Nancy B King

Oh where, oh where,

Has the ‘Recovery Summer’ gone?

Oh where, oh where can it be?

With employment cut short

And recession cut long

Oh where, oh where can it be?

Unemployment rate in June—9.5

Unemployment rate at the end of August—9.6

Added Later: The latest unemployment figure for Alaska is July’s 7.7%. Read the full article in The Anchorage Daily News.

Now, I know why I have been feeling so unenthusiastic about stocks—other than we are in a major recession with no substantial sign of sustainable growth coming our way.

I’ve been working on a lecture about economic cycles and the return on stocks, bonds, and cash. Since I do not have access to the Ibbotson data, I’ve been digging around the Internet and found a great data table from Aswath Damdaran. Take a look at the chart I created from his data, particularly for the return on stocks from 2000-2009 —a minus 0.96%. That is like, “Oh, my gosh!” I know there have been ‘up times’, but the ‘down times’ seem to have left a more lasting impression on me.

Year	Stocks	T Bonds	T Bills
1960-2009	9.26%	4.97%	3.70%
2000-2009	-.96%	6.26%	2.72%

Stocks were up 25.92% in 2009. However, stocks were down 36.58% in 2008. Maybe that is why the Downs make more of an impression on me than the Ups.

As a follow up to my Alaska’s Economy post, the chart and commentary below show where the economy of Alaska (AK) is in relation to the other 49 states.

CHART OF THE DAY: 49 Out Of 50 State Economies Are Still Underwater by Vincent Fernando, CFA and Kamelia Angelova

49 out of 50 U.S. states are still showing less economic activity than a year ago, based on February 2010 coincident economic indicators from the Federal Reserve of Philadelphia. The chart below is organized from top to bottom, from the most growth in economic activity to the largest declines in economic activity.

States like West Virginia (WV), Maryland (MD), Idaho (ID), and Wyoming (WY) are the worst off year over year. Their February 2010 economic activity remained 13.5%, 6.3%, 6.3%, and 6.2% lower year over year. Thus their economies, along with those of another 45 states, all the red ones, are all underwater on an annual basis.

North Dakota (ND) is the only state to currently have a higher level of economic activity year over year. Its February 2010 economic activity was 1.1% higher than February 2009, as shown by the green dot in the chart below.

Moreover, 28 out of 50 states even exhibited less economic activity in February 2010 than just three months earlier (not directly shown below). This means they have been deteriorating most recently as well.

In fact, the chart below is organized from left to right by the change in economic activity in the last three months (February 2010 vs. November 2009).

Thus West Virginia (WV), Maryland (MD), Montana (MT), and Delaware (DE), have seen their economic activity fall since November 2009 the most, given that they are the left-most dots. For example, West Virginia’s economic activity fell 3.1% vs. November 2009 (percentage not shown). In contrast, Michigan has done the best most recently, given that it is the right-most dot, rising 1.5% vs. November 2009 (percentage not shown).

Net-net what this tells us is that 49 out of 50 state economies are still underwater on a one year basis, and 28 out of 50 are even still falling vs. November.

Read more: http://www.businessinsider.com/chart-of-the-day-economic-activity-for-us-states-2010-4#ixzz0plifdhIV

Here is a great two-and-a-half-minute video explanation of the current global indebtedness and its domino effect.

Thanks to Very Short List:

It’s the question of the day: “How can broke economies lend money to other broke economies who haven’t got any money because they can’t pay back the money the broke economy lent to the other broke economy and shouldn’t have lent it to them in the first place ’cause the broke economy can’t pay it back?”

Then the following from Neil Cavuto:

Living in a Country Determined to be Indebted

Being broke means you don’t have options. Being broke means you don’t have influence. Being broke means you answer to someone who does have influence.

Being broke means someone else calling the shots—not you with nothing in your wallet, someone else with something in his wallet. Because when you’re broke, you’re desperate, so you get what you can from whomever you can. You’re so afraid of things getting worse, that you settle for terms that are just bad.

I know of what I speak. As a young man with an illness, I went into deep debt with abandon. I was as much an emotional wreck as a physical one. Disease does that. Being in hock does that too. Because creditors don’t much care what made you broke, just that you are broke.

And they have your number, so they call your number—a lot. Because they know you are desperate, and you know you are desperate. It’s as if you have “desperate” written all over you.

Forget sucking up to you; consider yourself lucky if they even talk to you. Because, like I said, you’re a loser.

And doesn’t the United States of America know it? Because, you know something? We’re broke. We’re losers. We’re an increasing laughing stock because we have no stock.

