Why it Is or Isn't Different This Time

[TromboneAl]

If the current market collapse is "different this time," then there's something to worry about. If it isn't different this time, even if it's as bad as the great depression, there's less to worry about (in the past the market has always bounced back).

So, do you think it's different this time (e.g. peak oil, overpopulation, things got too far out of whack) or not (e.g. hangover from irrational exuberance, normal housing price cycles, naughty bankers)?

 

[samclem]

I don't have an answer, but I have an idea of what one important indicator might be: Are the basic mechanisms of homeostatis still in place?
- Stable systems have "feedback" systems that lead to renewed stability after being upset. Free markets do this- e.g. if products or labor or capital gets too expensive, then things will self correct. The US economy is robust, and will rebound if left alone.
- The one area that looks like it may have a "negative feedback" loop (thus increasing diversion from stability) is our tax system, political system, and government spending. Once 51% of the people become net "takers" of government payments, they have a direct persoanl interest in voting for more taxes and spending on an ever smaller % of productive people. There's no positive feedback loop here--it accelerates to a very bad end.

 

[OAG]

Stand by for Monday's announcements: Obama to Unveil an Ambitious Budget Plan

 

[REWahoo]

So, do you think it's different this time (e.g. peak oil, overpopulation, things got too far out of whack) or not (e.g. hangover from irrational exuberance, normal housing price cycles, naughty bankers)?

Let me consult my disco ball. I'll get back to you...

 

[unclemick]

If the current market collapse is "different this time," then there's something to worry about. If it isn't different this time, even if it's as bad as the great depression, there's less to worry about (in the past the market has always bounced back).

So, do you think it's different this time (e.g. peak oil, overpopulation, things got too far out of whack) or not (e.g. hangover from irrational exuberance, normal housing price cycles, naughty bankers)?

Yes - but sometimes it rhymes. Mark Twain or some cat like that - right?



heh heh heh - Leverage in reverse? Or do we stick with da 'pop the bubble' theory? Hmmmm??

 

[freebird5825]

I haven't been investing long enough to know what is different this time or not.
But I can say what IS different from the way I was raised - there is too much entitlement mentality in the general public. Maybe it's because I live in the Ultimate Welfare State.
Hard w*rk and its rewards seems to be a dirty concept to many of the younger demographics. "Gimme" just doesn't work anymore.

 

[newporttony]

I don't have an answer, but I have an idea of what one important indicator might be: Are the basic mechanisms of homeostatis still in place?
- Stable systems have "feedback" systems that lead to renewed stability after being upset. Free markets do this- e.g. if products or labor or capital gets too expensive, then things will self correct. The US economy is robust, and will rebound if left alone.
- The one area that looks like it may have a "negative feedback" loop (thus increasing diversion from stability) is our tax system, political system, and government spending. Once 51% of the people become net "takers" of government payments, they have a direct persoanl interest in voting for more taxes and spending on an ever smaller % of productive people. There's no positive feedback loop here--it accelerates to a very bad end.

Unfortunately, I have the same concerns. A year ago I would have laughed at any suggestion that it would be different this time (which is why I was still "buying on the dips"). I am now deeply concerned about the political situation and I really think we are on the brink of a tiping point where more than half the population will be living off the more productive half. That is not a sustainable situation.

Over the past few weeks, a surprising number of friends and family members have told me that they will are planning to materially scale back their work if their state and federal tax burden becomes too much.

 

[bbbamI]

Living my life in my own little world for 51 years I have noticed and believe; there was crap in the past, there's crap now and more than likely there will be crap in the future.

I keep plenty of 2 ply on hand.....

 

[Purron]

I haven't been investing long enough to know what is different this time or not.
But I can say what IS different from the way I was raised - there is too much entitlement mentality in the general public. Maybe it's because I live in the Ultimate Welfare State.
Hard w*rk and its rewards seems to be a dirty concept to many of the younger demographics. "Gimme" just doesn't work anymore.

Perhaps Ayn Rand forsaw our future in Atlas Shrugged. "Who is John Galt"?

 

[Rich_by_the_Bay]

I wonder if, in 1929, anyone wondered whether it was different that time.

 

[TromboneAl]

I think things always feel "different this time."

