Was 2009 a Stepping Stone on the Road to Recovery?
Roger L. Johnson CFP
We went through a painful recession going into 2009 that according to most economists ended in the summer. The effects of the great recession will be felt for many years. Is the worst over, and when will we see a continuing recovery? There are differing opinions on the answer to these questions. We will look at a couple of the perspectives.
The stock market had losses in excess of 50% and has made a partial reversal.The perspective of the skeptics is that the rally has no legs and they may have a compelling argument. The employment outlook is the worst in three decades and the jobless rate is around 10%. Housing activity and prices are still depressed from their earlier peaks and will most likely remain near the lower end for some time. The credit market is still tight and the debate is centering on whether the financial institutions are using their new-found income after TARP relief to pay back the Government and dole out large bonuses to upper management, rather than focusing on extending credit to Main Street for stimulating the economy and helping small businesses create jobs. Consumer spending makes up two thirds of the GDP and with a shaky job market, tight credit, household debt remaining high and low housing prices, consumer spending may continue to be weak.
Value line in their December 11th Economic and Stock Market commentary has a more positive perspective noting that we have seen a pickup in activity during the third quarter. Even though small, this may be the initial step in a long recovery process. The evolving recovery is likely to be in its early stages. They think that GDP growth will range between 2%-2.5% during the fourth quarter and hold at this modest level through 2010. It is believed the declines in housing activity and employment may hold growth to modest levels until 2011, when a more vigorous business expansion may begin, and a stronger and more sustainable economic upturn should follow.
Perceptions often motivate our behavior, so I would like to share the story below:
The scene, a Washington, DC metro station on a cold January morning in 2007. A man with a violin played six Bach pieces for about 45 minutes. During that time approximately two thousand people went through the station, most of them on their way to work. After three minutes, a middle aged man noticed there was a musician playing. He slowed his pace and stopped for a few seconds and then hurried to meet his schedule.
Four minutes later: The violinist received his first dollar; a woman threw the money in the hat and, without stopping, continued to walk.
Six minutes later: A young man leaned against the wall to listen to him, then looked at his watch and started to walk again.
Ten minutes later: A three-year old boy stopped but his mother tugged him along hurriedly. The kid stopped to look at the violinist again, but the mother pushed hard and the child continued to walk, turning his head all the time. This action was repeated by several other children. Every parent, without exception, forced his or her children to move on quickly.
Forty-five minutes later: The musician played continuously. Only six people stopped and listened for a short while. About 20 gave money but continued to walk at their normal pace. The man collected a total of $32.
One hour later: He finished playing and silence took over. No one noticed. No one applauded, nor was there any recognition.
No one knew this, but the violinist was Joshua Bell, one of the greatest musicians in the world. He played one of the most intricate pieces ever written, with a violin worth $3.5 million dollars. Two days before, Joshua Bell sold out a theater in Boston where the seats averaged $100. This is a true story. Joshua Bell playing incognito in the metro station was organized by the Washington Post as part of a social experiment about perception, taste and peoples’ priorities.
The questions raised:
* In a common environment at an inappropriate hour, do we perceive beauty?
* Do we stop to appreciate it?
* Do we recognize talent in an unexpected context?
One possible conclusion reached from this experiment could be this:
If we do not have a moment to stop and listen to one of the best musicians in the world, playing some of the finest music ever written, with one of the most beautiful instruments ever made … how many other things are we missing?
The views expressed are not necessarily the opinion of Royal Alliance Associates. Investing is subject to risks including loss of principal invested.
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