Blowing Bubbles

The stock market gained to 10,000 this week, then had some sell off. But clearly Wall Street thinks this depression (oops, I mean recession) is over.

However, I think this piece is great on thinking through the fundamentals. In other words, the reasons to invest in stock still are not apparent.

Perhaps we are creating, yet again, another bubble?

How Gullible Are We?

Today Washington State is having a primary election. Aside from the horrible date (I am convinced politicians love having primaries when only their core constituents will be around to vote, but more on that later), this is also the first all mail in ballot vote for this state. Early indications are that this is a popular idea. A local ballot drop off box was stuffed to the brim by 8 AM this morning!

Here in the City of Seattle we have a hotly contested mayoral race. Which is unusual, given we have an incumbent. But, after two weeks last winter where snow clogged traffic (worse yet, holiday packages were not delivered because it was during the last two weeks of December and no garbage was picked up for three or four weeks) and a contentiously bitter dispute over how to replace a major earthquake damaged thoroughfare, our current mayor suffers from low favorable ratings.

Seattle is a very blue town. During the last presidential campaign it was almost a city ordinance to have an Obama sticker on your car. So what's an incumbent mayor to do? Especially one who came late to the game of being "green," but once he embraced the idea, seems bent on making sure he gets every photo-op and press release out about his so-called green agenda. His marketing research, then, has told him that he needs to use the words: "progressive values," every chance he gets. In one television ad he says he wants to be the mayor of Seattle and champion it's progressive values as he gazes up at signs showing where to bicycle.

And chances are voters will fall for those lines. They have been polled, numbers crunched, and sure as heck, "progressive values" will appeal to Seattle voters. Mayor Nickels has probably spent hundreds of thousands of dollars just to learn that using the line "progressive values" will get him re-elected.

Mayor Nickels isn't the only Seattle candidate who is using those terms. I heard at least several others mouth the exact same language. This week, at least, Seattle is about "progressive values."

Acutely aware of marketing language, I was struck with another ad I heard today. It was for a local appliance dealer. During the height of the real estate bling bling when they couldn't sell fancy Italian stoves, wine storage units, and expensive stainless hoods fast enough, I went into the store looking for a replacement for my broken refrigerator. The minute I told them I didn't want to spend more than some magical price they had in mind, I was toast. I couldn't have gotten a sales person to wait on me if I screamed. But now, now they are advertising that they are all about value. Value to the customer in terms of service, quality merchandise, delivery and installation. And the reason they are all about value is because their marketing research (or someone's marketing research) has told them that in a recession, consumers are looking for value. I finally counted and in a 60 second commercial, this ad used value 20 times! They got value out of their ad, that is for sure! I would hazard to guess, however, if I went back to the store I still wouldn't get service because I don't want to buy fancy Italian stoves!

Moral of story? Remember, we're being marketed to 24/7 now days. From President Obama to the appliance store, they all have their marketing research. They know what terms work on us and what doesn't. Think for yourself. Laugh when you hear terms used over and over. Sometimes the issues are really important, like health care, local politics, or the next national issue, immigration overhaul. Working your way through the hype is easy, ignoring the sophisticated marketing, targeting directly at your "profile," is hard. But it's important to do...

Ta-Da! Recession Over. Sadly, Pain is Not

No longer waiting around for the stimulus money to "trickle down" to its citizens, Tennessee decided to put people to work in the fashion of a New Deal works program. The several hundred people in a rural Tennessee county who were laid off when an automobile manufacturing plant went to Mexico, were able to find state jobs in, yes, the unemployment office, working on thinning a forest, and other public works tasks.

And this is good, because despite economists declaring the recession "officially over," the pain of unemployment, lost value in retirement equities, and increasing prices in necessities such as gasoline, are continuing to hit everyone.

We have a long way to go before anyone feels like they are out of the woods. The so-called green job creation may, at it's peak, develop into 2.4 million jobs, a mere drop in the bucket of how many jobs have been lost in this recession, much less how many more need to be created to keep up with the growing work force.

