Yesterday we had to do an errand in Kona at Costco. This was my third time at this Costco and it was far busier than other times (it took a while to find parking even at the outer edges) and yes the cash register lines were all very deep.We then went up to Hawi (pronounced Ha-vee) for lunch and the little place where we ate (at 3pm mind you) was packed with people coming and going.
The plane from Phoenix to Honolulu was packed as it almost always is (for people who ask; Hawaiian has has the same schedule of one flight from Phoenix every day and one flight back). The flight attendant said most of the flights are still full although one thing she said that was odd is that they have stopped showing full-length feature films between the mainland and Hawaii because the rights to the films are too expensive.
Obviously these observations are not scientific but they are interesting. I mentioned something along these lines the other day and the comments were a mix of its not that bad and it looks pretty bad. I've noticed a few things here and in Arizona like empty store fronts and less real estate activity but nothing like the sense of despondency like I imagine there must be in places like the rust belt.
The jobs numbers have stunk for a long time, output numbers stink too and the stock market has clearly discounted in a crappy economy. There is no doubt about that regardless of where anyone thinks stocks will be in three months, the stock market is telling things are lousy but the data doesn't necessarily have to jibe with the story on the ground everywhere (some places yes but not everywhere). In that context I feel better that socially we are not headed toward a repeat of the 1930s. The data for now seems unlikely to get as bad as the 1930's (I don't read too much analysis that calls for GDP to contract by more than 10% or unemployment anywhere near great depression levels) even if a lot of folks are worried that stocks are headed toward an 80% decline.
If we somehow actually go into a depression I do not think it will be as bad as our visions of the previous depression. I wonder whether most folks actually have as good a sense for what things were like as they think they do. In the 19th century there were several depressions but given how little they get discussed I am assuming they were not as bad as the 1930s (I only know that they happened, not any particulars; feel free to leave a comment if you know about them).
Of course I might be wrong about this and I'm sure someone will tell me why I will be wrong (popular theme lately) but I don't think this will really hurt as many people as the numbers would imply. I would submit that given the S&P 500 is 46% below where it was ten years ago and at 1996 levels we might already be in a depression of sorts. If so, then we arealready many years in and things are not anywhere close to the 1930s.
The picture is on the drive down from Hawi to Waimea.
22 comments:
As an expat in the Middle East things here are not ticking over at the pace they were a year ago, but ticking over they still are. People can still afford food, but the high-end shops, restaurants and coffee shops are noticeably quieter.
Off topic: I was surfing through the tv channels and, thinking back, I swore I heard one of the newcasters say President Obama thought now was a good time to buy stocks, because they're so cheap.
Apart for the initial 'What the..?' reaction my second thought was 'Hell yeah, the buying opportunity of a lifetime, if we don't go down the same route as Japan that is'.
At these levels and with the economic backdrop, buying seems like a complete gamble. But who's selling now? After a 55% decline just WHO is cashing in?
Anecdotal evidence is interesting when it is surprising but is it really surprising that things look okay while vacationing in Hawaii, swinging by the mall, or hanging out at home in a bedroom community or, for that matter, a retirement/resort town like Prescott?
If we are going to indulge in anecdotal evidence then my observation is that a significant portion of the upper 20% -- those with more than $80k income/yr -- as well as many who are still regularly employed do seem determined to convince themselves that there's a lot of hysteria out there, that it's not as bad as it seems; but that isn't very surprising either so FWIW.
The media news is just anecdotal for the most part too so people take what they want and leave the rest pretty much. (shrug)
You may have seen this article already, but here's one interesting look at what a modern day depression would look like, and how it would look very different from the 1930's.
http://www.boston.com/bostonglobe/ideas/articles/2008/11/16/depression_2009_what_would_it_look_like/?page=1
Lines at the ER, a television boom, emptying suburbs. A catastrophic economic downturn would feel nothing like the last one.
The key issue is parents who are very worried because their childrens' education funds have fallen off a cliff. Parents are panicking as their children's funding has fallen off a cliff. Children are the most important part of most families life - for those who have children.
I purhcased a new Honda in the past week. The dealership was void of customers for the two days I was present.
Restaurants are full - McDonalds and $30-$50 (southwest part of US) establishments - but many restaurants have already been closed for a few months. Chains such as Bennigans were closed.
