It is comforting to realise that a level is, perhaps, being created after the swiftest collapse in activity I have ever known.
I blame technology. Information is so readily available to businesses that they can react with amazing speed to a change in circumstances and inventories are maintained in a tighter fashion now, again a function of IT.
What we know is that business reacted remarkably quickly to a perceived deterioration in the economic climate. Trading statements in the past week or so have been mostly downbeat. A recession is now a given. The bottom lies ahead of us. But do those indicators favoured by my trend- watching friend mean it will, after all, be more of a traditional cyclical downturn than a 1930s-style collapse?
Picking up scrap metal on the cheap suggests some operators are already preparing for the upturn. They must surmise that when things start to get better, such will be the shortage of available materials that securing supply now will be no more than prudent.
Nowhere is the change in the investment climate more marked than in the US. I lunched last week with James Abate. Once the manager of the Credit Suisse American fund, he now runs his own investment boutique in New York. The occasion was an update on the progress of the PSigma American growth fund, which nhe runs on behalf of Ian Chimes and his merry band of Credit Suisse escapees. Bullish does not even start to describe his mood. All the evidence for the best year for the S&P 500 in a while was contained in the handouts. Market performance under a Democrat administration? Superior to a Republican result. First-year likely return? North of 15 per cent.
The main point he was trying to get across was that America had been first into the crisis and would be the first out. Do not forget, he reminded us, the US had outperformed on the way down and would, as like as not, outperform in recovery. Aside from the S&P 500 proving more robust in index terms, compared with its peer group, the currency had done you no harm whatsoever.
Given that I had journeyed across the City in the glow of realising that Tokyo scrap prices were rising, his take on what we might expect was music to my ears. Perhaps Warren Buffett was right after all. Perhaps the capitalist system was, indeed, so ingrained in our society that it simply could not be allowed to fail. Perhaps we really could achieve the 20 per cent gain – ex currency – that he believed possible? We might indeed – but from what level?
This is not meant to be a negative comment but rather recognition that this, like other recessions and bear markets, will be different from its predecessors. We may see Detroit blasted as the car giants cave in to commercial pressure. Why not? The airlines have in the past – more than once. Once again, I was reminded that the stockmarket is a market of stocks and not all will recover at the same pace. Some will not recover at all. Shares suffered another bout of the blues last week. What a pity we will only learn when the bottom was after the event.
Brian Tora (email@example.com) is principal of the Tora Partnership