Businesses operating in a free market system are able to efficiently respond to market forces. In fact, it is the need to show a profit to investors, that keeps companies actively pursuing the bottom line.
This bottom line that is profit-driven greed however, also accelerates an already rapid downturn and a rapid up-tick, by requiring companies to either expand or contract, accordingly to their bottom line needs.
Unfortunately, that profit number is a false representation of the true state of the economy - banks with record profits do not foretell an improvement of the economy, more than it indicates that banks have reduced their liabilities by cutting their workforce and raised customer fees elsewhere.
The true nature of the beginning of a recovery isn't as some would suggest, the mixed quarterly results where some companies are earning a profit while others are continuing to show large drops in profit. The divergence between high profit and high levels of red ink suggest that some companies are cutting faster than others, and finding other sources of revenue, while those deep in red are trying to stave off excessive shrinking. In my opinion, we will only know when we've hit bottom and begun in a recovery period when we start to see that
red ink slow down and unemployment figures stabilize or shrink at the same time.
Be careful of how you judge the market's reaction and what the market is saying; if they knew what was really going on, the market would have corrected itself a long time ago and avoided this deep recession.
