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Bay Street guru Richard John “Jack” Lawrence and his companion, Carol Richardson, died in a plane crash while leaving the family cottage on Lake Muskoka yesterday afternoon. Authorities continue to investigate the details surrounding the accident.

Lawrence was most recently the chair and CEO of Lawrence & Company Inc., a company he founded in 1996, and was known for his influence and leadership on Bay Street.

Lawrence influenced and contributed to Canada’s economic policies and helped business gain a larger voice in policy-making decisions — a very important step for the development of the Canadian economy and the first step in what would become a lifelong mission for him.

Lawrence will be greatly missed by his family. Further details will be made available after the post mortem is shared with the family.

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Positive signs don’t signal economic growth

Despite the government’s massive stimulus efforts and the current rally in the financial markets, “formidable” challenges remain for the U.S. economy and “the market backdrop remains highly volatile and uncertain,” said Max Bublitz, chief strategist and portfolio manager at SCM Advisors LLC.

In his recent quarterly economic commentary titled “The Nine Most Terrifying Words in the English Language,” Bublitz warns that while the federal government is doing all it can to lift the U.S. economy, signs don’t point to a quick recovery.

Bublitz pointed out that though the recession may have ended, a return to normalized level of growth is has yet to be achieved.

“Equity investors should not count on outsized gains based solely on a slowing rate of decline. A sustained market recovery will require a move beyond the current stabilization phase and into a growth phase,” said Bublitz.

Unlike prior downturns, Bublitz does not see a consumer-led recovery. Despite U.S. personal income being up 1.4% in May, personal spending rose only 0.3%, lifting the national savings rate to a 16-year high of 6.9%. As a result, the government’s plan to put money in people’s pockets with the hopes they would spend it backfired as consumers saved the extra cash.

Bublitz isn’t concerned about inflation over the foreseeable future. Rather, he is worried that the U.S. is entering a period where, already burdened by a high degree of economic slack, it will face “significant headwinds” from increased government regulation in the financial sector, health care reforms and higher taxes.

He also noted that all this government involvement, though helpful, could potentially be harmful to growth. He cautions that government stimulus spending could result in consumer complacency as the economy moves towards recovery.

“It’s our fervent hope this government-as-the-solution doesn’t create a kind of unintended nuclear winter where today’s ‘green shoots’ grow into disfigured mutations,” said Bublitz.

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Securities suits may spike back up

In Q2 of 2009, the number of securities lawsuits in the U.S. fell to 140, compared to 221 lawsuits in the first quarter. The drop is believed to be due to the quiet period before an expected surge of securities activity in Q3 and thereafter.

In Q3, securities fraud cases filed by regulatory and law enforcement agencies will replace securities class action suits as the majority of cases going forward, according to the Advisen Quarterly Report.

“The increase in securities fraud suits is almost certainly a harbinger of things to come,” said Dave Bradford, executive vice president of Advisen. “Many of these suits are filed by the U.S. Securities and Exchange Commission, which has been revitalized under the Obama administration. The Commission already is staffing up with enforcement personnel.”

The meltdown of the subprime mortgage market and the ensuing credit crisis was the most significant source of securities suits in 2007 and 2008.

The Bernard Madoff ponzi scheme drove new filings in the first quarter of 2009. While still representing important sources of new filings, both diminished in significance in the second quarter. These events are likely to remain major sources of new securities suits, but indicators suggest that the tidal wave of new claims may have crested.

(08/04/09)