I found a newsletter in with my Dad's stock papers yesterday.  I found it interesting and somewhat ironic that it was written in January, 1967.  To me, it could have been written yesterday - or at the very least 2006, but you can be the judge.  It comes from the Research Institute of America, Inc. in New York.  **********************************************************************************

THE TWO ECONOMIES
The Economic Outlook for 1967 and It's Implications for Sales

"It was the best of  times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity..."
-Charles ****ens, A Tale of Two Cities

Uncertainty - over Vietnam, the stock market, inflation and possible controls, interest rates, federal tax policy, the auto industry, housing, etc. etc. - is a word that has been cropping up with increasing frequency in economic forecasts for the new year.  The result is that many of the prognostications of the economist, including the Research Institute's, have something of the flavor of the famous opening lines to Charles ****ens' novel about the French Revolution quoted above.  But not quite...

As one RIA economist points out, "It has become standard for economic forecasters to preface their projections with the disclaimer that the many uncertainties make this a  particularly bad time for looking into the future.  But I'm not aware, "our economist added, "that there has ever been anything but a bad time for economic forecasting.  There is no question that today's uncertainties are impressive and different, but I doubt if they will seem any more serious, in retrospect, than those faced in the past."

For the business executive, manager or salesman planning ahead for 1967, a fixation on the possible range of these uncertainties (which often tend to cancel each other out) is not likely to be constructive.  Much more important, in practical terms, will be the realization and acceptance of the fact that there are increasingly 'two economies' in the U.S. , which will not be moving in the same way in the year ahead.  Your own particular outlook for 1967 will depend heavily on which of these two economies your company and your customers are more closely linked wtih.

THE TWO ECONOMIES: AN OVERVIEW
The first, and at the moment the more dynamic, of these two economies is the one tied to defense spending and the rapid expansion of the U.S. industrial plants closely associated with the defense effort.  This part of our 'guns-and-butter' economic complex has grown aggressively in 1966, and will amost certainly continue to expand almost as firmly in 1967.  Government efforts, via tax policy and monetary restraint, to moderate this growth will have  some effects.  The net result, though, will be only a curtailment in the rate of expansion.

The seond of the two economies is the one based on satisfying consumer demand.  This economy has shown some distrurbing signs of sluggishness and weakness recently.  Auto sales have dropped off somewhat and other hard goods sales have hardly risen.  Housing activity, obviously, has plummeted, and shows no signs of an immediate recovery.  Consumer outlays on soft goods and services continue to expand, but this is not the sort of spending to spark a boom. 

All in all, there will be relatively little year-to-year growth in the second economy through 1967, and very likely signs of 'recession' in some sectors.  Putting these two pictures together, the pattern for 1967 in gross numbers, becomes one of gradually slowing growth, approaching a plateau.  We will probably again be hearing about a 'rolling recession,' as this indusstry or that dips.  However, the 'big picture' can be dangerously misleading as far as the outlook for any particular industry is concerned.  More than ever, 1967 will be a year in which you will be well advised to pay more attention to the trees (the particular factors that can affect your business), less to the forest (the general economy).

Note: While a recession-crisis-and-collapse isn't imminent, or even a long-run probability, you can be sure your top executives are keeping a sharp and conservative eye on the money situation.  Depending, of course, on which of the two eonomies you're in, and on your particular business, don't be surprised when and if you're asked to do your share in controlling expenditures - if this hasn't already happened.  But even more important, at least as far as sales is concerned, will be the increasing pressure to maintain high sales levels.

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Well, what do you think?