Are You a Single or a Double Dipper?
Walking down Fifth Avenue recently, I couldn't help but be struck by the number of empty storefronts, particularly at this time of year. So much for those green shoots. Talk of an economic double dip is rising, as typically happens at the tail end of every recession. What backs up the argument for a double dip? Let's have a quick run-through of the major reasons:
- The government stimulus is limited in reach. Many experts argue that double the fiscal punch would have been needed to do more than merely prevent a depression (which we have, indeed, averted).
- Unemployment continues to rise, as corporate downsizing continues and stimulus programs wind down.
- Consumers are (still) tapped out. Already, we are seeing projections of holiday sales decreasing versus last year. With homes no longer functioning as ATMs, and job prospects uncertain at best, cash is tight in most households.
- The stock market's bull run is losing steam. For the last few quarters, it has built in little downside to an upwards economic trajectory. Couple that with a weak dollar and ever-increasing gold prices and... it just doesn't smell right. Robert Shiller's recent statements underline my view that this is not just another recession.
- Housing prices are still in negative territory. The fact that the latest Case-Shiller index has been used as evidence of stabilization is like congratulating a gambler on losing just $500 dollars instead of $2,000.
These same fundamentals, however, can be sliced and diced to support either point of view.
The more rosy perspective of the no-double-dip camp argues that:
- Government stimulus is just now starting to kick in
- Unemployment is a very lagging indicator
- The stock market is a great leading indicator, and
- Home sales are surging
The bottom line is that, human sentiment is a funny thing. If you think the world is going to end, you act like it, and your behavior has ripple effects in all that you do. Similarly, if you see the economy poised for a boom and expect your paycheck to follow suit, you will hire and spend more, thereby fueling the upward momentum.
In Manhattan, at least, sellers are confidently looking forward to a healthy Wall Street bonus season and believe that the worst is most definitely behind us. Buyers, on the other hand, remain wary of the future and still expect to pay below ask.
Fundamentals can often be influenced, if not overshadowed, by the self-fulfilling prophecy of what we believe will happen. -- For more of Ana Maria's views, visit www.theapplepeeled.com