Economic Summary pt. I Q2 2009
When I was in high school, my soccer team made it to the state finals. In spite of a grueling double-overtime game, the score remained tied. So, it come down to a penalty shootout to determine the outcome of the state championship. I was the third of five nervous shooters on our team. When taking a penalty shot, it’s important to examine your surroundings, focus on a target, and eliminate all distractions. As I approached the ball, I made a fundamental mistake by trying to predict which direction the goalie would move. Instead of focusing on my initial target to the left of the goalie, I was distracted. My indecision forced me to change my mind at the last second and kick the ball towards the right corner of the goal. The ball collided with the cross bar, bounced straight down, and the goalie immediately covered it, declining me of what would have been the winning goal.
Ah, the glory days—many athletes wish they could go back to relive them, whatever they were. (In my case, it was high school soccer in Idaho, so maybe not quite so glorious.) It’s not uncommon to hear one say, “If I had a chance to go back and do it all over again, I would have made such better choices.” Just as I couldn’t predict where the goalie would jump, no one can predict the future. However, we can take lessons from our past, and not repeat the same mistakes. Lessons I learned in that single moment on the soccer field apply fittingly to today’s investment environment. Examine your surroundings, focus on a target, and eliminate all distractions.
Let’s examine our surroundings.
What is a recession? How can looking at past recessions give context to where we’re at today? The National Bureau of Economic Research officially determines the beginning and the end of recessions. In December of 2008, they announced that the current recession officially began in December of 2007. Notice how they weren’t able to identify exactly where the recession began until twelve months after it started. Historically, the committee has been able to identify a recession’s beginning and ending points between 8 and 12 months afterwards. So even if we’re headed out of it right now, we won’t know for sure until 2010. The longest “recession” ever was the Great Depression, which lasted 43 months, from 1929 to 1933. Since then, America has had 12 recessions, the longest of these being the 16-month recessions of 1973-1975 and 1981-1982. If the recession ended this fall, it will have lasted somewhere between 20-22 months. We’ll have to wait and see what the committee says, but it’s worthy to note that we be passing through the longest recession since the Great Depression.
