Addendum: November 22nd, 2008
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The news says the sky is falling. The stock market and the housing market are crashing. Major companies are going out of business. Yet, this week at the HCD08 conference I saw no hint of dark clouds on the horizon. I talked with many designers and art consultants in healthcare who are overwhelmed with work. When I go out to dinner at night here in DC the fancy restaurants are full.
What is the truth? Is the sky falling? What impact will the economic crisis have on the use of Art in HealthCare?
I asked Charlie Peltason to give me his take on the economic outlook. He has spent his entire career in finance. He has been a good friend of mine since High School. Here is what he wrote:
1st of all I am very pessimistic. I think things are going to be simply horrific. Yes HealthCare may be relatively protected, but not all aspects of it will be ok. You know all those high priced plastic surgeons charging $5 grand for breast augmentation....forget about them and their nice shinny new offices. Discretionary surgery including cosmetic is history! Unemployment means less health insurance, who needs plastic surgery when they are worried about keeping their homes?
Hospital occupancy? History. Home health care is way cheaper.........and it implies trouble for the nursing home industry as well. So...unless it's an emergency, hospitals are going to see way less admits.............they can't hold em longer cuz they can't get reimbursed, etc.............Why would anyone in their right mind concern themselves with pretty pictures on a wall?
Like I said....even within safe industries there are going to be huge challenges.
Unemployment at 8 1/2%-9% and I may be LOW!!! DOW Industrial Average 6500! Initially, interest rates low to lower but not necessarily at the consumer level. Taxes moderated near term, eventually going much higher. Interest rates going a lot higher in a year or so.
Massive continued bankruptcies, both personal and public (i.e. Circuit City). Massive continued home foreclosures which imply continued decline in home prices. Many (a majority) of home mortgages will be upside down, in other words people will owe more than their houses are worth. This is a simply dreadful outlook because it implies so many other horrible outcomes over time.
HUGE rates of closings of restaurants, travel and entertainment will take HUGE hits. Large air carriers may go broke along with auto companies which mean either one of two things. They will be nationalized or gone, poof, gone! State and local municipalities will be unable to fund Medicaid/Medicare. Ditto other obligations. We're talking deficits at the state and local levels not seen in our lifetimes with implications that are equally horrific.
So pretty much end of the world scenario in my opinion. Cash is and will be king. Huge deflation.....before we are all done and said, huge inflation, then stabilization. I'm thinking at least 5 years of hell, maybe more. This is going to be a 21st century version of the great depression. Baby Boomers will have to work longer and or sell retirement assets at values far below what they expect or need to fund retirements.
So, don't buy stocks now, don't buy bonds now, don't buy commodities now. Think tech names and consumer durables (i.e. Microsoft, Cisco, P&G, Clorox). If you don't buy it yourself don't buy the stocks or funds who invest in those kinds of names. The PC pipeline is devastated as are the related industries. Starbucks is an example of a company who may be gone after a while! Who the hell needs a $5 cup of espresso when they can get a good cup of coffee at McDonald's for a buck? There's still huge unrevealed structural challenges and there's no end in sight. You are in a full employment city right now Henry....gov't jobs! I looked at the Federal Job sit yesterday and the wages they pay are huge by comparison to the private sector!!!! I'm betting after Christmas a lot of shopping centers will begin to close and at the least loose a lot of paying tenants.
There is no delay Henry....this is hitting the fan right now, BIG TIME. The other day DHL ceased operations in the US. A small town in Ohio, Middlebury I think it's called suddenly lost 10,000 jobs overnight and unemployment there is now 50%!!!! Think maybe that will presage a shit storm for the local grocery stores and other business's there?
There are a few areas that are relatively safe, now and for the foreseeable future. Health care and consumer durables including supermarkets. Just about everything else is going to get creamed. Art in HealthCare will get hit but only because it's discretionary not a required aspect of health care
I'd hunker down if I were you....be scared, I mean it. I know it's a self fulfilling mind set but if you don't you will regret it. Too many people have VERY real reasons to be scared and they will act accordingly and spend accordingly. Be glad you live on a farm, live near the state capital and could go back to medicine if you chose to. The sky might be puffy with patches of blue to you but I'll bet regular folk like me are going to be suffering big time, for a long time. Barack Obama can't fix this any time soon, no one could.
Reasons? For 12 years or so the economy grew because a lot of people used their home values to increase their standards of living. This was the linchpin of the whole economic expansion. Now...the birds are coming home to root (no pun intended) and we are going to have to reverse direction to make up for the massive deflation of housing values. It's a titanic disaster and one that isn't going away any time soon.
You know for example that the St. Louis Art Museum 'postponed' their $24 million capital improvement program, right? Think maybe they don't see getting the pledges any time soon? Think this is an isolated case? It's not and we are closer to the beginnings of this than the end.
This is what I think and I seriously doubt I am going to be wrong. What would I do right now? Even though I don't know the specifics, I'd be willing to bet that you and Lorna will be supporting more than one family member within a year.....and this will go on all over the US. The worst part of this is the unknown....which is that we aren't alone. The rest of the world's economies are going to get trashed and it's hard to say how much worse that will make matters. Aren't you glad you asked? :(
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