You are driving down the interstate nearing your destination, when suddenly the unmistakable sound of The Stones starts humming through your stereo. If you are a middle-aged guy, this immediately causes you to crank up the volume (way up cause your hearing is fading), stomp down on the accelerator (even if you are driving a Buick) and start doing the Jagger rooster bob. (I personally believe that all speed limits should be suspended if a Stones song is playing on the radio and I also believe explaining to the officer that “there’s fever in the funk house now” should be good enough to get off with just a warning).
It’s after the song ends, when the volume has been lowered and the rooster has been returned to its cage, that you realize you have blown by your exit and gone entirely off course. Unfortunately, you cannot immediately start repairing the damage. You need to wait until the next exit. Even then you may need to stop for a while to make sure you know how to get back on course and to refresh. And for certain when you get turned around, you drive much slower and more cautious than when Mick was blasting through the speakers. (You might even listen to Barry Manilow instead). What your mistake has produced in your trip is slack. In order to get back on track, all the slack must be eliminated.
Today’s topic is slack and how it impacts economic recovery. In a previous post I stated that I now believe the economy will be stronger in 2012 than most experts now forecast. (the government just downgraded its 2012 forecast last week, which actually reinforces my thinking.) One reason I believe the economy could grow at a rate of 5% or more in 2012 is slack.
Recessions create slack in the economy and large recessions create significant slack. This slack must be used up before the economy can really start growing. When all the slack is removed from the economy the impact can be dramatic, but slack is usually very difficult to measure.
To illustrate, consider what happened in the platform trailer market in the previous recession. Before the economy slid, the platform trailer market was booming. Existing trucking fleets were buying many new trailers and new fleets were entering the market to handle a seemingly continuous increasing demand for freight. Trailer dealers had huge inventories to service this demand. Trailer manufactures were running multiple shifts and struggling to keep up with orders. Even after the first signs of economic weakness were apparent, trailer manufacturers considered it “just a blip” and continued at full production rates in order to keep manufacturing costs lower.
When the real recession hit, freight demand quickly dropped. Fleets had too many trailers so they parked or tried to sell their excess units. When older trailers broke down, they were repaired instead of replaced. Many fleets went out of business and their trailers went into the huge used trailer inventory. Thousands of new trailers sat in dealer lots ready for customers that no longer existed and thousands more sat at the manufactures a result of the irrational exuberance that characterized the time period. There was a tremendous amount of slack in the platform trailer market.
After the economic recovery began, it took an extended time before this slack was used up. For a long time, people in the industry wondered why the demand for new trailers was not stronger. During the time though; freight was growing, fleets were putting units back into service, profits were increasing so there was money to buy new equipment and used inventory was being depleted. When all the slack had been eaten up, something almost magical happened. Demand for new platform trailers exploded, catching the industry by surprise.
Slack impacts economic recoveries like this. Imagine that you have a very tangled rope with a ball attached at the very end. Then you tie the other end to a pick-up truck. The pick-up truck starts to move forward. You can’t see the truck or most of the rope, so you watch the ball and use that as an indicator to determine how fast the truck is moving. The truck starts at a slow speed and the ball moves a little. As the truck accelerates the slack in the rope is being tightened up, but the ball still doesn’t progress much. Now the truck is moving at a high rate of speed, at some point the rope becomes taut and the ball now accelerates at a speed equal of the truck.
This is what I expect to eventually happen with this economy. People are hoping for a fast recovery, but you don’t always get what you want with this economy, but with the economic forces at work, you get what you need. This has been a very long economic slide. We’ve been holding out so long and we miss you (economic good times). The unemployed try, yes they try, but they can’t get no satisfaction in this labor market. It’s enough to make a grown man cry.
But at some point this misery will end. It will be a memory, a memory of a slump that used to mean so much to me (and you). And once you start it up, this economy will never stop (until the next downturn of course).
People think I’m crazy, others think I’m hazy, but that’s my roll of these tumblin’ dice on when the economy will climb out from under the thumb of economic hardship and finally say goodbye to those rueful Tuesdays.
So to review: It’s all right now, except for some slack. Then it’s a gas, gas, gas.
Mailing List
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Sunday, November 28, 2010
Thursday, November 11, 2010
Real Time Election Results
The true election results are what happens in the time following the election, not what happens on election night. After the votes are tallied, it’s not important who won, but what that person actually does in office.
While this blog is about economics and not politics, let’s look at some issues that will impact the economy after the mid-terms….
Do You Hear Me Now?
The Voters Wrote the Following Message on President Obama’s Facebook Wall: “FOR THE LOVE OF GOD, PLEASE JUST STOP IT!!!!! PLEASE JUST *#$!*!* STOP IT RIGHT NOW.
President Obama replies: Hey, you don’t need to shout. I don’t understand what I’ve done to cause this type of reaction.
The Voters reply: Uhhh … we already knew that.
Repossession Order
The main problem with the healthcare bill is there is no money available for the states to be able to pay for it. That’s why governors are so opposed to it and after the election this opposition will increase.
The healthcare plan is similar to buying a new Rolls-Royce on credit. It is wonderful to drive. Your friends and neighbors just ooh and aah about it and of course the chicks dig it. Absolutely everything about the car is a positive experience until the first bill comes. Of course you can’t pay it, so you don’t. Then Matt and Sonia from Operation Repo show up with a camera crew and rip the car right out from under you at a most inappropriate time.
So now the Republicans want to change most of the healthcare bill while the Democrats do not. This is similar to two doctors operating on the same patient at the same time, but not agreeing on what needs to be done. This is not going to end well.
California Screaming
Both my California (business) girls (Whitman and Fiorina) lost. No sour grapes, but the financial problems in the state are huge and I just can’t see them improving much now. Expecting political veteran Jerry Brown to sharpen his pencil (literally) and solve the problems is like asking your grandfather to fix you iPod. “This is pretty small for a transistor radio. How do you get a 9-volt in this dadgum thing?”
The California ballot initiative on legalizing marijuana also went down to defeat. Supporters of the initiative reportedly were very bummed about the outcome. If only there was some way for them to relieve their sadness.
Seems to me if you were going to return to the hippie era and elect Jerry Brown, you would want to go the whole way and legalize pot. California could really use the tax revenue and with Brown in charge of handling their financial crisis, they are going to need more than just medical marijuana to deal with this pain.
WWF Defeated
Voters also rejected former World Wrestling Federation CEO Linda Mc Mahon in Connecticut. But don’t worry; with this divided government I predict that the upcoming political fighting will make the WWF look like the World Series of Hopscotch.
