Tuesday, April 29, 2008

The Economy by Any Other Name......

So—Are we or are we not in a recession? Like many issues having to do with anything financial, it depends on whom you ask.

Our President says we are not in a recession. Times are hard, but…(The less said about that and the rather discomfiting news conference earlier today, the better. ) Many economists think we are, indeed, in a recession and at least one financier went so far as to allude to “depression.”

Why can’t anyone agree whether we are in a recession?

As respected economist Bernard Baumohl, Managing Director of The Economic Outlook Group, based in Princeton, NJ, explained, “The main reason you are not going to get any agreement whether we are in a recession right now is that none of the pundits can officially declare it. The group that formally declares whether the economy is in a recession is a group of academic economists who are part of a non partisan organization called the National Bureau of Economic Research based in Cambridge, Mass. Led by Martin Feldstein, they might get together at the earliest in the Fall, more likely at the very end of the year when all of the economic data has been revised and updated. They will then look back at what happened from the end of 2007 and what took place in 2008 and make an official declaration as to whether economic activity in fact contracted. They are the official arbiters—the referees on the economy.”

But can a recession be determined only after it has ended?

Baumohl believes that “employment numbers are bad enough to suggest that we are in a recession. We now have at least three months of net job losses from payroll numbers so far this year. The payroll numbers include government hiring, which I don’t like to include because the government doesn’t really care about profit and losses—they’ll hire whenever they need to hire people—so I take a look at the part of the jobs report that focuses only on hiring and firing in the business sector. That’s one of the more important economic indicators for me. The others that are critical are industrial production (and if that’s shrinking, that’s certainly an indicator), consumer spending and housing. So there are a lot of things we need to consider. I know the common definition people use to define a recession these days is 2 consecutive quarters of negative growth. But that’s one of those ‘finger in the wind’ definitions.

The recession, in my opinion, most likely began in December, and will probably last through the second quarter. That’s based on the economic evidence we are getting. Having said that, on Wed., April 30, we will get the first quarter GDP. That’s the first set of numbers for 2008. So we’ll see right then and there whether there’s negative growth.”

How would Baumohl sum up things right now?

“I think there are just enough economic indicators to tell me that this economy is in real jeopardy and there’s probably a recession underway right now. It certainly feels like a recession regardless whether it is one technically or not. Most people are not going to be able to tell whether we are in a recession or not. It still is going to feel awful for most Americans if the economy grows by 1% or whether it shrinks by 1%. It’s going to feel essentially the same.”

In other words, a recession by any other name would be very painful.


Princeton Junction, New Jersey 08550

Friday, April 25, 2008

Spend, Don't Save

So let me see if I have this right--- Interest rates are so low because, even though, as a population, we have always been nagged about not saving enough, we are now not supposed to be saving. The line now is spend, spend, spend. The government wants us to buy. Hence those tax rebate checks. But what can we buy if we can never save? A house? Not anymore. More likely that ballpark G will go to the 2 g’s--gas and groceries.
And if we just keep spending, buying, consuming, stuff that really won’t hold any value, then what will happen if we are suddenly faced with an unexpected life change—it does happen—usually just when you think everything is hunky-dory.
Talk about mixed messages. Cut interest rates so people (oh, and businesses) will borrow and/or spend, not save. Then give the people a tax rebate so they, for some reason, feel flush and go out and spend more. (Reality—that rebate is long gone, baby) Maybe we are now supposed to follow the example of the government and rack up a big deficit.
It seems as if that has already been happening. The Federal Reserve states that revolving credit increased at an annual rate of 6 percent, meaning we have been sliding our credit cards through those MSRs (magnetic stripe readers) quite a lot.
Revolving, or open-ended credit is an agreement by a bank to lend a specific amount to a borrower, and to allow that amount to be borrowed again once it has been repaid. http://www.investorwords.com/
According to the Federal Reserve Bank of San Francisco, open-end credit is a line of credit that may be used repeatedly up to a certain limit. (Also called a charge account or revolving credit.)

The key words here are “again” and “repeatedly” Think “revolving doors”—the kind that can turn so fast and for so long that you never know what hit you until you're flung out onto the walkway with your head still spinning.

(To ease some of the pain, while there is a time lag from when the Fed cuts rates, it does pay to call your credit card issuer and ask about a reduction in the rate you are charged, particularly if you have been paying on time.
In any case, a straightforward site to read about credit cards in general and how to avoid the quagmire that so often ensues, is
http://www.federalreserve.gov/Pubs/shop/ )

Monday, April 14, 2008

Descort over Escorts

Here is something that I have wondered about whenever I have to look up something in the Yellow Pages that happens to fall alphabetically somewhere in or near the “E” section.

It has seems a little strange that anyone can pick up a copy of the Yellow Pages, Yellow Book, most any business directory, whatever the color, and find a category named……………Escorts.

Go ahead. Look it up.

Or go online to Yellowpage.com . Type in Escort Services. I ask, who is kidding whom here? Typing in NYC 10021 here are some of the names I found:
“ Adorable Centerfold Escorts.” “Rock Star Escorts. “ And, in homage to the Al Pacino film, I guess, “Scent of a Woman.”

The list gets more entertaining: USA She Males, Tokyo 25, Victorias She Males, The Relationship Center, Young College Girls, Oriental Delight, “Oriental Delights” “Oriental Delight Toll-Free Dial 1 & Then…”

But let’s look at other locations:

Orlando, FL
“Wicked Ways.” “A Touch of Class” (usually when this is the name it has none. )“All Executive Service” Robertson Brothers (?) And the twelve stepper’s “Sober Escorts, Incorporated.” Even when the business is named “A Absolutely Discreet Desires.” As Spitzer found out, it's not so discreet after all.

Oklahoma City, OK -- “Asian Baby Dolls” (paging Stabler and Benson), “Hot Little Hotties” (Again—let’s get Olivia and El), “40 & Fabulous” “About 40 & Over” (evidently anyone over 40 can still be in demand in OK City) “Well Built” and “Blondes, Brunettes & Redheads’ and “Hot Housewives” “Latin Temptations” “Petite Treats” “Upscale Blondes”

LA— No surprises here----“Caligula Productions-- Exclusive Male Escort - American Express Accepted.” Good to hear that.
“Have You Been a Bad Boy”, “ICM Media” (I wonder if ICM knows about this?)

Boise, Idaho --“Slender and Sultry” “Ancient Thai Massage” “Boise Motor Escort” I have no idea what that one means. Don’t think I want to know.

You get the idea. Why can’t we just be honest here and say what is going on here?
It exists but we don’t want to know about. It is there but let’s not look too closely. This has nothing to do with Eliot Spitzer. Almost nothing.

I wondered if the companies that publish these advertisements have any thoughts about, well, the legitimacy of these services. So, I wrote and asked two of them:

What criteria must advertisers meet before they can advertise in the Yellow Pages?

How do you determine if a business is legitimate? Or if it is in violation of some law?

Thank you very much

One reply came back:
Thanks for contacting YELLOWPAGES.COM.
A representative will contact you as soon as possible.
If you have any other questions or concerns, feel free to contact our customer service department toll free at 1-800-343-7390.

I never heard back. If and when I do, I’ll let you know here.

Thursday, April 3, 2008

An excellent economic explanation

For a look at how we are frequently being "Fooled By Randomness" and the theory of "The Black Swan,"
Go to

Thank you to Nassim Nicholas Taleb for these theories and thanks to Eric Gelman for the timely and clear article.