The other day Jeff Mackey was on Power Lunch making some comments about how scared everyone is.I do not doubt the anguish caused in 401ks and the like but I'm not sure how scared "everyone" really is.
We flew to Hawaii yesterday, and the plane was packed. In order for us to get here we have to drive to Phoenix the night before (we stay at my in-laws house) and we usually get dinner. The restaurant we went to was packed. The parking lot at the snooty mall in between where we ate and Trader Joe's (two birds, eh?) was packed.
My wife has mentioned several times about how packed various parking lots are and then makes the same joke, "in case you haven't heard there's recession."
So are things not as bad as we who touch this stuff every day believe it to be? Are the masses in complete denial continuing to charge it up (good times)? Is there something else?
I suspect both are correct. I believe "they" are worried about 9 million more foreclosures. If all 9 million do get that far that might be something near 23 million people that would be displaced. That is a big number but less than 10% of the population. If unemployment gets to 10% then I think the number of people displaced by that would be less than 23 million (size of labor force not population, and I realize under-employment might be a bigger problem). If these numbers stand up that means most people will have homes, jobs and consumer demands that they will continue to meet.
Up to this point how many people do you know that have been directly effected (job loss or foreclosure)? I know a few, not many. Let's face it, if you keep your job and can afford your house you may not feel this at all. Maybe that will be wrong, maybe Michael Panzner will be right after all (he is much closer to right than when I first heard about him several years ago--got to give him props on that).
It is difficult for me to hop on the end times bandwagon but it is easy to get on the scare the hell out of them bandwagon, I think I was early on that one. Let me reiterate, to tie in with previous posts, I don't rule anything out but I do not think this is the end. It is possible that we the well (?) read might be more worried than what the situation calls for. Demand for equities is unhealthy so I remain defensive.
19 comments:
"Let's face it, if you keep your job and can afford your house you may not feel this at all. "
One area that many people will feel it this upcoming year (even if they can afford their house and keep their job) is through raises and bonuses at their employers. I have spoken to many friends/family and their companies are pulling back all raises and bonuses this year. Not nearly the same impact as losing a job or gettin foreclosed, but might prevent people from many major purchases, etc.
I've speculated that it's a sector thing. Financial and housing are gigantic sectors, yes, but I don't know anyone personally who's lost their job at this point (related to the economy). Now rewind to the dot bomb days and I couldn't find anyone that I knew in tech (including me) that kept their job. Everyone that I knew in that sector was adversely effected. If you ask me, that sector suffered a great depression. Makes this go around to me seem like a cake walk :) It may not be over yet though.
The 'everyone' thing is overused. I saw some things this morning talking about how 'everyone' is facing financial difficulty.
Good restaurants are often still busy in prime time; it's just that they'll no longer to 3 seatings. Bad restaurants/bars are having problems.
Airlines drop flights to meet demand, and one airline that served Hawaii has gone out of business.
This recession could be very "geographic." I don't see it too bad here in Chicagoland but for family in Ohio the recession started a couple of years ago.
For those who think things are bad, things are bad. For those who think that things aren't bad, they aren't so bad. Perception is reality.
I guess the scared people are outnumbered by the ones who aren't. Afterall, 92% of all loans are being paid on time. If unemployment is at 8%, then Employment is at 92%.
However, for businesses who can't gain access to credit things are terrible.
I lived through the recessions in the 70's, 80's and 90's. I remember the gas lines and restrictions. I remember the concern, the unemployment, the high interest rates and more.
But, we both had good jobs and they didn't affect us. Not one bit.
This time is different for us. My wife has a menial job just to get health insurance and I'm unemployed. We're living off of our savings and investments. Now we wish we had saved more and spent less.
This is important. If I were still making the salary I enjoyed, this time would only be different because our home equity is taking it on the chin. We're watching hundreds of thousands of dollars disappear and that affects us. Yes, we're scared.
This recession is different and my peer group agrees. We're 50 somethings.
First time Poster: loved the post. Have been wondering the same about full parking lots. But have you noticed they are around less expensive restaurants? and am wondering if those mall shoppers are doing just that, shopping but not buying.
I know someone who was foreclosed on about 18 months ago. They moved out, the house was vacant, and they moved back in. THey continue to pay utilities that were never turned off. Now they are living there for free. Don't know how long it will last, but it has been well over a year now
I notice the full lots as well, but don't earnings tell the story? I mean, every store you go in, you can get BOGO, or 50-70% discounts.
Also, agree with Drone...everyone I know has taken either a pay freeze, pay cut, or loss of bonus...across industries. This tends to stem spending, particularly on big items.
Of course, I'm in PA, which is not weathering the recession all too well.
Big impact on the investor class; reductions in dividends. FRO 2008 Qtr 2 dividend of $3.00; 2008 Qtr 4 dividend of $0.25 just announced. Ouch!
I have no problem with the notion that much of what ails us may be psychological -- even if we avoid difficulty or don't see it ourselves, news of hard times can be depressing -- but the same was true during other recessions and depressions too. For example, biographical histories of the Great Depression make it clear a great deal of the damage was not visible: People hid in their houses or even pretended to go to work to mask the shame of destitution, worker cattle calls and soup kitchens were not located on main thoroughfares to be seen by casual passersby, etc.
