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2010 NGCOA keynote speaker says better financial times lie ahead 

It’s no secret that the long-suffering U.S. economy has taken its toll on the golf industry. But noted economist Todd Buchholz provided a mostly positive financial forecast yesterday during the Opening Session of NGCOA’s Annual Conference, and predicted that a sustainable financial recovery is already underway.

“I’m not telling you to pop champagne corks, and I’m not telling you you’re going to be flooded with new customers flushed with money ready to buy new clubs at the shop,” said Buchholz, who served as director of economic policy for the first President Bush from 1989 to 1992, and is currently managing director of the $15 billion Tiger hedge fund.
“I’m not telling you that, but I am telling you that the worst is certainly behind us and that we’re staging an economic recovery that I think will sustain itself through the year and through next year,” he said.

Buchholz, who is also an award-winning economics teacher at Harvard University, called this a Pigouvian recovery, so-named for Arthur Cecil Pigou, an early 20th century economist and Cambridge University instructor. Pigou theorized that the way to come out of a recession was to get the central bank to lend and print money, which didn’t happen during the Great Depression, but is happening now, Buchholz said.

“Pigou also said that when a recession hits, consumers get scared and hide. But then after a year or so, they peak out and make an assessment to determine if they’re going to keep their jobs,” Buchholz added. “And then they notice something. They look around and notice that everything is on sale and they say to themselves, ‘If I’m ever going to take a vacation or buy a new suit or a new set of clubs, this might be the very time to do it because I might never see these prices again.’”

Buchholz said this is exactly what happened to the U.S. economy in August 2009, when back to school sales were a little better than expected and then Christmas shopping, as bad as it was, was better than expected.

“We’re engaging in a kind of Pigouvian recovery,” he said. “Does it feel good? No, it’s still tepid, it’s still weak, it’s still tentative because the hiring hasn’t yet begun. But I think we have this recovery that will sustain itself for the next two years.”

Buchholz also noted that when you adjust for falling retail prices, personal income is actually up. Discretionary spending, restaurant spending, and travel spending is also beginning to pick up, he said. “We’re beginning to see a consumer with some discretionary money willing to actually take the wallet out,” he said.

Another positive indicator for an economic recovery is commodity prices, which he said aren’t bad at the moment. He also noted that inflation isn’t currently a terrible concern. He also said that the home market is slowly improving and that there’s currently a positive savings rate in the U.S.

“The price of the dollar is interesting,” Buchholz also noted. “The dollar is weak, which is bad if you want to buy lunch in Paris. But it’s good for U.S. manufacturers because our prices look cheap.”

Buchholz called the current job market “miserable,” but he predicted we will see positive numbers in the next six months.

“These are the most treacherous economic times that any of us have ever seen,” he said. “But this is the ‘new normal,’ as many are calling it, and it looks like it’s going to sustain itself.”

Also during the session, Mike Hughes, CEO of the NGCOA, thanked everyone in attendance for taking the steps to lead the golf industry in this new economy.
“It’s easy in this environment to say, ‘I’m going to be bunkered in, I’m going to hunker down, and I’m going into survival mode,’” Hughes said. “But one of the things that separate you from other people in our industry is the desire to learn, the desire to push on, the desire to progress. I thank you for the support you’ve shown to the association for being here, and I congratulate you on the investment in our future and in your own future.”


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