So we find ourselves in hock to those who are not in hock. Countries like China who know we need them; rich benefactors who know we depend on them. They are our sugar daddy, and it pains us to admit it; because we are broke, and there is nothing we can do about it.

As a young man, I remember vowing never to be so indebted. Now I find myself living in a country never so determined to be indebted.

It’s as if from the highest levels are begging to be beggars; failing to realize beggars can’t be choosers. Yet we have a government which chooses to spend even it means the rest of us poor suckers are spent.

Updated

From an anonymous source:

The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title.

What drives the Alaskan economy—the 3-legged stool. Here it is via Northrim Bank’s new econ website.

It’s going to be a while before the current housing problems work their way through the economic system. The following chart and comments are from  Chart-of-the-Day.

Housing continues to be a serious problem for the U.S. economy with a tremendous amount of unsold overhang remaining in the system.

This means that more than 7 million homes remain weighing down the market, due to bank’s having repossessed them or the loans being in delinquency.

It’s interesting to note, per this chart from Whitney Tilson’s T2 Partners, this does not include new defaults, which are around 300,000 per month.

Read more: http://www.businessinsider.com/chart-of-the-day-housing-crisis-2010-5?utm_source=Triggermail&utm_medium=email&utm_campaign=CS_COTD_051010#ixzz0nphuwHIX

This graphic of the Geography of a Recession by LaToya Egwueke presents a vivid picture of the growth of employment across the United States. It’s like, “Oh, wow.”

According to the U.S. Department of Labor’s Bureau of Labor Statistics, there are more than 31 million people currently unemployed — that’s including those involuntarily working parttime and those who want a job, but have given up on trying to find one. In the face of the worst economic upheaval since the Great Depression, millions of Americans are hurting. “The Decline: The Geography of a Recession,” as created by labor writer LaToya Egwuekwe, serves as a vivid representation of just how much. Watch the deteriorating transformation of the U.S. economy from January 2007 — approximately one year before the start of the recession — to the most recent unemployment data available today. Original link: www.latoyaegwuekwe.com/geographyofarecession.html.

The following is thanks to an Econ friend who provided chuckles this morning while I was trying to finish the handout booklet for next week’s Introduction to Stocks class.

DEMOCRAT

You have two cows.

Your neighbor has none.

You feel guilty for being successful.

You push for higher taxes so the government can provide cows for everyone.

REPUBLICAN

You have two cows.

Your neighbor has none.

So?

SOCIALIST

You have two cows.

The government takes one and gives it to your neighbor.

You form a cooperative to tell him how to manage his cow.

COMMUNIST

You have two cows.

The government seizes both and provides you with milk.

You wait in line for hours to get it.

It is expensive and sour.

CAPITALISM, AMERICAN STYLE

You have two cows.

You sell one, buy a bull, and build a herd of cows.

BUREAUCRACY, AMERICAN STYLE

You have two cows.

Under the new farm program the government pays you to shoot one, milk the other, and then pour the milk down the drain.

AMERICAN CORPORATION

You have two cows.

You sell one, lease it back to yourself, and do an IPO on the 2nd one.

You force the two cows to produce the milk of four cows.

You are surprised when one cow drops dead.

You spin an announcement to the analysts stating you have downsized and are reducing expenses.

Your stock goes up.

FRENCH CORPORATION

You have two cows.

You go on strike because you want three cows.

You go to lunch and drink wine.

Life is good.

JAPANESE CORPORATION

You have two cows.

You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk.

They learn to travel on unbelievably crowded trains.

Most are at the top of their class in cow school.

GERMAN CORPORATION

You have two cows.

You engineer them so they are all blond, drink lots of beer, give excellent quality milk, and run a hundred miles an hour.

Unfortunately they also demand 13 weeks of vacation per year.

ITALIAN CORPORATION

You have two cows but you don’t know where they are.

You break for lunch.

Life is good.

RUSSIAN CORPORATION

You have two cows.

You drink some vodka.

You count them and learn you have five cows.

You drink some more vodka.

You count them again and learn you have 42 cows.

The Mafia shows up and takes over however many cows you really have.

TALIBAN CORPORATION

You have all the cows in Afghanistan, which are two.

You don’t milk them because you cannot touch any creature’s private parts.

You get a $40 million grant from the US government to find alternatives to milk production but use the money to buy weapons.

BELGIAN CORPORATION

You have one cow.

The cow is schizophrenic.

Sometimes the cow thinks she’s French, other times she’s Flemish.

The Flemish cow won’t share with the French cow.

The French cow wants control of the Flemish cow’s milk.

The cow asks permission to be cut in half.

The cow dies happy.