Rumors of Economic Demise Greatly Exaggerated

You can all come out now. The worst is over. The panic is subsiding. The “new economy” will come back, stronger than ever (if somewhat chastened). You’re not going to be hanging out on the side of a highway with a sign reading, “Will write web content for food.” You’re not going to be bumping into Bill Gates in a breadline.

How do I know this? I know this because Michael Mandel, economist at Business Week magazine, has just published a book stating it’s all going “to hell in a hand basket,” as my mom would say.

How do I know Mandel’s wrong? There are two reasons. First, he had enough time to write and publish a book claiming the sky is falling, and it hit him on the head. In the time it takes to get the truth between dead tree leaves in today’s world, the truth changes. Second, it’s just the perverse nature of the market.

When everyone screams buy, everyone’s bought, and it’s time to sell. When everyone screams sell, everyone’s sold, and it’s time to buy. When everyone starts using a “foolproof” way to “beat” the market, that way is going to stop working. It’s only when everyone says the market can’t be beat that you can beat it.

Why won’t this be a 1929 crash leading to a worldwide depression? Because in 1929 (as in 1999) people thought everything was going up. Markets can only rise against a “wall of worry” and folks like Mandel who assume the worst and (best of all) place their bets that way. So if you see Mike, thank him for me.

This doesn’t mean we go straight up from here. I said it when the market was high, and I’ll say it again when the market’s low. I’m not a market timer, and I’m not a market analyst. Don’t come to me for stock picks because my horses always lose or come up lame. But I do get clues to the distant future from having seen a good deal of the past, and I’ve seen this movie before.

All sorts of stocks are going to bounce around in the bargain basement for a while, priced at multiples to earnings that compare well with those of bonds, but eventually some will find they do have earnings. Content sites that extract value from every part of the sales funnel will have earnings. Commerce sites that keep their back-end costs low will have earnings. Advertising agencies that prove they can convert prospects to customers will have earnings.

It won’t be sexy, it won’t be glamorous, and there will be personal pain along the way (especially for us freelance writers), but things will gradually improve. This, too, shall pass. Given that this is the Internet economy, it will probably pass pretty quickly.

How do I know this to be true? Because smart people are panicking, a lot of smart people. A lot of people who are a lot smarter than I am are panicking. That’s how I know things are about to get better.

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