Woo-hoo!

Wait a minute.
I’m already starting at broke.
Where do I go from here?

I’m not one for conspiracies, but maybe the current administration was the cause for the lag? It is hard to believe that in today’s day and age, information is still scarce. Forgive me for not remembering my freshman economics but isn’t there a certain number of quarters in losses that determines a recession? Then another number to determine a depression. I read a story over the weekend that had the best definition…

A recession is when your neighbor loses his job.

A depression is when you lose your job.

Those symptoms of recessions were very clearly felt and seen for more than a year that demand for output were down, unemployment numbers kept getting bigger, business profits kept going down, capital spending were much less, price cuts kept happening, imports were down and government borrowings were going up. Were they not enough for any sensible persons to figure out a long term recession? What was in it for NBER or any public bodies for not making it public??

Duh, golly gee, Stan, I’m glad the people in charge are right on top of serious econmic details.

But, by the same token they are really swift to forecast a WMD warning of a potential biological weapons attack within five years.

My concern is: Will it take a year or more to discover that we did really, indeed, come under attack by a terrorist group brandishing flu viruses.

Act quick to stock up on “Alkaseltzer Plus, Nyquil, V-C, and Chloroseptic gargle!!!!

If you want to beat the odds, get ready and be prepared!!!!

I had my Flu Shot; did you????

To be fair to the National Bureau of Economic Research, the preparation of their report may have been slowed down by unforeseen budget difficulties.

The reason it takes a while to determine is that they look back – i.e., they look at the data AFTER it has been compiled. Typically the data is available more quickly, but you never know what happens. A recession typically is defined as two full quarters of negative growth (itself an oxymoron definition but whatever). So you can’t know you’re in a recession til you’re at least 6 months into it – and the reality is a little longer cause you must GET the data, then you must ANALYZE the data.
And it’s not as easy as it looks. Of course, I don’t know what the NREB is using, and if they can pinpoint a month that it started, maybe they first looked at a quarter’s worth of data, then started analyzing the monthly data.
Yes, we all know what’s going on well before it happens. It’s been well longer than a year that housing has been hit hard. So we all knew it was coming.

David,technically, a recession is 2 consecutive quarters of negative GDP growth. The NBER definition looks at broader metrics then just GDP. It takes several months for all of these metrics to become available for the NBER. Further, the NBER is a non-profit, non-government entity. The current administration has nothing to do with influencing when they determine a recession. All the NBER does is track when business cycles begin and end. There is typically a lag of at least 5 months between the time a peak or trough in the business cycle is identified and reported by the NBER. For instance, the end of the 1991 recession was identified by the NBER as taking place in March ‘01, but announced in November ‘01. You can see the announcement dates here: http://www.nber.org/cycles.html

Well, if the NBER says so than it must be true.
Thank God we are blessed with their insight and dilligent research.
I wonder what tipped them off? Was it the, the boarded over factories and the long unemployment lines, or just a lucky guess on their part.
Sometimes it’s hard to see the elephant in the room.
Reminds me of monty pythons movie where the guy has an arm and a leg cut off and he say’s “just a flesh wound”.

They must be from Canada, we are always 10 years behind the States on the news, somebody said Elvis is dead, is that true??

I’ll wait for the OFFICIAL WORD, before I send flowers.

kudos to you Bing for the subtle dig at the post from yesterday. “…even though flat screen TV’s are a necessity in general, it becomes impossible to avoid buying one when it’s at a 15% discount!” How about you save your money just in case there’s an economic downturn…… or better yet buy a fruitcake as an xmas gift.

I can’t blame the average Joe. maybe he knows his dollar is going to be worth 37 cents in a year and he wants to buy as much as possible before his purchasing power is eroded away by the Fed’s fake money pumping into the system.

NBER can roll out all the fancy “statistics” they like, I think we were officially in a recession right about when people started wearing clothes made from their pets’ shed fur.