Get ready for a smack down. Pelosi better put on her game face (or at least pump up her present one). Boehner better hope his tan goes deeper than the first layer because he’s going to lose lots of skin in this game.
And that’s too bad. Many people believe that the government that governs best governs least (Quote often attributed to Ronald Reagan, but he was quoting Thomas Paine). Gridlock results in less “governing” and that worked great in the 1990’s. However, I agree with several commentators that have warned that we have serious problems right now that need to be addressed.
The First Cut is the Deepest
Many people are now alarmed that people who won elections are actually going to --- gasp and gasp again --- cut spending. Oh the horror! If you are spending too much, you either have to get more money, i.e. raise taxes or yes, cut spending. Is this concept too difficult to understand? When people lose their jobs and have less money, they have to cut their expenditures. What makes government so special that it would not have to do the same thing?
Yes, We Have No Bananas (Republic)
It’s probably too late for the election to change this…..
When third-world countries recklessly inject mass quantities of capital into their economies, we laugh at them and refer to them as “banana republics”. When we do it, it is wise monetary strategy. We’re not “printing money” it’s “Quantitative Easing”. The name sounds so pleasant and gentle. You might also say that quantitative easing is what your Uncle Ned does right after finishing his huge Thanksgiving dinner. That doesn’t turn out to be so pleasant and gentle either.
This quantitative easing in this case is like pouring water on a chemical fire. It appears like you are doing something but you are achieving very little. Banks say they have the money to lend but there is little demand from customers. It’s like a restaurant with bad food that tries to stimulate demand by offering all-you-can eat specials. If people aren’t hungry for what you are serving, lowering the price doesn’t help.
Please checkout this video clip from a recent presentation I gave to a job seekers group: Click Here
While this blog is about economics and not politics, let’s look at some issues that will impact the economy after the mid-terms….
Do You Hear Me Now?
The Voters Wrote the Following Message on President Obama’s Facebook Wall: “FOR THE LOVE OF GOD, PLEASE JUST STOP IT!!!!! PLEASE JUST *#$!*!* STOP IT RIGHT NOW.
President Obama replies: Hey, you don’t need to shout. I don’t understand what I’ve done to cause this type of reaction.
The Voters reply: Uhhh … we already knew that.
Repossession Order
The main problem with the healthcare bill is there is no money available for the states to be able to pay for it. That’s why governors are so opposed to it and after the election this opposition will increase.
The healthcare plan is similar to buying a new Rolls-Royce on credit. It is wonderful to drive. Your friends and neighbors just ooh and aah about it and of course the chicks dig it. Absolutely everything about the car is a positive experience until the first bill comes. Of course you can’t pay it, so you don’t. Then Matt and Sonia from Operation Repo show up with a camera crew and rip the car right out from under you at a most inappropriate time.
So now the Republicans want to change most of the healthcare bill while the Democrats do not. This is similar to two doctors operating on the same patient at the same time, but not agreeing on what needs to be done. This is not going to end well.
California Screaming
Both my California (business) girls (Whitman and Fiorina) lost. No sour grapes, but the financial problems in the state are huge and I just can’t see them improving much now. Expecting political veteran Jerry Brown to sharpen his pencil (literally) and solve the problems is like asking your grandfather to fix you iPod. “This is pretty small for a transistor radio. How do you get a 9-volt in this dadgum thing?”
The California ballot initiative on legalizing marijuana also went down to defeat. Supporters of the initiative reportedly were very bummed about the outcome. If only there was some way for them to relieve their sadness.
Seems to me if you were going to return to the hippie era and elect Jerry Brown, you would want to go the whole way and legalize pot. California could really use the tax revenue and with Brown in charge of handling their financial crisis, they are going to need more than just medical marijuana to deal with this pain.
WWF Defeated
Voters also rejected former World Wrestling Federation CEO Linda Mc Mahon in Connecticut. But don’t worry; with this divided government I predict that the upcoming political fighting will make the WWF look like the World Series of Hopscotch.
Get ready for a smack down. Pelosi better put on her game face (or at least pump up her present one). Boehner better hope his tan goes deeper than the first layer because he’s going to lose lots of skin in this game.
And that’s too bad. Many people believe that the government that governs best governs least (Quote often attributed to Ronald Reagan, but he was quoting Thomas Paine). Gridlock results in less “governing” and that worked great in the 1990’s. However, I agree with several commentators that have warned that we have serious problems right now that need to be addressed.
The First Cut is the Deepest
Many people are now alarmed that people who won elections are actually going to --- gasp and gasp again --- cut spending. Oh the horror! If you are spending too much, you either have to get more money, i.e. raise taxes or yes, cut spending. Is this concept too difficult to understand? When people lose their jobs and have less money, they have to cut their expenditures. What makes government so special that it would not have to do the same thing?
Yes, We Have No Bananas (Republic)
It’s probably too late for the election to change this…..
When third-world countries recklessly inject mass quantities of capital into their economies, we laugh at them and refer to them as “banana republics”. When we do it, it is wise monetary strategy. We’re not “printing money” it’s “Quantitative Easing”. The name sounds so pleasant and gentle. You might also say that quantitative easing is what your Uncle Ned does right after finishing his huge Thanksgiving dinner. That doesn’t turn out to be so pleasant and gentle either.
This quantitative easing in this case is like pouring water on a chemical fire. It appears like you are doing something but you are achieving very little. Banks say they have the money to lend but there is little demand from customers. It’s like a restaurant with bad food that tries to stimulate demand by offering all-you-can eat specials. If people aren’t hungry for what you are serving, lowering the price doesn’t help.
Please checkout this video clip from a recent presentation I gave to a job seekers group: Click Here
Monday, November 1, 2010
Hard Questions, Difficult Answers
Hey Don, if the recession ended in June of 2009, why does it feel like we are still in one 17 months later?
Because even though the recession officially ended the economy remains recessed. Calculatedriskblog.com reports that the economy is currently 0.8% below pre-recession peak and industrial production is still 7.5% below peak.
Think of a recession as an event and a recessed economy as a condition. If you suffer a wound that results in significant bleeding, stopping the bleeding is a good thing. However, it will take time for your blood count to return to normal.
So as soon as we get back to where we were in November 2007, things are going to be great. Right?
Unfortunately, no. Recessions are actually good for the economy because they squeeze inefficiencies out of businesses and reallocate capital that has not being optimized. But recessions are similar to fevers. Mild ones often accomplish the task and the recovery time is fast and the event relatively painless. Severe ones are very painful and recovery takes an extended time before the patient is healthy.
