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2007 All Over Again? Let Us Count The Ways (And Remember What Happened Then)

Tyler Durden's picture




 

Submitted by John Rubino via Dollar Collapse blog,

There’s a journalistic sub-genre that might be called “The Highest/Lowest Since XXX,” in which a reporter takes a current statistic and illustrates (often with snazzy charts) how it hasn’t been this high or low since some date in the distant past. This is a compelling theme, implying as it does that the connection between now and then makes the current situation more important or meaningful while providing context with which to judge current trends.

Unfortunately, these articles often miss the point of the whole context thing by not exploring what subsequently happened last time the stat in question hit that level. Here’s a good recent example from Bloomberg:

For the First Time Since 2007, Most Americans Feel Good About Money

For the first time since 2007, more than half of Americans, 52 percent, say their financial situation is “getting better,” a new Gallup poll shows. That’s up from a low of 29 percent three years ago.

American's finances

 

A third of Americans still say their finances are getting worse, Gallup says. But that’s a big improvement from the poll’s 2008 peak, when 49 percent of respondents said things were going south.

 

Millennials are the most optimistic of any group in the survey. Seventy percent of 18-to-29-year-olds say their financial picture is improving, up from 60 percent last year. Meanwhile, just 33 percent of those 65-plus are feeling better.

 

Not surprisingly, the wealthier you are, the better you feel. Of those making $75,000 or more, 65 percent say they’re doing better. For those earning less than $20,000, the number is 36 percent, though that’s up 7 points from last year.

 

The reasons for the improving mood include a rising stock market, falling debt levels, and a better job market.

What’s amazing about this article from an analytical standpoint is that while mentions in passing that the 2007 high in good feelings was followed by a low in 2008, it doesn’t connect the two numbers. This, it would seem, is the key piece of the puzzle: if the stat matters enough to be article-worthy, then a discussion of why it matters should be mandatory. And if its previous high was followed by a catastrophic low, the reason for this reversal should be the story’s narrative center.

So here’s what it means: Extreme optimism — whether in the form of stock valuations, consumer spending, or happiness surveys like the one mentioned here — tend to be followed by corrections because to get to an extreme point in a data series, extreme behavior is usually required. That is, a lot of really optimistic investment decisions have to be made to push financial markets to cyclical highs, and these kinds of moves tend to exhaust themselves and produce big moves in the other direction. Hence the 2008 low following the 2007 high.

If reporters got this, and asked the two obvious questions “what happened next and why did it happen?” these articles would contain a lot more useful information. But of course they also wouldn’t lead readers to borrow, spend and speculate, which seems to be the overall goal.

And while we’re on the subject of reporters not getting life’s cyclicality, check this out:

Wall Street’s 2007 Heroes Ascendant as Goldman, Blackstone Surge

 

Goldman Sachs Group Inc. and Blackstone Group LP were the toast of Wall Street in 2007 as they raised record-setting funds and earned returns of more than 30 percent. Eight years later, they captured some of that dominance again in the first quarter.

 

Goldman Sachs rode a rare increase in trading and more than $1 billion of gains from equity investments made with its balance sheet to post the highest earnings per share in five years. Blackstone, the largest alternative-asset manager, doubled first-quarter profit to a record.

 

Commercial banks’ margins remained squeezed by interest rates near record lows, leading to Wells Fargo & Co.’s first profit drop since the global credit crunch of 2008. Goldman Sachs’s return on equity, boosted by its highest post-crisis merger advisory revenue, topped Wells Fargo’s for the second time in the last four years.

 

“This quarter, they got some cyclical strength,” said Alison Williams, senior financials analyst with Bloomberg Intelligence. “The pick-up shows the opportunity still in these businesses, and supports the view that at the depths of last year, at least some of the weakness was cyclical.”

 

After posting losses in multiple years in the wake of the financial crisis, Blackstone has made steady progress culminating in last quarter’s record profit. It has benefited from the increased regulation on banks, entering new businesses and buying assets from financial firms.

 

Blackstone also gained from the rebound in the U.S. property market, as the real estate group reported a 99 percent jump in profit from a year earlier. Its real estate unit, already the biggest of its kind, has raised almost $15 billion in just four months for a new fund.

 

“All signs point to 2015 being a very big year for us and our shareholders,” CEO Steve Schwarzman, 68, told analysts and investors on a conference call Thursday. “I do not believe Blackstone is in any way at a long-term peak.

*  *  *

 

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Sat, 04/18/2015 - 15:39 | 6006822 Automatic Choke
Automatic Choke's picture

most comparisons since Lehman

 

Sat, 04/18/2015 - 15:46 | 6006833 Rory_Breaker
Rory_Breaker's picture

2007: 2+0+0+7=9

2016: 2+0+1+6=9

 

coincidence?

Sat, 04/18/2015 - 16:23 | 6006891 falak pema
falak pema's picture

That means that 2017 = 10 !

Reminds me of a movie made by blake edwards : 10 !

http://www.imdb.com/title/tt0078721/

What else ?

Sat, 04/18/2015 - 16:33 | 6006905 Stuck on Zero
Stuck on Zero's picture

Nine is a sacred number. So is 5.  And 1. And 3 and 6 and 4 and two and ...

Sat, 04/18/2015 - 17:32 | 6007021 ucde
ucde's picture

hahhahaha. nice.

Sat, 04/18/2015 - 19:59 | 6007383 Well Hungarian
Well Hungarian's picture

Ummmm...yes?!

