The Great Recession - post mortem
 

Some news in the past week indicates some major players believe we are in a recession now.

The official definition (ex. 2 qtrs of negative growth) would seem to indicate we cannot be in an official recession now (ex. 4Q 2007 did not have negative growth, or at least not until it has been revised).

Other than for my 401K/IRA and gas prices, I don't personally feel the "recession" as my house value has not declined much if at all and think I am in pretty good shape with my employer (ex. won't be the first to be let go).

Wanted to setup a poll and see how you vote. Regardless of an official recession, do you think we are close to bottoming out and then rebounding, or do you think there will be worse to come.

How long does a recession last?

Just looking at projections for mortgage and other loan defaults says we're not close to the bottom.

from economy.com

No disrespect but anyone inculding Bush who says we aren't in a recession or heading into one are fucking idiots. Believe me I felt it firsthand, being that I got laid off and it was because of the slow down in the economy effecting are clients budgets for 08.

gonna get worse before it gets better. For sure

oh I think you should say it with disrespect intended. It's pretty much clear-as-day right now, regardless of what the NBER indicators say at the moment.

I was hoping all of that was known and factored into our "efficent markets" and that the banks revealed all their losses.

It varies according to the below. 1981 was <1 year.

http://www.economicshelp.org/blog/re...cessions-last/

Thank You Sir.

Spent sometime reading articles.

Here's a comparison to the 1990-91 recession


http://money.cnn.com/2008/02/08/pf/r...ion=2008022709

For anyone interested, the article was more on survival strategies for a recession.

Maybe a sign of it bottoming out sooner rather than later. Bear Stearns bites the dust.



http://www.nytimes.com/2008/03/16/bu...l?ref=business

Not sure I understand how this can go through at such a steep discount. Reminds of of post USSR when the robber barons got some Soviet assets at a steal.

Dude, why would that be a sign of it bottoming out sooner, given that BS is being forced into sale to stave off a panic in the Asian markets?

Under the assumption you agree the market is a 'leading indicator' of the economy ...

The uncertainty and volatility in the market is because it does not know of the full extent of the housing/subprime mess. This is the first (?) big bank to fail, more may come but until the shakeout occurs, I don't think the public/market will regain its footing.

When the market recovers stability and growth, the recession/downturn will also end. You can't have the latter without the former.

It will probably go through because $2/share is better than nothing. BS essentially can no longer operate. If BS becomes insolvent, then the shareholders would get nothing.

After closing at around $30 a share, BS was trading at $.09 in after hours trading since then. The $2 a share actually marks a significant premium, although the holders of the stock aren't getting a haircut, they're getting a completely shave.

You'll get the usual nonsense blaming subprime lending, but this collapse was due to complete systemic poor investments, decisions and actions throughout the company's entire portfolio and business model.

I get that but what I don't get is this.

I am sure there are other financial institutions (domestic and/or overseas) that would have paid more for the $1B NY building alone?

This looks as if the Government basically handed BS to JP without allowing a competitive bid. From a layman, it would have been better for the Government to take it over (ala S & L in the early 90s) and then sell it at a better price?

I wonder if this means BS stock price will go down to approx $2 Monday?

But by buying the company you are also acquiring the exposure to their overextended positions. Which I've heard figures of $250 to $400 billion bandied about for BS.

And yes, BSC will trade right around $2 (and in line with JPM's) until the deal closes.

Nothing has changed for JP since the 19th century. :)

Okay, I get this. The severe discount factors in the "risk" of $250-$400B which is something the government (or other banks) would not want to incur.

Deep down, I still think there were some nod-and-wink-wink between JP and the Government that were not offerred to other domestic or overseas institutions that may have been interested.

BTW. Wiki says the S&L bailout totalled $160B in 90s dollars.

http://en.wikipedia.org/wiki/Savings_and_Loan_crisis

The government hasn't had a chance to weigh in on this yet. The Fed has guaranteed to help cover some of the exposure, but that was before the talk of this buyout happened. The only people to agree on this so far are the boards of JP Morgan Chase and Bear Stearns.

wow. That's crazy (Bear Stearns)

Per the NY article quoted above.


Interestingly I know the article has been updated with this. This passage was NOT there when I first referred to it. People working late at NY times.

watch CNBC this week and you could see Fireworks IMO

I say it gets worse. I have been saying for a good year now that transportation costs are going to start jacking up prices eventually. Companys are going to be 1)paying higher transportation fees to move product or 2)paying a higher fuel surcharge to have their product moved. Basically the same thing, an increase in what is being paid.

The price of fuel keeps going up and up, and it really doesn't look like it will stop sometime soon. It is going to make it's impact felt with all this other stuff going on around it IMO. It is also going to force another round of small trucking companies to shut down just when the survivors may have been finding away to survive with the fuel prices.

Just my 2 cents.

I read the other thread ... you said up +1000 pts?

My best friend's father was a long-time Lehman employee...he survived the first two big rounds of layoffs before falling on Wednesday. Thankfully, since he was pretty close to retirement, they did right by him, giving him enough severance that would allow for him to reach his retirement date so he'd get his full benefits.

I have two other good friends, one being my roommate, who just got massive promotions within Lehman. With the talk that they could be next to go bust, they're both literally shaking.

well i said down 1000 is what I expect by the end of the week but becuase the stock market usually does the opposite of what I expect it will probably go up a ton. its the contra-flasch theorem.