This economy was very sick. Now the fever is gone, but other problems still persist. Unfortunately just getting back to “even” will not significantly reduce unemployment. Millions of workers lost their jobs during the recession. This is part of the efficiency improvement. Companies are now functioning with less employees and this helps profits and makes them stronger. Under normal conditions the displaced workers would find jobs with newly expanding companies benefiting from the more productive reallocation of capital. That is not happening now. The credit markets are still dysfunctional so capital is not being reallocated and we are still “exporting” jobs to China. Therefore, once we get back to “even”, unemployment will remain elevated.
When will the economy be strong enough to really make a difference?
The Model T shows the economy growing slowly in 2011. The economy will reach 2007 peak levels sometime in the first half of the year and slowly keep moving ahead in the second half. Unemployment will decrease, but not substantially.
But the Model T does predict strong economic growth in 2012. GDP could grow in excess of 5%. This is higher than most economists are predicting. But when the economy is weak, people tend to believe things will continue to stay the same indefinitely. It is the same when the economy is very strong. Some of the 2007 quotes by Ben Bernanke, Henry Paulsen (then Treasury Secretary), and some top economists predicting an on-going strong economy and a continued great housing market are now laughable.
In 2012 things will start to hum. Consumer confidence should improve leading to more consumer spending. Business confidence will then improve leading to more investment. The credit markets will be healthy enough to support the increased need for capital. These conditions will finally start to create jobs and drive down unemployment. More workers getting paychecks helps fuel a recovery, just as it is supposed to. In addition, it is a big election year. There is nothing like an important election to get Republicans and Democrats to work together to boost the economy and improve everyone’s reelection chances. And if the economy is booming, don’t count out a second term just yet.
What will happen with the stock market?
I am officially abandoning the Model T’s prediction of an S & P low of 580 at this time. I still believe the model would have worked, but the extreme government intervention created a “false bottom” for the stock market and the economy. The government stopped the market from crashing. The trade off is in taking these actions it kept things pushed down for an extended period of time and has delayed an economic recovery. Only time will tell if these actions were brilliant or boneheaded. The fact that it could be either proves how difficult it was to make decisions during the midst of the financial meltdown.
Several analysts now predict that the next correction will take the S & P down close to 800. That makes sense. It would be logical for the market to drop sometime in 2011 as investors lose patience with the economy. If the S & P approaches 800 or below, it is time to jump back in. Even if the market continues to fall below 700, it should not take long to get back to 800. And you definitely want to be in the market before the boom year of 2012.
Because even though the recession officially ended the economy remains recessed. Calculatedriskblog.com reports that the economy is currently 0.8% below pre-recession peak and industrial production is still 7.5% below peak.
Think of a recession as an event and a recessed economy as a condition. If you suffer a wound that results in significant bleeding, stopping the bleeding is a good thing. However, it will take time for your blood count to return to normal.
So as soon as we get back to where we were in November 2007, things are going to be great. Right?
Unfortunately, no. Recessions are actually good for the economy because they squeeze inefficiencies out of businesses and reallocate capital that has not being optimized. But recessions are similar to fevers. Mild ones often accomplish the task and the recovery time is fast and the event relatively painless. Severe ones are very painful and recovery takes an extended time before the patient is healthy.
This economy was very sick. Now the fever is gone, but other problems still persist. Unfortunately just getting back to “even” will not significantly reduce unemployment. Millions of workers lost their jobs during the recession. This is part of the efficiency improvement. Companies are now functioning with less employees and this helps profits and makes them stronger. Under normal conditions the displaced workers would find jobs with newly expanding companies benefiting from the more productive reallocation of capital. That is not happening now. The credit markets are still dysfunctional so capital is not being reallocated and we are still “exporting” jobs to China. Therefore, once we get back to “even”, unemployment will remain elevated.
When will the economy be strong enough to really make a difference?
The Model T shows the economy growing slowly in 2011. The economy will reach 2007 peak levels sometime in the first half of the year and slowly keep moving ahead in the second half. Unemployment will decrease, but not substantially.
But the Model T does predict strong economic growth in 2012. GDP could grow in excess of 5%. This is higher than most economists are predicting. But when the economy is weak, people tend to believe things will continue to stay the same indefinitely. It is the same when the economy is very strong. Some of the 2007 quotes by Ben Bernanke, Henry Paulsen (then Treasury Secretary), and some top economists predicting an on-going strong economy and a continued great housing market are now laughable.
In 2012 things will start to hum. Consumer confidence should improve leading to more consumer spending. Business confidence will then improve leading to more investment. The credit markets will be healthy enough to support the increased need for capital. These conditions will finally start to create jobs and drive down unemployment. More workers getting paychecks helps fuel a recovery, just as it is supposed to. In addition, it is a big election year. There is nothing like an important election to get Republicans and Democrats to work together to boost the economy and improve everyone’s reelection chances. And if the economy is booming, don’t count out a second term just yet.
What will happen with the stock market?
I am officially abandoning the Model T’s prediction of an S & P low of 580 at this time. I still believe the model would have worked, but the extreme government intervention created a “false bottom” for the stock market and the economy. The government stopped the market from crashing. The trade off is in taking these actions it kept things pushed down for an extended period of time and has delayed an economic recovery. Only time will tell if these actions were brilliant or boneheaded. The fact that it could be either proves how difficult it was to make decisions during the midst of the financial meltdown.
Several analysts now predict that the next correction will take the S & P down close to 800. That makes sense. It would be logical for the market to drop sometime in 2011 as investors lose patience with the economy. If the S & P approaches 800 or below, it is time to jump back in. Even if the market continues to fall below 700, it should not take long to get back to 800. And you definitely want to be in the market before the boom year of 2012.
Monday, October 11, 2010
Story Time: Featuring Sammy Sublime, Billy Banker, and the return of Pooh Bear
Sammy Sublime Yearns for the Past
There once was guy named Sammy Sublime. Sammy lived life to the fullest. He drove luxurious sports cars; he wore expensive suits, ate the finest foods, drank exotic liqueurs, smoked big cigars and lived in a Mc Mansion. This flashy lifestyle naturally attracted extensive female attention. Sammy choose for his main squeeze one Valerie Vapid. Valerie was drop dead gorgeous, a very sexy vixen. She had more curves than a calculus test and was delicious, double “D” delicious, if you get my drift and I know you do. Sammy liked Valerie’s eye candy appeal and Valerie liked all the things that Sammy had.
