Warren Buffet (now worth about 45 billion dollars) has said that the recession is not over.
Not but a few days ago the powers that be said that the recession ended in June. Then the next day the Oracle of Omaha confidently stated that the recession is in fact not over.
Now before we all get to excited over the confusion I should mention that the 45 billion dollar man (that pays a low 15% tax rate as the richest man in the world next to bill gates. His secretary pays about 35 - 40%) did correctly disclose that he uses a different definition of a recession and a different definition of when a recession is over. He says measures must return to a level that are equal to the levels that were reached prior to the recession. This differs from the traditional definition which actually is quite subjective in nature but more or less goes like this; a recession is over when the economy starts growing again.
Government folk measure out put growth or GDP. So once the economy starts to expand rather then shrink the recession has ended.
So what should we think of this?
Well both sides of this contradiction are using different variables and measures. the government sees that the economy has started to expand and more importantly stopped contracting.
Buffet has given numbers from his company Berkshire Hathaway that support this analysis. He also says that the companies are only 1/3 - 2/3 of the way back to levels that they were before the recession.
Is the recession over?
Look I am not buffet and I am certainly not on the government payroll. But I do have a strange and elegant talent to visualize the way large, broad, systems function on the macro level. I assign variables as visual shapes that interact with each other and I play these sort of "mental model - what if scenario experiments" They tend to be more or less accurate for the most part. when they go wrong it is almost always because I have made a very large and fundamental error when visualizing what variables are at play.
So given that I have a good understanding of the economic forces that be, I have a clear idea of where we are.
Here it goes...
We are just beginning to recover from the recession. We are not well. if we were in grade school we would be requesting homework assignments because we are not at school.
If we are able to rest and stay put at home for the next year then we will be able to stabilize this thing with certainty. As of now there is a lot of risk, if we get disrupted (that is if we are to get hit with another economic problem) and are not able to get the rest that we need then you can rest assured that things are going to take a dive for the worst.
We don't have the physical strength to recover from a fever caused by exhaustion. We have already taken medicine so med's won't help, more stimulus could actually make things worst.
I have painted this picture before but instead we were using a car analogy.
I have to admit that when buffet shared his idea or thoughts on stimulus I was floating on air. It was as if he had read this finance blog, my very words, and my thoughts.
So let us hope that we are not struck with a financial bump, before we are able to get over the hump.
Buffet said that we are, and will recover. He said there was no doubt. I trust him.
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