Commentary on the economy, the markets, and business

Fodder for conversation at the holiday dinner table

Next week is supposed to be a slow one here at Time, so I won't be popping up on the Curious Capitalist super-often. Let me leave you with something to toss into the conversation when your family starts talking about the economy. No matter which winter solstice celebration you observe, I'm guessing it's going to come up at dinner.

Since WWII, recessions have lasted 10 months on average. We hear that a lot. Our current recession started in December 2007. Even though this go-around seems worse that usual, that's still a little cause for optimism.

Or maybe not. This week Merrill Lynch economist David Rosenberg put out a report—thanks for the tip, John!—questioning why we'd only look at recessions over the past 60 years. Yes, the economy is fundamentally different now than it was in the 1880s. Just like stock valuations were fundamentally different in the late 1990s (ahem). Rosenberg is a little less snarky about it:

This recession has more in common with the pre-WWII era. However, most of the data we have and most of the analysis still being conducted is done within the context of post-World War II cycles. That will not work, as this is a balance sheet recession and not just within the confines of the financial sector, but within the broad US household sector. This involves debt repayment and asset liquidation, and for the first time in recorded history, the entire $70 trillion household balance sheet is in the process of shrinking.

He then goes back to 1855 (a better timeframe for true historical context, he figures), and finds that recessions last an average 18 months. If his logic is right, then we're not due for sunnier skies until mid-2009. Oh, and that would be assuming this is an average recession. Show of hands on how many people think that's true?

The chart that goes with the argument is pretty neat:

recessions1

As Rosenberg writes, since WWII, we've been spoiled. Maybe no longer.

To end on a cheerier note, I'd like to thank Justin, Mrs. Curious Capitalist and Curious Capitalist Jr. for my holiday present: personalized "Barbara!" stationary. That exclamation point looks even better outside of cyberspace.

Happy holiday!

Barbara!

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  • 1

    Ya know, every time I start saying I'll spend less, that's exactly when I start spending more. Whether the computer crashes (argh!$$$), or the car needs to go to the garage, or the cat needs to go to the vet. Still, I'm doing what I did the last couple of recessions: chuck the Fidelity and Northwestern statements into the green bin, keep contributing, and save what I can. I keep thinking next fall will be a good time for my long overdue trip to Ireland. Hope springs eternal. Cheers, ;-)

  • 2

    Oh, one silver lining: now's a good time to refinance the mortgage. Thank god I did 30 year fixed in the first place.

  • 3

    WALL STREET BAIL OUT WONDERLAND
    (Winter Wonderland)
    WilliamBanzai7

    Opening Bells ring, are you listening,
    On the Street, the snow job is glistening
    An ignoble sight,
    We're happy tonight,
    Working in Wall Street bailout wonderland.

    Gone away is the old bird,
    Here to stay is a new bird
    He sings an opprobrious song,
    As we go along,
    Working in Wall Street bailout wonderland.

    We can go and eulogize a subprime snowman,
    Then pretend that he is Madoff the clown
    He'll say: Whats my carry?
    We'll say: None man,
    But you can always do a fleece job
    In Ponzi town.

    Later on, we'll all conspire,
    As we dream of not being fired
    To face unafraid,
    The new scams that we'll make,
    Working in Wall Street bailout wonderland.

    In the meadow we can build another financial snowman,
    And pretend that he's an SEC circus clown
    We'll have lots of fun shtuping mister snowman,
    Until the markets inevitably knock him down.

    When it snows, ain't it thrilling,
    To aim the hose while pyramiding
    We'll frolic and play, the old fraudulent banker way,
    Working in Wall Street bailout wonderland.

  • 4

    MY LEAST FAVORITE THINGS (WALL STREET VERSION)

    (My Favorite Things, Revised by WilliamBanzai7)

    Bankers and brokers, quants, accountants and securitization lawyers;
    Greek lettered formulas and OTC screens;
    Toxic assets repackaged and tied up with lots of Ponziesque strings;
    These are a few of my least favorite things.

    Red power ties, pinstripes and suspenders;
    Opening bells, black boxes and management fees by the oodles;
    Hedge funds that fly like black swans with the moon on their wings;
    These are a few of my least favorite things.

    Madoff and Blankfein, Fuld, Cayne, Mack, Thain, Pandit all them Wall Street smart a$$es;
    Those flakes are one and the same don't let them manage your assets;
    Hubristic CEOS who melt shareholder net worth into huge bonus schemes;
    These are a few of my least favorite things.

    When the dog bites,
    When the bee stings,
    When I'm feeling sad,
    I simply remember my least favorite things,
    And then I don't feel so bad.

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