Watch #5: Fat Bottomed Recessions
by Jerald Cumbus (JCMach1)
...Are you gonna take me home tonight
Ahhh down beside that red firelight
Are you gonna let it all hang out
Fat Bottomed Girls you make the rockin' world go round
This week Commerce Secretary Donald Evans said of the current
Recession that we are "a
little closer to the end..." For the first time
in a long time, this columnist can agree with an official
of the Bush administration about the state of the economy.
I would differ with the Secretary over the type of 'end' it
Stephen Roach of Morgan Stanley warned
this week of the possibility of a Double Dip Recession.
"The last so-called "double-dip'' - or false-start recovery
- occurred during the 1981-82 recession, when the economy
grew for one quarter on two separate occasions, only to twice
fall back into a contraction before pulling out of recession."
However, I believe that this recession will produce something
similar: a fat bottomed recession. A fat bottomed
recession differs from a double dip in that it forms two distinct
bottoms (cheeks) of particular depth and length. Between
the two parts is a short rise forming the separation between
the two halves.
Speaking of bottom heavy, Ford announced this week that it would cut 35,000 jobs and
close 5 plants. Also, they will eliminate complete
lines such as the venerable Lincoln Continental and the Mercury
Cougar. During the 1990's because of their success in
the van, truck, and SUV market, Ford did very little to forward
innovation. Now, however, with increased competition from
companies such as Honda which announced HEV version
of the popular Civic. Another rival, Toyota also announced
an HEV version of their popular Rav 4. Ford is facing
stiff competition in the coming years.
Allen Greenspan also offered support for the fat
bottomed recession theory when he stated in his first speech
of the new year that he "sees significant risks that the recovery
beginning may not endure." The only real hope which the Chairman
of the Federal Reserve seemed to be offering was when he touted
"the extraordinary pace of inventory liquidation as setting
up the chance for production snapback." The setup is similar
double-dips, consumer and business demand for goods fell just
when manufacturers had succeeded in clearing inventory shelves
and were gearing up for new production. The drop in demand
prompted manufacturers to cut back on production again, sending
the economy into a second downturn.""
As all of that were not cheeky enough, the Depression Watch Economic
Depression Indicator changed very little and now rests at
61.45 (-0.08). Not yet a Depression, but we have yet
to hit bottom.