The Boom: How Prosperity Is Reshaping the American Economy
A classic cover indicator, now 9 years old, via Business Week.
Dated this February 14th 2000, it was a mere month from the ultimate top:
Time to celebrate. This month, the current economic expansion became the longest in U.S. history. The boom has done more than create millions of new jobholders and stock owners. It has also restored the public’s confidence and given more people than ever a shot at the American Dream. We tell the story
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Sources:
How Prosperity Is Reshaping the American Economy
Rich Miller, Laura Cohn, Howard Gleckman, and Paula Dwyer
BUSINESSWEEK: FEBRUARY 14, 2000
http://www.businessweek.com/archives/2000/b3668001.arc.htm#B3668002
The Risk That Boom Will Turn to Bust
Michael J. Mandel
BUSINESSWEEK: FEBRUARY 14, 2000
http://www.businessweek.com/archives/2000/b3668001.arc.htm#B3668019
The Boom
BUSINESSWEEK: FEBRUARY 14, 2000
http://www.businessweek.com/archives/2000/b3668001.arc.htm
February 14th, 2009 at 11:12 am
I guess we should watch for the cover with “BUST” on it.
February 14th, 2009 at 11:45 am
Yeah, the sooner breaks out “The Bust” cover story, the better….
February 14th, 2009 at 11:59 am
given the number of magazines and their frequency of publication wouldn’t one expect to find one that has a “well timed” cover story? where is naseem when you need him?
February 14th, 2009 at 12:05 pm
Don’t wait for any Cover Stories. Now is the time to batten down the hatches. I think most people in this Country have a gut feeling that something is terribly wrong. Our “Problem Tree” is growing much faster than we have the intelligence or means to resolve.
IMO, interest rates and inflation will soar (think late 70s & early 80s) in the next few years. The USD and the US Treasury Market will crater just like the Stock Market is on the precipice of doing.
The only money we have received in the past from foreign investors has been our own money reinvested by its new owners. We no longer have the means to continue our insatiable appetite for the fanciest cars, latest gadgets and geeh whiz stuff. We will be working our butts off just to keep our heads above water. As a result, the foreign money will not be coming as in the past without a significant enticement in the way of higher interest rates.
Lock-in a low fixed rate on all of your debt and pay it down as quickly as you possibly can. Yes, you could choose to not pay it down hoping to pay it down with cheaper Dollars in the future; but, you may not have the means to do so if you lose your job or health some time in the future.
Don’t assume the Governement will bail you out. By that time, the Government will be overwhelmed and will not be bailing anyone out other than the Federal Government and trying to fight off bankrupcy itself.
Hunker down now while you can.
It is going to be a rough future for the US both financially and socially. Sorry for such bad sentiment; but, I can only hope I am wrong. If I am, that will be a wonderful surprise. That’s my 2 cents worth.
February 14th, 2009 at 12:18 pm
BG – i’m no economist (although I sometimes play one on the internet) so i have a hard time understanding how one can have inflation when there is global overcapacity of everything except cash (i mean real money not credit). if you are talking about some future time when the credit deflation we are in right now is over can you put a time frame on your call?
February 14th, 2009 at 12:38 pm
Barry, what are your thoughts about market direction now? It looks like the market is on the verge of yet another serious plunge.
February 14th, 2009 at 1:11 pm
Mark,
The Fed will continue to fight deflation (wealth destruction) until our currency is totally worthless. As far as a time frame, I hope it is after I am already dead.
February 14th, 2009 at 1:14 pm
@mark
Textbook definition: Inflation occurs when the rate of the money supply is greater than the rate of growth of the economy. (Bush economics was the “guns and butter” speech revisited + bailouts = huge inflation backlog, when it will kick in it should be nasty)
February 14th, 2009 at 1:34 pm
Thanks, Barry. As classic as the “Death of Equities” cover on the same rag in, What? 1979? With the Dow at 800, give or take?
February 14th, 2009 at 1:47 pm
“Business Week” is just another flavor of Prole Feed–the vast majority of McGraw-Hill is a lame joke..
