Wednesday, December 10, 2008

Why the Worst May be Over

In these days of economic doom and gloom, I would like to be one of the first to climb on my soap box and take a big risk by saying that: I think that the worst may be over. That's a bold statement with the stock market in the pits, the unemployment rate projected to climb up to 10% by next year, and some big name companies on (the wrong side of) the brink of collapse. Still, I am getting a hunch, and its nothing more than a hunch at this point, that the worst may be behind us. Here are my reasons:

The world isn't ending - yet everyone is acting like it is. Back in September and October (seems like eons ago), it seemed like we were on the precipice of disaster. Personally, I was concerned that the banking system as we know it might completely cease to function. It looks like this is not happening. While some big name banks have gone under in a massive wave of bankruptcies and fire sales, the system is still here. I have been tracking the LIBOR rates - which show the interest rates that banks are charging each other, and rates have been progressively going down since the worst of the crisis. Is some semblance of confidence returning to the markets?

Stocks have slowed their descent - month over month my Quicken reports still show that our portfolio has lost value. However, on a weekly view, for the past few weeks the market has been moving more or less sideways, and in the past 14 days the direction has been up. Could it be that the low of 741 we saw on the S&P 500 just a few weeks ago might be the illusive bottom? Or is this a bear trap we're looking at?

Liquidity galore - the amounts of money that governments around the globe have been throwing at the economy are simply staggering. We are talking multiple trillions here. You gotta believe that all this money has got to make a dent in the problem. Now whether this is a good thing in the long run and whether we'll see rising inflation and a crumbling Dollar in the future is a different question that we should leave for another day, but all of this stimulus should be... stimulating.

The shock is gone - I talk with a lot of people. Over the past couple of months everybody wanted to talk to me about how the economy was horrible and things were going to hell in a hand basket. Over the past few weeks it seems to me that the shock has worn off. These days I don't hear a lot of chatter from folks about how they are losing a ton of money in the stock market and how the latest news will mean disaster for the economy. I think people are more or less resigned to the situation and in their own careful way, are getting back to business. I think this will eventually translate into more robust economic activity.

I don't know, I may be imagining things, but I think that the worst may be over. Don't get me wrong, things aren't going to be great all of a sudden, and if you are out looking for a job in this climate, you are not going to have an easy time. However, I think we may be going from a class 5 hurricane to a class 3 hurricane. It's still pretty bad, especially when it hits you directly, but it's just slight less horrible. Thoughts anyone?

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4 comments:

anelson@3creek.com said...

I first heard of your blog from a colleague of mine who was laid off last month. She informed me that she had - just prior to being laid off - read a post of yours about this topic. How ironic, right? I have since subscribed to your blog and find it not only a fascinating read, but so pertinent to every aspect of my life right now (along with everyone else, I'm sure). I truly look forward to your posts and find that in this economic downturn and while working for a small, privately owned company that just had a reduction in force (I now find myself terrified and paranoid that I may be next if they must reduce again), your breadth of knowledge and willingness to share your honest opinions brings me solace in these hard times - even if just for a moment.

Going through lay-offs for the first time has been one of the greatest learning experience I've had in my adult life so far. More so than any Organic Chemistry or Engineering course I took in my Biology/Chemistry undergrad :) I am left feeling betrayed (when you work at a company with 30 people and the President tells you the company is doing fine, then suddenly 4 weeks later 5 people are laid off - I think betrayed is an appropriate feeling, no?), saddened for the loss of my co-workers, wondering (but thankful) why I am still here - why not me?, how did I make the cut?, and worried (CUBED). I LOVE my job, was confident in my job, and had faith in my company. Afterall - more than half of our clients are Fortune 1000 companies. I've never had a plan B, career-wise. I didn't want to. I didn't need to. WRONG. What I didn't know, is that I NEEDED to.

So this year - there will be no Christmas presents. There will be no ski trips. There will be no going out to dinner. There will be SAVING. This is my plan B. I just got married a few months ago and while I wish things were different, they just aren't. I took to heart every word you wrote about lay-offs and such (and every other word therein). After having gone through this whole lay-off thing, I can only prepare myself for the worst (something I can control), and hopefully be happily surprised in the end (something out of my control) ANNNND with a plan that never had to be used. BUT, with a plan at the very least. I like to think of myself as pessimistically realistic. Pragmatic, perhaps? Ultimately, one can only hope for the best, right? I will continue loving my job, being confident in my job, and having faith in my company. I will bring value to this company to help make it through the storm. Prove that I am not expendable, right? In the mean time, I'll be reminding myself, "...This too shall pass..."

Thank you for sharing your wisdom. Thank you for sharing so uninhibitedly. I look forward to whatever's next.

Sincerely,
A Reader

frugal zeitgeist said...

I'm not as optimistic as you, I'm afraid. I think 2009 is going to be a rough year, although we might start to see improvement in 2010. I'm basing that on anticipation of continued foreclosures, continued tightness in the credit market, and continued contraction in the job market. I would very much like to be wrong, though.

Your reader (above) is right: your wisdom and articulate writing makes the blogworld a better place. Keep on keeping on.

Shadox said...

Wow. You are making me blush. Thanks for the kinds words guys. They are appreciated.

"A Reader" - thank you for the long and detailed comment. You raise many interesting points on which I wish to comment, and I think I will use portions of your comment in one of my upcoming posts. I think you are keeping the right attitude, but am I detecting a tone of resignation in your comment? I think I hear a lot of fear and pessimism in your words. Keep the faith!

Frugal - I hope you didn't take my post to mean I expect things will turn all sunshine and daffodils in the next couple of months. I absolutely don't think so. Things are going to stay rough. Very rough. However, I no longer fear an ultimate collapse of the financial system and a large scale depression. I just don't think that those are in the cards. Recession, a nasty one, is certainly materializing in front of our eyes. As I said - I think it is time to downgrade this storm from a category 5 to a category 3. Still highly destructive, but objectively better than the worst case scenario.

anelson@3creek.com said...

Thanks for the reply. Perhaps there is a slight tone of resignation in my tone? I think you're onto something :) I am worried that my company may have to do more lay offs down the road due to this unpredicatble market and I'll surely be one of them next time around. I have just started updating my resume and saving every cent I have (which isn't much). But I can only save so fast and if I were to get laid off tomorrow, I would be in an absolute world of hurt. What else can I do? I am trying to keep the faith - I really am. But I am young, just learning about all of this economy stuff, finances, bills, what I want to be when I grow up, how to survive lay-offs, etc. So it's been a dramatic and eye opening experience to say the least. But like I said - one of the best lessons of my life thus far. Even more so than my parents teaching me to look both ways before crossing. Nothing I learned growing up could have prepared me for this, except THIS. The first-hand experience. And for that, I guess I'm thankful.

Keeping the faith :)
Ashley