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Recession Deniers?

Free Thinkr said:
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Seriously, don't be daft. Anyone can look at the DOW chart and see how it's a loose indicator of the state of the economy through history.
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"Seriously, don't be daft." Scrutinizer pointed out, quite correctly, that there are always good investments available in the stock market. It's always a great time to buy stocks; simply buy the stocks that are doing well and selling at reasonable prices.

And even buying a stock that's doing badly and losing money right now is often a brilliant investment if your time horizon is long enough. Caterpillar (CAT) is currently selling at about 30, nearly 2/3 off its two-year high. What better time to buy than at a buy-one-get-two-free sale? Are you seriously worried that people are going to stop needing construction equipment? Even if it goes down another 10%, use dollar cost averaging to ride through the trough and see what happens on the other side.
 
drkitten said:
"Seriously, don't be daft." Scrutinizer pointed out, quite correctly, that there are always good investments available in the stock market. It's always a great time to buy stocks; simply buy the stocks that are doing well and selling at reasonable prices.

And even buying a stock that's doing badly and losing money right now is often a brilliant investment if your time horizon is long enough. Caterpillar (CAT) is currently selling at about 30, nearly 2/3 off its two-year high. What better time to buy than at a buy-one-get-two-free sale? Are you seriously worried that people are going to stop needing construction equipment? Even if it goes down another 10%, use dollar cost averaging to ride through the trough and see what happens on the other side.
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I get the feeling that Free "Thinker" is one of those people that pours money into stocks when the DJIA is at 12,000 and times are great, then sells it all when it drops to 7000, and times are bad. Then starts buying again when we recover, and the DJIA is back at 12,000.
 
drkitten said:
"Seriously, don't be daft." Scrutinizer pointed out, quite correctly, that there are always good investments available in the stock market.
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No, that's not what he said. You're reading into what he said things which weren't there. He said "It's always a great time to buy stocks." Generally, that's not true. You're being silly by saying "well, in some cases it is." Of course. But most investors aren't experts in such matter, and thus it's a bad time to get into the stock market (and much worse yet in the time period I was discussing).

It's always a great time to buy stocks; simply buy the stocks that are doing well and selling at reasonable prices.
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LOL. Well, we'll just use that crystal ball to know which ones will be doing well in the future. You make it sound much easier than it is. The fact is, most people diversify, so general trends will determine whether they win or lose. When the general trend is downward, to people who aren't being daft, it's a bad time to buy stocks.

And even buying a stock that's doing badly and losing money right now is often a brilliant investment if your time horizon is long enough. Caterpillar (CAT) is currently selling at about 30, nearly 2/3 off its two-year high. What better time to buy than at a buy-one-get-two-free sale? Are you seriously worried that people are going to stop needing construction equipment? Even if it goes down another 10%, use dollar cost averaging to ride through the trough and see what happens on the other side.
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But if Caterpillar continues to go down, buying at the low would still be better. If Caterpillar ends up going bankrupt, it's a bad time to buy Caterpillar stock.
 
The Central Scrutinizer said:
I get the feeling that Free "Thinker" is one of those people that pours money into stocks when the DJIA is at 12,000 and times are great, then sells it all when it drops to 7000, and times are bad. Then starts buying again when we recover, and the DJIA is back at 12,000.
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Why would you think that, when I explicitly said I was telling people to sell after the initial large drop?

I get the feeling you were one of those people who, when the DOW was at 13,800, was telling everyone what a great time it was to buy.
 
themusicteacher said:
My father-in-law, who is a very intelligent, well-read lawyer with a degree in economics (though from the 70's), success in the market and owns and operates his own practice quite well. He does not believe we are in a recession at all or at least believes that the economic gloom-and-doom so oft reported is highly exaggerated. He laughs when the prez or anyone else claims that the economy is as bad as it's ever been since the Great Depression. Not surprisingly, he is a real Repub (not one of those social conservative whack-jobs but a dyed-in-the-wool big-R Republican) even leaning towards libertarian (though he would never admit that).

My questions are:

1. In light of the cold, hard numbers on job losses, collapsing banks, etc, how can someone so smart and usually economically savvy deny that we are in a recession?