The ‘MainStream’ is, but, a slow, stagnant River heading toward a Waterfall–not oxygenating Rapids.
February 14th, 2009 at 1:48 pm
I do love academics….from the second article by Mandel:
“Today, most economists believe that appropriate monetary policy can keep any slowdown in check. The banking system and capital markets, they say, are strong enough to absorb even severe shocks. “We could be surprised and have a serious recession,” says Frederic S. Mishkin, a Columbia University economist and former research director for the New York Fed. “But what I don’t see is the kind of situation where the financial system seizes up.” Adds Temin: “A great depression like the Great Depression we had before is impossible.”
So keep this in mind when they trot out the next academic from Columbia, or Stanford, or Podunk…
I was a clinical professor in salt mining for 15 years, and discussions with full time academics…at times you just wanted to say shut your pie hole and use some common sense…
February 14th, 2009 at 1:54 pm
Bruce,
most ‘Academics’ have had their faculties impaired by Laser-toner toxicity–due to lack of exhaust fume inhalation.
IOW, they have little, to no, *Real World experience..
http://www.thefreedictionary.com/Faculties
February 14th, 2009 at 1:57 pm
Updated version:
The {boom} bust has done more than create millions of new {jobholders} jobless and stock {owners} victims. It has also {restored} destroyed the public’s confidence and {given} cost more people than ever a shot at the American Dream. We {tell} missed the story.
February 14th, 2009 at 1:57 pm
Reinflate the bubble.
Long live the bubble!
February 14th, 2009 at 2:00 pm
Suspending foreclosures is a really desperate measure and says everything we need to know about where we are.
February 14th, 2009 at 2:03 pm
BG and froglips:
hasn’t japan been doing this for close to 20 yrs now? ZIRP and huge stimulus packages. where is their inflation?
February 14th, 2009 at 2:25 pm
and in the bust, how can we forget:
Sub-prime is a small part of the market and will be contained..
The recovery will begin in the second half of 2008..
The recovery will begin in the first half of 2009..
The recovery will begin in the second half of 2009..
The recovery will begin in the first half of 2010..
Greenspan took rates down too low and kept them there too long..we’ll never make that mistake again.
It is not a deleveraging problem..as with all recessions if you provide liquidity, you will fix the problem..
…the take home message: it’ll be over when it is over…Nostradamus is long dead, and our own present day crackpots don’t see the future any better than he did..
February 14th, 2009 at 3:32 pm
There is one other bit in the Mandel piece that I like very much…
PERVERSE POLICIES. Another problem: It is often not obvious in the early stages of a crisis just how bad things will get. After the October, 1929, crash, for example, it took a year for businesses and policymakers to realize that the economy was not going to bounce back.
Fog of war, gang…let’s say that this really started when Ben and Paul went on tv (September) and told us the world would end without bailout I…
then a year from then is September 2009…
..just keep your powder dry.
February 14th, 2009 at 3:54 pm
How is Jerry Bowyer’s book, “Bush Boom” doing these days? Still selling for a penny on Amazon?
Oh yeah, that’s right, but being wrong doesn’t matter in the bizarro world of the MSM, in fact, it’s a trait they seem to prize quite richly, considering the fact that he still appears on Sir Goldilocks’ show and writes a column that appears in the WSJ from time to time.
February 14th, 2009 at 4:16 pm
It’s quite simple…the “global synchronized boom” had to be followed by the “global synchronized bust.” But anybody warning about it at the time was called “all gloom and doom.”
February 14th, 2009 at 4:34 pm
@Steve Barry: Correction: Anybody warning about it is STILL being called “all gloom and doom”. Some still don’t want to hear the truth.
February 14th, 2009 at 4:47 pm
@Mannwich: Correction: Most still do not want to hear the truth. ;
February 14th, 2009 at 7:14 pm
The only way we have runaway inflation is if the Stimulus and TARP plans actually work.