Perhaps Ayn Rand forsaw our future in Atlas Shrugged.

I thought of that when I saw the "buy American"clause in the stimulus package.

 

[MichaelB]

This time is different

Each situation is different. What never changes is human nature.
greed - stupidity - fear - repeat...

This situation was created by excess greed leveraged by excess stupidity. The tools have been more effective than in the past, hence the overachieving results.

What's also different - so far

The entire political leadership of the developed world committed to stop the bleeding and improve the economic outlook.

Most of the leadership of the heavily populated developing countries doing the same.

Most of the leadership of the developing rabble-rousers have refocused their attention from external petro-rousing to internal petro-soothing.

Around 5% of world GDP has now been committed to turning this situation around.

The world will not come to an end, the economies will not collapse, and most people in the US will find their before vs after lives quite similar. We will forget our greatest fears and remember our courage, and after a prudent time, go and make some other stupid mistakes.

I gotta go - having a dinner party tonight, where we will actually spent the whole night talking about something even worse.

 

[Martha]

I haven't been investing long enough to know what is different this time or not.
But I can say what IS different from the way I was raised - there is too much entitlement mentality in the general public. Maybe it's because I live in the Ultimate Welfare State.
Hard w*rk and its rewards seems to be a dirty concept to many of the younger demographics. "Gimme" just doesn't work anymore.

I hate to say, but you just entered oldfartdom. Welcome!

 

[Koolau]

So, do you think it's different this time (e.g. peak oil, overpopulation, things got too far out of whack) or not (e.g. hangover from irrational exuberance, normal housing price cycles, naughty bankers)?

There are plenty of differences this time. You've alluded to several. Question is whether the current situation will RESOLVE itself differently than in previous economic downturns and calamities. As I see it, the solutions being tried may exacerbate the problems and cause a worse outcome than doing nothing or at least doing more traditional interventions. Time will tell, of course. It appears that few of us will emerge unscathed, even though many of us did the "right" things - diversification, LBYM, voted, paid our taxes, etc.

I'm a pessimist by trade and someday I'll be right. Hope it's not this time.

 

[unclemick]

I hate to say, but you just entered oldfartdom. Welcome!

Yep - starting hearing that from 1953 on - I didn't cut the grass short enough - tryed to lower the agree on price - told me to come back on payday for my money, etc,etc - never liked old farts.

Except for the Norwegian widow who paid well - in cash and didn't ask the impossible lawn/edging wise.

But now being an old phart myself - I have a Curmudgeon Certificate downloaded from this very forum - and I'm ready:

You young whippersnappers- - .

heh heh heh -

 

[freebird5825]

I hate to say, but you just entered oldfartdom. Welcome!

I am honored...
I may have to get creative (like Khan's diploma a ways back) and do up an Old Fart card for myself...but, on the other hand, that sounds too much like w*rk.
I have a looooooooonnnnnnggggg ways to go til I even begin to approach curmudgeon status, though.
I'm way too lightfooted (or lightheaded ) to let that catch up with me yet.

 

[CuppaJoe]

But now being an old phart myself - I have a Curmudgeon Certificate downloaded from this very forum - and I'm ready:

You young whippersnappers- - .

heh heh heh -

Ah, I always like to keep an older phart around so I can be a whippersnapper to someone.

What was it Lincoln said when he freed the retirees? you can be a whippersnapper to some of the people all of the time, some of the people all of the time but you can't be a whippersnapper to all of the people all of the time.

 

[clifp]

Ah, I always like to keep an older phart around so I can be a whippersnapper to someone.

What was it Lincoln said when he freed the retirees? you can be a whippersnapper to some of the people all of the time, some of the people all of the time but you can't be a whippersnapper to all of the people all of the time.

If Lincoln freed the retirees what has Obama done?

Proud to still be a whippersnapper for 6 months and 5 days.

 

[OAG]

Since I missed the "last time" by a few decades (but heard a lot of "real life" stories from the family). This time I am here so, referencing the old tales I heard, it is different. Since we are all "living it" now and the impact is different for everyone it remains to be seen if it ends differently. Frankly, my fear is that there are way too many "cooks in the kitchen" on this one. Seems like every one is an "official" in the Government and has way different ideas on what to do. Even the Politicians "in control" are starting to argue among themselves in public - not a good sign IMHO.

