Tuesday, October 07, 2008

Bull vs Bear, recessions, depressions, and other definitions

There isn't anything in this post that is new. If you already know what a recession is (or are aware of the art of google-fu), this will bore you.

Bull Market - The general economy and stock market are doing well. To feel bullish, is to have optimism that something is going to perform well, be it individual stocks or the broader economy as a whole. Bull markets experience good growth, easily above inflation.

Bear Market - The general economy and stock market are not doing well. To feel bearish, is to have a belief that something will not perform well, be it individual stocks or the broader economy as a whole. Bear markets experience poor growth. The key indexes will often trend downward or sideways (stagnate). A bear market does not equal negative economy growth though. An economy can still be growing, but not well enough for stock prices to rise.

Recession - Negative growth in the economy. This is often measured by the growth of our gross domestic product (GDP). If the GDP growth is negative, that is a recession. Your economy is receding as it were. A recession is usually about a couple of quarters long.

Depression - There is not a clear line between a depression and a recession. In general a depression is a prolonged recession. So a recession that continues for 6 quarters of negative growth would likely be called a depression. The percentage drop of in the GDP would also indicate a depression instead of a recession. A 10% drop in the GDP would likely be considered a depression.

We've been in a bear market since October of 2007. That sucks! We've all been losing money in our mutual funds ever since. Let's cut the crap, find the bottom, and get on with making money again. Oh and a good way of getting to the bottom, is in a recession. We could fight off a recession for a long time, if the government keeps being stupid. We could find ourselves in a stagnated bear market indefinately (which might then also be defined as a depression), in the vain attempt to avoid a recession.

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3 Comments:

Blogger Capn John said...

I've got a retirement plan that I automatically make payments to from every paycheck, with equal amounts going into 5 different funds. It's a little disheartening to see that even though I'm adding to my investment every couple of weeks, not only is the total balance not going up but is actually going down.

Then I remind myself that I'm in this for the long haul, so when the share prices of my funds are going down, it actually means I can buy more shares for my dollar. Eventually the price/value will come back up and that's when all those shares I bought for cheap are really going to shine.

10:17 AM  
Blogger Chris said...

Ah Economics, the dismal science, trying to predict the actions and behavior of individuals based on historical information. Anybody here read Adam Smith's The Wealth of Nations. I find all these happennings very interesting. I am not sure why the stock market is always so connected to the economy, it is a speculation driven activity. Peoples perception of the stock market have an effect on their personal spending habits even if they don't own stock, which begin to effect the economy in various ways. That is the only real connection I can find aside from how the media prophesies doomsday for all if the stock market has had a down day. If the government wanted to fix the economy it should think about listening to its citizens instead of just throwing my money into corporations I have no connection with. And look we're still screwed. One more thing, (I am an independent conservative by the way) Obama's campaign keeps saying that the current administration's policies are responsible for this mess. I'd like to point out that Congress is controlled by which party and when did they take control. Just think about that for a few moments. Enough of the rant. I am going home now to the house which I dutifully pay for every month and which I knew before buying I could afford.

Cuzin Chris

3:33 PM  
Blogger Andrea said...

Ok, so I hadn't read your blog, but I wasn't wrong. I said a bad economy has to last like a year and a half to be a depression. I was right. Don't roll your eyes at me like I'm an idiot. You married a smart woman and don't you forget it.

Oh, and I still haven't read the rest of this post.

4:07 PM  

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