As I See It: The Swami Speaks

Published: December 15, 2008

by Victor Rozek

It's that time of year again when I try my hand at prognostication. And not a minute too soon. For seekers of truth, wisdom, and missing 401(k)s, questions abound. Will the Fates be kind to IT next year? Will the economy find its pulse, or is it twitching post-mortem? Is Wal-Mart hiring greeters, and if so, is there a trampling bonus? Only the Swami knows. Hence, properly turbaned, sitting cross-legged at my predicting station--the one with the broadband connection to the Wu-Wu channel--I dust off my crystal ball, and peer deeply into the mists of economic collapse.

Man, what a mess.

Making predictions is not as easy as it used to be. In the old days, a Swami would wait for an eclipse, and study the shadows cast by chicken bones. But times have changed. Now a psychic has to write books and command $400/hour for consultations. At least that's what Mary T. Browne, the Wall Street psychic, charges to advise the money men on how to manage your money. Further proof that prosperity does not make a person wise. And you wonder why the country is in trouble.

We can take some comfort from the fact that if Wall Street is reduced to using psychics, it's amazing the economy didn't tank long ago. But tank it did.

Gazing through the haze, I see a bunch of 800-pound gorillas with begging bowls. Bankers, brokers, and crummy car makers; guys with private jets and $5,000 suits who burn through money like Rastifarians burn through ganja. The Swami's first prediction is that throwing money at them is like trying to fill a Zodiac with a bicycle pump. By the time the raft is seaworthy, the ocean will have dried up.

Tough love is in order. Forcing them to drink domestic champagne and fly first class commercial will teach these wastrels a thing or two. But you don't have to be a Swami to know that Congress practices discipline about as frequently as Britney Spears. Then there's former Treasury secretary, Robert Rubin. The guy, who along with Alan Greenspan, was most responsible for orchestrating this disaster, has been appointed by Barack Obama to fix it. As any Swami knows: arsonists start fires, they don't put them out.

The Swami predicts that when it comes to economic policy, the operative word in "promised change" will be "promised."

For IT professionals--and indeed the rest of us--the lack of regulatory and leadership reform means this nonsense will last longer than it needs to. For things to shift quickly, all of the financial geniuses would first have to admit they were idiots. The Swami predicts that the likelihood of that is zip, zero, zilch.

But there are hopeful signs, the most notable of which is that the president-elect has wedded the economic recovery to vastly expanding the use of information technology. Mr. Obama announced a two-year stimulus plan that includes investment in infrastructure and alternative energy--the engine of 21st century economic growth. The goal of the investment is to create or retain 2.5 million jobs, which sounds like a lot until you consider that over 750,000 jobs were lost in the last two months. Nonetheless, Mr. Obama's own words suggest that he's placing a lot of recovery eggs in the technology basket. Included in that basket is a massive upgrade of the Internet.

"As we renew our schools and highways, we'll also renew our information superhighway," Obama said last week in outlining his plan for infrastructure investments. "It is unacceptable that the United States ranks 15th in the world in broadband adoption. Here, in the country that invented the Internet, every child should have the chance to get online, and they'll get that chance when I'm president--because that's how we'll strengthen America's competitiveness in the world."

Yeah, those kids will need to make a lot of money to pay off the national debt.

He also said this.

"We must also ensure that our hospitals are connected to each other through the Internet. That is why the economic recovery plan I'm proposing will help modernize our health care system--and that won't just save jobs, it will save lives. We will make sure that every doctor's office and hospital in this country is using cutting-edge technology and electronic medical records so that we can cut red tape, prevent medical mistakes, and help save billions of dollars each year."

OK, right now it's all silicon in the sky, but what choice does the nation have? It will take a great many companies employing millions of people to repair schools, roads, bridges, and dams. A great many more to upgrade sewer systems, electric grids, mass transit, and to make government buildings energy efficient. And each of those companies doubtless has an IT department.

IT providers will also play a leading role in computerizing health care and education. The good news is that IT jobs are front-end jobs, and if there is any money left in the government vending machine to fund Obama's pronouncements, there will be a marked increase in opportunities for IT professionals.

For those who have already lost their jobs, however, the only question is: "How soon?"

The Swami peers into the past and discovers an unexpected historic sign: all major economic recoveries have begun right after taxes were increased on the wealthy. When taxes on the wealthy were high, GDP and real wages were also high. When the rich received deep tax cuts, wages fell, the rich gambled and schemed with their surplus money, and bubbles and crashes followed. During the campaign, candidate Obama announced his intention to raise taxes on those making more than $250,000. Alas, every good intention is marred by a jarring dose of reality. The president-elect is already back-peddling on his campaign promise. What seems possible before the votes are counted is often stillborn after the election, so the Swami predicts the recovery will be delayed until the tax increase is passed.

Nonetheless, investing in infrastructure and energy is wise, not only because they have been ignored for so long (and what hasn't), but because they will provide an instant subsidy for businesses that, due to lack of size and lobbying strength, are not eligible to participate in the bailout orgy.

Consumer confidence is the lowest it has been in 22 years. Investors are freaked and hiding under designer rocks. The trick will be to coax them out. If you don't have a personal Swami and want to find out how well the new administration is coaxing, watch the Volatility Index. The VIX is based on data collected by the Chicago Board Options Exchange and it measures the market's expectations of volatility over the next 30 days. Among investors, it's known as the Fear Index.

When the market experiences massive sell-offs, investors get jittery. Traders rush to buy "puts" (options used when stock is expected to go down), which in turn pushes the price of these options higher. The increased amount investors are willing to pay for put options shows up in higher readings on the VIX. The higher the readings, the more fearful the marketplace. And right now, the VIX is at an all-time high. When the numbers begin to steadily decline, the economy will be in recovery.

Until then, we can enjoy the irony of dropping gas prices. One theory is that the speculators who drove gas prices up did so with borrowed money. Now, no one will lend them money, so the prices are retreating back to where they belong. But for two million people the net result is: Just when they can afford to drive to work again, there is no work.

On the other hand, try being an unemployed Swami. After all, this is my one annual prognostication gig. Tomorrow, I go back to the unemployment office where they ask: "What kind of work do you do?"

"I'm a Swami," I say.

"We have no work for you," they say.

"I knew you were going to say that," I say.

But my prescience does not impress them. So in the interest of a speedy economic recovery the Swami is--for a limited time only--offering private readings to inhabitants of the IT Jungle. For a discrete consultation call 1-888-Go-Swami. For you, dear reader, only $395/hour.

                     Post this story to del.icio.us
               Post this story to Digg
    Post this story to Slashdot