Housing is dead in Albuquerque - which was one of the top cities for the recent housing decline. I am aware of past-year house owners who have brand new houses next door that don't receive looks or offers.
i wonder what are the copyright issues involving with pasting whole articles into comments sections like happens all the time here.
recessions and depressions are just technical terms for the growth or contraction of the economy. I believe employment is a lot more important than the recession/depression tags. If we have a recession with very high unemployment it will be worse than a depression with lower unemployment albeit at lower wages for the employed.
The depressions of the 19th century were different because they were most economic phenomena. Since the establishment of the Central bank in its current form these became monetary phenomena related directly to the boom and bust cycles caused by the relentless expansion of credit followed by its collapse.
Most, I dunno, "internet posters" aren't really aware of copyright issues like that.
You can't post the whole article. You can link to it, or post a couple of lines (a leader, for instance) then link to it.
That issue has been around since usenet news.
For interesting reading see:
The Panic of 1819: reactions and policies, by Murray N. Rothbard. New York, Columbia University Press, published 1962.
Hoover promoted the terminology "depression" as being less alarming than "panic", which was the common term describing markets during the 19th century.
Interesting and scary chart here:
thewallstreetbully.blogspot.com
With the markets having plunged at an unprecedented rate over the past year, it helps to look at things in a historical context to see if any parallels exist.
The chart above does a fine job of showing were this current decline ranks in terms of past market disasters. I have featured it before, but it now has been updated through 3/5/09. It’s courtesy of Doug Short, and I appreciate the efforts that went into producing this gem.
To me, there are only 2 lines of interest at this particular time. The gray line, which shows the effects of the crash of 1929 and the superimposed blue line, which demonstrates the drop of the current bear market.
The similarities are striking although the 1929 the initial crash happened much faster than the current one. What turned out to be devastating back then was the rebound after the initial -47.9% drop, which lured many investors back into the market believing that the bull had returned with full force.
That wrong assumption turned out to be deadly for those holding on to their positions for dear life until there was not much left when the bear made its final curtain call after having destroyed the Dow by -89.2%.
Looking at the current bear (blue), which is showing losses of -56.4%, it becomes clear that the bottom may not have been reached. Nobody knows for sure, but those continuing to cling to their buy-and-hold philosophy have learned nothing from history (and bear markets) and may be destined to repeat it.
Roger- What do you think about the Mark to Marker debate, The up tick rule and putting some new rules into the rating agencies.
I think the Mark to Market rule needs to be refined or reversed, removal of th eup-tick rule has been a disaster, and the rating agencies need some parental guidance.
Heh. Yes! We should let banks value assets however they like!
Anyway. YOu mentioned the book; I've been thinking about getting the book about the 1819 panic; but it also brings to mind some things I read in House of Morgan years ago, a book I highly recommend.
One thing the author talked about is that, prior to 1910 or so, you didn't just have market declines. You had panics. Violent adjustments that happened almost like clockwork every 10 years or so and affected more than just the stock market.
Around that time - I don't remember the reasons - you stopped really having financial panics. Banks started figuring out what they were doing. I think there may have been federal legislation. I really don't remember. And then of course down the road you had government regulation, the Federal Reserve system, etc.
I sometimes wonder if something changed in the 90s. I read a lot about how much more liquid the market is. There are a buttload more individual investors. There are hedge funds. International markets are MUCH easier - well actually trivial - to access. There's a ton of 401k money and pension fund money floating around, and now there's Roth IRA money and 529 money. There was a decade of exceedingly easy credit. some people say it could take decades to sop up all that credit.
Maybe things have really changed? Without some sort of regulation, we're going to go back to a period of more violent change?
Here it comes. gov't takes over Lloyds...
http://uk.news.yahoo.com/4/20090307/tuk-government-takes-control-of-lloyds-dba1618.html
I live in Central Florida. Real estate is in turmoil, tourism is down significantly with Disney laying off. The plus side is fertilizer, which remains strong, and agriculture. More strawberrys than ever. Had a weeklong meeting in Reno. Several Casinos were out of business and it as deemed unsafe for a woman to walk the streets in Sparks due to purse snatching from unemployed males. The casino hotel we stayed in had about 20% occupancy. The Southwest flight was full both ways. Looks like a mixed bag.