Sorry to hear about your friend's dad. Good to hear it worked out for him.

I have not heard anything about Lehman? If they work at the Lehman office in NY by Times Square, I remember walking by there after 9pm and there were a couple Lehman guy's waiting to get into Limos ... thought to myself, what a lifestyle.

Good luck to them, it looks as if the auto and financials industry are the 2 most precarious industries ... following textile which went south (ex. sucking sound) in the 90s.

Okay, lets do a post mortem next weekend. If this checks out we will have to start the "contra-flasch theorem" thread.

This should help them out "for now."

http://www.bloomberg.com/apps/news?p...v.k&refer=home

The news didn't seem to settle the Asian markets too much, as the Nikkei is down 3% at the start.

Isn't this their first real shot at reacting to Bear Stearns at all? (not counting after hours trading)

Markets that haven't opened since then will likely trend downward at the start. I will be more interested to see where they end up.

At the end of the morning trading session, the Nikkei ended up down 4.23%. The afternoon session starts up in an hour and a half.

Can you send me your link where you can see international markets?

I see the reports via cnn but they don't seem to be realtime updates.

Bloomberg.com does international markets.

On Bear Sterns, I've read that the Fed took on 30 billion in "less liquid assets." Was that essentially a 30 billion handout or will it be paid back?

CNN was where I was getting them. You are correct that they aren't realtime updates, they are usually updated every 30 minutes or so. This is the link I was using:

http://money.cnn.com/data/world_markets/

And looking at the link, the Hang Seng is down 4.98%. All signs are pointing to a Black Monday. :(

I believe it was a 30 billion dollar foreclosure

/rimshot

it's gonna be an ugly Monday...

I know its unfair, but the only thought I have tonight is

"damn Bernanke"

Is there some point where we can stop with the Saint Greenspanning and show that he set up a lot of what is coming to fruition right now? Or has that already started and I've just missed it?

SI

It will be interesting to see what happens this week. You have to expect some decline tomorrow, I'm betting in the 2-4% range. I would be surprised to see another selloff Tuesday after the Fed meeting if they drop rates as low as some rumors have been going around -- one rumor has a full point drop. If that's the case, it's going to panick investory even more since it will be a sign that the Fed thinks things are going to get worse and they won't have much more room to cut rates further.

But I wouldn't be surprised either to see a quick rebound later in the week. There are a some big earnings reports out this week that could impact the market. But if we see a 5% decline by close Tuesday, there will be some bargain shoppers jumping into the market later this week.

I think it's a case of Greenspan getting way too much credit for the market when it was booming and way too much blame now. I really don't think there was anything Greenspan did that got this going.

The only complaint you could lodge against Greenspan is that he kept rates too low for too long. I don't necessarily agree with that.

From my experiences and observations, the problem has been that there has been too much investment money chasing loans. Banks were lending money across the board to people who shouldn't have been getting the loans because they had plenty of money. There was a reason BS was buying so much mortgage debt. There was a demand from investors. This applies to other types of lending as well. There were too many investors looking to buy debt.

I'm not sure economic policy would have addressed that. I do know there is a perception among some people even now that the Fed, the Administration and Congress have been slow to react to the problems in housing because they want money out of housing and bonds and into the stock market. Not sure I agree with that either, but I'm surrounded by people who believe that.

hxxp://www.gregpalast.com/elliot-spitzer-gets-nailed/

Thought this was interesting. Surreal, but somehow believable, and that amazes me.

I wasn't even thinking about Greenspan, my statement was directed towards Bernanke only.

Hindsight is 20-20 etc. and the final act has yet to play out but I strongly suspect that Bernanke will take a hit in the economic history books for not acting quickly or aggressively enough 3Q-4Q 2007 when the signs started.

I don't think Greenspan can possibly get enough blame. Having said that, I'm still essentially optimistic. The market is in a weird state right now, but I think in a year or less things will good again.

Oops, Cramer was wrong on this one last week. :)

http://www.wjno.com/cc-common/news/s...rticle=3413726

Going to get worse before it gets better. I dont think enough emphasis can be placed on the consumer being more inclined to spend when their living arrangements feel secure.

The fact that we have a relatively large number of defaulted loans already means that (A) many who overbought, will be renting for a few years and (B) House values have and will continue to drop.

The problem with that is those who did not overbuy, and have & will continue to pay on their homes for the next few years means that by the time the first/second round of "defaultees" are ready to buy, they will be buying from the "responsible" parties that have just lost their a$$, just by paying on time. I would expect this to result in a third round of defaultees who will see this as unfair and not within their interests to continue to pay on a debt that many others have long since recovered from.

I dont think this means everybody...just a reasonably large precentage who bought at or near peak values...and subsequently cannot afford to sell without losing 20-30% at least. I think it would take quite a while for these people to just break even...barring some sort of legislation or assistance.

Dola,

I cant blame the lending institutions enough for this mess. Investors are also culpable...but the lendors in many cases were not even thinking about keeping most of these ridiculous loans.

Just a mess all the way around...but somebody gave these loans out...and it wasnt Greenspan. I'd agree he could have "possibly" done some things to help lessen the mess, but I dont see him as the problem in it.