February 14th, 2009 at 7:33 pm
Barry and others,
I have to STRONGLY disagree with your premise. The magazine cover indicator does not hold thru because on 9/11/2001, we had a Black Swan type event. 9/11 occurred right around a recession that probably was going to be mild and corrective without the events of Sept 11. After 9/11, we decided to lower rates for borrowing, lower credit standards, get into a war, get into another war, the housing bubble, oil bubble, etc. We had a very small, easy to put out fire (the mild recession that would have been if not for Sept 11). The war on terrorism added a helluva lot of fuel to that fire. If ever you could say a magazine cover was just purely coincidental, I think this was it.
Now other mag indicators such as the famous one recently “Home Sweet Home” were definitely more of an indicator. Maybe its just me, but I think this big economic pain we are experiencing started more with the events of 9/11 than due to the boom of the 90’s.
February 14th, 2009 at 8:01 pm
to investorinpa:
I think this is referring to the large drop that happened in March 2000, well before 911, but one month after this cover.
I recall it well as I was laying in a hospital bed in Houston after a little heart surgery watching the news with my dad. We drove by Enron Field on the way from the airport to the hospital as I recall. Those were the days.
February 14th, 2009 at 9:28 pm
The only way we have runaway inflation is if the Stimulus and TARP plans actually work
————
If capacity and production dwindle at an accelerated pace amid governments sending out checks, you’re going to get inflation. I think we’re going to see a lot of outright liquidations.
Right now people have trouble understanding how the governement is going to get money into the system but it’s easy and there are signs. Here in Canada, our government has been announcing sitmulus checks left, right and centre. Perfect example: billions for retraining programs. Great. People getting paid while producing nothing.
If you want to bet on continuing deflation, be my guest but for me deflation is my best case scenario. Rampant inflation the other hand is my nightmare.
Here’s my rationale… Who’s the biggesy debtor? The US government. Who wins with inflation? Debtors = the US government. Would I bet against that machine? I’ve never heard of a country that could not produce inflation when it served its purposes. Come on, France managed to do it, Zimbabwe perfected it, how could America the Great not accomplish such a feat?
My guess is that America is still so full of itself that it will generate inflation thinking it will be able to stop it when it wants to.
February 14th, 2009 at 10:03 pm
And here’s something out of the annals of Fortune from 2006 for amusement …
http://money.cnn.com/magazines/fortune/fortune_archive/2006/03/06/8370659/index.htm
February 14th, 2009 at 11:39 pm
The tenth anniversary edition … ‘Boom, how declining oil supplies blew up the world’s financial system and economy’.
February 15th, 2009 at 3:10 am
V:
That article is actually very correct on a micro-basis…in practice, it blew up on a macro-basis, because for every company that was underleveraged, there was a bank leveraged 30 to one.
Two more theories I learned in Finance…if a company’s stock price is overvalued, management makes stupid decisions (see banks, tech companies)…and a company’s complexity can be measured by the number of pages in its 10k.
February 15th, 2009 at 7:49 am
I subscribe to Business Week. I look forward to the cover “Will Stocks Ever Come Back” or Death to Equities” It will be time to go all in again. My wife is upset with our lumpy mattress, hopefully that cover comes soon.
February 15th, 2009 at 9:10 am
mark asks: I’m not a traditionally schooled economist either. I’m schooled in Construction & Graphics – separatly not combined.
I see inflation getting a foot in the door (you mentioned “I mean real money not credit”) … look past money and think what money buys .. items you need to survive .. the providers of those basic needs have rein in this current situation. If there is/was a free economy without “to big to fail / to big to fight” monopolies then inflation has an enemy.
Machine propulsion fuel is a big one. Food, coal, oil, uranium.
E Says: “we have runaway inflation is if the Stimulus” works.
Hum – that seems to be the battle line of the 2009 Elected Lobbys … More destruction or else your worthless .. beware VS. Save Us .. beware.
This whole post of mine is why this issue is so Americas Jihad. My issue is with rule changes mid game that favor one team over another. My education on this site has me in the camp of the joe6packs who work for the industry captains.