While housing sales are increasing, house values continue to slide. In other words, people are buying, but sellers are losing value with each sale. Most of these sales are excess inventory or subsequent to bank foreclosures.

As the Slate article suggests, don't download Happy Days Are Here Again.

The Unemployment Rate

We are now at a breathtaking 25 million people who are unemployed since this recession, oh heck, depression started.  25 million.  And that's just those who are reporting.  More than likely there is a greater number of people underemployed or chronically unemployed for a variety of reasons.

The international governments are attempting to do something, and world leaders announced, after all the theatrics (see, the agreements on what the are going to do have been worked out long before Air Force One touched down in London), a global stimulus of 1 trillion dollars.  

The see-saw is, however, convincing highly leveraged employers to employ workers when they are madly scrambling to find cash to service their debts, pay calls on stock used as collateral which is not worth the amount secured, or merely have money to continue their own lavish life styles.  Right now employers are reluctant to hire much less retain people.  

The Obama Administration now believes that the effects of their stimulus are beginning to show.  They point to increases in paychecks from the reduction on income tax withholding.  However, if you don't have a job, this is moot.  And the increases in paychecks are, frankly, miniscule (around $12 a week) compared to the increases in cost of gas, fuel, milk, eggs, cheese, fruit...

Usually when the unemployment rate goes up, Wall Street reacts with a bump.  But as I type this, the market is down.  Wall Street usually feels unemployment is good.  It keeps the cost of labor down, and hence more profits for corporations.  But perhaps this morning, the Lords of Money are thinking that an economy that relies on consumption (remember 70% of the American economy is about buying stuff) can not recover if people don't have an income.  Hello!

25 million.  The number will increase.  It's scary.

Conspicuous Consumption Makes the News!

In today's New York Times came an article about the demise of conspicuous consumption because of the recession.  I am shocked!

What these kinds of articles do, however, is set up a dynamic (a conflict if you will) between the folks who believe this recession (I really really want to use the "d" key instead of the "r" key, and then a few "p's") is a cultural policy window and those who, like the current and past federal administrations, understand that unfortunately, our economy is dependent upon consuming.  Those who see this as a cultural policy window are savoring the moment of  "I told you so."  They saw the worst of the worst, the McMansions, the expensive cars, the gaudy jewels, the $1,000 Sex In The City Jimmy Choo shoes, and consistently (in their minds) said our culture was far too out on a consumption limb.  They are thoroughly enjoying the idea that we'll all give up our cars, our McDonald's Big Macs, and our Nordstrom credit cards for a simple life growing lettuce instead of grass in our front yards.

But then there are the folks who are coming late to this debate.  Laurie David and her stopglobalwarming.org who is currently on a rant about toilet paper.  This from a woman who lives in a huge mansion in LA and probably spends on clothing in a month what many of us spend in a year!  Or Arianna Huffington, who once wrote a piece about how many Blackberry phones she owned.

Culture wars or divisions will always be a part of our society.  And this combined rush for "sustainable" living (local food sources, green architecture, transportation etc) along with an energized policy initiatives on the environment, we may gradually move our culture toward a renewed sense of "just enough" rather than "too much."  But I think pundits expounding on how everyone else should live is not good.  If it's one thing we do well it's seeing through hypocrisy.  In order to sway a cultural shift, we  need to let the impacts of this depression (oops, recession) seep in as well as provide positive answers.  In other words, yes, we can all live well with two pairs of Jimmy Choos not four!  The reality is while this depression will alter all of our lives, it will not be a radical change in our culture.  Radical takes time.  A major concern is that while this depression will alter lives, it may also further expand the disparity between the rich and poor, further eliminating the middle class.  And that is not good at all.

But the good news is, we're beginning to have discussions in the "public town square" about how much stuff is enough.