Sound The Alarm For Tech Vendors: The European Titanic Has Already Hit The Iceberg

Neither The Economist magazine nor the Organization for Economic Cooperation and Development (OECD) is known for being alarmist. So one pays attention when The Economist in the lead item ("Is this really the end?"; see also "The euro: Beware of falling masonry") in its November 26 issue stated: "The chances of the euro zone being smashed apart have risen alarmingly, thanks to financial panic, a rapidly weakening economic outlook and pigheaded brinkmanship." The OECD had similar strong words of concern in its press release ("OECD calls for urgent action to boost ailing global economy") announcing its latest "Economic Outlook": "Decisive policies must be urgently put in place to stop the euro area sovereign debt crisis from spreading and to put weakening global activity back on track."

For me, the economies of the European Union (EU) have disturbing similarities to the ocean liner RMS Titanic as it steamed across the Atlantic on that fateful trip in 1912. From the start when Greek debt crisis surfaced in early 2010, the leaders of the EU have consistently done too little, too late to keep the problem contained and manageable. The steps that could have been taken to change course were not taken. Instead, the EU ocean liner stayed on its course, right into the path of an iceberg of financial panic.

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The Tech Market Gives Small Thanks — "It Coulda Been Worse"

The day before Thanksgiving is a good point to pause and give thanks for the recent news in the tech market, before we give thanks for our personal blessings with our families and friends tomorrow.  So, amidst the glum news about the ongoing European debt crisis that is grinding growth to a standstill, the failure of the congressional supercommittee to make any progress on US budget deficits or stimulus, and the crashing stock markets, here are some things that tech vendors can be thankful for.

  1. US economy is still growing.  The revised real GDP growth rate for Q3 2011 was 2%, down from the preliminary report of 2.5% (Gross Domestic Product, 3rd Quarter 2011 [second estimate]).  That's not much growth, but at least it is growth.  And the report on "Personal Income and Outlays: October 2011" released this morning showed a 0.4% increase in October from September (5% at an annualized rate), with consumer spending up by 0.1% (1% annualized).  So, the fourth quarter began with some good momentum for consumer spending. 
  2. The US tech market is still growing — better than the government data indicates.  The Bureau of Economic Analysis data on business investment in information technology was revised downward from the preliminary release, with total IT investment growing by just 3.3%.  However, computer equipment grew by 10.6% and software by 6%, with software doing even better if we make adjustments to exclude the "own account" software that is created by firms for their own use.  The bad news was that communications equipment investment declined by 13.2%. 
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