But Sammy’s lifestyle was all built on cheap credit. He borrowed piles of cash to support his luxuries and when the banks finally realized his game, they cut off all his funds. Sammy’s life came crashing down. He lost his car, he lost his house, and without the bling-bling, he lost Valerie. It turns out that Sammy wasn’t sublime, he was really subprime.
Sammy fell fast and hard on his way to the bottom. He then slowly began to recover and put his life back together. He lived a much simpler and modest lifestyle that matched his income. He even met a woman named Patty Plain. Patty is a very average, pleasant, woman. She is a sensible match for Sammy’s new lifestyle. She isn’t A-List; she’s an “A” cup. She isn’t interested in Sammy for what he has; she is interested in him for what he is. But even though Patty is a nice woman and a perfect match for Sammy, he isn’t interested in a relationship with Patty. He longs for the hot sultriness of Valerie, even though their entire relationship was based on false wealth and deceit.
Billy Banker was Too Big to Fail
Billy Banker was too big to fail. While the other children in third grade read their assignments and did their homework, Billy watched television, played video games and engorged himself on enormous amounts of junk food. He even refused to participate in gym class. While the other children exercised and played sports, Billy just sat on his ever expanding butt.
When the school year ended Billy’s grades were horrible. The teacher had seen many Bankers in her class over the years, but Billy’s performance was exceptionally poor. Any student receiving such poor grades would not pass the class and would have to repeat the third grade, but Billy Banker was too big to fail.
Billy’s poor behavior, the junk food and lack of exercise, had caused him to grow very large. He was almost too heavy for a third grade desk, so new furniture would have to be made to accommodate him. In addition, the third grade classroom was on the second floor of the school house. Already the floor had started to bow under Billy’s tremendous weight. If he was not promoted to the fourth grade classroom on the first floor, it was feared that Billy might crash though the floor and bring the whole school building down with him. Finally, all the junk food had festered in Billy’s digestive system causing him to carry a large amount of toxic gas which he would emit at very inappropriate times. This scared and sickened the other students. The fourth floor classroom had more windows with a better ventilation system and was better able to handle Billy’s eruptions.
So the decision was made to not let Billy fail, but to help him down the stairs to the new classroom. But the principal gave Billy a stern warning. He told Billy that he needed to perform better, to study harder, and to exercise more. He told Billy that he needed to be a better Banker. To help him do that, the principal said he would enact new strict rules for Billy to make sure he improved. This made Billy very sad. Billy’s face got red, he stamped his foot and finally he turned his back to the principal and bent over. The principal quickly relented and said he was just joking about the new rules. Billy gave him a big hug and promised never to act so irresponsibly ever again. Until of course nobody is watching, and it happens again.
Pooh Bear’s New Sports Car
There was a problem in the land of Nectarinia (See July 5 post). There was a recession in the land and the production of honey was down. However, the council in Nectarinia had a plan. The honey refinement factory was powered by a wood-burning furnace. If they could get more wood to the furnace, they could stimulate more honey production and bring the economy out of recession. So they commissioned the Grand Pooh Bear to request funds from the treasury to purchase a new wood hauling truck to carry more wood to the factory. The treasury enthusiastically supported the plan and granted a large amount of funds to the program.
Pooh Bear took the money and went to the lot to purchase the new truck, but then something went horribly wrong. Before he even looked at the truck, he saw a bright, shiny, new, sports car. It was wicked awesome. I could buy this sports car and give all my friends free rides and they would have a great time thought Pooh Bear. They would love me so much for the car rides that they would surely remember it when it was time to decide if I should remain the Grand Pooh Bear. And there would still be room in the trunk to haul wood to the factory.
So the Pooh Bear bought the sports car instead of the truck and spent all his time giving all his friends rides in it. He told the people of Nectarinia how great the sports car was and how happy people were to be getting the free rides. But as a result, not much wood was getting to the factory. Honey production increased, but at a very slow rate.
When the people complained, Pooh Bear told them that what we need is a new truck to haul more wood to the factory to stimulate production. “But didn’t you already buy a truck for that purpose”, the people asked? “Why of course”, said Pooh Bear. “What I meant to say is that we need a second truck to stimulate production.” So Pooh Bear went back to the treasury to get funds to buy the truck. Buy the treasury wizards told him that there were no more funds available for a second vehicle and he would have to make do with the one he had. And so the honey production slowly dripped ahead and the recession continued.
There once was guy named Sammy Sublime. Sammy lived life to the fullest. He drove luxurious sports cars; he wore expensive suits, ate the finest foods, drank exotic liqueurs, smoked big cigars and lived in a Mc Mansion. This flashy lifestyle naturally attracted extensive female attention. Sammy choose for his main squeeze one Valerie Vapid. Valerie was drop dead gorgeous, a very sexy vixen. She had more curves than a calculus test and was delicious, double “D” delicious, if you get my drift and I know you do. Sammy liked Valerie’s eye candy appeal and Valerie liked all the things that Sammy had.
But Sammy’s lifestyle was all built on cheap credit. He borrowed piles of cash to support his luxuries and when the banks finally realized his game, they cut off all his funds. Sammy’s life came crashing down. He lost his car, he lost his house, and without the bling-bling, he lost Valerie. It turns out that Sammy wasn’t sublime, he was really subprime.
Sammy fell fast and hard on his way to the bottom. He then slowly began to recover and put his life back together. He lived a much simpler and modest lifestyle that matched his income. He even met a woman named Patty Plain. Patty is a very average, pleasant, woman. She is a sensible match for Sammy’s new lifestyle. She isn’t A-List; she’s an “A” cup. She isn’t interested in Sammy for what he has; she is interested in him for what he is. But even though Patty is a nice woman and a perfect match for Sammy, he isn’t interested in a relationship with Patty. He longs for the hot sultriness of Valerie, even though their entire relationship was based on false wealth and deceit.
Billy Banker was Too Big to Fail
Billy Banker was too big to fail. While the other children in third grade read their assignments and did their homework, Billy watched television, played video games and engorged himself on enormous amounts of junk food. He even refused to participate in gym class. While the other children exercised and played sports, Billy just sat on his ever expanding butt.
When the school year ended Billy’s grades were horrible. The teacher had seen many Bankers in her class over the years, but Billy’s performance was exceptionally poor. Any student receiving such poor grades would not pass the class and would have to repeat the third grade, but Billy Banker was too big to fail.