2. Could he be right? If so, how?

I, personally don't know much about economics but I am worried that when I finish my master's degree this spring and go job-hunting, I will not be greeted by my FIL's version of reality. We do live in a state (New Mexico) that hasn't been hit particularly hard (yet) so that sould have a buffering effect. My FIL is notorious for smugly relegating what is happening in the wider world "irrelevant" to his life and writing it off as much ado about nothing, liberal nonsense, east-coast bias and whatnot.

Any thoughts about this would be helpful as would any additional conjecture about when you believe the economy may right itself (latest projections have been revised to early 2010). Thanks
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At the very least, YOU LIVE IN NEW MEXICO!!!! Love the place, love the food, love the scenery - and, in June '07 even loved the wee ice/snowstorm coming down the mountain (Colorado to Santa Fe) though very surprised even locals were pulling off the road.
 
Hate to point it out, but a number of economists were predictating a slow down and possible recession in the Summer of 2007.
 
Free Thinkr said:
No, that's not what he said. You're reading into what he said things which weren't there. He said "It's always a great time to buy stocks." Generally, that's not true. You're being silly by saying "well, in some cases it is." Of course. But most investors aren't experts in such matter, and thus it's a bad time to get into the stock market (and much worse yet in the time period I was discussing).


LOL. Well, we'll just use that crystal ball to know which ones will be doing well in the future. You make it sound much easier than it is. The fact is, most people diversify, so general trends will determine whether they win or lose. When the general trend is downward, to people who aren't being daft, it's a bad time to buy stocks.


But if Caterpillar continues to go down, buying at the low would still be better. If Caterpillar ends up going bankrupt, it's a bad time to buy Caterpillar stock.
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You really, truly don't know what you are talking about, do you?
 
The Central Scrutinizer said:
You really, truly don't know what you are talking about, do you?
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You really, truly, are incapable of making any point whatever, aren't you?

If you have a point, out with it. Following me around from thread to thread and telling me I don't know what I'm talking about is not only unproductive: it's against forum rules (you see, someone reported one of my posts, and I was thus reminded of rule 12; it was a nice reminder, as it's easy to get so caught up in these discussions that you tend to forget the rules).

So, that in mind, be a gentleman, and please attempt some sort of argument.
 
Free Thinkr said:
there's a lot of people who simply deny the economy will ever go into recession. I know it, because I've been of the opinion it would for a long time.
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Have you been forecasting a recession since 1992? Or earlier?

(You know--one of those "growth deniers")
 
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Nothing happens by accident, here in Australia our big mines are slowing and closing because China has lost its markets and doesn't want our raw product. Our housing market is nearly stopped, The building industry is a major employer as we have run on expansion. Now the knock on effect is just starting and some are preparing for total break down. Some are hording gold, silver and fuel,I'm tipping the next strife will come from insurance firms going broke. Who would trade with out cover? That problem is bigger than Ben Hur.
 
Free Thinkr said:
Why would you think that, when I explicitly said I was telling people to sell after the initial large drop?

I get the feeling you were one of those people who, when the DOW was at 13,800, was telling everyone what a great time it was to buy.
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Is it a great time to buy now?
 
Francesca R said:
Have you been forecasting a recession since 1992? Or earlier?
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No. Summer '07. I read Fred Harrison's Boom Bust and felt his analysis of the situation was more or less correct, and that his prediction of a major recession starting in 2008 and running through 2010 would likely come to pass. So far, it's played out exactly as he said it would.

(You know--one of those "growth deniers")
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No, I'm all for growth. The sad fact is, however, that much of the "growth" we've experienced over the last decade in change has been nothing more than an asset bubble. Now we're stuck with the massive debts accrued during that run-up, but we don't have the ability to pay for them.
 
Smackety said:
Is it a great time to buy now?
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I don't think so. The market seems to have settled somewhat around a temporary bottom awaiting government action, but once it becomes clear that the stimulus won't work, that will get priced in, and the general level will probably fall. Even if it doesn't, it's doubtful you'll see any considerable rise for a while, so you might as well wait it out.
 
I think now's a great time to buy - conditionally.

First, you have to be able to go at least 5 years to see a return of any significance, in certain industries. I don't think it's hit bottom yet, but by five years, we should see new growth.

