Outlook: Delusion in the face of market gloom

AMID ALL the gloom, here are a couple of upbeat statements from international business leaders, both issued this week. Michael Dell reckons that world-wide sales of personal computers will rise by 17 per cent a year for the next three years, and that his own sales growth will be much higher. Meanwhile, Wendelin Wiedeking, chairman of Porsche, acknowledges that his sales will be hit in Asia and Latin America, but insists that "order books are filled to the brim" and that the rest of the world will keep the overall position healthy.

Both these companies are obviously exceptional ones that to some extent can be expected to rise above the usual laws of the business cycle. The market for PCs will probably continue to grow worldwide regardless of economic slowdown. This is not just because it has a momentum all of its own - the more people who own a PC, the more everyone else has to have one - but also because constantly falling prices are making them affordable to an ever expanding market.

Michael Dell is an extraordinarily talented young entrepreneur; his vision and energy are boundless. But surely not even someone as highly focused as he can buck the international economy to that extent? The awful truth is that Mr Dell is probably deluding himself.

As for Mr Wiedeking, he must be living on an altogether different planet. Has he not noticed the wealth destruction that has taken place in the City and on Wall Street over the past two-and-a-half months? Some of his best customers have just lost their shirts and he's talking about a healthy outlook for sales of Porsches. What he's seeing in his "brimming" order book right now is the after-effect of last year's boom. Most investment banking bonuses have been paid in shares and they've just lost 50 per cent of their value. Very few people are going to be buying a new Porsche next year.

For the time being, the outlook for equities remains bloody. Because shares have come down so much, and because bonds keep on rising, there is a quite compelling illusion of value out there. As a result, many brokers insist that the present downswing should be seen as a once-in-a-lifetime buying opportunity.

But it is only so if you take the view, as Mr Dell and Mr Wiedeking seem to, that nothing has changed fundamentally, that the US and Europe will continue to see healthy growth, albeit at a reduced pace, regardless of the losses that have been sustained in the banking system and the flood of cheap imports coming at us from the East. Hopefully, this will indeed turn out to be the case, but it is not what the market is telling us will happen.

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