What a touchy feely mess .. rule changes make .. made mid game.
investorinpa – reminds me of the 9/11 factor.
danm – woke me up to not get tired .. juiced .. complacent .. again.
February 15th, 2009 at 9:23 am
http://www.pbs.org/moyers/journal/02132009/watch.html
From CR…don’t watch this if you’ve eaten…
February 16th, 2009 at 9:39 am
Another classic!
Pricing in a Bush Presidency?
New York Times, July 9th 2000
“Stocks sold off again today as the markets is pricing in the likely impact of a George W. Bush presidency.
Since Bush has emerged as the polling leader in March, stocks have been hit hard. The NASDAQ has fallen 37%, while the S&P500 and the Dow are both down 20%, placing equities squarely in bear market territory.
Various Wall Street strategists have expressed concern regarding how a new set of Bush monetary and overseas policies could impact equities.
“My biggest concern is that the promised Bush tax cuts will be in extremely expensive. That would create huge deficits and be extremely inflationary” said Peter Leslie, a trader on the CBOT floor.” Governor Bush has promised to reduce captial gains and dividend taxes, and lower the marginal rates on the nation’s biggest earners. He has not explained how these tax cuts will be funded.
Maverick Capital fund manager Henry Carlyle is more concerned with government spending than Tax cuts. The Dallas resident stated “I have followed Governor Bush in Texas, and fiscal discipline is not his strong suit.” Cabot expects a big increase in federal spending and budget deficits that will have ramifications for both inflation and an interest rates.
Vanguard chief John Bogle is more concerned with a lax regulatory environment: “A return to the sort of crony capitalism that we’ve seen in the past would wreak havoc with investor confidence. We need a strong SEC to make sure companies are transparent, and report their accounting fully and fairly. We should not throw the individual investor to a wild and woolly free market that is totally lacking in supervision.” The Vanguard chief has long been a proponent of a strong regulatory environment for the protection of individual investors. “I do not see that sort of regime under a President Bush.”
Robert Rubin, the Treasury Secretary under Presdient Clinton who retired last year to join the Board of Citigroup, focused on the Federal Reserve. “The next president needs to make sure that the Federal Reserve fulfills its obligations as bank supervisor. I am concerned that Governor Bush, as President, would move away from strict regulation of markets for ideological reasons.” Rubin, a Democrat, warned of negative repercussions for the housing and financial sectors. “[Since joining Citigroup], I have been looking into the issue of derivatives. This is another area that requires close scrutiny from both the Treasury Department and the Federal Reserve. I see Bush lacking expertise in this crucial area.”
Goldman Sachs chief investment strategist Robert Hormat, was even blunter in his assessment of a Bush Presidency: “I am looking for a market crash as a reaction to the election of George W. Bush. Investors should brace themselves for losses of 50% or more — and even worse in the Tech sector — should he be elected.”
Legendary legendary oil trader T. Boone Pickens is more optimistic. “We should expect several military conflicts in the Middle East under President Bush (this was pre 9/11!), and while this may not be great for the economy it will be terrific for my energy holdings.” If Bush gets elected, Pickens plans on opening a new oil based hedge fund, and is forecasting 100% increase in the price of oil to $40. “I’m an Oil, George is an Oil man, and his VP DIck Cheney is an Oil man. I expect energy returns to significantly outperform equity markets over the next eight years” he said.”
February 16th, 2009 at 11:00 am
ENOUGH! with the cover story contrarian indicators. Yes there is a slection bias in place as everyone remembers the ones one got it wrong blah blah.
Pah-leease enough. I suggest you read “The Crash”–the NY times nailed the crash only a few months before it, the WSJ and Barrons did not. Later, Barron’s changed its tune, and still got people on the right page before the second leg.
The parallels between then and now are amazing–no not all the same, but amazing. I’m in the process of compiling a time-line from the book with what happened then and now, what’s different and what’s the same [some are good, some differences bad, IMO]. If interested I’ll send it your way.