IS THE RECOVERY REAL -- (POSTED 10-20-01)

by Rick Shaffer 20. October 2009 12:40

 

With the Dow Jones Industrial Average back around 10,000, and many other statistics on the uptick, it does appear that the recession, if not over, is – albeit slowly – beginning to mend. Earlier this week, the Wall Street Journal weighed in with the an article that looked at the question, Eighty Years After the Great Crash, is it the [19]30’s Again? In all honesty, we here thing the answer is a definite no, and following is an article written byWSJ writer Dave Kansas which give a very good overview of why that’s likely true.  (In the interest of fairness, however, if you want to read the other side of the argument – which we here do not agree with – go to http://online.wsj.com/article/SB125581121032292239.html

 
 
Wall Street Journal, Tuesday, October 21st
 
By Dave Kansas
 During the past few months, a number of economists and even some policy makers have declared the Great Recession over. The data support that view. Leading indicators are on the rise, home sales have improved, and third-quarter growth is expected to come in positive.And yet, the doomsayers will not relent. The stock-market rise is derisively called a "suckers' rally." The economy may be better, but it will soon "double dip" back into recession. The jobs picture will only worsen. These mutterers of darkness believe that we are deep into a replay of the Great Depression, an era filled with false dawns.Oh please. Let's not make any mistake: The current downturn is almost certainly the worst since the Great Depression. A high jobless rate and the loss of personal net worth from collapsing home values and declining stock markets have made this a period of pain for many people. Ever since the downturn ripped through the financial system one year ago in the wake of the Lehman Brothers collapse, comparisons to the 1930s have come and gone. On the 80th anniversary of the great stock-market crash those comparisons are likely to intensify, though they shouldn't. During the Great Depression, more than 10,000 banks failed. Bank runs were so commonplace that moviegoers understood viscerally what was happening during the pivotal bank-run scene in the Christmas classic "It's a Wonderful Life."Since 2008? A mere 125 banks have failed. During the Great Depression, stock prices declined 90% in the three years after the Crash of 1929, and gross domestic product fell by 30%. By comparison, the stock market fell about 55% from its 2007 high before rebounding, and GDP declined less than 5%. Data have recently indicated that the economy is on the mend. Forecasters have declared the recession over. The index of leading indicators has risen every month since April. The stock market is up about 50% from its lows. Corporate-profit forecasts are rising. Jobless claims have dropped 13% since March. Thrifty consumers are saving money. Morgan Stanley recently reported: "Employment and capital spending are improving.... Corporate restraint seems to be reducing excesses and laying the foundation for sustainable economic growth." There's really only one fly in the ointment: the jobs picture.The unemployment rate, at 9.8%, is the highest in 20 years. More than seven million people have lost their jobs, and most economists expect the jobs situation to worsen into 2010 even as economic growth picks up. These figures are bad. But they aren't nearly as bad as the 20% rates seen in the 1930s, even though the way unemployment measures have changed over the decades makes comparisons difficult. The plain fact is we haven't come anywhere close to the heartbreak and destruction associated with the 1930s. The Joads aren't about to make a return, and Oklahoma remains a going concern -- heck, they even have an NBA team. The only folks who benefit from overwrought comparisons to the 1930s are bond investors, gold bugs and makers of canned goods. Don't be fooled. Write to Brett Arends at brett.arends@wsj.com and Dave Kansas at dave.kansas@wsj.com   

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About Rick Shaffer

Rick Shaffer brings “The Money Show” to 96.9 WTKK, Boston's Talk Evolution each Saturday Afternoon from 1PM - 4PM. Then on Sunday from 9AM – NOON, Rick Shaffer and Susan Kaplan reprise the Money Show where they discuss everything from finance and investment to real estate and law.

Shaffer, an attorney with the law firm of Andrews & Updegraph and a graduate of both Boston College and Northeastern University School of Law, has hosted “The Money Show” since 1991. He has also been a regular guest and contributing financial expert on various programs on New England Cable News, WLVI-TV and other local television stations, and has been a financial, real estate and business writer for the Middlesex News, the Boston Herald, the Boston Globe and S&P Personal Wealth.

Susan Kaplan is a Certified Financial Planner and is the president of Kaplan Financial Services in Wellesley. For the past four years, Worth Magazine has named Kaplan one of the top 200 financial planners in the country and she has been featured in Louis Rukeyser’s Wall Street and Mutual Fund publications.

In 2006, Barron’s named Susan as one of the top 100 Women Financial Advisors in the country. Susan has also been named by Boston Magazine as one of the top 10 financial advisors in Boston (March 2006) and inducted into the 2003 Advisor Hall of Fame by Research Magazine. Susan has been chosen by Worth Magazine as one of the top 100 financial planners in the country for six years. She has been chosen by Medical Economics in the past five consecutive years as one of the best 100 financial advisors for doctors.

Susan has been featured in Louis Rukeyser’s Wall Street and Mutual Fund publications as well as numerous other financial journals. She has appeared on Bloomberg News, CNBC, WGBH, and Channels 4, 5, and 7. She has been asked to speak on investments at several major national meetings and has also been chosen to do Money Makeovers for the Boston Globe. She was a presenter at the CNBC / Fidelity Money Show for two years in a row. She co-hosts the radio show, The Money Show, on WTKK – 96.9 FM every Sunday morning.

 

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