Billy’s poor behavior, the junk food and lack of exercise, had caused him to grow very large. He was almost too heavy for a third grade desk, so new furniture would have to be made to accommodate him. In addition, the third grade classroom was on the second floor of the school house. Already the floor had started to bow under Billy’s tremendous weight. If he was not promoted to the fourth grade classroom on the first floor, it was feared that Billy might crash though the floor and bring the whole school building down with him. Finally, all the junk food had festered in Billy’s digestive system causing him to carry a large amount of toxic gas which he would emit at very inappropriate times. This scared and sickened the other students. The fourth floor classroom had more windows with a better ventilation system and was better able to handle Billy’s eruptions.
So the decision was made to not let Billy fail, but to help him down the stairs to the new classroom. But the principal gave Billy a stern warning. He told Billy that he needed to perform better, to study harder, and to exercise more. He told Billy that he needed to be a better Banker. To help him do that, the principal said he would enact new strict rules for Billy to make sure he improved. This made Billy very sad. Billy’s face got red, he stamped his foot and finally he turned his back to the principal and bent over. The principal quickly relented and said he was just joking about the new rules. Billy gave him a big hug and promised never to act so irresponsibly ever again. Until of course nobody is watching, and it happens again.
Pooh Bear’s New Sports Car
There was a problem in the land of Nectarinia (See July 5 post). There was a recession in the land and the production of honey was down. However, the council in Nectarinia had a plan. The honey refinement factory was powered by a wood-burning furnace. If they could get more wood to the furnace, they could stimulate more honey production and bring the economy out of recession. So they commissioned the Grand Pooh Bear to request funds from the treasury to purchase a new wood hauling truck to carry more wood to the factory. The treasury enthusiastically supported the plan and granted a large amount of funds to the program.
Pooh Bear took the money and went to the lot to purchase the new truck, but then something went horribly wrong. Before he even looked at the truck, he saw a bright, shiny, new, sports car. It was wicked awesome. I could buy this sports car and give all my friends free rides and they would have a great time thought Pooh Bear. They would love me so much for the car rides that they would surely remember it when it was time to decide if I should remain the Grand Pooh Bear. And there would still be room in the trunk to haul wood to the factory.
So the Pooh Bear bought the sports car instead of the truck and spent all his time giving all his friends rides in it. He told the people of Nectarinia how great the sports car was and how happy people were to be getting the free rides. But as a result, not much wood was getting to the factory. Honey production increased, but at a very slow rate.
When the people complained, Pooh Bear told them that what we need is a new truck to haul more wood to the factory to stimulate production. “But didn’t you already buy a truck for that purpose”, the people asked? “Why of course”, said Pooh Bear. “What I meant to say is that we need a second truck to stimulate production.” So Pooh Bear went back to the treasury to get funds to buy the truck. Buy the treasury wizards told him that there were no more funds available for a second vehicle and he would have to make do with the one he had. And so the honey production slowly dripped ahead and the recession continued.
Thursday, September 23, 2010
Happy Anniversary Model "T"!
Happy anniversary baby
Got you on my mind
Hey everybody, I am excited about a big upcoming anniversary. If my wife is reading this, of course I’m talking about my 30th wedding anniversary. For everyone else, I’m referring to the one-year anniversary of the Model T Stock Trends Blog.
I started the blog a year ago to share the Model “T”, which attempts to predict the highs and lows of stock market cycles using data primarily connected to the commercial transportation industry. It also helped me keep my skills sharp as a looked for employment.
My friend Robert who helped me set up the blog page, asked me a year ago, “Who is going to read this?” I said maybe the 15 people who already know about the model and whoever else is interested. But the blog has a readership larger than I ever expected. It is read by people who want an understandable explanation of the economy. It is read by financial professionals in New York who remain curious about the model’s potential. I have received e-mails from readers in India, Sweden and other countries.
After presenting and explaining the model in my initial posts, I delved into factors that impacted the economy and made many predictions and forecasts along the way. The interesting thing about blogging is those predictions “go on the record” and can be reviewed at anytime. And it is now time for a review. So what did readers of the blog get over the past year?
The Losers
Let’s start with the failures. The Model “T” predicted the S & P 500 index would bottom out at around 580 in September or October of this year. So the model has not been accurate the past 18 months. The main reason for this “miss” is that the economic conditions are very unique and the government has injected an enormous amount of support and stimulus to stabilize the economy. I have been critical of Timothy Geithner, but the one thing he has been very successful at doing is stabilizing and strengthening the stock market. And don’t dismiss this. It was a very important factor in controlling this crisis.
The Model “T” has not been accurate in predicting the recent stock market, but none of the other sophisticated models developed by your PhD in Economic experts have worked either. As I have stated before, even some very accurate economic indicators have been rendered useless in this Redression (my new term for the Recession/Depression) So as a marketing person, I can honestly say that the Model T has been as accurate as many of the models developed by respected economists.
The Winners
Don’t focus so much of the content, much of which is obvious now, but when the predictions were made.
- In October 2009 you read that the economic recovery would not be a V-shape, a U-shape, an L shape or a W. It would be a “UL” with a slow, sluggish growth rate after riding the bottom of the cycle. (Almost a year later, this one has been spot on).
- In October 2009 you read that the unemployment situation was unique and pervasive. The number of displaced skilled, white-collar, workers meant that that unemployment would remain high for an extended period of time (some government officials still don’t understand this).
- In November 2009 you read how lack of credit availability was choking the economy and would not improve much until well into 2010 and would not fully recover until 2011. (Count it)
- In November 2009 you read that 2010 GDP would be below 3% and that the housing market despite the government stimulus efforts and low interest rates, would not recover in 2010. Housing starts were predicted to be below 700,000. (GDP is forecast at 2.7% for 2010 and housing starts at 590,000 (Wells Fargo))
- In November 2009 you read that the recession ended in July 2009 (NBER just announced this week that it ended in June 2009. (Okay, one month off but 10 months ahead of the experts).
- In December you read that the government programs to stimulate the economy were not working. In February 2010 this issue was addressed in more detail. (No comment necessary)
- In January 2010 you read that the economic indicators predicted slow, choppy, economic growth in 2010. (Slow and getting choppier)
- In January 2010 you read that this was not going to be an economic recovery as much as it was going to be an economic “healing”. Also, there would be no “double-dip” recession. (The “recovery” hasn’t really happened)
- In March 2010 you read that there was a structural unemployment problem that a typical economic recovery would not solve. (Several economists agreed with me several months later, but the government still doesn’t get it.)
