I grew up with the most wonderful of wonderful grandmothers. Not only did I love her greatly, I respected her and her generation for all of their accomplishments through some very difficult times in history.
In a way, I felt a bit embarrassed by the lacking of my own generation. For the most part, it has been smooth sailing for the entirety of my 43 years here with many of those years filled with opportunity and success. There have been no world wars, no depressions, and no plagues to speak of.
Instead of having to walk 5 miles to work in a blizzard or suffer through a sweltering summer without air conditioning, I’ve lived relatively pain-free. It just hasn’t been as tough on us as it seemed be tough on Grandma and her generation.
At least that’s the perception.
If you dig a bit deeper, there may be more suffering going on in the U.S. economy than is really acknowledged. With the benefit of hindsight, I can see that there have been in fact many issues that may not be as glamorous as world wars, depressions or plagues, but have been nonetheless very challenging for the current generation.
Are We Worse Off?
Front and center for me is the idea that my generation will be the first generation in U.S. history to be worse off than the previous generation.
Whether true or not, I can attest to such a notion based on my own perceptions. For starters I am certain that the hundreds of thousands of dollars personally fed into the Social Security system will be all but squandered by the time I reach retirement.
What about the current housing crisis and credit crunch we are experiencing today?
Asset values are disappearing before our very eyes led by home prices falling, but following not far behind are stock market values. It is as bad out there as we have ever seen, maybe ever seen.
The one big difference is that with my grandmother’s generation, the pain was always followed by a…</> gain. The one thing that could always be counted on was an improvement in quality of life. As I mentioned above, that is not necessarily so today, and that fact alone is why this market is acting so stubbornly bearish (see also, “You Still Need Stocks, Just Not the Headaches!“)
Time for a Rally
Like others on a day after a major bank failure and government intervention with respect to Fannie Mae (FNM) and Freddie Mac (FRE), I expected the market to rally hard (see also, “Fannie Finally Gets Off Its Fanny?”
If there were ever a time to say oversold or the stock market was due for a rally this is it. We have a major negative event combined with a level of selling that would seem to indicate capitulation. In fact, earlier this month I delved into this topic in “Stock Market Capitulation.”
Unless of course, the view on the Street is that too many people are calling for a stock market bottom for this to really be the bottom. Perhaps, but I am more troubled by the fear of the future permeating the market.
IndyMac, as badly managed as it is succumbed after a run on the bank. In the absence thereof IMB may have survived. In the wake of the IMB news, stories are now circulating of more bank failures. It really is a classic psychology run. Are we really that gullible? Will we all now run to the bank withdrawing our funds?
The market is telling us that we will. The entire banking sector is down another 6% as I write this piece. The carnage is devastating with a risk of becoming a self-fulfilling prophecy.
Hope Springs Eternal
Or will it be the beginning of a new day filled with new hope.
I’ll take the latter. Despite the feeling that our generation has less chance of improving our lots in life, such a economic perception is overly pessimistic. Progress and improvements are for the most part guaranteed results of capitalism.
The last I checked, capitalism still ruled. That means we can expect progress and opportunity to continue just as it has over the last 100 years or more.
It may seem like we are having a tough go of it and we are, but this still pales in comparison to what my grandmother’s generation endured.
I hate to say it, but I think Phil Gramm had it, right by saying there is way too much whining going on. I have faith that if this is not the bottom, we are very close.
There are way too many cheap stocks to buy and own for this to continue much longer.
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