Open Court Topic #4: Have We Hit The Bottom?
By Corey Thompson, filed in Corey Thompson, Open Court on Mar.17, 2009
***(Editor’s Note: In an effort to promote more dialogue among our readers, “The Thirsty Quill” will run a special series entitled “Open Court” each week. Typically these questions/prompts will run in conjunction with a controversial issue or ‘hot topic,’ while others may be entirely random and cover a more obscure subject altogether. Regardless, the aim of these questions/prompts will be to encourage more debate, dialogue, and discussion among readers of ‘The Quill.’)***
“Open Court” Question of the Week:
Given last week’s modest turnaround on Wall Street, accompanied by President Obama’s optimism regarding the state of our economy in a recent speech, do you believe that we have seen “the bottom” of the current economic recession? Why or why not? Will things slowly begin to get better, or, are we still in store for another dip in our financial markets?
March 17th, 2009 on 9:01 pm
I am somewhat superstitious about things but none the less I will bite. I think that even if there is a little dip in the next few days, as may likely happen, I thinks we still can see that momentum has defiantly shifted. I think the good news is partially due to the fact that we are finally putting names and faces to these questions about where all the money went. It is sort of like a doctor who had just been shot gunning prescriptions for you for a long time hoping that he might catch a break. Then once he realizes that more examination is in order he studies the x-rays, puts a name to your infirmity and gets a game plan together to get you back to wellness.
With Madoff, AIG, Cramer and CNBC’s public exposure of lying CEO’s (Not to mention Henry Paulson) and 35-1 leveraging of securities, we finally have the names and destinations to where the vacuum of this missing capital emptied. This along with the normal cycle of markets has made for some positive news. We are a long way from being out of the woods and those who expect profit levels that were attainable during de-regulation will have to find more creative ways to commit fraud. But for now, I think we all could agree that like the great Anne Murray used to sing “We sure could use a little good news today.
March 30th, 2009 on 4:07 pm
Corey,
I think you have asked a series of questions, not just one about the recession. 1. Has the recession bottomed? 2. When will we see things get better? and 3. What is going on in Financial Markets?
1. Here’s what’s happened thus far: CDO’s got messy. Banks starting taking it on the chin. Then “financial” companies started to hurt. Then, as Warren Buffet said, “the market fell off a cliff.” Here’s where we are now: commercial credit is still scarce, consumers continue to open credit card statements to see rate increases and available lines reduced. The next 2 quarters are really going to prove a lot. Are there enough companies that can meet monthly expenses with no new credit available. I hope there are. If businesses continue to tighten their belts, and is seems they are, then the question is how high can unemployment in the market place get before more comsumer debt goes bad. More bad mortgages? more credit card defaults? Then, how does that relate back to the Banks who made those loans, who will continue to write down what was thought to be good debt? Should banks have to contract to the point of not knowing who will and who won’t pay, then the commercial credit market seziure of August 2007 won’t be our biggest problem. Have we bottomed? Nope.
2. Good news. Depending on where you look, there are bright spots. To those with good credit, fixed rate mortgages are crazy good. Money isn’t easy to borrow, but it is cheap. The thing we all welcome is a decrease in prices. We’re all looking for good deals these days. The problem is that falling prices leads to an awful sprial of deflation that has a whole set of other issues. So, when will we see things get better, they are. Free markets are self correcting. The concern now, is if intervention (that was needed to speed correction) went too far already. Has it? Probably. (Case in point, the Federal Government basically fired the CEO of GM over the weekend. That’s some serious meddling.)
3. Fear is still driving the markets. Fear is an unstable driver and intoxicated on emotional response. Until the fear driven by uncertainty can leave main street and wall street, we’re in for more bad accidents.
Gloom, yes. Doom, no. The fact is, we’re not done yet.