This is one of the fastest media turnarounds I've seen in a recession.
IIRC, the 2001 recession didn't end in the media until later 2004 and early 2005, with the sales of Flickr and Del.icio.us and the development of FaceBook and YouTube. I remember that I didn't even look for sumer internships in 2003 because I figured the market was so bad nobody would hire a mere intern, and about half the companies I approached in 2004 said "We liked your resume, but we're not hiring now." In 07 (after this had all ended), I talked with a fellow computer programmer at a fencing class, and found out he was making half what I was because he had graduated into the sluggish job market of 04 instead of the growth market of 05.
In the 91 recession, I recall the media being very subdued and depressed right up until Netscape's IPO in 95.
I don't remember the 79-82 recession, but to hear my parents tell it, there was a widespread belief that America had permanently lost its technological edge, and things would never get better. This perception didn't change until around 1984, and even through my childhood in the 80s, I remember recurrent fears that we'd lost our economic supremacy to the Japanese.
The only recession I can think of where people started proclaiming "We've turned the corner; happy days are here again" a mere year after it started was the Great Depression. If you read http://newsfrom1930.blogspot.com/, it sounds almost exactly like something you could read in the newspapers today.
That alone makes me suspicious of this recovery. The point of a recession is so you stop doing what you're doing and find new uses for your labor and capital; that hasn't happened so far. In all the recessions above, that's what brought the country out of it: new markets opened up and absorbed all the workers that were laid off by the old ones. I haven't seen that yet (though there are some interesting developments in mobile and in the revival of hardware hacking); mostly we've seen government attempts to paper over the inefficiencies in old industries with taxpayer dollars.
The whole thing is laughable. Very little bad debt was defaulted--most of it is hidden on the fed's balance sheet or by mark-to-magic accounting. Banks are letting people live mortgage-free to avoid booking a loss. The CRE, Prime, option ARM, and ARM problems are just getting started. And then there's this:
H-50: A PE ratio of 116. This quarter is 118 so far. (!!!) Anything over 20 has been traditionally considered bearish. What do the people in-the-know think about this?
1.) The value of a stock's supposed to reflect its earnings over all future time, not just current earnings. That's why stocks don't instantly fall to 0 when a company has a bad quarter. Earnings are at a low point now; a P/E of 118 implies that investors think they will get better soon. Whether they're right remains to be seen.
2.) Insider selling itself doesn't mean much. Many directors and executives receive a large portion of their compensation in stock; they're always selling, because that's how they get cash to spend. I'm curious how it stacks up to pre-crisis ratios though.
This is one of the fastest media turnarounds I've seen in a recession.
That's probably because the stock market has gained around 40% in the past 5 months. I'm not sure about the other recessions, but I'd wager that this bounce in the equities market is pretty unprecedented.
Mind you, I'm not defending the media response. I'm conjecturing as to it's cause.
The bounce in early 1930 was from a low of 195 to a high of 267, then stabilizing at 240 before falling off a cliff and hitting 42 in 1932. That was a bounce of around 35%.
The bounce from Sept 11, 2001 to early 2002 was from 8000 to 10500, about 25%, before dropping back down to 7500 6 months later.
The Dow recovered from 800 to 1000 in 1980, a gain of 25%, before dropping back to 800 in 1982.
The Dow recovered from 600 in January 1975 to 1000 in January 1976, a gain of 66%, before falling back down to 750 by 1978 (and still being there in 1982).
well, in the great depression and the recessions you mentioned the government did not give out billions and then went on to print money like there is no tomorrow. I would be more worried about inflation now than really a depression. I just can not see how a depression can occur. The whole problem was that banks lost billions! The economy was fine, what was not was the banks and the banks now are sort of getting fine, so I say on with the champaign.
* Bank books are happy fiction
* Banks are delaying foreclosing on houses so they can keep showing it as a profit
* The Fed is pumping billions into their operations
* Option ARMs resetting, as mentioned elsewhere
* Available credit is shrinking
* People are spending to shrink their debt, hence an increase in the savings rate, and a decrease in spending on goods and services
* Government numbers are lies.
Think for a moment. Where does the government money, what is keeping this charade going, coming from? They are borrowing it, printing it, doing just about anything they can. What they are intent on doing is kicking the can down the road to the next administration.
"The government will have to borrow nearly 50 cents for every dollar it spends this year..."
We have a massive debt which we are going to have to eventually reckon with. Gradually, the government will have to pay more and more to borrow, as well as borrow more and more to pay off the interest and have enough to sustain the banking system. Is that a vicious cycle, or what?
Pop the champagne cork, but watch out for the falling house of cards. The reason depressions represent opportunity is that the herd does not see it coming. Its your choice whether to believe nutcases like me!
Comments
This is one of the fastest media turnarounds I've seen in a recession.