 

[deserat]

Yup -trying to control the second order response in the middle of the severe oscillations and not knowing the effect of the input - will it go into a positive control feedback loop or a negative control feedback loop - the former allowing for an orderly return, the latter to possible out of control acceleration. This is crazy - and scary.

 

[mf15]

I think it is different. Dow Chemical cut its dividend for the first time in 100 years, baby boomers like me cutting back and retired, manufacturing base gone,still cost way too much to buy a house. I just saw a letter from my former company, they have instituted draconian cash conservation controls, they are scared s---less.
Old Mike

 

[Helen]

Dow Chemical cut its dividend for the first time in 100 years

This is really sad for me to see. My Dad worked for Dow for 42 years (he started working there in 1931!) and my hometown is where Dow is headquartered. It's a bad time to lose a job and have to relocate.

My Mom is going to notice the difference in her dividend checks, it was a huge cut.

 

[samclem]

A lot of folks who have traditionally depended on one solid stock for a significant portion of their income are starting to feel the pain. Depending on the results of one company has been widely recognized as not a good plan, but many people just stuck with what they knew/what they'd been told.

Likewise, people who thought dividend investing (over a large number of companies) would insulate them from the ups/down of the economy are finding that isn't a bulletproof plan either. The returns are less volatile than some other methods of investing, but it's not foolproof.

 

[Gone4Good]

So by "different this time" you mean different from the Depression of 1807? Or maybe the Depression of 1837? Or of 1873? Or of 1893? Or 1930?

Some differences I can think of . . . FDIC insurance so when banks fail depositors aren't wiped out, accommodative monetary policy so the Government doesn't compound the problem, unemployment insurance so people who lose their jobs can maintain some economic stability, higher standards of living so losing a job doesn't mean starving to death, etc. etc.

So look, it is different this time . . . it's better.

 

[Running_Man]

If the current market collapse is "different this time," then there's something to worry about. If it isn't different this time, even if it's as bad as the great depression, there's less to worry about (in the past the market has always bounced back).

So, do you think it's different this time (e.g. peak oil, overpopulation, things got too far out of whack) or not (e.g. hangover from irrational exuberance, normal housing price cycles, naughty bankers)?

The main difference between now and other times in history is the amount of leverage that corporations have put up. This is a direct result of the buyout financing binge of the 1980's and the ability of computers to model profitable buyout opportunities and hedge funds to take advantage of these models by borrowing huge amounts of money for LBO's to then reemerge as new "efficient" companies, though now with little room for error in the execution of their plan. Therefore there are far far fewer AAA rated companies than any time in history as competitor companies had to leverage as well to compete and get stock market price growth.

Companies have been labeled fools if you didn't go out and borrow money to buy back your stock.

Therefore as the economy goes into a slowdown similar to those times corporations are not having the ability to have "solid" assets to back their long term plans. Companies do not have the funds to buy their own stock as they did in 1987 when that financial problem was forestalled to today. A sign of this is the record decline in dividends as companies just don't have the funds to pay them shows the financing problems are real not imaginary. And that earnings have been overinflated over the past years due to the leverage in corporate America provided unsustained growth.

Golden examples of this are GE and DOW. They are both now so overextended they are in need of the government to bail them out, whether by loan guarantees for GE or the government to upend contract law as for DOW, instead of going out and picking up cheap companies and setting themselves to come out of this situation flying, they are turning to the US goernment and Warren Buffet to save them.

So we end up in a situation where the US govenrment lends/invests hundreds of billions to corporations with a capitalization of less than 25 billion because they are "too big to fail".

And instead of the world's future growth coming from a free and relatively debt free country to help crawl out of the economic morass from a populations overextention as the United States was in 1929, now we are counting on a corrupt regime in China for the world's growth.


USATODAY.com - As company priorities shift, fewer get AAA debt rating


What will happen only time can tell, it may have fallen far enough already, but I am reminded of what I read about the great depression , "At every corner we thought we had come out of the worse time in history when in reality it was only beginning, it appeared happened so quickly but yet in slow motion."

Letting it fall and having something to invest whenever this ends will result in being able to set yourself up quite well for life.