|
PureBytes Links
Trading Reference Links
|
I found this Lycos post of interest and wanted to share it.I do not
necessarily agree with all within, but there is certainly food for
thought.
John
"It is my understanding that a depression is defined as 4 quarters of
negative GDP. I suppose that the same group that declares recessions
also declares depressions. It would be well to note that this same
group has not yet declared an end to the last recession! They don't
meet often because its bad for the economy to have that much
negativism in one room
Just as Pmcw and I had our disagreements on efficiency and
effectiveness a number of posts ago, there are different ways to
define an economic downturn. As far as the term depression goes, its
association with the great economic disaster that was the decade of
the 1930’s has forever altered it! If a recession is a mild form of
the Great Depression, and you flatten the curve by eliminating the
mildest recession and the greatest depression, you do come out with a
different view of the whole concept.
It is virtually impossible to compare what went on in 1929 and beyond
to what is going on now simply because there is no comparison to the
society then as opposed to now. There are almost no companies left in
the indexes that were there in 1929--and we all know the Ford and ATT-
T stories all to well!
As far as deflationary periods go, they do not necessarily lead to a
depression. Look at the period from 1979 through early 1982, when
interest rates went down from around 18 percent to a more normal
historical level. The problem with the 1979-82 period is that it
began the period of modern inflation that has lasted to this very
day. Everybody remembers when coffee went from a dollar a pound to
what it currently is. Ask Juan Valdez what it costs, I don't buy the
stuff all that often. Another factor that has affected this price
inflation is the historic rise in the price of oil that occurred in
the first energy crisis in the mid-1970's when OPEC became a
household word. And, of all things, the price of tobacco has also
been a major contributor to price increases in the United States
along with the rise of lottery tickets. Remember when the Irish
Sweepstakes was the best you could do!
On the price deflation front, long distance telephone calls have
probably lead the way to a potential deflationary period of time. So
have the price of personal computers! Our biggest culprit on the
deflation battlefront has been the training of generations of people
to look for the lowest price, all too often to the exclusion of good
service and careful manufacturing!
The search for the lowest price is the death knell of a service
economy! As the service gets worse as the prices continue to spiral
downward, it becomes a viscous cycle that, after a time, becomes very
hard to break! We have now reached the point where Pizza Hut is
leading the charge toward bad service by beginning to charge the
consumer for delivering pizzas to their abode! What this is doing to
the pizza delivery system in this nation is nothing short of a
national tragedy!
Please don't laugh because it’s not really funny! As I look at the
leaves on my favorite plants, they begin to die by browning at the
edges and working their way toward the center! If your next pizza is
burned on the edge, just consider that to be another leaf of the
economic pie gone bad! My last one was delivered sort of on time. It
was, however, not what I ordered! It was too late in the evening to
do much about it so I ate the whole thing anyway. I was kind enough
to call the pizza shop to report what had happened and was told that
since I had consumed it, they couldn't do anything about it! I hadn't
asked them to in the first place but ended up getting upset because
of the attitude I received for my phone call. The phone call was not
long-distance so it probably cost me more to make it than it should
have, with all of the fees attached! There is still pricing power
where there is a monopoly and I suppose that our economy now rests on
angry consumers getting into their a!
utomobiles to go to the pizza place! We survived the conversion to
self-service gas at a higher price so I suppose that we can pay more
for the free gas we get with our pizza. It's always been there and
they say that natural gas is the play to make in the next few months
in order to make a few loud bucks!
If we look at the economic charts, many of the ones that count are
heading in the wrong direction! The definition of a depression for my
era is as follows: If I have a job its a recession, if I don't its a
depression. This is an updated play on the older version which says:
If my neighbor is unemployed its a recession, if I am its a
depression! We have to update this term simply because there are so
many people out there these days who have either retired early, or
made a killing in the stock market that they no longer have to work!
We are, just like our census data, no longer absolutely sure what is
going on in our neighbors abode! We used to be more sure of what went
on there but since 19 people who aboded among us who flew planes
where they should not have gone...! Then we have these people who,
almost on a daily basis now, are not sure where their daughter are!
And then we have the friendly priest and we're not sure about our
sons anymore either!
Are we seeing more and more inaccuracies in our economic data as
reflected in revised government figures because of bureaucratic
tampering with the results in order to influence definitions such as
recession and depression, or simply because they can no longer figure
out what is going on in the first place? I don't know if it’s
effective or efficient but I do know that we are efficiently not
getting the desired result!
The retail sales 10-year history is at its lowest point in 10-years!
Business inventories are where they were last August! The Industrial
Production 5-month Upswing is swinging back down! CPI inflation, as
measured by the Department of Labor, again sits where it did in 1980--
22 years ago! This is important because that was the period of the
last great beginning in over-all inflation. It sits theree with all
of these wonderful efficiencies that we have achieved in the last 22
years fully in place! Real Spending Gains, although positive for 6
straight months, are now trending downward while they are less than
they were before September 2001! Fed funds are at levels not seen
since I was 12--I have an illegitimate AARP card--and are wistfully
expected to go lower still! (A legitimate AARP card is 55 or over,
thank you!)
There is a corporate profit turnaround--if you can believe the
accounting and haven't discounted the options thing! The problem with
that is, if you look at a chartt on percent year-over-year, you don't
want to look at what it is that they're comparing with last year!
We are, as a people, saving more at 3.1 percent than we did, at 1.1
percent a year ago. But we are also spending more just as well! And
that doesn't count what we are spending as a government, which has
apparently offset the personal savings rate and is heading on further
south as the deficits continue to build! The surplus is gone!
There is no doubt that there is one depression going on out there
right now--the stock market and financial communities face one on a
daily basis, and have for some time! I suppose that it just goes too
show that we still have some modification to do in the definition of
depression. Just about everyone that I know is depressed about the
markets, so it blows the part away about you and your neighbor,
unless you look at it from a Greenspan point of view! I am reminded
of the cartoon of AG counting the number of bodies falling past the
window of his office and counting them before he issues another rate
cut! Ninety-eight, ninety nine...Cut! After, what is it now--11 cuts,
I just hope that he can still see out his window as the bodies
continue to pile up!
You don’t have to have a depression to have social disruption either,
but it helps! I think that type of disruption may be on so many minds
as we go forward these days. We remember the disruptions that
occurred less than a year ago, and how depressing they were!
Somewhere along the line, human depression and economic disruptions
blend together and their chart’s flow along in an indistinguishable
blur. The Enron Age has depressed so many people that there is no
actually chart to reflect that trend. There may be a Laffer chart for
the efficiency of government spending, but there may need to be a
crier chart to reflect what is currently going on! We are all giddy
about the rise in the Dow that occurred last week while we should
probably be praying that Greenspan can engineer a miracle and restore
pricing power to interest rates. If he can’t, you can look up your
own chart as to where the Dow was sitting the last time they stayed
this low!
IMHO!
Regards,
Tin
PS—I’m still going to post here because I still have things that I
want to say—and you arguably need to hear them!
Well, some of them anyway! When my ego and my humbleness get to
fighting and want to go hide from each other, just consider it a
domestic disturbance and call the local psychiatric police! The cat
simply sleeps through it all!"
**********************************************************
------------------------ Yahoo! Groups Sponsor ---------------------~-->
4 DVDs Free +s&p Join Now
http://us.click.yahoo.com/pt6YBB/NXiEAA/ySSFAA/zMEolB/TM
---------------------------------------------------------------------~->
To unsubscribe from this group, send an email to:
realtraders-unsubscribe@xxxxxxxxxxxxxxx
Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
|