Why We are Coming Out of This Recession Even in the Stink of It
I have never had a Bank of America account.
But given the 80 percent stock price decline Bank of America has experienced since the rushed announcement of the Merrill Lynch acquisition – inclusive of the $20 billion the U.S. government threw them to stay solvent in the face of the blemish Merrill Lynch has come to represent – it appears that understanding the plight of Bank of America is in my best interests.
Large-scale U.S. banks are going through the kind of altered-state changes that have shaken apart any semblance of confidence in their stated forward guidance. Their collective shareholders are cringing at the prospect of nationalization and the formidable background noise that government intervention continues to inflict. In turn, the most monstrous banks – in terms of both scale and prescient forward thinking – are now cutting lending.
The popular thinking on lending in this recession is that money should flow effortlessly to those that request it. But the structural problem with this thinking is that the root of the current financial malaise resides in this easy openness.
Tighter lending practices do not necessarily equate to higher misery indexes. The National Association of Realtors just reported a 6.5% jump in existing home sales. It may be helpful to repeat this, as a 6.5% increase in existing home sales nationally represents the beginning of a turnaround. Likewise, Pfizer’s acquisition of Wyeth is a representation of the kind of big-ticket M&A activity that can move markets – even in a tempered lending period.
Speaking of moving markets, E*Trade reported their 2008 Q4 results today – adding 97,000 new accounts and representing – according to Marketwatch – their “best organic account growth in more than five years.”
These are just three of the underreported beacons of our time.
The variable in all of this is found in the wellbeing of the nation’s gross domestic product. A recent survey by the National Association for Business Economics underscored a general pessimism with regard to America’s gross domestic product, but that was largely to be expected – as they tend to be a backward-looking bunch when it comes to the interpretation of data.
“Things will get worse before they get better” is one of the more irritating comments floating about these days, as it is the kind of offhand remark that requires an air of insightfulness to pull off and that smacks of something incredibly stale.
My son is ten years old and we are driving with his good friend. I ask them to tell me inappropriate stories because I want to better understand their definition of what is inappropriate and because I want them to have this small free moment – and while there is no shortage of material, one particular story stays with me.
The friend shares the story of a road trip he took recently with his parents and three older sisters. It was one of those long and dull drives that absolutely demands some broken rules. In an effort to make his sisters laugh, he decided it would be a hoot to push some methane gas from his lower digestive tract. His reward for the effort was a full-on bowel movement in his pants. After the shock and general hoopla that this unintended event understandably inspired, his father remarked dryly that the boy had become the family’s gross domestic product.
And so here we are now, taking in the fetid air – as it is explained and rehashed through numbers and through emotional images that this is the dosage to be taken in. And while the big banks recoil and the government postures and the news organizations spit out their observations and the consultancies curiously offer nothing and the consumers do not consume and the companies recalibrate and the markets present more confusion, it is helpful to remember this dirty gas and to find the high in it.
Tags: Bank Of America , Merrill Lynch , Recession , Banks , Home Sales , Pfizer , Wyeth , Finance , Economics , Recovery
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