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UQ – No Economic Recovery Now
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- UQ – No Economic Recovery Now
UQ – No Economic Recovery NowEconomy low – investor confidence has dropped San Jose Mercury News 7/28 (Scott Duke Harris, 7/28/10, http://www.mercurynews.com/business-headlines/ci_15623653)BHB Uh-oh. Just when it seemed Silicon Valley's recovering economy might start humming like a Tesla powertrain, along comes a new survey suggesting that venture capitalists are frowning again. The last time that happened, things soon went from bad to worse. The Silicon Valley Venture Capitalist Confidence Index, a quarterly report that has tracked VC moods since 2004, showed a marked decline in the second quarter, to 3.28 from 3.65 on a scale in which 5 indicated high confidence and 1 indicated low confidence. That reversed five consecutive quarters of gradual improvement since the financial industry meltdown created fears of global depression. "It was a bit of a surprise," said Mark Cannice, a professor of entrepreneurship and innovation at the University of San Francisco who conceived and conducts the survey. A bit? Just two weeks ago, the National Venture Capital Association delivered its most upbeat quarterly report on new fundings since the already-shaken, shrinking industry was rocked by the financial crisis of 2008. And business was especially strong in the Bay Area, where startups gathered up more than $2.9 billion during the quarter, nearly doubling the amount from the previous quarter and accounting for 44 percent of the national total. And VCs, Cannice noted, had to be pleased that Wall Street had hosted some new initial public stock offerings during the quarter, headlined by Tesla Motors. A healthy IPO Advertisementmarket is critical to the venture industry because it typically delivers the biggest return on the investments — a rising tide that also lifts the values of mergers and acquisitions, the other source for venture returns. But Tesla's debut may be an exception. Solyndra's withdrawn IPO application may be more symptomatic of the dicey economy. While VCs were busy making investments in the second quarter, Cannice said, the 32 VCs he surveyed were also growing more concerned about the IPO market, possible federal regulatory changes and a stubbornly "sketchy" macroeconomy. Several VCs put their dour outlook into words for Cannice. "The world and U.S. recovery are still very fragile, and concerns are growing about Europe and China dragging the U.S. back into recession," said Graham Burnette of Red Planet Capital. "Collective fear of sluggish growth in the overall economy will drive down investors' perceived need to deploy capital. Why invest now if it's going to be cheaper in the future?" said Dag Syrrist of Vision Capital. "It's troublesome how long-term investments are now almost completely driven by short- to medium-term market worries." Cannice's VC index may not have a long track record, but it's notable that its steepest decline was recorded in the first quarter of 2008 — the quarter immediately following the onset of the recession. As the market for IPOs, fairly strong the previous year, all but froze over, the VC mood continued to plummet with the collapse of Bear Stearns and later Lehman Brothers, before bottoming out in the fourth quarter of 2008 while fears gathered that the economy could tumble into a depression. And now, as some economists warn of a double-dip recession, we have the specter of a double dip in VC confidence. UQ – No Economic Recovery NowDouble dip is coming – stimulus has run its course Washington Post 7/28 (Neil Irwin, 7/28/10, http://www.washingtonpost.com/wp-dyn/content/article/2010/07/28/AR2010072806049.html?hpid=topnews) BHB The U.S. economy is out of the ditch. But is there enough gas left in the engine to reach highway speed? The recovery faces a crucial test over the next couple of months: Either it will pick up vital momentum from increased consumer spending and investment or stall out, dipping into a period of anemic growth -- or perhaps even another recession. Forecasters knew this inflection point would arrive, a moment when consumers and businesses must take over for government stimulus spending and the rebuilding of inventories. On Friday, the government will offer crucial evidence when it reports on second-quarter economic growth. This will be the first in a series of indicators in the coming weeks that could help answer whether the economy has achieved cruising speed, in particular whether the private sector is growing fast enough to put unemployed Americans back to work. Forecasters are expecting that gross domestic product rose at a rate of 2 to 2.5 percent rate in the April-through-June quarter, which would be too slow to drive down the jobless rate. Just Wednesday, the government announced a surprising 1 percent drop in June orders for durable goods and a compilation of anecdotal reports from around the country by the Federal Reserve showed a recovery that is increasingly uneven. This fit into the pattern of recent economic indicators showing that the transition to a self-sustaining recovery has been rocky. Fits and starts are common during early stages of economic expansion. Before long, it should be clear whether the summer of 2010 has indeed been a mere soft patch as recovery took hold. "We're right on the cusp between simply decelerating and actually falling into a double dip," said Robert A. Johnson, executive director of the Institute for New Economic Thinking. "We have households still trying to be cautious and improve their savings, and if they cut back further, it will create a feedback loop that drives us back down." It was barely a year ago that the economy made the transition from steep contraction toward expansion. Simultaneously, a gush of federal stimulus money started spreading through the economy. Government backstops for the financial system helped instill confidence that the system wouldn't collapse. An aggressive series of interest rate cuts and other actions by the Federal Reserve took effect. All those factors helped ease the fear of economic collapse that earlier weighed on businesses considering investment decisions and consumers thinking of purchases. Now, though the impact of the fiscal stimulus continues to be felt, it is tapering off, no longer adding to growth. At the same time, a one-time boost to growth from business inventories is also ending. During the depths of the recession, companies reduced their production even more than consumers pulled back, depleting their inventories. The need to replenish those inventories contributed to growth in late 2009 and early 2010. Economists and policymakers have been counting on the inventory bounce and stimulus priming the pump, helping create a self-sustaining momentum. Those temporary factors, goes the logic, should make consumers more confident about making major purchases, which in turn increases demand for products, leading businesses to ramp up production and hire more employees. That should result in higher incomes and even more consumer confidence, fueling a virtuous cycle. But that cycle could sputter if Americans, groaning under the weight of household debt run up during the past decade, decide they would rather pay it down instead of increasing their spending. Americans remain deeply uncertain about the economic future. A Conference Board survey showed they are actually less confident about the economy now than they were last August, when the expansion had just begun. Download 0.75 Mb. Share with your friends:
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