Of course nearly 25% of the labor force was looking for work back then and "only" 10% or so is doing so now (if you don't count U6 semi-employment) but anecdotal evidence and personal opinion is useful in counteracting bad news regardless so what harm could it be. Well, it's one thing when we do it, and it's another when national policy-makers enter the game and not only appear to be selling us that same line but look like they might be buying the line themselves.
While addressing the question of whether or not Sweden really nationalized its banks (it did not but Norway really did), Edward Harrison addresses the possibility that key US financial policy makers are moving in a direction that could lead to a lost decade like Japan's. Referring to Bernanke's recent speech, Harrison writes:
"This goes to the mindset here. What Ben Bernanke does not say but clearly suggests is that asset prices are being depressed artificially by ‘irrational despondence.’ Stepping in to offer a bid to these assets will lift them — at which point the despondence will go away and all will be fine with the world.
This view is misguided because many asset prices are still above their long-term trend. This is certainly the case with house prices, where renting is still significantly cheaper than purchasing in many locales.
In short, the U.S. government is making a big mistake by rejecting pre-privatization and embracing bailouts. We all will pay the price. ..." http://tinyurl.com/b34g5l
Well, the U.S. government isn't really completely rejecting it. They're completely rejecting the terminology.
Rejecting the terminology was all I thought they were doing too but the continuing misuse and abuse of the word 'nationalization' appears to be affecting decision making; e.g., the Treasury appears to be willing to accept common stock, the lowest rung of the corporate ownership ladder, as the price for recapitalizing but this is utterly stupid unless the government takes a big enough stake to gain a majority on the corporate board and is willing to exercise it but right now they're talking numbers like 40% not 50%+1 and they're not talking directorship.
Frankly we've already seen more than enough abuse of the English language over the past couple decades as it is and calling a dog's tail a leg does not give the animal five legs, it still has four, so I honestly think it would do the markets a lot of good to see zombie outfits like AIG and Citi taken into official receivership and formally liquidated.
IOW I don't believe our biggest problem is a depressed psychology, I think it's ongoing uncertainty and the impact this has on risk analysis. Approaches such as we have seen so far from the Fed and the Treasury do not seem to be addressing that problem, in fact it could be argued they are adding to it, the Fed through its opacity and the Treasury through its vacillation or tentativeness.
I can take it when the governor of state that receives more federal money than it's citizens pay in taxes puts the knock on welfare and waste, that's just politics as usual, and I can take a more nuanced view of reality than sound-bites too, but at some point a decision has to be reached and articulated clearly; it would be nice if it made sense too even if I don't like it. JMO
I am seeing more vacant commercial real estate from storefronts to the ex Home Depot that closed last May.
Mercury Marine, a manufacturer of outboards and Corvette engines, has laid off 85 people. Odd timing since this is normally close to when production ramps up to have outboards on hand for the summer boating season.
Worry?
"So far, the Crash of ’09 has paralleled the Crash of ’29... and the Crash of 1873."
"The worrying thing... it is not unreasonable to expect the eventual low to come no earlier than 2010-11.”
http://tinyurl.com/bo77nk
Perception may be reality to some, however this is the worst downturn in the design and construction industry since early 80's. Our N.Calif. firm of 70 has laid off half our staff since Nov.'08 and we still have more employees than billings will support. Don't anticipate an improvement until late '09 or beyond.
We see more vacant offices and storefronts each day in SFBayArea.
From my vantage point (observing parking lot, store, and restaurant traffic), this recession feels a lot less serious than what is being reported. No doubt some areas of the country are more hard-hit, but if you did a time shift from 2006 to today, and asked somebody who had no acccss to media to guess the economic condition of the country, they would probably say there is no difference.
I am a lot less concerned (although I'm sincerely emphathetic) about the hardships being experienced during this recession compared to what we might see 3, 4, or 5 years from now. The massive power grab by government coupled with skyrocketing debt is going to be have an ugly outcome. It isn't a matter of IF, but WHEN.
tom k - "I am a lot less concerned (although I'm sincerely emphathetic) about the hardships being experienced during this recession compared to what we might see 3, 4, or 5 years from now. The massive power grab by government coupled with skyrocketing debt is going to be have an ugly outcome. It isn't a matter of IF, but WHEN."
you worry too much, obama will save us all. he can just keep taking from those rich people and corporations. see, all fixed (sarcasm)
Good lord, you mean rich people may actually have to disgorge some of their passive profits? The next thing we'll be hearing is that capital is not equivalent to labor and plutocrats might actually have to work for a living instead of gaining tax benefits for showering us peons with their tinkle -- oops, excuse me, trickle. What fresh horror do these socialist scum have in store for us!? (/sarcasm)
I invest conservatively. I've lost more in this downturn than ever before. Every holding (asset class) has been affected; several have gone under (there goes my dividends); many, many are under $10/share. (my conservative mutual funds have done worse)
If I keep my job, I'll be okay. But retirement...well, it will be more difficult.
I put a large amount down on my house to keep monthly payments reasonable; now my mortgage is more than the house is worth.
Very interesting times, to say the least.
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