Dow Jones watch - 9/29/08

[nub]

Real estate is highly regional, though. Where I am, we've seen modest declines in the price of houses, but there's a huge glut of houses on the market. I expect either a stalemate for at least another 6 months, or an additional 10% decline in prices.

Well, where you invest does not have to be regional. You could still invest in REITs.

[BigWorm]

Daniel is correct about there not being a standard definition of a recession and it's a very tricky state to identify in advance.

You hear on the news a lot (CNBC mostly) that a recession is defined as two consecutive economic quarters of negative growth, but if you just think about it, that definition is so flawed and illogical it's surprising that it's still widely quoted by the media. According to that simple definition, you could have an economy go to 0 without there ever being a recession, but more importantly, there have been several recessions that did not involve two consecutive quarters of negative growth, the last one being in 2001.

When the economy goes bad, there is usually heavy volatility, that volatility can easily allow for one quarter to have a small positive growth, followed by a huge negative growth, followed by small positive growth etc... basically a zig zag of small ups and big downs... this would not constitute a recession according to the commonly quoted definition but it would drive the economy down the crapper.

Anyhow, that's my continued rant on why one should be very skeptical of mainstream financial news (like... CNBC). It sounds very easy to digest a simple definition like "two quarters of negative growth constitutes a recession" and make decisions based on it, but the reality is that both historically, and just using basic reasoning, that definition is incredibly flawed.

Not to mention that the standard definition of a recession is totally useless during the recession due to the fact that it takes six months before the recession is acknowledged. Also, the only reason it is two quarters instead of one is that "No one wants to say the R word", meaning that economists are gun shy in declaring a recession because prognostications like that from a respected economic thinker (i.e. Fed Chair, Tres. Sec) tend to be self fulfilling. This is an example of the many ways that economic theory is more useful in analyzing the past than the present.

It amazes me that some of the posters here who claim to vote entirely on economic matters lack a basic understanding of economics. Recognition lag, response lag, and implementation lag. These are basic macroeconomic topics.

[Daniel]

It amazes me that some of the posters here who claim to vote entirely on economic matters lack a basic understanding of economics. Recognition lag, response lag, and implementation lag. These are basic macroeconomic topics.

You really find that surprising in reference to who you are talking about?

[Kranar]

Not to mention that the standard definition of a recession is totally useless during the recession due to the fact that it takes six months before the recession is acknowledged.


Haha, that's genius!

[Gan]

It amazes me that some of the posters here who claim to vote entirely on economic matters lack a basic understanding of economics. Recognition lag, response lag, and implementation lag. These are basic macroeconomic topics.

One finds that very evident when observing the assigning of credit and blame for economic periods with current and past presidents.

[BigWorm]

One finds that very evident when observing the assigning of credit and blame for economic periods with current and past presidents.

Yeah because deficit spending during a period of economic growth has always been considered an awesome idea. (Hint: It's not)

[Daniel]

Uh.... Thanks for the input gan

[Gan]

Yeah because deficit spending during a period of economic growth has always been considered an awesome idea. (Hint: It's not)

/Agreed.

So was handing out tax cuts and then following it up with a costly war. (same hint applied)

[Gan]

Uh.... Thanks for the input gan

/Anytime

[Keller]

your argument was that we were already IN a recession.. completely dismissing the accepted definition of what a recession is.

Crash and . . .


The U.S. economy (http://search.breitbart.com/q?s=U.S.+economy&sid=breitbart.com) fell into a recession in December 2007

. . . burn.

[Kembal]

Damn. Keller beat me to it. Stupid meeting.

[Miscast]

http://www.youtube.com/watch?v=2I0QN-FYkpw

and

http://www.businessweek.com/magazine/content/08_48/b4110036448352.htm?chan=magazine%20channel_top%20s tories

Good times.

[Stanley Burrell]

I loved macroeconomics because all I had to do was agree with radical liberal views on how the WTO and IMF were Satan and just write all my papers with a clear bias against the evil imperialist agenda closing its icy fist around the globe to get a B+.

HUZZAH, I'M ALAN GREENSPAN BITHCES.

[Daniel]

Lol.

[Gan]

I loved macroeconomics because all I had to do was agree with radical liberal views on how the WTO and IMF were Satan and just write all my papers with a clear bias against the evil imperialist agenda closing its icy fist around the globe to get a B+.

HUZZAH, I'M ALAN GREENSPAN BITHCES.

hahaha

Thats awesome.

[nub]

So I transferred my mutual funds to my bank yesterday based on the market at the end of the day. From the peak of my investment I lost 36%, however, it is still higher than what I had put in.

I did not take it out because I thought it was going to get worse (it had positive gains on Friday and Monday, seems to be down today). I took it out as a down payment on a house.

Fortunately, the range of homes prices I am looking at was able to stay the same. What is even more fortunate, more newer/nicer homes have also fallen to my price level.

Homes prices in South Florida have fallen by 30%-50%, due to over-pricing/foreclosures/short sales etc. So overall I am quite happy, I just need to pick one now.