Image courtesy of: Stuart Miles
When economic bad news piles on as it has since 2007, end of times feels certain. The truth is however, economies cycle. What falls off the cliff creeps back and in the process, we gain insights and wisdom. So stay hopeful. Happy days will be here again.
Doom and gloom popular programming
Apocalyptic gloom has become highly marketable. Shows like Doomsday Preppers andDoomsday Bunkers have added their names to the reality TV roster. Website Shtfplan.com offers visitors this friendly tagline: When it hits the fan, don’t say we didn’t warn you.
The popular Left Behind series, first introduced through novels then with a series of movies, offers the Rapture end of times warning. As the presidential campaign approached Dinesh D’Souza rolled out his movie 2016: Obama’s America, as an omen to voters. Obama’s mission were you to accept him as President, D’Souza claimed, is to even the global playing field and in doing so, deflate our nation’s superpower influence.
“He (Obama) wants Americans to have less so the rest of the world can have more.” D’Souza tells Piers Morgan, “He wants America to have less power so that other countries can come up in the world. He’d like to see a multi-polar world in which America is not the sole super power.” (Piers Morgan Tonight. August 12, 2012).
So, take heart. If the Rapture doesn’t swallow you up, ready yourself for economic and societal collapse, war, pandemics, geomagnetic reversal, the electromagnetic pulse, terrorist acts, nuclear incidents and fuel shortages.
Feel better yet or are have you curled into a fetal ball of “Why bother?”
Essentially the gray skies are going to clear up message of what’s going right in the world has the distinct disadvantage of grabbing less air time and social media stir. What’s going right in your daily existence has the mundane quality of just sitting flat and unnoticeable. Good news just is.
Bad news however, irritates and buzzes; it jars our eyes and ears awake with adrenaline and fear.
I will say however, anyone with an ounce of sensitivity wouldn’t expect citizens terrified about where their next mortgage payment, health care coverage or meal will come from to be Pollyanna about the nation’s state of economic affairs. There is however, something to be said for acknowledging that economies (and politicians) cycle. Moreover, with each economic crisis our nation gains new knowledge about where things went terribly, terribly, wrong and more importantly, where things went incredibly right.
“For the past 15 years, home-price changes and sales volumes have either been boosted by a bubble mentality or crushed by crash psychology,” said David Stiff, Fiserv’s chief economist in a March 2013 Orlando Sentinel online article.
The term “crash psychology” struck me.
I assume it has something to do with what Jim Taylor refers to in his July 2012 Psychology Today.com article as herd behavior, the bandwagon effect and recency (paying more attention to latest data than putting market conditions into long term perspective) and loss aversion (an inclination to avoid losses rather than produce profits).
“This is it, the big one,” Sanford of the old sitcom Sanford and Son grumbled before he grabbed his heart for the nth time.
Just last night I heard someone say to a friend who doesn’t happen to share her political view, “Yeah well, good luck. See if you have any money left in the next few years.” As she said this another woman smirked and nodded emphatically across the table.
In my experience naysayers don’t need a crushing presidential election to feel the world is going to pot. Naysayers are universally bi-partisan yet unilaterally pessimistic. They see the world changes as an eventual avalanche and that the latest election out of their favor is simply speeding up our demise.
But, how many false alarms before we decide the Great Depression isn’t coming, again?
Not that I want to downplay or arrogantly dismiss the harsh economic blows affecting millions. The reality is, we have had plenty of fuel to create real fear and economic end of times worry. People are hurting and cheerful mantras won’t hold off creditors. But, previous generations have been hit by recessions and generations to come will as well.
Since December 2007 our economy and global reputation has been beaten up. Businesses scaled back dramatically. Markets crashed to record lows. Real estate dumped. Housing starts halted. School budgets were slashed. Unemployment skyrocketed and remains high in many areas. Gas prices are headed towards Europe’s. Entire countries are being downgraded. Healthcare costs are now a primary cause for personal and small business financial ruin. And, one of the United State’s historical industrial strongholds, the auto industry, is limping along.
For an added kick to our lagging morale, we watched our government save Wall Street (which I was all for given the potential fall-out). The sub-prime mortgage mess was a house of cards with multiple players including overzealous lenders and consumers, borrowers confused by loan fine print and families just trying to tread water. But in the end, throwing a life raft to the Too Big to Fail market makers who knew better than to invest in deep murky waters — hurt.
Pile on this much economic instability in a short time span and indeed, the world can feel apocalyptic.
Negative economic warnings hide good news
Like the hot issue climate change, while the frequency of out-of-range weather patterns areabsolutely influenced by human behavior, it’s also a product of cyclical weather changes. So too, massive changes to our economy and worldwide standing may seem sudden and cataclysmic, but they occur over time and courtesy of multiple administrations’ policies.