- In May 2010 you read that the recovery was it trouble and there was an economic slowdown ahead. (Swish)
Of course there were other predictions made earlier in 2010, but it is too soon to determine the accuracy of those. The Model “T” would still indicate that the stock market will see a significant drop to compensate for the rally that has taken place the past 15 months, but the market continues to show surprising strength.
I am tempted to boast about the accurate predictions, but my Pennsylvania Dutch upbringing prevents me from doing so. Proud Pennsylvania Dutch boys get sent to bed without any cheese and birch beer! So I will just quote Walter Brennan’s character from the 1960’s western The Guns of Will Sonnett: “No brag, just fact.”
Happy anniversary baby
Got you on my mind
Got you on my mind
Hey everybody, I am excited about a big upcoming anniversary. If my wife is reading this, of course I’m talking about my 30th wedding anniversary. For everyone else, I’m referring to the one-year anniversary of the Model T Stock Trends Blog.
I started the blog a year ago to share the Model “T”, which attempts to predict the highs and lows of stock market cycles using data primarily connected to the commercial transportation industry. It also helped me keep my skills sharp as a looked for employment.
My friend Robert who helped me set up the blog page, asked me a year ago, “Who is going to read this?” I said maybe the 15 people who already know about the model and whoever else is interested. But the blog has a readership larger than I ever expected. It is read by people who want an understandable explanation of the economy. It is read by financial professionals in New York who remain curious about the model’s potential. I have received e-mails from readers in India, Sweden and other countries.
After presenting and explaining the model in my initial posts, I delved into factors that impacted the economy and made many predictions and forecasts along the way. The interesting thing about blogging is those predictions “go on the record” and can be reviewed at anytime. And it is now time for a review. So what did readers of the blog get over the past year?
The Losers
Let’s start with the failures. The Model “T” predicted the S & P 500 index would bottom out at around 580 in September or October of this year. So the model has not been accurate the past 18 months. The main reason for this “miss” is that the economic conditions are very unique and the government has injected an enormous amount of support and stimulus to stabilize the economy. I have been critical of Timothy Geithner, but the one thing he has been very successful at doing is stabilizing and strengthening the stock market. And don’t dismiss this. It was a very important factor in controlling this crisis.
The Model “T” has not been accurate in predicting the recent stock market, but none of the other sophisticated models developed by your PhD in Economic experts have worked either. As I have stated before, even some very accurate economic indicators have been rendered useless in this Redression (my new term for the Recession/Depression) So as a marketing person, I can honestly say that the Model T has been as accurate as many of the models developed by respected economists.
The Winners
Don’t focus so much of the content, much of which is obvious now, but when the predictions were made.
- In October 2009 you read that the economic recovery would not be a V-shape, a U-shape, an L shape or a W. It would be a “UL” with a slow, sluggish growth rate after riding the bottom of the cycle. (Almost a year later, this one has been spot on).
- In October 2009 you read that the unemployment situation was unique and pervasive. The number of displaced skilled, white-collar, workers meant that that unemployment would remain high for an extended period of time (some government officials still don’t understand this).
- In November 2009 you read how lack of credit availability was choking the economy and would not improve much until well into 2010 and would not fully recover until 2011. (Count it)
- In November 2009 you read that 2010 GDP would be below 3% and that the housing market despite the government stimulus efforts and low interest rates, would not recover in 2010. Housing starts were predicted to be below 700,000. (GDP is forecast at 2.7% for 2010 and housing starts at 590,000 (Wells Fargo))
- In November 2009 you read that the recession ended in July 2009 (NBER just announced this week that it ended in June 2009. (Okay, one month off but 10 months ahead of the experts).
- In December you read that the government programs to stimulate the economy were not working. In February 2010 this issue was addressed in more detail. (No comment necessary)
- In January 2010 you read that the economic indicators predicted slow, choppy, economic growth in 2010. (Slow and getting choppier)
- In January 2010 you read that this was not going to be an economic recovery as much as it was going to be an economic “healing”. Also, there would be no “double-dip” recession. (The “recovery” hasn’t really happened)
- In March 2010 you read that there was a structural unemployment problem that a typical economic recovery would not solve. (Several economists agreed with me several months later, but the government still doesn’t get it.)
- In May 2010 you read that the recovery was it trouble and there was an economic slowdown ahead. (Swish)
Of course there were other predictions made earlier in 2010, but it is too soon to determine the accuracy of those. The Model “T” would still indicate that the stock market will see a significant drop to compensate for the rally that has taken place the past 15 months, but the market continues to show surprising strength.
I am tempted to boast about the accurate predictions, but my Pennsylvania Dutch upbringing prevents me from doing so. Proud Pennsylvania Dutch boys get sent to bed without any cheese and birch beer! So I will just quote Walter Brennan’s character from the 1960’s western The Guns of Will Sonnett: “No brag, just fact.”
Happy anniversary baby
Got you on my mind
Thursday, September 9, 2010
What is This Thing Called, Love?
I've been through the desert on a horse with no name,
It felt good to be out of the rain.
In the desert you can remember your name,
'Cause there ain't no one for to give you no pain. (America)
I have previously stated that economists are having a difficult time explaining the current economic situation due to the unusual conditions that exist. In is interesting to note that economists and the government have underestimated the current downturn at almost every point in the process. If you go back and read some of the 2008 quotes of FED Chairman Ben Bernanke and former Treasury Secretary Henry Paulsen about the economic conditions at the time, you find the analyses faulty and the forecasts laughable.
This is not your father’s recession. Unfortunately the government has viewed this as a typical recession and has responded accordingly. Remember that the first economic stimulus program from the Bush administration. Talk about p***ing on a forest fire. Then the Obama administration follows that up with a stimulus package that is less about creating jobs as it is about solidifying and rewarding voting constituencies (never let a crisis go to waste). I really believe they expected the economy to recover regardless of how poor the stimulus package really was. Similarly, Cash for Clunkers and the housing tax credit programs were “gadget” plays to prop up these industries until the economy improved. It’s hope and change all right --- you keep stalling and you hope that things will change.
This downturn is more than just a recession. If it wasn’t, The Great Recession of 2008-2009 would have been followed by the Great Recovery of 2010 and we would all be partying to the music of Kool & the Gang right now. It is not a depression, because the economy did not drop far enough for that designation. Some economists have noted that this is not a depression because the unemployment rate during the Great Depression was 25%. I say be careful here. If you take the unemployment rate, add the underemployment (part-time wanting full time) rate, plus the people not counted because they have given up looking, you are up to over 20%. Obviously this is not as devastating as the 1930’s, but that was The “Great” Depression, not just any depression.
