the tunnel. Business is still happening and smart businesses will consider the five elements. John gave a little advice to us all and advised us to throw the little piece of paper we receive in the mail from our broker in the trash if we are told to invest in the four or five funds that showed a big jump after the last recession. Those strategies will not work, he said.
 
Regarding the question about the bailout money? He said this was one time, believe it or not, that he would have to side with Barnie Frank. And with that comment, there was a big round of applause.
      
   
Head Table: Sandy Osborne, Gene Marx, Mac McCarley, Chuck Lew, John Armistead, Suzanne Bledsoe;
Invocation: BG Metzler;
Visitors & Guests: BG Metzler: Health & Happiness: David Zimmerman: Song: Gregg Walker; Piano: Thomas Moore; Photos: Bert Voswinkel

• Tony Zeiss introduced new member Art Ringwald. Art is Founding Partner of Southeast Capital Partners and can be reached at aringwald@aol.com. Welcome, Art.
         
• Ed Turner was quoted in the "Insider - The Charlotte Business Scoop Column," commenting on the possibility of three or four financial companies opening in Charlotte to take advantage of our banking talent; Floyd Davis accepted a $10,000 check on behalf of Community Link during the Pride Magazine's 2009 Awards; Steve Meckler racked up win number four in the Observer's "You Write the Caption" contest; Todd Stevens was on hand to accept the Construction Safety Excellence Award for a Specialty Contractor by the Carolinas Associated General Contractors of America, which was award to WB Moore Company; Gene Clark was named interim dean of the Arizona-based Phoenix School of Law; 2009 Business NC Legal Elite: Bryan Adams and Jerry Walters, Employment; David Erdman, Family; Phil Van Hoy, Hall of Fame.
       
• Proud grandparents, Bill and Bobbie Nichols, welcomed the birth of Sara Grace on January 15th; Pam Jefsen helped counsel survivors of US Airways Flight 1549 as they arrived home. Twelve years ago, Pam was riding in a commuter plane that crashed in Maine; well wishes to Sandy Osborne as she recuperates from an automobile accident.
       
• Contact Luther Moore if you would be able to host exchange student Luciano for March, April and May.