Oh, Now It's Officially a Recession

In one of the silliest headlines ever, news sites are reporting that the recession started in December 2007. Apparently, till now, it was unclear. Most news articles were saying up until now that we were probably in a recession, or that we will be in a recession soon and that it will last for a while. Of course, to a person who lost a job, it's been a depression for some time. Nevertheless, it takes us a whole year to officially decide. Then promptly on this news, the Dow drops 680 points. What? Didn't they know already? Weren't previous results and future expectations already priced into equities? So much for the stock market being a predictor of where things are going. If you go back to Dec 2007, the Dow was around 13,000 up a few percentage points from the year earlier. It actually reached 14,000 in October, about the time it should have been predicting this whole thing.

Many of us in business have felt it throughout the year even though the press kept discussing endlessly rising markets. Everything seemed fine from all that you read, except for concern about the housing market. People were concerned about rising fuel prices, but airplanes & hotels were full, people were buying more flat screens, and India & China were growing at unbelievable rates. Then things got ugly with banks failing, foreclosures, bailouts and state revenue deficits. Now, market volatility is at an all time high. Check out the VIX, it's double where it normally is. That means people don't really know what is occurring.

Every article about the economy is now negative. Any positive result is couched with concern, reduced expectations or sometimes disbelief. For example when HP announced positive results, it was almost as if the writer did not believe it because it did not fit into the narrative. There was a great Lexus ad recently in the back page of the Wall Street Journal where they crossed out every negative word in a faux front page leaving... well, very few words.

The whole thing smacks of revisionist history. Yeah, there were foreclosures and a credit crunch, but that was before recession. A long and deep recession was coming. Now, everything must be reassessed because those weren't actually good times. We weren't really making money, working at a decent job or having fun the other day. We were actually in a... er... recession.

Tomorrow, I'll write about what my company, Position2, is doing about the recession.