Full Southwest plane may be related to the corporation's decision to cut a couple hundred flights in the first quarter as it "...tries to focus on more profitable flights to combat high fuel costs and a slow economy."; http://tinyurl.com/aklws3
If Southwest determines Reno is not a 'growing market' a lower number of flights there would be consistent but, still, not a good reflection on the gaming industry IAC.
Dear Roger and all,
what we can only do is look at what is happening at this moment, but a month from now or even two months can deteriote drastically. As I said I have been following this blog since may 2008. I live in Italy and from the reports and this blog I have stayed more than 100% into cash. What I doing is take very short positions for max one week about 30% of profits I buy stocks that I really like that I wanted to purchase long term. So actually I have more than 100% in cash and some profits into stocks. I do not care if the stocks loose another 50% or even 80%. I am protecting the tool that can make me operational. What is happening is a distribution of securities. The market no longer looks at valuations. What is happening is portfolio managers, banks and holders of securities because of the deleveriging that is going on sell the weakest properties. These are any properties that is holding lots of dept. The fire sale is happening for survival purpose. How long will it happen. Until it reaches a balance. It may go to the other end and then come up again, until it reaches equilibrium. I buy stocks on a company, great value, it snaps up for a few days, then wak they bring it down faster that the days it came up. So I only do the trade very short term. Perhaps, It would have been better to be on the other side- the short side.
Roger, there is a little book pub. in 1903 - The ABC of stock speculation by S.A. Nelson. Page 86 the recurrence of crisis it list the years of crisis. It states that in 1808 there was a banking crisis. It goes on to say that in 1825 there was a crisis but more of an interruption due to a falling demand of goods by Europe.
But this crisis is global and bigger that anyone has ever imagined. I think that every country was in a sort of a bubble. And Internet has cause to be interlinked and has produce a bigger fall. Look how AIG and Bear Stern and Lehaman where all interconnected. The internet age. The problem that I see is that we do not know how to deal with it because we have never had a crisis of such magnitude. People are looking for a snapback a V-shape type. But we are in a dreamland. You are correct that we will have a sort of snap like we had from nov/08 to feb/09 but bigger and than we will have a very long period of tight range, perhaps 5 years or even 10 years. This destruction that we are witnessing is not over yet by any imagination.
Best to all,
Jeff from Milan Italy
annon 5:40: You are right about the number of flights.
I thought the occupancy rates at the hotel and lack of traffic at the casino was a better indicator. My son is just back Daytona. Bike week is a madhouse with folks from all over the country having a good time until the beer runs out. Superbowl week in Tampa was huge succcess according to local merchants. I live in a mature neighborhood of about one hundred homes. Only one is for sale. In other parts of the city, principally new sub divisions, for sale signs line the streets. It is not a uniform downturn in Central Florida, more like pockets of bad decisions by lenders and borrowers.
Jeff,
Great post...
Roger, on the news today was footage of people living in tents in the Sacramento, CA area. I think there are areas in the country that are in a depression.
But the thing that was truly chilling was watching the hearing before the Senate Banking Committee on AIG. I think the shoe to drop next is CDS (credit default swaps). The Fed won't tell us who the counter parties are to AIG, although what's coming to light is American taxpayers have been bailing out European banks. The Fed can't or won't reveal what the condition of AIG is, whether it's solvent or not, but warns that future requests for bailouts may occur, and shares have been sold for 100 cents on the dollar to U.S. taxpayers. The U.S. banking system is insolvent and banksters' friends at Treasury and the Fed are propping them up with taxpayers' money. And CDS have infected the global banking system. Because of CDS, this is a whole new ballgame worse than 1929-1932.
We're vacationing in Florida and the crowds are noticably smaller than in past years. We're renting the home of a real estate broker who opted to move into a small apartment to improve his cash flow. He offered to sell us his home, which is not listed, for the balance remaining on his mortgage.
I find the situation here oddly comforting since we're from Michigan, which often leads the nation in grim statistics.
Damn power lines! Why do they always spoil a great photo?
In July we sold our home just north of Tampa - we priced aggressively and found someone who liked it; otherwise I'm sure we would still be there. We bought in a small town outside Las Vegas in December. Of the 13 houses we saw, only 1 was not in foreclosure. There are entire strip malls that are empty in the town. It's tough when people want to make changes or must because they lost their job and foreclosure is the only way out.
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