IIRC, the 2001 recession didn't end in the media until later 2004 and early 2005, with the sales of Flickr and Del.icio.us and the development of FaceBook and YouTube. I remember that I didn't even look for sumer internships in 2003 because I figured the market was so bad nobody would hire a mere intern, and about half the companies I approached in 2004 said "We liked your resume, but we're not hiring now." In 07 (after this had all ended), I talked with a fellow computer programmer at a fencing class, and found out he was making half what I was because he had graduated into the sluggish job market of 04 instead of the growth market of 05.
In the 91 recession, I recall the media being very subdued and depressed right up until Netscape's IPO in 95.
I don't remember the 79-82 recession, but to hear my parents tell it, there was a widespread belief that America had permanently lost its technological edge, and things would never get better. This perception didn't change until around 1984, and even through my childhood in the 80s, I remember recurrent fears that we'd lost our economic supremacy to the Japanese.
The only recession I can think of where people started proclaiming "We've turned the corner; happy days are here again" a mere year after it started was the Great Depression. If you read http://newsfrom1930.blogspot.com/, it sounds almost exactly like something you could read in the newspapers today.
That alone makes me suspicious of this recovery. The point of a recession is so you stop doing what you're doing and find new uses for your labor and capital; that hasn't happened so far. In all the recessions above, that's what brought the country out of it: new markets opened up and absorbed all the workers that were laid off by the old ones. I haven't seen that yet (though there are some interesting developments in mobile and in the revival of hardware hacking); mostly we've seen government attempts to paper over the inefficiencies in old industries with taxpayer dollars.
The whole thing is laughable. Very little bad debt was defaulted--most of it is hidden on the fed's balance sheet or by mark-to-magic accounting. Banks are letting people live mortgage-free to avoid booking a loss. The CRE, Prime, option ARM, and ARM problems are just getting started. And then there's this:
http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.X...
H-50: A PE ratio of 116. This quarter is 118 so far. (!!!) Anything over 20 has been traditionally considered bearish. What do the people in-the-know think about this?
http://www.zerohedge.com/article/las-weeks-insiders-transact...
Couple comments on those metrics:
1.) The value of a stock's supposed to reflect its earnings over all future time, not just current earnings. That's why stocks don't instantly fall to 0 when a company has a bad quarter. Earnings are at a low point now; a P/E of 118 implies that investors think they will get better soon. Whether they're right remains to be seen.
2.) Insider selling itself doesn't mean much. Many directors and executives receive a large portion of their compensation in stock; they're always selling, because that's how they get cash to spend. I'm curious how it stacks up to pre-crisis ratios though.
This is one of the fastest media turnarounds I've seen in a recession.
That's probably because the stock market has gained around 40% in the past 5 months. I'm not sure about the other recessions, but I'd wager that this bounce in the equities market is pretty unprecedented.
Mind you, I'm not defending the media response. I'm conjecturing as to it's cause.
The bounce in early 1930 was from a low of 195 to a high of 267, then stabilizing at 240 before falling off a cliff and hitting 42 in 1932. That was a bounce of around 35%.
The bounce from Sept 11, 2001 to early 2002 was from 8000 to 10500, about 25%, before dropping back down to 7500 6 months later.
The Dow recovered from 800 to 1000 in 1980, a gain of 25%, before dropping back to 800 in 1982.
The Dow recovered from 600 in January 1975 to 1000 in January 1976, a gain of 66%, before falling back down to 750 by 1978 (and still being there in 1982).
well, in the great depression and the recessions you mentioned the government did not give out billions and then went on to print money like there is no tomorrow. I would be more worried about inflation now than really a depression. I just can not see how a depression can occur. The whole problem was that banks lost billions! The economy was fine, what was not was the banks and the banks now are sort of getting fine, so I say on with the champaign.
* Bank books are happy fiction * Banks are delaying foreclosing on houses so they can keep showing it as a profit * The Fed is pumping billions into their operations * Option ARMs resetting, as mentioned elsewhere * Available credit is shrinking * People are spending to shrink their debt, hence an increase in the savings rate, and a decrease in spending on goods and services * Government numbers are lies.
Think for a moment. Where does the government money, what is keeping this charade going, coming from? They are borrowing it, printing it, doing just about anything they can. What they are intent on doing is kicking the can down the road to the next administration. "The government will have to borrow nearly 50 cents for every dollar it spends this year..." We have a massive debt which we are going to have to eventually reckon with. Gradually, the government will have to pay more and more to borrow, as well as borrow more and more to pay off the interest and have enough to sustain the banking system. Is that a vicious cycle, or what?
Pop the champagne cork, but watch out for the falling house of cards. The reason depressions represent opportunity is that the herd does not see it coming. Its your choice whether to believe nutcases like me!