As I was driving from Escanaba to Batavia yesterday I listened to the radio. I heard a report that Goldman Sachs now believes we are either already in a recession, or will be shortly. These are the same folks who told their clients and others that subprime loans were a good investment, but now have to write off about $3.4 billion (according to bloomberg.com) because they were SO wrong. Now they expect us to believe them when they predict a recession? The market went up yesterday, apparently ignoring their pronouncement.
The market gyrations lately have been overreactions. The media stokes the fires and the traders overreact to the supposed news - most of which is rumor, or at best undigested raw facts.
Recession? When I graduated from college in the late 70s:
- Inflation: 13.5%
- Prime Rate: 18.5%
- Unemployment: 7%
I was watching the pundits after the New Hampshire primary and the only one who made any sense at all was Tom Brokaw. He said that we should all "take a breath" and quit speculating about Michigan and South Carolina. He's right - all this speculation (on the financial channels too) is just to fill air time. And, in the case of the financial media, it's costing us billions in evaporated market value because traders react (stupidly, but what else do they have to do?) to these pronouncements.
What happened to slowing down long enough to understand?