Post Election Blues

Well, the presidential election and the primaries are finally over. The Democrats even let Joe Biden out from under his rock, after a time out for bad behavior. I'm sure he's glad to be back.

Note the catchy title. I chose it to honor the color of the party of the winning candidate. Clever, yes?

So now the economists are predicting a deeper than usual recession. Aren't those the same guys and gals who didn't even see most of this coming? So I should listen to them? I think not. I'll continue my own research, and I'll post my conclusions from time to time.

As for the Obama button toter's, I saw this statement by a fan in a WSJ Forum:
"I believe the market will begin to turnaround in the upcoming weeks. President - Elect Obama will lift the spirits of people worldwide, and American Iconic companies such as Coke, Johnson and Johnson, Wal - Mart, etc. will lead the way. The market needed to contract, and shake out the casino/stock analyst. Wall street will regain its stride, as the market starts to respond the worldwide support for American goods. What we have learned is that the American Presidency is more than just a title, it is the measure of the Free - Market. When people believe that the American president is a good person, they respond by buying up American goods".

OK, pass the guy some more cool-aid.

The Onion had a piece on the emptiness facing these people, now that the party is over. What will they do? Maybe go to an orgy in the dorm, or plan an overthrow of some democracy. Is South Korea on the list? Of course, after proposition 8 in California, there is always the Mormon Church to attack. With the power of the web, the opportunities are endless! Onion Video.

To be serious for a moment, I am concerned by the naivete of some of these people. I'm glad they feel good, but feeling good and having confidence is not the same thing. Nothing has really happened yet. We don't even have President elect Obama's design for tackling the problems or a team to do it. In fact, the only thing we do have is most of the same congresswomen and men who got us into this mess in the first place. Wake up America!

The economy will turn around when people again have confidence in the economy. It will turn around when they reach the point that they are certain that a depression is not just around the corner, or if one has arrived, that we have survived it; and when they reach the point that they can trust their money in the stock market, and in the banks. Finally, it will turn around when the herd reaches the point at which they feel secure. We have a long way to go before the guy or gal in the street feels that way. At present, millions have seen a large chunk of their savings vaporize (or someone else's in the case of many home "owners"). However, it is very important to remember that the stock market will turn around before the economy does. So if you see the stock market turning up and staying there, that's a good sign. As for the economy, it will be a year or more before it actually bottoms. That's my guess, sometime late 2009 or early 2010. Sorry to all of you "instant gratification" people out there. Remember, the crazy people, the speculators, have been out of the asylum and running the financial system for a few years. It's going to take a while to clean up the mess they created. If you were flipping houses, or bought one in 2006-7 and expected a huge increase in value, you should be aware I am talking about people just like you!

I'll know the worst is over when the retirees climb out of their homes and into the light of day and again begin purchasing dinner at the diner down the street. At present, many of these people have apparently, like the proverbial turtle, pulled their head in and dug down. One local restaurant which these types frequent, told me their business was off 70%! Who knows when they will return? Perhaps they'll climb up into the sunlight with the return of spring, or when they begin feeling flush with the 5.8% SS benefit increase. Those retirees and other beneficiaries have a big impact on the economy. As of September, 2008 they numbered over 50 million! See Social Security Beneficiaries Snapshot. To put this number in perspective, in 2006, according to the US Census bureau, there were 144 million employed civilian workers in the US. See US Census Employed Civilians. So when the social security beneficiaries pull back, about 26% of the population with income pulls it's chips off the table. As some of these people work and collect benefits, there is possibly a larger effect on the economy.

For many of us, who have never experienced a true, deep recession, this is a new phenomenon. Unlike the "worst recession since the great depression" campaign rhetoric that Sen. Kerry used in his bid for the presidency, this is the real deal. Kerry was spouting bull. I do remember the Arab oil embargo, the recessions of 1973-74, 1980-82, and the stock market crash of 1987. I have been in the work force since 1963 (worked a real job in high school) so this is not a shock to me. However, it isn't pleasant, either. Now we have to deal with those around us who did not prepare, who refused to prepare, or who speculated and gambled, and deal with the fact that "People Will Be Strange."

Now everyone is impatient to get beyond this crisis. Heck, the unemployment numbers have just begun to really rise. It will take time for this to be resolved, and until then, we can only watch and deal with our personal realities. It took years to get into this mess. It will take years to get out of it. As I said earlier in this blog, we could bottom out in late 2009. But that means that at that point we are just beginning to claw our way out of the pit. If you don't believe me then do your own research, but do avoid MSNBC and the other minute miracle entertainers out there. And don't believe anything an economist or politician tells you.

Nor do we know what will be at the end of the tunnel when we do emerge. Given the typical Americans penchant for instant gratification, I have no idea on how these addicts will deal with the new reality. I do know that some and perhaps many of us will eventually come to the conclusion that the worst is over, and like the passing of a tornado, we will conclude it is safe to again emerge from our shelters. At that point we will breath a sigh of relief and allow our lives to resume. When enough of us have done this, the stock market will begin a reversal, people will begin spending some of the cash they hoarded during the "crisis" and the economy will rebound. Will we return to the "good old days" of the Internet boom, cheap credit and so on? No. We blew that wad of cash and sent much of it overseas. Nor will oil return to $25 a barrel; more likely it will return to $150 a barrel and continue upwards, perhaps reaching the predicted $200 a barrel in 2030.

Until then, I suggest we simply watch something besides the talking heads, the economists and that drivelling weatherman Tom Skilling on WGN-TV. Unless you enjoy the equivalent to listening to our economists. You know, 15 minutes of noise about the weather, and then the next morning no matter what Skilling said, you look out the window, go online to Weather.com and decide how to deal with the current events. As for TS's Proselytizing, as we know, the weather will do what it will do, and frequently, it has little to do with the "predictions".

On a positive note about the election, Pres. elect Obama may be the perfect guy for the job. Let him deal with his team-mates Nancy Pelosi, Harry Reid, Charles Rangel, John Dingell, Barney Frank and the rest of them. Have fun fella! This will be more entertaining to watch than the weather or the economists. Of that, I am absolutely certain. The trick will be to separate the wheat from the chaff.

Today, the New York Times decided to put a positive spin on the economy in the article:
Stocks Are Higher After Jobs Report. Here are a couple of choice quotes:

"Investors were not letting a barrage of grim economic news get them down.......After two days of heavy losses, shares on Wall Street bounced back on Friday................In late afternoon trading, the Dow industrials were up about 165 points............but they were still poised to close lower for the week after a two-day sell-off that sent the Dow plunging by nearly 1,000 points".

Ok, so this cool-aid would have me celebrating that the Dow is only down 835 points, or about 9% over the past three days. Wow, I am thrilled. If I had put $10,000 into the market at the close on Wednesday, I would have lost "only" about $710 by the close on Friday; it was actually a larger loss at the time the NYT issued their "news". That's what they call "bouncing back" in New York ? I'm sure my broker would be thrilled, as he made a commission on the sale. Oh, that's right, Wall Street is in New York City, isn't it? So my stock purchase was good for the big, rotten apple. Should I send some more $$$ to the poor people in Times Square? I think not! OK, to put a positive spin on all of this, as they say "long term" the stock market indexes always go up! However, brokers make no money selling Vanguard indexes, so it is some company's stock I would have purchased. In 5 years or so, my stock may be worth more than I paid for it, or then again, the company could have imploded, like Enron!