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Denver Metro Economic Forecasters Split 3-2 on 2011


The 24th Annual Economic Forecast Breakfast held this morning at 7 a.m. at the DTC Hyatt by the South Denver Metro Chamber of Commerce, drew hundreds of business leaders and politicians from throughout the Denver Metro area and had generated no small amount of pre-event buzz.  Most had expected, or perhaps simply hoped that the panel experts would foresee a brighter 2011, if for no other reason than 2010 had been so dismal.  Unfortunately, of the five panelists, only two were optimistic about the coming year.  Three of the five foresaw further problems, while the moderator Brian Vogt, CEO of Denver Botanic Gardens stated that he did not believe that the problems encountered in 2010 actually rose to the level of being the worst economic dislocation since the Great Depression.  That the situation had been so-termed, was the product of a society "addicted to drama," according to Vogt.


The panelists included Donna Lynne President of Kaiser Permanente, Rick Jory, President of Sandhill Scientific, George Bye, President, Chairman and CEO of Bye Energy, Mike Matthews, Denver Market President Wells Fargo, and Jack Eckstrom, Vice President of Corporate and Government Relations, Whiting Petroleum Corporation.  


In business as well as in sports, when there is a consensus among the experts about the future, it is often a good time to bet the other way.  The most recent illustration of that phenomenon is the prognostications concerning the New Orleans Saints - Seattle Seahawks Wildcard game that followed Seattle's improbable capture of a playoff berth with the worst record ever by a team entering the playoffs.  One expert stated that the Rams - Seahawks game that gave Seattle the NFC West title was "their Superbowl," implying that the Seahawks would be content with that.  In any event, he went on they were no match for the Saints.  




Every other "expert" that I was able to find that week concurred.  The overwhelming nature of that consensus made me wish that I could have afforded a trip to Vegas to make a sizeable bet on the Seahawks, 11 point underdogs at game time, although the spread had been much higher during the week.  That I did not had as much to do with the number one rule of sports gambling.  That being that one should never bet on a team in which one has a rooting interest.  My nine years in the very beautiful Seattle area meant that such a bet might be a mistake.  It was not, of course, as the Seahawks defeated the defending Superbowl champs 41-36, in a game where the commentators heaped praise on a Seattle defense that held the very talented Saints to "just" 36.  




In business, that axiom may be even more true, although, of course, there are no absolutes.  That statement is, in fact, an absolute, which suggests, in a very convoluted way that there are some or at least a few absolutes.  Investors are often told that the time to buy is when everyone else is selling and that the time to sell is when everyone else is buying.  This suggested that while economic forecasts made by this set of experts might be valuable in terms of gleaning some important information, embracing their conclusions might well be another matter entirely.  




Clearly, however, there was no consensus here today.  There was no shortage of interesting facts and opinions.  Including the observations of one panelist who made no apologies for the fact that his company employs 45 people in Colorado, as opposed to 130 in the Czech Republic where the going wage rate is $6.  That will change, however, because the company intends to move operations to Vietnam, where the going rate is $1/hr.  




For that he made no apology, stating that he did not feel that the nation's manufacturing capability was as necessary to its long-term prosperity as its ability to innovate.  If anyone on the panel disagreed, they did not do so directly.  




The President of Wells Fargo was one of the two optimists, seeing both problems and long-term financial benefits to the vast amounts of capital that are now sitting on the sidelines.  He worried that Wells Fargo at least have not gotten their "arms around" the vast new regulatory environment that includes bills 3000 pages in length.  By comparison, all banking legislation since 1913 has been a mere 1000 pages.  




Panelists from the oil and gas industry worried that $100 to $120 a barrel oil might cripple the economy and choke off any recovery, stating that $80 a barrel oil was just about right for continued growth.  On the plus side, they considered the new Governor, John Hickenlooper, as friendly to the industry and business in general, much more so that the previous administration, despite the fact that the party in power had not changed.  They also foresaw a 100 year supply of domestic natural gas.  Oil shale was another matter, and will remain only a potentiality until some technological leaps could be overcome.




One panelist stated he had been optimistic until he had a long talk with former Wyoming Senator Allan Simpson.  Simpson, he explained, expected to see "blood and guts and eyeballs on the floor, when the new US budget comes up for a vote in March.  He foresaw big cuts, even to the "Big 4" which includes Social Security, in addition to, tax increases.




One of the Denver area's biggest competitive advantages has been a highly educated workforce.  That, however, may be endangered by cuts to education.  Worse, shortages in aerospace and petroleum engineers will create serious problems for those industries.  One panelist estimated that nearly 40% of petroleum engineers and scientists will be retiring or leaving the industry in five years.  Today the dismal science was indeed just that, dismal.



Comments

  • Terry McElhaney 3 years ago

    You summed up the meeting nicely! Thanks for your support of the South Metro Denver Chamber and its Economic Development Group.