April 28, 2009


Following is the second in a series of newsletters designed to foster a healthy dialog. I hope you enjoy it and encourage your feedback and discussion.


Please drop me a line and let me know your thoughts: ward@caswell.org




Ward S Caswell


(617) 304-2689


Smart Decision Making in Tough Times


Its springtime in New England and signs of emerging life are everywhere. Tree branch tips are bright red in the morning sun and bulbs have pushed their green shoots from cool ground. The daffodils are blooming and the crocuses have already passed their prime. Still, it was just above freezing last week and the squirrels are looking pretty thin after a long cold dark winter. The analogies for the economy are striking. The stock market rallied, financial institutions reported unexpected profits, consumer confidence improved, and other leading indicators rose. Still, we are a long way from full recovery. Clearly there is much to be hopeful about even as institutions continue to shed jobs or fail. Good farmers know the right time to plow and plant. So too must the good manager know when to make changes in their business.

Stock analysts point to price earnings ratios and healthy balance sheets of many firms to try to reason that the bottom has been hit. I suggest that the turn in the markets derives more from the attitudes of the masses and their need for a feeling that something has changed to make markets more trustworthy. There is a cry for justice and punishment. On March 9th, 2009 the Dow Jones Industrial dropped to 6547, a level not seen since the end of 1996. On March 12th Bernie Madoff pled guilty to 11 felony charges. Images of

Madoff in handcuffs filled TV screens around the world and on trading floors. Finally someone had been punished for something. A line had been drawn. It was not the rating agencies who declared every CMBS tranche AAA, nor the House Finance Committee Chairman whose oversight over those rating agencies failed to bring any discipline. Still someone was going to prison, and the Dow is up over 20% since then. Additional scrutiny and accountability could further lift the markets just as much as good news over earnings prospects.



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