Bing, I believe that you owe little girls everywhere a bit of an apology. I have never met a little girl who could not shriekingly jump up and down with much more style, sense of purpose, sincerity and effect than the current iteration of Wall Street.

Just a nit, Stanley. Little boys are pretty good at jumping up and down and shrieking too.

Stan, my comparison of this revealed recession is like this: Passing gas is normal and when it happens the group normally stays mum.

People will be alerted to the signs of passed gas; they don’t need an after blast for documentation!

This recession talk is simply lies. The definition of a recession is two consecutive quarters of negative growth (declining GDP). The economy grew at more than 3% in 2008 Q2, so this talk of us being in a recession since 2007 is ridiculous and mistaken.

NBER came out today with an announcement that Milli & Vanilli were actually lip syncing their songs.

The recession hit Michigan and Ohio six years ago and nobody gave a damn, least not the GOP (which is why McCain fizzled in the rustbelt). Pelosi and Reid didn’t care much either, to be fair.

‘Cept now the whole ship is sinking and suddenly when California and New York are in trouble it is a real, live emergency.

The boy geniuses on Wall Street really did it this time, huh? And now the “free market” will be fixed by the Rubin-esqe economists.

Best investment? Ammo and canned food.

In my opinion, the country has been in a recession since early 2007 and will most likely continue to be in a recession well into 2010-2011. People and companies have been overspending and overleveraging by using borrowed money to feed their habit of gluttoney! Now EVERYONE is paying the price for it! The new president will have a VERY tough time convincing the public that things will get better when jobs are being slashed.

I’m still pondering yesterday’s post, “What Recession?”. Some of the comments floored me. I’ll leave the most distasteful ones alone, knowing they were written by zealots who will attack upon little or no provocation.

So then, what recesssion? I see more empty storefronts, shorter lines at the grocery store, less demand for gasoline, smaller lunch crowds at restaurants, and many other signs. Including falling orders where I work, and a 401K in the tank. From my back deck I can see four empty houses, at least one of which was abandoned in early September. I don’t think we are imagining the pain. Can’t be.

And yet, some places I go to are packed and rolling along, as you and your readers describe. The party is still in full swing. I am baffled.

Is this a grasshopper/ant thing? Are the grasshoppers still partying hard, while the ants have cut back for rough times ahead? No other explanation works for me. However, I sure would like a better explanation that that one. Any thoughts?

Chris from Minn:

Don’t let accuracy get in the way of a good bit of humor!

Bill, I think you’ve described the phenomenon beautifully. Perhaps it was like this in the Great Depression, too, with a bunch of folks living life as they always had and about 30% of the population sucking wind and unemployed. People try to live their lives and ignore the bad stuff as long as they can. What annoys me very much are organizations that attempt to glorify their members and their existence by claiming they can quantify the irrational.

Bill, I think you’ve described the phenomenon beautifully. Perhaps it was like this in the Great Depression, too, with a bunch of folks living life as they always had and about 30% of the population sucking wind and unemployed. People try to live their lives and ignore the bad stuff as long as they can. What annoys me very much are organizations that attempt to glorify their members and their existence by claiming they can quantify the irrational.

I didn’t find out until well after the event occurred. I was absorbed all day long with “day trading” Citigroup. I was in and out of that stock all day long. (Actually, it’s more like “hour trading” since I’m buying and selling usually every hour or so, depending on mood of the market.) On top of that, I managed to make about 3% on my investment. I would have gone on longer but all of my capital is now tied up for the next 5 days waiting for the transactions to settle.

Not bad for a day’s work, methinks, although I find it somewhat ironic.

Thank God for having the NBER, I was so confused about what was going on! But now I finally see it clear, thank God for having people explaining on a timely manner what the heck is going on.

