Most expect the recession to last through 2009, but it could be longer. Ultimately the details of the government’s plans will go a long way in determining exactly when we rise from these ashes.
More important than duration though is sustainability. We should know now that gimmicks will not work. Refund checks and any other short term stimulus do more harm than good.
From my perspective, a sustainable recovery depends upon seeding and incubating small business while providing for an environment in the capital markets that supports reasonable speculation.
The Well is Dry
Last week I was given an interesting assignment. Specifically, the task was to write about companies that were up and comers ready to change the game in a particular field.
The trouble, of course, was finding that next big thing.
One of the consequences of the dot-com bust is that the idea based CEO has become nearly extinct. In its place came CEO’s that were biased toward the bottom line instead of the top line.
Learning From the 90s
If you look back at periods of economic expansion, innovation was at the heart of growth. Not everyone will be winners, but if we want to expand instead of contract, we need to do more to promote innovation.
That means supporting small businesses by encouraging venture capital investment.
The 1990s will be remembered as a very prosperous decade. The main reason for that prosperity was innovation that was well fed by venture capital.
Innovation created businesses that in turn created jobs. The expansion will go down as one of the greatest since the industrial age began. We should do everything in our power to duplicate that effort.
In emphasizing lower taxes and increased spending, the government should focus specifically on things like tax credits for venture capital funds and low tax rates for small or new businesses.
Creating that fertile ground for future success to me is the single best thing we can do at the moment. Sure many companies that attempt innovation fail, but the benefits from the successes far outweigh the negative.
Avoiding the Next Bubble
In concert with providing that fertile ground, the government must nurture small business investments with strict oversight of capital markets.
One of the major issues with the dot com period was that too much capital ended up chasing too few companies.
That forced prices to rise to unsustainable levels. When the bubble was pierced several companies that most likely would have survived in a less speculative environment failed.
The way out of this mess is to rebuild the garden of innovation while containing excessive speculation.
For individual investors the best way to play the return to innovation would be to focus on growth stocks. Our very own Louis Navellier is a great resource to help you find the best growth stocks for your portfolio.
This article was written by Jamie Dlugosch, contributor to InvestorPlace.com. For more actionable insight like this, go to: www.InvestorPlace.com. James F. Dlugosch contributed to this article.
