One is the persistent pessimism I’m seeing in both the media and the polls. I just looked at Gallup’s daily numbers, and the phenomenon is clear. More than three-quarters of Americans believe we are in some sort of recession. 40% believe their standard of living will decline in the future. Almost a third believe the next generation will be worse off than this one.

Good grief! Given that the bill for years of politicized mortgage policies is finally coming due, it is remarkable that the economy is growing. It is possible, of course, that we will have a recession. Given the reality of the business cycle, in fact, it’s a safe bet we will. Nothing irritates me more than economists and analysts who act as if they have some special knowledge when they warn of a downturn.

Just so I can say I predicted it too, let me speak my prophecy: Someday, we’re going to have two consecutive quarters of negative economic growth. Probably. Of course, it won’t be for two more quarters, since we’re still growing positively now.

Then, however, we’ll return to increasingly rapid economic growth. New products and technologies will continue to extend and revolutionize our healthy lives. Increasingly powerful financial tools and rapidly growing international free market forces will prevail.

I’m not saying this, by the way, out of some Pollyannaish desire to cheer up readers. Successful investing requires rationality. It is irrational, given the evidence, to bet against the market forces changing the world — literally.

Let me quote James Gwartney, director of the Stavros Center for the Advancement of Free Enterprise and Economic Education at Florida State University in Tallahassee. I started reading Gwartney, incidentally, in the late ‘70s, and no one has done a better job of predicting the future than he.

“This is, by far, the most stable quarter of a century in the history of the United States,” Gwartney recently told a Florida paper. “By way of contrast, the U.S. economy was in recession more than 25% of the time during the first eight decades of the 20th century.”

Not that we don’t in some sense deserve a recession, or even a depression. For economists, who understand how to encourage economic growth, our anemic current state is distressing. We’re growing, but both major U.S. political parties have dropped the ball when it comes to responsible governance. Fortunately, however, consumers have grown far more skeptical in recent decades. Many institutions have prepared for the consequences of this irresponsibility. This is lessening the impact considerably.

Moreover, Eastern Europe and Asia have joined the global economy in a huge way. Their growth is an enormous buffer that counters the impact of stupid U.S. policies that once would have tipped us over the edge.

What else has contributed to this pessimism in the midst of unparalleled recent improvements in our standard of living? Well, obviously, the mainstream media are doing their best to paint the economy as failing due to the current administration. Presidents are not the primary political influence on the U.S. economy, but that’s the nature of a financially ignorant journalistic community. Moreover, the old media are, in fact, in a real economic depression.

The revenues of once mighty players like The New York Times, Los Angeles Times, the BBC and the broadcast networks are evaporating. Journalistic staffs are being slashed. Advertising dollars are shifting rapidly to new media. This is a really bad time to be an old-school journalist, and it colors the entire media’s perspective.

Don’t let their attitudes get to you. It may be the end of the world for old media, but that’s all. These are near-perfect conditions for long-term investors watching new markets emerge to replace the old dinosaurs. To the extent that the public is convinced that things are getting worse, stock prices will be artificially low.

Today, I’d just like to point out one unlikely dinosaur — satellite radio. There’s a lot of buzz about the merger of seemingly high-tech Sirius and XM satellite services. On the surface, the government’s change of heart regarding their monopolistic consolidation implies future growth. It doesn’t. It’s an admission that neither is likely to survive in direct competition with the wireless Web.

Satellite radio is nearly obsolete, if it ever wasn’t. The explosion in high-speed wireless coverage and speed guarantees that subscription radio will never achieve serious success. Cars, the only place satellite ever had a real advantage, are moving to wireless Web connectivity. Within a few years, phone/media players will automatically connect to automotive entertainment centers, probably via Bluetooth. Already, all the media on your hard drive and all your favorite Web-based entertainment sites are accessible through phones — and often free of charge via Wi-Fi.

There will, though, be lots of opportunities to invest in the new players in this space. More on that later in the future…

For transformational profits,
Patrick Cox
August 13, 2008

An Investment Better than Satellite Radio was originally featured in the Penny Sleuth.