State of the world economy

This is the type of time when it’s good to have contacts in different parts of the world and different industries. A few queries gave me a clear picture of what is going on. The economies related to housing and finance are going down hard while everything else in the world is still having record sales figure. Everything except the US and Europe that is. Some OEM unrelated to the two trouble industry but situated in these two geographic locations are panicking because of the freezing in bank lending. Most of them are companies that overly rely on credit to get through the month. Which brings me to the conclusion that a 35% drop in every sector is uncalled for.

To bring this into perspective, yes the economy is contracting by a few percentage, but you can’t just look at it in terms of percentage. Five percent from a historical high is still a great number. You have to understand that there are only so many people to consume products that a cap will be reached at one point or another.

The traditional industrial equipment saw a record bookings in the month of August which suggest that most of these industries are been overlooked. Let’s  take the tech sector for example, its record revenue this quarter are muted by the insane losses at the financial institutions. Wachovia lost 29billion today. Whereas before the fear settled in people’s heart, investor’s would just shift their money into sectors that are outperforming. In a fear driven environment any bad news will propagate through the whole economy. If this continues, you will have to look at the facts one day and realize that even if everything looks like shit. Apple is still selling 11 million ipods every 3 months.

Tech was poised for a big jump before this whole mess came in and I expect it to continue once we muddled through these uncertainties.