Sun, 04/19/2015 - 04:59 | 6007977 chilli sauce
chilli sauce's picture

I freelance over th? internet and earn about 80-85$ an hour. I was without a job for 7 months but last month my paycheck with big fat bonus was $15000 just working on my computer from my home for 5-6 hours. Here's what i have been doing... www.globe-report.com

Sun, 04/19/2015 - 09:45 | 6008219 Mi Naem
Mi Naem's picture

Are the Tylers overwhelmed by the number and variety of internet attacks on their site,

too disinterested to coordinate an effective response,

or just pissing on the floor in their own house?

Sun, 04/19/2015 - 04:59 | 6007978 chilli sauce
chilli sauce's picture

I freelance over th? internet and earn about 80-85$ an hour. I was without a job for 7 months but last month my paycheck with big fat bonus was $15000 just working on my computer from my home for 5-6 hours. Here's what i have been doing... www.globe-report.com

Sun, 04/19/2015 - 09:45 | 6008218 Mi Naem
Mi Naem's picture

Are the Tylers overwhelmed by the number and variety of internet attacks on their site,

too disinterested to coordinate an effective response,

or just pissing on the floor in their own house?

Sat, 04/18/2015 - 15:43 | 6006827 seek
seek's picture

I think it's year-end 2008 all over again, not 2007. Tons of macro reports are coming n showing the same class of collapse, they're just better at suppressing the news and keeping the market juiced now, which is hiding it.

Sat, 04/18/2015 - 16:07 | 6006852 Thirst Mutilator
Thirst Mutilator's picture

They'll need to engineer it in a way that Hillary's 'ECONOMIC DREAM TEAM' promises all the solutions...

 

Obama's 'ECONOMIC DREAM TEAM solution was to take US Debt to 20 trillion and have the FED print itself a few trillion joobux...

 

http://www.doctorhousingbubble.com/wp-content/uploads/2013/04/fed-balanc...

 

I'm sure 'SOMEBODY' got rich...

Sat, 04/18/2015 - 16:55 | 6006959 negative rates
negative rates's picture

The problem with a dream is that it only works when you are asleep.

Sat, 04/18/2015 - 16:00 | 6006858 KnuckleDragger-X
KnuckleDragger-X's picture

Better at suppressing everything, which unfortunately, is not the same as fixing or stopping.....

Sat, 04/18/2015 - 15:51 | 6006843 FreeShitter
FreeShitter's picture

2008 on steroids.

Sat, 04/18/2015 - 15:59 | 6006853 Pitiful
Pitiful's picture

"If reporters got this, and asked the two obvious questions “what happened next and why did it happen?” these articles would contain a lot more useful information."

So where exactly is the useful information in this article? 

Sat, 04/18/2015 - 16:00 | 6006859 kchrisc
kchrisc's picture

Got God*, gold, guns, grub, and ground?

The banksters need to repay us.

 

* Not an endorsement or inducement. Substitute with another word that starts with "G" if need be.

Sat, 04/18/2015 - 16:07 | 6006864 MilwaukeeMark
MilwaukeeMark's picture

Twain said "history doesn't repeat itself but often it rhymes"
It's those rhyming words that worry me, like:
Violation and Annihilation

Sat, 04/18/2015 - 16:53 | 6006954 NoWayJose
NoWayJose's picture

The 2007/2008 collapse was driven by big banks and hedge funds being forced into liquidating their holdings. There is no reason whatsoever to think that ANY regular 'correction' is going to be severe - because the Fed has the market's back and everyone is trained to buy the dip. So earnings, technicals, fundamentals, etc can be tossed out the window. The 2007/2008 collapse was financial, and any meaningful future correction must either be financial or currency related - to the point of forcing over leveraged positions to be liquidated at any price. That said, there are plenty of highly leveraged one-sided bets out there waiting for something to go wrong.

Sat, 04/18/2015 - 18:38 | 6007198 geno-econ
geno-econ's picture

Problem  is it is all about bets and very little to do with investments.  Bets on mortgage and college loan securitization, sub prime auto loans, currency bets testing public debt limits and impact on commodity valuations.  One big Casino providing unproductive jobs for elitists until a credit freeze similar to 2008.

Sat, 04/18/2015 - 18:25 | 6007162 bid the soldier...
bid the soldiers shoot's picture

For me the most important event of 2007 was the beginning of the Recession in December.

Since 2008 was an election year, the Fed chose not to inform the people until  after the election in November 2008.

Imagine how much money would not have been lost if, in early 2008, the people had been told of the recession.

Sat, 04/18/2015 - 21:37 | 6007578 monad
monad's picture

So why is Paulson still breathing, soldier?

Sun, 04/19/2015 - 01:55 | 6007889 bid the soldier...
bid the soldiers shoot's picture

Paulson forgot to tell everyone when the recession began and when the MSM learned how bad things were in October 2008, everybody was more concerned with their 401(k) than they were with Paulson's bald ass.

If the recession had been announced in December 2007, when NBER informed the Fed, the Senate would have been filibuster-proof for the Democrats in 2009, so the Republicans owed Paulson for their obstructionism.

Sat, 04/25/2015 - 21:35 | 6030277 monad
monad's picture

I was more impressed by the NYC cops shooting abilities with those big handicap "go running man go" triggers.

Sun, 04/19/2015 - 07:44 | 6008074 d edwards
d edwards's picture

The PTB-0bamao and co. will keep the current charade going until election yr 2016, then look out!

Do NOT follow this link or you will be banned from the site!