Our current situation has characteristics of both a recession and a depression (See excellent article “You Say Recession, I Say Depression”). So what do we call this thing? If you have lost your job or taken a pay cut during the last two years, you want to call this the **#**x!!!! Recession, but that doesn’t translate well in civilized discussion. So here are my suggestions:
The Great Repression
Psychologists define repression as excluding painful or disturbing memories from the conscious mind. You put uncomfortable thoughts in inaccessible areas of the mind. And what uncomfortable thoughts do we need to repress?
- That one major political party blindly led us into this mess and now the other major political party is pathetically attempting to blindly lead us out. Different clowns – same circus. Who do we vote for now?
- That CEOs of some major financial institutions were removed from their posts, but not before received receiving seven-figure bonus checks as a reward for their fine efforts. They now make difficult decisions about whether to order the quiche or the croissant before tennis at the club.
- That the government’s response to the banking crisis was a 2,300 page financial reform bill that somehow never got around to fixing many of the things that went wrong. The banks are bigger than ever – Too tremendously big to fail! The reform bill concentrated more on your credit card bills and bank fees. Darn, it was my credit card bill that caused this mess.
- That the current administration has enacted healthcare legislation that will increase business costs and possibly personal costs at a time when we can’t afford it. Introducing this burden and uncertainty into this weak, unstable, economic environment is sheer lunacy. Even if the new healthcare system works wonderfully (a very big “if”) down the road, it is not worth the damage that it is doing right now. Ditto for Cap and Trade.
The Great Redression
To redress is to set upright, restore, to make up for, to repay. As I have stated before, we are now paying for a credit, housing, and cheap import, binge that started around 1995. It is payback time and you know what they say about paybacks. I think this term is perfect.
After two days in the desert sun
My skin began to turn red
After three days in the desert fun
I was looking at a river bed
And the story it told of a river that flowed
Made me sad to think it was dead
You see I've been through the desert on a horse with no name
It felt good to be out of the rain
In the desert you can remember your name
'Cause there ain't no one for to give you no pain
Horse With No Name Video
Benny Hill Video that explains the title
It felt good to be out of the rain.
In the desert you can remember your name,
'Cause there ain't no one for to give you no pain. (America)
I have previously stated that economists are having a difficult time explaining the current economic situation due to the unusual conditions that exist. In is interesting to note that economists and the government have underestimated the current downturn at almost every point in the process. If you go back and read some of the 2008 quotes of FED Chairman Ben Bernanke and former Treasury Secretary Henry Paulsen about the economic conditions at the time, you find the analyses faulty and the forecasts laughable.
This is not your father’s recession. Unfortunately the government has viewed this as a typical recession and has responded accordingly. Remember that the first economic stimulus program from the Bush administration. Talk about p***ing on a forest fire. Then the Obama administration follows that up with a stimulus package that is less about creating jobs as it is about solidifying and rewarding voting constituencies (never let a crisis go to waste). I really believe they expected the economy to recover regardless of how poor the stimulus package really was. Similarly, Cash for Clunkers and the housing tax credit programs were “gadget” plays to prop up these industries until the economy improved. It’s hope and change all right --- you keep stalling and you hope that things will change.
This downturn is more than just a recession. If it wasn’t, The Great Recession of 2008-2009 would have been followed by the Great Recovery of 2010 and we would all be partying to the music of Kool & the Gang right now. It is not a depression, because the economy did not drop far enough for that designation. Some economists have noted that this is not a depression because the unemployment rate during the Great Depression was 25%. I say be careful here. If you take the unemployment rate, add the underemployment (part-time wanting full time) rate, plus the people not counted because they have given up looking, you are up to over 20%. Obviously this is not as devastating as the 1930’s, but that was The “Great” Depression, not just any depression.
Our current situation has characteristics of both a recession and a depression (See excellent article “You Say Recession, I Say Depression”). So what do we call this thing? If you have lost your job or taken a pay cut during the last two years, you want to call this the **#**x!!!! Recession, but that doesn’t translate well in civilized discussion. So here are my suggestions:
The Great Repression
Psychologists define repression as excluding painful or disturbing memories from the conscious mind. You put uncomfortable thoughts in inaccessible areas of the mind. And what uncomfortable thoughts do we need to repress?
- That one major political party blindly led us into this mess and now the other major political party is pathetically attempting to blindly lead us out. Different clowns – same circus. Who do we vote for now?
- That CEOs of some major financial institutions were removed from their posts, but not before received receiving seven-figure bonus checks as a reward for their fine efforts. They now make difficult decisions about whether to order the quiche or the croissant before tennis at the club.
- That the government’s response to the banking crisis was a 2,300 page financial reform bill that somehow never got around to fixing many of the things that went wrong. The banks are bigger than ever – Too tremendously big to fail! The reform bill concentrated more on your credit card bills and bank fees. Darn, it was my credit card bill that caused this mess.
- That the current administration has enacted healthcare legislation that will increase business costs and possibly personal costs at a time when we can’t afford it. Introducing this burden and uncertainty into this weak, unstable, economic environment is sheer lunacy. Even if the new healthcare system works wonderfully (a very big “if”) down the road, it is not worth the damage that it is doing right now. Ditto for Cap and Trade.
The Great Redression
To redress is to set upright, restore, to make up for, to repay. As I have stated before, we are now paying for a credit, housing, and cheap import, binge that started around 1995. It is payback time and you know what they say about paybacks. I think this term is perfect.
After two days in the desert sun
My skin began to turn red
After three days in the desert fun
I was looking at a river bed
And the story it told of a river that flowed
Made me sad to think it was dead
You see I've been through the desert on a horse with no name
It felt good to be out of the rain
In the desert you can remember your name
'Cause there ain't no one for to give you no pain
Horse With No Name Video
Benny Hill Video that explains the title
Wednesday, August 25, 2010
Where Are We?
Are we in an economic recovery, stuck in a period of below average growth, or headed for a double-dip recession? Let’s look at some more of the traditional and non-traditional economic indicators to find out.
