Unless you’re Tiger Woods, 2009 has probably been a heck of a lot better than 2008.
Last year, most Americans felt as if they had been hit in the head by an iron. Wall Street nearly collapsed. The economy plunged into its deepest recession in decades. As housing prices sank, many homeowners realised that they owed more on their mortgages than their homes were worth. Millions lost their jobs, and even those who didn’t hunkered down, burying their wallets in the backyard.
This year — with more than a few bumps along the way — the situation brightened. The stock market surged, and the housing and auto markets appeared to have bottomed out. Demand for certain tech toys like smartphones, which allow people to check e-mail, surf the Web and play games, perked up.
The year also ushered in a new national pastime: kick the banker. Fresh off of receiving billions of dollars in a government-backed bailout, some Wall Street banks had a boom year and promised their employees huge paydays. That incensed many American taxpayers, who are worried about their own jobs and unable to refinance their home mortgages at some of the same banks they just helped to bail out.
The biggest target of this ire was Goldman Sachs, which found itself called a “great vampire squid” in Rolling Stone magazine and lampooned on “Saturday Night Live” for receiving early batches of the elusive H1N1 vaccine. “These are the least contagious people in the world. They don’t even touch their own car-door handles,” an ‘SNL’ comedian riffed. Ouch.
OK, so maybe Tiger Woods and Goldman Sachs will be happy to have 2009 behind them. (And, unlike most Americans, they have enough money stashed away to ride out whatever happens in 2010.) With that, here’s a look back at five of the biggest business stories of this year — and what to look for in the next 12 months.
Automotive sector
Years of losses, management missteps and declines in market share finally took their toll on the American automotive sector. General Motors and Chrysler filed for bankruptcy protection in the spring and received, collectively, tens of billions of dollars in a federal bailout.
In return, the federal government, which wound up with stakes in both companies, began calling more of the shots. The White House forced Rick Wagoner, the long-time chief executive of GM (sometimes derisively called “Government Motors”), to resign. It also nudged Chrysler into a marriage with the Italian automaker Fiat. The troubles at GM and Chrysler gave the Ford Motor Co., which shrugged off offers of federal money, a big boost among the Detroit pack as auto sales finally began showing signs of life in the summer. Still, the outlook for consumer demand for cars is cloudy. Some analysts say the uptick in sales was attributable to the government-backed “cash for clunkers” programme, which allowed owners of aging vehicles to receive up to $4,500 in credits on the purchase of new, more fuel-efficient models. With that money gone and many Americans still worried about their job security, some analysts say that the demand for autos will most likely continue to be weak.
And while GM and Chrysler are leaner in their operations, both continue to struggle to execute their strategic visions and contend with longstanding cultural issues. GM’s board, for instance, ousted Fritz Henderson, a lifer at the automaker, this month, naming its chairman, Edward E. Whitacre Jr., as interim chief executive. “Chrysler is still a basket case, and General Motors seems to be doing a lot of public relations. Changing the coach doesn’t change the team,” warns Gary N. Chaison, a professor of industrial relations at Clark University in Worcester, Mass.
A global gold rush
Without a doubt, gold is hot. As its price soared 23 per cent this year, Americans got together to hawk their gold bracelets and rings at gold-selling parties across the country. Hedge fund titans including Paul Tudor Jones and John A. Paulson, who made billions in recent years betting against the housing market and financial stocks, turned bullish on gold. For the last couple of years, the price of gold struggled to crack the $1,000-an-ounce ceiling.
This year, however, gold zoomed past that line, hitting a high of $1,215.70 early this month. Now some analysts say the $1,000 mark may become the floor for a while, given a weak dollar, central banks pumping trillions into fragile economies and expanding deficits in the U.S. and Europe.
Smartphones
Whether at office meetings or cocktail parties, the Apple iPhone grabbed centerstage this year as new converts eagerly showed off the latest gee-whiz application they had just downloaded — to the oohs and aahs of an appreciative audience.
Introduced just a couple of years ago, the iPhone shook up the mobile device landscape and created a whole new digital ecosystem of developers clamouring to write applications, or programmes, for smartphones.
Today, smartphones are the fastest-growing segment of the mobile device market, according to Gartner, the research firm.
As manufacturers scramble to create offerings that allow users to view e-mail or streak across the Web, Gartner predicts that smartphone sales could grow 9 per cent in 2010.
The question is whether Apple, which held about 17 per cent of the global smartphone market in the third quarter, behind Nokia and Research In Motion (which makes the BlackBerry), can continue to gain a bigger piece of the pie amid fierce competition next year. Apple will certainly face its share of threats next year. The biggest will most likely come from Google, whose Android mobile operating system can be found in Verizon Wireless’ new Droid phone, made by Motorola.
Several other handset makers are adopting the Android system, including the Taiwanese company HTC and the PC maker Dell, which plans to sell its first smartphone handsets in China and later, Brazil.
And unlike Apple, which puts all potential iPhone applications through a review before they are accepted in the App Store, Google allows any developer to publish an application instantly to the Android Market, its version of the App Store. So far, about 14,000 applications are available for Android-powered smartphones.
A jobless recovery?
While it’s not yet official, many economists say the recession in the U.S. most likely ended sometime during the summer. But few squeals of delight greeted that observation, perhaps because many economists predict that continued weakness in the job market may well damp the recovery. After shrinking for a year, the nation’s gross domestic product — a broad measure of total goods and services produced — finally expanded, at an annual rate of 2.2 per cent, in the quarter ended in September.
Other indicators, meanwhile, including industrial production figures, the Standard & Poor’s 500-stock index and even housing starts and building permits, are “signalling that the worst is now over,” said Edward E. Leamer, director of the UCLA Anderson Forecast.
Still, many economists contend that many of the gains in consumer spending and housing this year were driven by government programmes created to encourage consumers to buy. As those programmes expire, consumer demand may again dry up.
As policymakers weigh more proposals to stimulate the economy and to finance job creation programmes, some economists say there is a light at the end of the tunnel. When consumers continue to push off purchases of cars and homes, it creates pent-up demand that eventually will be fulfilled. “Eventually” could mean next year, but no one knows for sure.
Washington v Wall Street
Last year, when several Wall Street banks teetered on the edge of collapse, their leaders rushed to the White House to receive billions of dollars in bailout money. This year, as the performance — and pay levels — for some Wall Street banks soared, some of those bank chiefs were absent from a meeting at the White House to receive a dressing-down, as bad weather delayed flights.
“If somebody had just saved my life and they asked me to come to a meeting and it was foggy, I would take the train. I would get in a car. I would bicycle to meet that person who had just saved my life,” says Cornelius K. Hurley, director of the Morin Center for Banking and Financial Law at Boston University and a former counsel to the Federal Reserve Board of Governors. “It’s just unacceptable behaviour.”
Some argue that the balance of power between Washington and Wall Street has again tipped in Wall Street’s favour. Policy makers have tried to shed light on the shadowy world of derivatives, rein in compensation levels and give regulators the power to break up financial institutions before they become “too big to fail”. But Wall Street’s lobbying machine is again revving up to try to cut off any serious efforts to curb its size and scope.
A result of their orchestrated efforts, some argue, is likely to be a set of watered-down changes that have little effect on Wall Street’s ways and do little to prevent another crisis that could take down the country’s entire financial system.
“It was Rahm Emanuel, the president’s chief of staff, who told us earlier this year that a crisis was a terrible thing to waste,” Hurley added. “And here we are, very likely to waste it.” —
New York Times News Service, 2009