Yet, time and time again our nation returns from recessionary slumps and economic turmoil armed with new knowledge. We’re painfully forced, as we’ve seen with the recent budget crisis in Congress, to adapt, create new or compromise, unless however, you believe we’re destined to repeat our past.
While I do believe in cyclical human and earth behavior, I also believe we’re destined to make new mistakes, not old ones. We evolve.
It’s hard to believe we’re actually advanced beings given Snookie, Jerry Springer, Dance Momsand Tosh O. But indeed, humans have progressed from our early knuckle dragging days.
And, with every crisis we’re forced to re-visit and re-balance. Consider the gas shortage, savings and loan crisis, Enron, the Exxon Valdez, over lending, over spending, over reliance on oil, over fishing, over eating. Too much regulation and we pull back. Too little, we add oversight.
Optimistic outlook in economy
Take a look at our economic indicators (Kiplinger economic outlook). They reveal policy ripple effects and red flags long, long in the making, arrived tipping points, but not eventual collapse or the Great Depression.
Take a look at these positive economic signs:
- GDP crept ahead at a snail-like 0.1-percent pace in last year’s closing quarter, but at least it didn’t contract, as initial estimates had shown.
- There is still no reason to look for an early end to the lengthy period of extremely low interest rates.
- Inflation will edge up a bit this year, but not to troublesome heights.
- On the positive side, and despite a bump upward at the start of the year, core inflation, which excludes food and energy costs, will see only muted increases.
- Spending by businesses this quarter gets the benefit of renewed tax breaks for new or leased equipment. The recent spike in gasoline prices has run its course.
- Crude oil prices will take a breather.
- But expect overall retail sales to climb about 5% this year
- Look for the trade deficit to widen by 2% in 2013, presenting a slight headwind to U.S. economic growth
- Export growth will be held in check by recession in Europe and moderate growth in China.
- We expect imports to increase about 5% for the year, with most of the growth coming in the second half.
- Gains in the housing market will solidify this year.
- Overall, we anticipate sales of existing homes to climb about 7.5%
Granted I cherry picked, which is exactly my point. Look for positive signs. Become aware of the negative only to the degree it informs key decisions about your life. For example, it’s useful to know which industries are cycling, dying and expanding. And, it’s good to know that every financial and investment guru can be dead wrong — or dead right.
Pick your point of view.
In June 2011 James Altucher wrote in the Wall Street Journal that an impressive rise in the stock market was coming…”The market fell like a brick on Wednesday. People can’t handle any piece of bad news without saying ‘this is the big one.’ But it’s not going to happen. Even God took one day to rest. The market every now and then needs a day or two to rest. Maybe even more than a day or two. But over the next 12 to 18 months I expect to see Dow 20,000.”
Nearly two years later, it appears he was on the right track. Andrew Tangel, LA Times, March 6, 2013 writes:
“The Dow Jones industrial average has barreled to an all-time high, erasing $11 trillion of losses racked up when the financial crisis began five years ago. The stock market’s revival — with the Dow at a record 14,253.77 — has some respected minds on Wall Street suggesting the Dow will puncture 20,000 in just a few years. But, as investors may recall, the last few times the stock market seemed headed for records, disaster soon followed.”
Granted it took five years to reach the record high. As well, my husband a trader, reminded me that had we not crashed in 2008 we would have hit 20,000 soon enough. Moreover, the stock market isn’t the best signpost for recovery because it’s not adjusted for inflation. However, consider Daniel Gross’s recent analysis:
“Regular readers will note that I’ve long been pushing back against the notion that the U.S. is in economic decline. A stock market index like the Dow and the S&P 500 may not be the best barometer of national well-being. But it does say something about the ability of U.S.-based companies to thrive in an era when domestic growth is slow and when most of the growth takes place in unfamiliar foreign terrain.”
Certainly Gross or any other pundit isn’t the final word on predicting economic movement. You’ll find plenty of people ready to pick apart his argument line by line. But my philosophical point, and I generally write from philosophical underpinnings, is that the market is on the up, again. The Second Great Depression never came, as more than a few people predicted it would.
Of course there’s numerous times when people predicted a strong bull market and it turned horribly bearish. Outside of getting into the factors around market timing (which I don’t study) if you’re in the “If it’s too good to be true, it probably is” mindset then zoom in on Andrew Tangel’s hedging last line:
“But, as investors may recall, the last few times the stock market seemed headed for records, disaster soon followed.”
Can’t we enjoy a moment of celebration? Or is that too naïve, uninformed and resting on our laurels? After five years of getting the recessionary crap beat out of us we still have more economic naysayers who insist on a cover-all-bases prediction caveat of: “It looks good, but it won’t last” than eternal optimists.
Well true, it won’t last. Cycles, cycle.
But, I’d rather wake up every day cautiously optimistic than confidently pessimistic. It feels better. Be on the look out for good news. It’s out there, or it’s predictably on its way.