Wall Street Recession Vs. Main Street Recession

Wall Street and economists have a standard to call a recession - essentially two negative GDP quarters. Of course GDP relies on government statistics... which we've seen are close to useless. Interesting article on Yahoo Finance  on nearly 2/3rd of Americans believing we are in a recession. I'd call this a Main Street Recession. And Wall Street won't acknowledge it unless their funky models say so next fall...

I am sure this will be explained away by those "nutty sub prime people who got in over their heads" but I believe the combination of real inflation well above what is reported combined with traditional 3% wage growth is the force behind this angst. It can be hidden by credit expansion and house ATM for those homeowners, but in this era of home depreciation a lot of what was hidden below the surface is now being shown as the tide of credit runs back, and more and more shore is exposed.

• Empty homes and for-sale signs clutter neighborhoods. You've lost your job or know someone who has. Your paycheck and nest egg are taking a hit. Could the country be in recession?
• Sixty-one percent of the public believes the economy is now suffering through its first recession since 2001, according to an Associated Press-Ipsos poll.
• "Absolutely, we're in a recession," said Hilda Sanchez, 44, of Waterford, Calif. Squeezed by high energy and food bills, "we can't afford the things that we normally buy," she said. "We are cutting corners in our spending. For our groceries, we are buying a lot of generic and we are eating out less."
• Credit has become harder to get, thwarting would-be home buyers, adding to the glut of unsold homes and aggravating the housing industry's woes.
• "For-sale signs are everywhere. In my area, 35 to 40 homes are standing there and aren't even complete. There aren't any buyers," said Jim Sims, 60, of Greer, S.C.
• Nanette Dahlin, 52, of St. Louis Park, Minn., called the situation "very scary." She said friends in Madison, Minn., put their home up for sale recently and reduced the asking price more than $100,000 in just a week. "They are in bad shape," Dahlin said.
• A cooling job market along with high energy and food prices are taking a toll on paychecks. Workers' average weekly earnings, adjusted for inflation, fell 0.9 percent last year. In 2006, earnings grew by a solid 2.1 percent.
• In fact, that was the top economic worry in the AP-Ipsos poll. Fifty-nine percent said they were worried "a lot" or "some" about seeing the value of stocks and retirement investments drop.
• "People are both depressed and anxious about the state of affairs. The anxiety is going to persist because we are in an uncertain season economically and politically," said Terry Connelly, dean of Golden Gate University's Ageno School of Business.

Comments

[sunrises]

Hi Mark,

The article covers mainstream views quite well. In the instability we are facing, we're walking with caution in each move forward. We’re concerned for the countries political dilemma that our future leaders will face, economic unrest today and in future, and of course looking for ways to vanquish our fears by saving our depleted funds.

Thanks for your contribution.

2008 Feb 13 01:14 AM

[daffy]

Not quite sure that I want to even see this kind of stuff printed. Am I worried about my stock values? Yes. Do I think that everything will return to a readjusted accurate price when all of this hyperinflated valuation resets itself? Yes. Do I think we are in a recession? No. I just don't see it. What I see are a bunch of fools running around getting all teary eyed because they got caught where they shouldn't be (banks and indiviuals). This is not the time to sell your home. This is not the time to sell your stocks. That shoud be obvious to anyone, as obvious as the fact that an adjustable rate mortgage MIGHT go UP! Hello people. This is reality speaking. So things are a little tighter, the only thing you are doing by trying to sell your home, or your stocks at this point is to drive the downturn further, and potentially run the economy into an official recession, all the while loosing your hard earned money. Relax a bit. Take a look at the official definition of a recession and really take a close look at how long a recession typically lasts. That's right, they are short. Sit back, have a cup of coffee that you brewed yourself (skip Starbuck's), and watch the show. It WILL all be OK, unless you make it not OK.

2008 Feb 13 10:19 AM

[flyoverman]

To the contrary, my main street looks pretty healthy. House prices are going up much, but then didn't go up near as much over the last 5 years as those taking a hit. I don't see see the for sale signs littering the neighborhood. Our year-end commissions/bonuses were good. There is a "slowdown" but that is not negative growth and a full-blown recession. We don't know how good we have it. The mass media and apparently Trader Mark love a catastrophe to get attention with. Keep talking, we can probably talk ourselves into a real recession yet.

2008 Feb 13 10:51 AM

[J.Stevens]

I am worried, but, like so many others, I'm having a very tough time justifying my worrying. So far, this year, this market has been much kinder to me and my friends that the indices would suggest. I don't know why, but I am beginning to think we're all embarrassed and don't wish to hurt anyones' feelings. Worse. every one of us who have recently prospered on this market have been advantaged by the prospering of others. Though gasoline is a little more expensive, and food has gone up, particularly lobsters, one can back off the high-priced food and return to the healthy stuff. Some of the talk of inflation is justified but it is not as crushing as it's being depicted. I think this may become one the better years from an investor's standpoint. And I'm one of those pathetic old people we all read about!

2008 Feb 13 02:59 PM

[TraderMark]

J. Stevens, I think the stock market and "Main Street" might disassociate in bubble 3.0. All this liquidity being created (and we're not done, Fed funds are going to 2.0 I assume - maybe lower) will prop up asset prices. That's inflation. It props up all asset classes, equity markets included. So we could have a decent stock market while Main Street suffers.

Further, I think we will have a regional recession. Industrial Midwest, and housing based states (FL, NV, AZ, CA) are in it. Financial based areas might head there. And areas dependent on agriculture, (midwest/heartland/pla... or energy/mining (texas, ok, montana) etc will continue to prosper in a general sense.

So much like real estate this might be a recession that depends on where you live :) But this is based on my theory that natural resources and food outputs will be in a boom due to worldwide shortages, and hence those states tied to those things will prosper no matter what.

The last point is - as an investor class, generally these people are better off financially. Keep in mind many people in this country make $12/hr, $14, $16. That is $30k or less before taxes. An extra $10 a week in gas or $30 in groceries makes a world of difference as opposed to someone making $70K - just food for thought. Hence why inflation is going to make lives very hard for those at the bottom 50%... while the top portion (most who read Seeking Alpha) will shrug it off as "well things are a bit more pricey than before".

2008 Feb 13 05:36 PM