The Economy: First to improve will be tech areas, ports, and energy hubs.
Financial Services: Despite regs, a speculative spirit is returning to many banks.
R&D Trends: Cooperation is replacing competition as bigs partners with smalls.

The Economy
Odds are recovery from this recession will be even patchier than usual. The broad housing pickup that usually accompanies such a period … a rising tide that lifts all boats … will be absent. Foreclosures will still weigh heavily on the market, and this time around, the Fed can’t cut interest rates to spur buying.
Likely to lead the pack: Tech heavy areas, such as Austin, San Antonio, Denver, and Raleigh, N.C. Boston should also benefit from an increase in investment in technology equipment but lose much of the gain to ongoing financial services cuts.
Other pockets of swifter improvement: Ports … L.A. and Long Beach, Calif.; Seattle and Tacoma, Wash.; Jacksonville, Fla., and more … benefiting from export gains as the global recovery spreads. Energy hubs, too … Houston and elsewhere in Texas plus N.D. and Alaska … will enjoy an upward nudge from improving foreign economies.
And government-dominated Washington, D.C., plus neighboring Md. and Va. counties.

Lagging behind: Many manufacturing areas. Mich., Ohio, and Ind., of course, will continue to suffer with depressed auto sales. But so will Tenn., Ky., and Ala.
Plus tourism dependent regions. Persistently high unemployment rates will delay a rebound in travel and tourism spending and be a drag on gambling meccas in Miss. and Nev. as well as on other vacation spots: Hawaii, La., and coastal S.C., for example. And the shortage of tourists will compound Fla.’s deep housing woes.

Figure on higher mortgage rates by spring, with 30-year fixed loans in the neighborhood of 6%. Even higher if the recovery is stronger than now expected and businesses start selling corporate bonds to fund capital investment projects.
The upward push will come as the Fed quits buying mortgage debt. Right now, the Federal Reserve is buying about 80% of home mortgages being written, filling in for a largely absent private secondary market. But its effort to curb rates and prop up the housing market is slated to wind down between now and March 31.

Financial Services
The G-20 move to tighten bank regs makes the job tougher for Congress.
And it’ll be harder on bankers, who now face a two-tiered strategy aimed at limiting systemic risk by reining in their ability to take big chances.
Pledges at the Sept. meeting of the world’s economic powers were vague: Boost capital requirements and, for top banking executives, set pay guidelines that avoid encouraging them to take undue risks. Details are yet to come.
Congress will try not to get in the way or to limit U.S. negotiating power, complicating its own efforts to set capital requirements and curb executive pay.
But lawmakers won’t be deterred from creating a consumer protection agency or harnessing derivatives trading … maybe even from creating a sole federal regulator.

Has the FDIC found a compromise that will refill empty coffers? It seems so.
The decision to make banks prepay fees is the best of several bad options. Under the plan, banks will pay their 2010-2012 fees by the end of this year.
Banks like the idea, even though it amounts to an interest-free loan. It’s better than a special assessment they’d never get back or a Treasury bailout.
Prepaying leaves less cash for lending but won’t hurt bank balance sheets … fees can be carried as assets till normal due dates. Troubled banks can get waivers.
FDIC anticipates a lot more failures next year. The pace … almost 100 so far in 2009 … will pick up before it slows. Prepayments will bring in about $45 billion.

Meanwhile, look for more investors to dip a toe back into banking. So far in 2009, four banks have raised $207 million in initial public offerings. That’s sure to rise, though not to levels anywhere near the 30 IPOs that raised $6 billion in 2007.
Privately owned banks will use IPO capital to expand, buying failed banks in Fla., Ga., and elsewhere in the Southeast, plus in the Southwest, Calif., and Nev. IPOs will have little appeal in Mich. and Ohio, where recovery will come more slowly.

R&D Trends
Cooperation, not competition, is the route for more and more research. Private companies have long worked in tandem with the U.S. government on defense, energy, agriculture, health, and myriad basic science projects. Now …
Businesses are teaming up. Strained corporate budgets, limited federal funds for R&D and shortages of talent are pushing behemoths such as IBM and Intel to combine resources … with each other, with niche firms, even institutions sponsored by foreign governments. Hewlett-Packard has joint labs with China’s Tsinghua Univ. The firm also holds competitions for non-HP scientists to develop computer projects that they work on together. Intel employees partner with software and chip engineers from European companies and Germany’s Max Planck Institutes. Collaborative labs bring together IBM, Texas Instruments, Eli Lilly, and Swiss university ETH Zurich.

The trend is a boon to small companies with a knack for innovation, letting them develop and cash in on their ideas without having to give up equity or drum up financing at a time when venture capital is tight. To help woo the talent, big firms are structuring licensing deals more favorable to their smaller partners, giving them a bigger voice in decisions and improving communication. Intuit, Pfizer, and Procter & Gamble post their innovation needs online, soliciting proposals from entrepreneurs and small businesses interested in taking on the challenges.