Kicking the Bucket
There is a business district close to where I live that has been devastated during this recession. The only company in this area making any money is the one making the “For Lease” signs. Right in the middle of the district is a coin car wash. For around $4 worth of quarters you can soap, rinse, and wax your car. There were always prominent signs at the car wash that said “Bucket Washing Strictly Prohibited”. If people use buckets to “hand wash” their cars before rinsing, they take up space without spending more money and increase the waiting time of other customers. So recently I was shocked to see a large sign beside the car wash proclaiming “Bucket Washing Welcomed”. This is an act of desperation. This is the equivalent of a Baptist church advertising “Bring Your Own Bottle”on Sunday morning. If people don’t have enough quarters to wash their cars, things can’t be good.
Bottoms Up
Speaking of bottles, Ohio just announced that hard liquor sales were up strongly in 2009 and still steady in 2010. A spokesperson claimed that this is in no way related to people drinking more due to the state’s double digit unemployment rate. Of course this is a contributing factor, they just won’t admit it. But a bigger reason is that more people are saving money by drinking at home instead of in bars.
Eating In
Not only are people “drinking in”, they are also eating in. The latest data from the restaurant industry show that sales are up some from the bottom in 2009, but still weak. Discretionary income is still tight and people are not increasing outside meals. It is speculated that many restaurants are losing money, but are holding on and hoping business picks up soon.
Basket Case
Charitable giving continues to suffer. Reports from several churches show that giving is actually down from 2009. Unemployment remains high and people with jobs are being very conservative with their money.
Still Cutting
Companies continue to cut workers. My daughter became a victim recently when the call-center where she worked reduced manpower. Even in good times companies reduce workers, but in a recovery there should be plenty of new jobs for these people. Now they just join the 14 million other job seekers competing for the few new jobs available. One local job seeker group has actually grown in membership the past few months.
Temporary Workers
Temporary workers are increasing. This is good news and is usually the first sign of an economic recovery. The way it is supposed to work is that companies hire temporary workers until they are confident business is increasing. They then hire these people as standard workers and hire more “temps”. This time they are hiring temporary workers, but are not making these workers “permanent”. I do not believe that businesses have confidence in the government to effectively manage this economy. A friend of mine says he gets more nervous every time he hears Timothy Geithner speak.
The Sound of Silence
There is a landscaping material business close to my house. The sound of the digging equipment is audible from my house and it always been very busy in the spring and summer months, 6 days a week. But this year, there has been no work on Saturdays and it has also been quiet sometimes during the week. People are spending less money on their homes as property values continue to suffer.
The Rest of the Best
It is interesting that a multitude of economic indicators show an increase of only 1-2% versus a year ago. That was when the recession was ending. That means we have not moved that far from the bottom, which helps explain the lack of job growth. In addition, the experts expect Q2 GDP to be revised downward (not upward as I anticipated). This means the top economist were totally baffled by the Q2 results which is consistent with my belief that some economic indicators are giving false readings due to the unusual conditions.
So Where Are We?
Most of the indicators previously discussed reflect a very slow economy. There are no reliable trends and few reliable leading indicators at this time. Economists will still be analyzing the last three years of turmoil, twenty years from now.
The Model “T” still says no double-dip recession, but a long, slow, climb up a steep hill. This definitely can’t be called a recovery, but the conditions are unusual and economists are struggling to understand where we are. And if you don’t know where you are, you can’t know where you are going. More on this next time.
Kicking the Bucket
There is a business district close to where I live that has been devastated during this recession. The only company in this area making any money is the one making the “For Lease” signs. Right in the middle of the district is a coin car wash. For around $4 worth of quarters you can soap, rinse, and wax your car. There were always prominent signs at the car wash that said “Bucket Washing Strictly Prohibited”. If people use buckets to “hand wash” their cars before rinsing, they take up space without spending more money and increase the waiting time of other customers. So recently I was shocked to see a large sign beside the car wash proclaiming “Bucket Washing Welcomed”. This is an act of desperation. This is the equivalent of a Baptist church advertising “Bring Your Own Bottle”on Sunday morning. If people don’t have enough quarters to wash their cars, things can’t be good.
Bottoms Up
Speaking of bottles, Ohio just announced that hard liquor sales were up strongly in 2009 and still steady in 2010. A spokesperson claimed that this is in no way related to people drinking more due to the state’s double digit unemployment rate. Of course this is a contributing factor, they just won’t admit it. But a bigger reason is that more people are saving money by drinking at home instead of in bars.
Eating In
Not only are people “drinking in”, they are also eating in. The latest data from the restaurant industry show that sales are up some from the bottom in 2009, but still weak. Discretionary income is still tight and people are not increasing outside meals. It is speculated that many restaurants are losing money, but are holding on and hoping business picks up soon.
Basket Case
Charitable giving continues to suffer. Reports from several churches show that giving is actually down from 2009. Unemployment remains high and people with jobs are being very conservative with their money.
Still Cutting
Companies continue to cut workers. My daughter became a victim recently when the call-center where she worked reduced manpower. Even in good times companies reduce workers, but in a recovery there should be plenty of new jobs for these people. Now they just join the 14 million other job seekers competing for the few new jobs available. One local job seeker group has actually grown in membership the past few months.
Temporary Workers
Temporary workers are increasing. This is good news and is usually the first sign of an economic recovery. The way it is supposed to work is that companies hire temporary workers until they are confident business is increasing. They then hire these people as standard workers and hire more “temps”. This time they are hiring temporary workers, but are not making these workers “permanent”. I do not believe that businesses have confidence in the government to effectively manage this economy. A friend of mine says he gets more nervous every time he hears Timothy Geithner speak.
The Sound of Silence
There is a landscaping material business close to my house. The sound of the digging equipment is audible from my house and it always been very busy in the spring and summer months, 6 days a week. But this year, there has been no work on Saturdays and it has also been quiet sometimes during the week. People are spending less money on their homes as property values continue to suffer.
The Rest of the Best
It is interesting that a multitude of economic indicators show an increase of only 1-2% versus a year ago. That was when the recession was ending. That means we have not moved that far from the bottom, which helps explain the lack of job growth. In addition, the experts expect Q2 GDP to be revised downward (not upward as I anticipated). This means the top economist were totally baffled by the Q2 results which is consistent with my belief that some economic indicators are giving false readings due to the unusual conditions.
So Where Are We?
Most of the indicators previously discussed reflect a very slow economy. There are no reliable trends and few reliable leading indicators at this time. Economists will still be analyzing the last three years of turmoil, twenty years from now.
The Model “T” still says no double-dip recession, but a long, slow, climb up a steep hill. This definitely can’t be called a recovery, but the conditions are unusual and economists are struggling to understand where we are. And if you don’t know where you are, you can’t know where you are going. More on this next time.
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