Better Times Just Around the Corner

By Frank Szivos

Editor Angel Investor News

Despite the waffling stock market, Nick Perna, Managing Director of Perna Associates – a consulting firm specializing in economic analysis, sees better times ahead for both investors and entrepreneurs.

As Perna sees it, the problem isn’t the economy but an unstable Wall Street. Key indicators show that the economy is growing –  not at the same rate a couple of years ago.

“The latest data show we’re doing okay,” Perna said. “The question is will Wall Street drag it down. The economy is in the midst of growth but not at a real rapid rate.”

An economist for Webster Bank based in Connecticut, Perna isn’t ready to throw in the towel yet despite stock market instability. He remains optimistic because of

• The continued forward push because of interest rates cuts from last year;
• Tax cuts over the last two years;
• Increased spending on Home Land spending;
• Falling exchange rate which is good for the economy;

A frequent contributor on the Jim Lehrer Report, Perna might see better times ahead soon but he’s not blind to the challenging economic climate. Rated the best economic forecaster by the Wall Street Journal, he’s torn about his projection for private investors who face a great deal of risk. However, Perna predicts the overall picture for the stock market and IPOs improving during the next six months. Nonetheless, investors can’t expect to see returns on investments as they did three to four years ago.

Perna warns that prognosticators tend to act as if the present conditions will last indefinitely. He predicts a steady turnaround in less than a year.

“The unbounded doom and gloom will dissipate,” Perna said. “People act as if today will exist forever. They’re saying it today, the way they said it three years ago when the economy was humming. There’s no reason to think this climate will continue indefinitely.”

Part of the turmoil involves figuring out the appropriate price earnings ratio after the irrational exuberance before the downturn on Wall Street.

“We knew the NASDAQ was wrong at five thousand and the Dow at twelve thousand was inappropriate,” Perna said. “We’re still trying to find out what’s a fair evaluation overall.”

For entrepreneurs, Perna thinks good ideas will still draw equity financing; but the money is tighter and the challenge is greater. Perna views the biggest challenge for start ups is drawing qualified people on board. Stock options are not a viable option today.

“Shareowners are looking closely at what’s been given away through stock options,” Perna said. “When the market was rising no one cared what was happening. Now they care. A good idea can still get financed. Start ups have to work harder and bang on more doors. But it’s getting better not worse. Profits are starting to rise, but the risk is still high.”