It's Always Something

by Suzanne Stepan

Posted November 4, 2009

Current Observations

November Edition

Talent and Optimism

by Paul Sutherland

It's Always Something

by Suzanne Stepan

PDF Version

One of my all-time favorite comediennes is Gilda Radner who appeared in the late 1970s on NBC's Saturday Night Live. I especially love her extremely hysterical character, Roseanne Roseannadanna, who periodically gave editorial replies to current issues on the show's Weekend Update segment. In the article below, I provide a tribute to a special gal who always put a smile on my face. And while I do not look much like Gilda, we both shared a common belief on style, basing "most of our fashion taste on 'what doesn't itch.'"

Hello, and good whatever the time of day it is that you might be reading this. Welcome to the November issue of Current Observations. Here now is the top story:

I'm Suzanne Suzannadanna, and a Mr. Harvey Skooner from Manalee, New Jersey, sent me this holiday limerick that says:

Dear Suzanne Suzannadanna,
This holiday is depressing for me. I gotta stay home in Man-lee. My cash is low, My business is slow. 'Cause I don't understand those economists, you see.

Well, Mr. Skooner, I don't know you, but I know exactly what you're goin' through 'cause this weekend, I, Suzanne Suzannadanna, was just complaining. Yes, it's true. My head was a sayin' but my lips were not a movin', I'm depressed, I gained weight, my face broke out, I'm nauseous, I'm constipated, my feet swelled, my gums are bleedin', my sinuses are clogged, I got heartburn, I'm cranky and I'm worried I might have the swine flu! While I don't mean to make a you sick with my disgusting innuendos, Mr. Harvey Skooner from New Jersey, my two cents on your cash dilemma (full pun intended) is you need an understanding of slumps, bumps and downturns.

Those fancy-schmancy perceived ivy-leaguers like Alan Greenspan, Ben Bernanke, Bill Gross, Larry Kudlow, and I can go on and on, have big words like "recessiton" and "depression" to describe those economic smacks. While I, Suzanne Suzannadanna, am neither weakened nor wasted by the infirmities of old age, there is an old economist joke about those big words, and it goes something like this: A recession is when your neighbor loses his job, and a depression is when you lose your job. SERIOUSLY, who in their right mind would call this a joke? Is anyone laughin'? Economists! I'm with you Harvey, o-nay omprend-cay. Little hint: it's Pig Latin for "I don't get it either."

So, are you listenin' to me, Mr. Harvey Skooner? The difference between depression and recession is not well-understood by many, because the economists think it's some sort of a joke. Ha ha economists, nobody is laughin' at your joke. Honestly Skooner, there is no worldwide agreement on the definition of these words. Now if I, Suzanne Suzannadanna, asked 100 of those droll economists to define both recession and depression, I, Suzanne Suzannadanna, would get not a one, not a two, not a even a 52... I would get a 100 different answers. Ugh!

As my sweet Bubby used to say, "Like milk and honey, let's make it nice and easy." Moons before the 1930s Great Depression, any fall in money-making activity was considered depressing, so the economists termed the expression "depression." Then, in order to get fancy and to differentiate excessive downturns from relatively eensy-weensy downturns like those that occurred in 1910 and 1913, the term "recession" was coined. Simply, a depression is a recession that has a longer duration and a much broader negative effect on financial activities.

Society has heard the word recession a lot these days. The not-so milk and honey definition is when the gross national product (GNP) declines for two consecutive quarters. GNP is the total market value of all the goods and services produced by a country's residents no matter where they live in the world during a given period of time. Technically, when the U.S. economy is shrinking and producing fewer goods and services, that is when we are in a recession.

A depression hits once the real Gross Domestic Product (GDP) shrivels by more than 10 percent. GDP is the total market value of all the goods and services produced within the boundaries of a country. So, if you, Mr. Harvey Skooner (assuming you are a U.S. citizen), can make some cash from some overseas investments, that cash would be included in GNP but would not be included in GDP. And the value of the goods produced by the foreign-owned business on U.S. land by a fictitious Mahoode Shiradadod from a fictitious Indocamisia would be included in the GDP calculation, but not the GNP. Just remember this, Harvey, when you are cryin', it's a big deal, and you are in a depression. When you feel bad and your nose sort of sniffles but your eyes don't tear, then you are in a recession.

So, in 2009, it appears as though we have an extended case of the sniffles, and we are in a recession.

There is some encouraging news about recessions, Harvey Skooner. In recent years, the U.S. government has done a better job of managing recessions, so they have less of an impact on the average American and are over sooner. For example, according to the National Bureau of Economic Research, the six recessions that took place throughout 1919-1945 lasted 18 months on average, compared to the 10-month average since 1945. In addition, inflation tends to be lower during recessions, so the cost of all the things we buy doesn't increase drastically.

My advice to you, Harvey, is to find your happy place for the holidays. And if it's not one thing, then it's another. It just goes to show ya, it's always something. All fun aside, at FIM Group we do understand investing during diverse economic cycles. During a recession people tend to put their dollars toward necessities such as food and utilities, so it is important to have holdings that are resilient. In addition, it is important to look at a company's advertising. Find companies that have cash to advertise and understand how those advertising dollars are being spent? Companies that can afford to advertise will win consumers, and this helps their resilience. During a recession we need to maintain the "price always matters" philosophy, do our homework and not overpay for securities. In an economic slowdown earnings might decelerate or even become non-existent for many companies. We look for promising cash-healthy companies and are always patient with our prices paid.

Good day and have a pleasant tomorrow.