According to Keynes, the root cause of an economic downturns is an insufficient aggregate demand. When the total demand for goods and services declines, businesses throughout the economy see their sales fall off. Lower sales induce firms to cut back production and to lay off workers. Rising unemployment and declining profits further depress demand, leading to a feedback loop with a very unhappy ending.
90% of the time you can make statistics show whatever you want 50% of time
http://nomedals.blogspot.com

Jeez…it must truly be a recession…the UAW has tacitly admitted that they have ’screwed the pooch’ by indicating they are willing to renogtiate their contracts. Too little, too late.

Ivan, I’m so very happy for you…the American Dream still exists for those, like you, who earn their daily bread by the sweat of their brow. Ya really busted yer ass today! Such is this honest labor that the constitution seeks to protect. Perhaps the Citigroup execs can boost your EPT by laying off more of the lackeys who, in aggregate, will save executive skins by paying more taxes allocated to their corporate bailout!

Is it just me, or is anyone else getting tired of the scavenging hyenas circling in on the last scraps left on the emaciated carcasses?

I went a bit over-board on my last post….I did not mean to denigrate the well-deserved and hard-won dignity of the hyena. My sincere apologies to that noble species.

On Monday I took my Toyota Matrix (best car I’ve ever had-except for my 1930 Model A) to a guy who is one of the most intelligent, practical and highly skilled men I have ever known. He works as a handyman, but his experience and expertise as a mechanic, expert welder, and all-around construction problem-solver are a constant amazement to me.

He completed some major brake work and electrical repair, gave me great advice and sent me on my way with an invoice that would have been triple at any Dealer service.

During our conversation, he said he was concerned about the economy and his workload.

It occurred to me-and I told him, that he was mistaken- that he was sitting in the catbird seat and would thrive in this dismal economy because he actually KNOWS HOW TO DO THINGS. And the things he knows how to do are a staple in today’s world.

In some ways, the cliff-diving our economy has been doing is a blessing- we are getting the big wake-up call to see that we have become a nation of consumers- not producers. We have invented 200 names for money, and none of them is worth a tinker’s dam now.

We are clever manipulators of information, which translates into zippo-nada-zero in a world in which Substance now rises from the ashes like the mythical Phoenix, devouring the pathetic, paper-pushing and ethernet-laced house of cards we have been referring to for years as an “unstoppable” economy.

It is still a real world. Tools, hard work, physical labor and a laborer’s pride will be the honorable watchwords of the day.

I watch Ken as he struggles with my car’s serpentine belt that fights him for control.

Ken will win.

I was at home drinking coffee watching Morning Joe. My girlfriend heard it in her sleep and said “well I told you we were in a recession”

Ken the mechanic shouldn’t worry. If the economy is in a shambles and people are afraid to spend money on a new car, they’ll have to keep driving their old car. Old cars will need more frequent repairs than new cars. Ken is in the ultimate counter-cyclical business.

OK I get it, NOW we are in a Recession!

The whole world has been waiting for two quarters of negative GDP growth to come and go before anyone would technically and officially declare the recession. However, once again the National Bureau of Economic Research (NBER) comprised of scholars, Nobel Prize winners in economics, and hundreds of learned university professors have finally conducted enough empirical research, developed enough statistical measurements, and made enough economic estimates to have concluded that hey, guess what, we are, indeed, in a recession.

Excuse me, but I could have saved them a lot of trouble. For anyone paying attention, it would have been clear that we’ve been on the road to recession since December 2007. But it’s typical for official recession announcements to get released just as we are about to hit bottom, or even when the economic cycle is actually beginning to reverse itself into recovery mode. In other words, these reports are USELESS. You might as well close the barn door after the. . .well, you know.

These announcements are not just old news, they’re an insult to the intelligence of consumers. It’s not as if we haven’t noticed that we’ve been living in a world that’s every bit as uncertain as it was after the 1930s.

If we’d kept track of the following events and tied them all together, we would have known that something catastrophic was coming.
• The credit-induced mess really began when interest rates were slashed between 2001 and 2004. Easy credit led to over-borrowing and everybody was getting in over their heads. But interest rates started to climb. In 2004 rates peaked at 5.25% and that’s when the stuff started to hit the fan.

