'Time' for Some Economic Perspective

Time is something very precious to us all.  Time heals wounds, and puts distance past bad events.  For the most part, we are not dismalists or doomsdayers (some do fit that bill), and we always try to find a silver lining from every dark cloud. 

For the economy, there is no darker cloud that the credit/housing crisis.  It's been nagging the markets for nearly two years.  We won't go into the gory details, but we know the collateral damage that has been caused.  Will we recover from such a bad trip?  No doubt about it.  But I would argue that it'll take time - and plenty of it - before a sustained recovery is at hand.  The more time is between the bad (choose your timeframe - last August, January, March or July 2008), the better things will look. 

Of course, things may not get as bad, which can be spun as a positive. 

Consumer is Still in Trouble, Regardless of What You Hear

There is a cliche that says, "as the consumer goes, so goes the economy."  That's clearly the catch phrase in the US.  How can the consumer keep the economy propped up?  The stimulus checks are done (which nicely boosted GDP in Q2), gas prices are down but not really enough, and the job market is still teetering.  Inflation continues to be a troublesome issue, and while the dollar has jumped lately, pricing power has still been sapped.  Mortgage troubles are currently tip of the iceberg, with more bad paper on the horizon.

Changing of the Guard: A New Leader

Come November, we'll have a new President, for the first time in eight years.  This is a critical election, not just for national security but also for the economy.  Whoever wins will have the awesome task of dealing with high energy prices, falling home values, a weakening domestic economy, a worsening job market and global growth issues.  Certainly the last regime had a different agenda, and only responded just before it was too late.  Perhaps the new leaders will have real solutions, but as stated above, only passing time will help most.

There Will NOT be an Alarm Sound to 'Get in the Game'

Remember - they don't send signals for when it's time to buy, nor when to sell.  The most critical aspect is the watch and listen to the market, use your available tools and make your moves.  This bipolar, choppy market is clearly delivering pain to both sides.  How you make out before the next trend is established is critical.  There is a time to be engaged in the market, and a time where cash is a good position.  Good timing to get back in is certainly key, but being aware of the landscape is critical.

Disclosure: none

Comments

[investor88:]

Bob has written a sensible piece here. Conclusion is balanced but reader is left in no doubt that a cautious approach is called for, the hoped for recovery is elusive and may take quite some TIME [ a quarter, a year, longer? we can only observe carefully and plan along the way without any crystal ball].

2008 Aug 31 08:58 AM

[CLH:]

Bob has said nothing

2008 Aug 31 11:11 AM

[whidbey:]

It may be that Bob knows something but can not bring himself to say it. I detect that he is bearish on consumers, but respectful of anyone who must deal with the economy and the price of commodities. Bob is like a man with whom I taught at Sanford; he has an opinion but he can not recall what it is. Thanks Bob you have our best wishes for a speedy decline.

2008 Aug 31 09:59 PM

[Bob Lang:]

CLH...and what have you contributed to the discussion? You clearly have said NOTHING. I try to make readers ponder about situations and think a bit for themselves, but I'm sure you didn't need me to tell you that, right?

2008 Sep 03 09:17 AM

[Bob Lang:]

Zooey...thanks for your wishes. FYI, I don't wish harm to anyone or any group, I just call em as I see em. I know what I said, and if you can't understand it, you have my condolences.

2008 Sep 03 09:19 AM