Should We Call It ‘Depression 2.0′?

Recently revised data show that the recovery from the 2008 Crisis is taking longer than expected. You may recall that a “recession” is the period when GDP is declining. Once GDP troughs and begins to climb, we call that phase “recovery”. Recovery gives way to “expansion” when GDP surpasses the old peak. We detailed this graphically in a prior post.

Blame Obama, Blame Bernanke for the dollar decline?

Getting tired of people blaming Obama or Bernanke for trashing the dollar? I am. Critics cite deficits, borrowing, quantitative easing/”printing” as reasons. I also frequently hear people attacking Greenspan for his “easy money” policies which helped fuel the housing bubble (I agree), but never mention this along with the decline in the dollar. Take a look at the chart below. It’s clear the bulk of the dollar’s decline was under Bush/Greenspan, though Bernanke has presided over a significant drop too. I hold Obama nearly blameless here, except to the extent his politics have focused in the wrong places (healthcare and hardening the opposition into stupid debt ceiling debates).

A Small But Encouraging Act

We often bemoan the corporate lobbying that seems to steer and control – if not write – legislation. Here is a small act, but one I find encouraging. Howard Schultz, famed CEO of Starbucks, urged his fellow CEOs to halt campaign giving until Congress delivers a solution to our debt/deficit issues. My cynical side is searching for a self serving motive here, but I applaud the call nonetheless.

Full, but short, article at Bloomberg

Circular Logic- “Because the market says so”

One thing you see rampant in financial commentary is the plague of circular reasoning. Circular reasoning or circular logic is when, citing Wikipedia:

“Only an untrustworthy person would run for office. The fact that politicians are untrustworthy is proof of this.“

Such an argument is fallacious, because it relies upon its own proposition — “politicians are untrustworthy” — in order to support its central premise. Essentially, the argument assumes that its central point is already proven, and uses this in support of itself.

Worried? Confused? Not sure what to do?

I had a few clients yesterday asking me how I was holding up during the sell-off. Very kind, I thought. Interestingly, they were not overly concerned about their portfolios. I assume that was because we communicate about these things regularly and I go to great lengths to explain why our portfolios are positioned as they are. While the past week’s sell-off was unpredictable, it was not unexpected. Read that last sentence again- it was unpredictable, but not unexpected. Our portfolios were not overly optimistic, bullish and naively exposed to these dangers.

Not that these past few weeks have been encouraging- they aren’t- and in fact are quite depressing. But we have had a plan in place for a while and clients understand our plan of attack. As for me, I’ve been in these environments before. From a big-money cockpit, I’ve watched in real time the Asian meltdown/Long-Term Capital Management debacle of 1998, the dot-com bust, 9/11 and of course the recent financial crisis and it’s huge volatility. The important thing is not to panic. Turn off CNBC, stop checking your accounts frequently and don’t read too many headlines. That is, if you were prepared both mentally and in your portfolio.

I realize a lot of people don’t have a plan of attack; the past week did take them by surprise and they may not know what to do now. To that end, please contact me. I have never been self-promotional on this site and don’t intend to, yet it struck me that there may be readers who could use my help or know someone who does. Knowledge is power- understanding the big picture, having an appropriate plan of attack and executing that plan makes a big difference. There is light at the end of the tunnel if you know to avoid being hit by the train.

Stocks “Plunge” and “New Questions” Really?

Take a look at today’s Yahoo! Finance page:

New questions? The real question to non-speculators is why did it take so long for the market to come to this conclusion? The lesson here is that if you are getting your bullish or bearish opinions from the front page, you are WAY behind the curve.