The Economic Recovery... Or Lack Thereof

We’ll start today by heeding some good advice:

“I urge you to remove the word ‘consumer’ from your lexicon,” James Howard Kunstler told us at the Investment Symposium last month. “It’s degrading. It suggests we have no duty to our fellow man.”

While the media have trained us to toss the word around with little concern, we’re going to make it a point to take on JHK’s advice, especially today. “Consumer” has this ring to it… as if we were pigs bouncing around in a pen, waiting for nothing more than the next slop bucket to come by. Americans — despite frequent evidence to the contrary — are smarter than that… just check out the latest Gallup poll:

The average Joe is usually a lousy stock picker, but the overwhelming majority of people can see the economic forest for the trees… even though the government and the media are bombarding us every day with recovery hopes and “green shoots.”

“The head winds against the U.S. economy are pretty stiff right now,” Addison Wiggin told Fox Business News yesterday. “They really aren’t heartwarming toward individual investors. If the unemployment rate continues to rise, and we expect it to go from 12-15%, you can expect the savings rate to spike even higher and retail spending to go down, and we don’t have anything to replace that.

“The government keeps looking for the economy to ‘get back on track’ — buzzwords we’ve been hearing for 18 months now. But the economy was not on the right rack in the first place — we were spending more than we were taking in and speculating on paper assets. That’s not a recipe for a prosperous society.”

“I fail to see how anyone can get excited about an economic recovery,” adds Chris Mayer, “when the nation’s banking system looks like Napoleon’s Grande Armee on its way back from Moscow. It is taking heavy losses — already 74 bank failures this year, and many more are on the way. My own guess is that bank failures will run well into the hundreds before this is over.

“The familiar past is always a good starting point to make a guess about what the unfamiliar future will look like. And so, if you look back at the big S&L mess, you see bank failures topped 500. See this chart below:

“That seems like a good round figure for a guess this time around too. This bubble was much bigger than that one. Another interesting point to note about that chart above is how long it took for the crisis to unfold. It’s like a Tolstoy novel. So again, I don’t see how people get so worked up over a recovery.

“We just saw a huge bubble pop, and it’s not going to be all better with a little spit and a Band-Aid. This is going to take some years to work through.

“As an investor, then, it would seem to be bleak. However, the market is a great creator of opportunity. It’s just that the opportunity doesn’t always come back to the same nest every year.”