Second, you have to be able to predict the companies that aren't going to wash out in the next two years. Normally, I'd say stick with big names and old companies; but the fact is, that's no guarantee right now. Now is a good time to examine the companies' business plans, and see who is leaning toward stable market necessities and limited risk spending, and who is banking it all on innovative but chancy strategies that, if they fail, could shut them down.

Caterpiller, for example, IIRC, is sticking to product lines and quantities that they KNOW will sell. GM, on the other hand, is in a small crisis, and is torn between sticking to their usual gas-guzzling monsters and retooling to produce more economy-friendly machines. In their case, either way, they could be in trouble. AM General, I think, has decided to stick to their usual products, but in more limited quantities - so they're not trying a risky new product, but they are still hoping that the fuel situation levels off or improves.

The point is, learn your facts, and invest with your eyes open; just popping open a newspaper and pointing is never a good idea.

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As to the recession, I'm down in the bottom edges of the thing. I work at a convenience store in a very small community, so I see and hear, every day, the unemployed and recently homeless, and hear their many complaints. Jobs have dried up and vanished, taxes have risen sharply, there is no new construction (most of our remaining local industry, after all the plants have moved away or closed, was in new home construction)... it's a real enough recession.

Yet here they are, every day, throngs of people in Wal-Mart, in Ingles, at the convenience stores... It's not basic necessities they're after, either. Krispy Kremes, cigarettes, Mountain Dew (No, really, it's not a basic necessity), lottery tickets, consumer electronics, new movies, designer clothes, cheap Korean-assembled plastic children's toys...

Where does all this income come from to be disposed of so lightly, if we're in such a recession?

Then there's the fast food franchises. Oh, they claim to have slowed down a bit since '07, but every time I think to stop in at McD's and get a fish sandwich, the line is backed up to the road. There's never enough open seating at Taco Bell, either. Now, Sonic, BK, Subway, and KFC are usually pretty clear - though the KFC ought to be shut down, as often as people get food poisoning there. Sonic and BK are off the beaten path a bit, and the Subway is one of those convenience store kiosks with, like, four tables open.

Still...

It's kind of like the gas crisis a few weeks ago. Everyone was sweating things when gas almost hit $5 a gallon, but the traffic didn't thin out that much, and we still serviced plenty of SUVs and large vehicles.

So while I'm positive it's a recession - maybe even a depression - things are a lot different now, and I think we can survive even an Average Depression (maybe not another Great Depression) a lot more comfortably these days.

Whether our government survives it is another story....
 
I find the psychological aspect of this curious as well. You find lots of people who claim that 'nobody' could see this coming. That's not the way I remember it. I'm pretty sure that anybody with the slightest clue knew that there was a huge housing bubble and that it was just a matter of time before it would implode. Same thing about the IT bubble; afterwards everybody claimed that they couldn't see it coming.

Are these people lying, or do they honestly believe that they could not see it coming and that they had not read all those articles that explained why, for very fundamental reasons, a crash was inevitable?

The thing with these bubbles is of course that even if most people know it's a bubble, they can still gain personally, in the short run at least, from pretending that there is no bubble. After all, nobody can predict exactly when the bubble will burst (if that was possible, there'd be no bubble). So it becomes a chicken race, everybody keeps on doing investments that most of them know are insane, but which still seem likely to be profitable for the next couple of months. Probably it's necessary to keep expanding the pool of investors with people who truly don't understand that it's a bubble, and when that inflow is exhausted, the bubble finally bursts.

These 'truly unknowing' people would be your retired grandmothers being convinced to invest their pensions by some desperate and unscrupulous agent, or, in the housing bubble, the uneducated people with little or no income who were given huge loans with no security.

But in my mind, there is no doubt that the vast majority knew very well. They are just denying it because it is socially convenient to deny that you were willingly partaking in a scheme to enrich yourself by engaging in economic transactions that you knew were going to be ruinous to the overall economy.
 
Francesca R said:
You don't? So if something you value goes down in price what do you do? Panic-sell it? If so you must have a terrible time of it in the sales.
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If you buy something and it goes down, it goes down. Buying more at a lower price doesn't make that loss less than it already is. You buy or sell shares because you think they are worth it, not because you bought some and they went down in value.
 
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