Hold on tight

Think of the economy as a roller coaster and we’re staring at a long, steep fall. Get the picture?

Hear that? It is the fast trackety-track of the Big Dipper. We are over the top and heading straight down, heading for collision. But I understand. You are confused at the mixed messages coming from the market. Let me explain.

And there are three fundamental trends that are about to collide:

The first is the crash that will come from declining consumer confidence. There is a group in the economy that is assuming the market will keep rising. I call them the Young Aspirers. They are the young professional trendies, the boys in the trading room and the middle-class professionals. They believe everything is OK because the market works. They are continuing to spend and they have only known good times.

Their attitudes are reinforced by the economists and representatives of large companies who want to protect their brands and are never going to say that the market is heading for a crash while they are still trying to get their money out.

The next trend is the decline in business confidence. People are starting to defer major decisions. They are starting to think twice about their future direction and rethinking their strategies. While large-scale infrastructure projects will continue, as will work on longer-term contracts, shorter-term contracts will go back to the drawing board and will be delayed as people rework their strategies.

Then you have the third trend, which is an increasing nervousness in boardrooms fuelled by the John Howard IR scare campaign about what will happen to business and costs and inflation if a Labor government is elected.

Throw into the mix the problems with sub-prime flowing through the global economy and a decline in confidence in the US and you have a cocktail of fear that is beginning to take hold of some sectors of the economy.

Still confused? Well join the club and hang on!

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