• In 2006 the blow-up started to unfold—all those low-interest, adjustable-rate mortgages began resetting. It brought dramatically higher interest rates and increased monthly mortgage payments. It was not uncommon to see a $1,500 monthly payment balloon to two or three times that amount—way beyond the budget for many unqualified buyers.

• That led to a 42% increase in mortgage foreclosures between 2005 and 2006—according to Realty Trac. By 2007, nationwide foreclosure rates were 0.75% compared to the previous year. An early victim was NovaStar Financial, which reported a 7% jump in delinquencies in 2006 compared to a 2% rise in 2005. By January 2008, their share price had dropped to $1, down from $150 in May 2006. For the first quarter of 2008, foreclosure filings, according to the Realty Trac index, were 112% higher compared to the same period during 2007.

• During the first quarter of 2008 Robert Shiller, the famous Yale University economist and economic author, warned that home prices could drop by over 30%—a precipitous drop not seen since the Great Depression.

• Meantime, the cracks in the central core of the financial system in the U.S. began to reverberate across the entire globe.

• On July 9, 2007 the Dow hit an all time record, surpassing the 14,000 mark. But two months later, it had slid 8% to 12, 845. The aggressive actions by the Fed triggered a fragile and short-lived recovery.

• After October 2007, the sub-prime mess was getting messier. Major financial institutions kept on reporting billions in losses, and the economy was flirting with recession.

• By March 10, 2008, the blue chip benchmark of the U.S. industrial might, sank to 11,740, a 17% drop from a high reached in October. The biggest investor decline in eight decades has sent investors fleeing to U.S. Government instruments, bank deposits and other cash funds

• From mid July to August of 2008, just about every financial market in both developed and emerging countries had registered double-digit losses.

• In October 2008, U.S Mutual funds were hit hard by record investor withdrawals as $127 billion were moved to the safety of treasury and cash. Balances fell from a May total of $12.3 trillion peak to $9.6 trillion by the end of October.

• SP 500 index slumped nearly 41% YTD—its worst performance since 1931, the MSCI World Index has dropped 47%, the average diversified U.S. equity fund has declined 48% this year through November 21—according to Morningstar—and the average non-U.S. fund has plunged 54%.

• 1.2 million jobs have been cut in the last three months with 533,000 jobs lost in November alone, according to labor statistics—the biggest cut in more than 30 years—bringing the unemployment rate to 6.7%.
As we’ve been reporting on this website, Bear Stearns and Lehman Bros. are kaput, AIG was rescued, many banks failed, well-known companies have gone bankrupt, millions of small business are closing shop, and the government’s $700b bailout has yet to unlock the credit markets. Then there was Citigroup and now the auto industry.

It’s a disaster of epic proportions and there’s still more waiting in the wings—the unraveling of commercial real estate and the explosion of credit card debt and the defaults that are sure to follow. It is true that the most, if not all, economies from the U.S. to China to Spain and Argentina have provided stimulus packages, but it appears that we are in the midst of a prolong recession. How do we know? Not because the NBER tells us so.

Actions taken to prevent deflation instead of inflation, to ignite economic activity and reduce the cost of access to credit, have thus far been fruitless. Meanwhile, the housing market continues to slide, GDP is dropping, consumers are not spending, the financial markets are in disarray and we have a U.S. team of economic fixer-uppers that keep tripping and stumbling into walls. Now we are holding our breath waiting to see what will shake out from the failing/flailing auto industry.

If we are going to survive this, somebody had better come up with a workable plan—and fast! A plan that provides clear transparency, open communication and fewer surprises.

On the other hand, who knows? We might actually be in the recovery period . . . but of course we’ll have to wait until the NERB formally announces it . . . sometime in 2010.

I would highly recommend you read a great new book called ” The Big Gamble” By Jose Roncal and Jose Abbo as they delve and provide great insight on the current crisis in their new release book.