No. of Recommendations: 4
fivethirtyeight
Why the Housing Bubble Tanked the Economy And the Tech Bubble Didn’t
In 2000, the dot-com bubble burst, destroying $6.2 trillion in household wealth over the next two years.

Five years later, the housing market crashed, and from 2007 to 2009, the value of real estate owned by U.S. households fell by nearly the same amount — $6 trillion.1

Despite seeing similar nominal dollar losses, the housing crash led to the Great Recession, while the dot-com crash led to a mild recession. Part of this difference can be seen in consumer spending. The housing crash killed retail spending, which collapsed 8 percent from 2007 to 2009, one of the largest two-year drops in recorded American history.2 The bursting of the tech bubble, on the other hand, had almost no effect at all; retail spending from 2000 to 2002 actually increased by 5 percent.
https://fivethirtyeight.com/features/why-the-housing-bubble-...

So of course you are dealing with the first Bush/Cheney recession in 2001 and then the second Bush/Cheney recession in 2008. Mild recession (?) vs. what was really a brief depression. Retail spending, fine, what about jobs since we are talking about the poor and the working class.

Total non-farm

https://data.bls.gov/cgi-bin/surveymost?ce

six years 2002 through 2007 about +7.6 million net new payrolls

six years 2009 through 2014 about +5.6 million

Of course the big difference is 2001/02 only dropped about 2.7 million payrolls while 2009/09 dropped about 8.6 million payrolls. Why would economists even call both a "recession"? They are qualitatively different.

All the more remarkable that 2001 through 2008 only +2.1 net new payrolls while 2009 through 2016 +11.3 million net new payrolls. The "mild" recession of 2001 dragged right through the next Bush/Cheney recession while it is amazing to see the strength of the rebound after what fivethirtyeight calls a much more severe recession for the poor and working class. Credit who/what you might.

Retail spending is one measure, by the measure of jobs and wages for the working class the rebound from the second Bush/Cheney recession is order of magnitudes larger.

Anyway, those are the only two recessions of the 21st century. Gives no comfort that the low level punditry/economists(?) like Laffer and Kudlow and Moore fully 100% supported the policies that led to the two Bush/Cheney recessions, so very different, this century. Of course now they fully 100% support the Trump/Ryan policies and assure us of many good things to come. No comfort at all.


Chris Hill
(TMFWizard)
Jan 18, 2018 at 4:55PM
In this MarketFoolery podcast, host Chris Hill and Motley Fool Asset Management's Bill Barker dissect some of the day's top business stories, starting with more chatter about a potential breakup of General Electric (NYSE:GE) and why Wall Street doesn't seem happy about it.
https://www.fool.com/investing/2018/01/18/ge-heads-toward-a-...

Very good discussion imo of the American disaster that is General Electric. Waded in at $18 and right back out in deciding to raise cash. If it was a flop for Buffett and Berkshire along with so many others I don't know any better. Value trap doesn't even begin to describe it.
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No. of Recommendations: 0
Very good discussion imo of the American disaster that is General Electric. Waded in at $18 and right back out in deciding to raise cash. If it was a flop for Buffett and Berkshire along with so many others I don't know any better. Value trap doesn't even begin to describe it.

I did the same. Bought some GE as a speculative play when the possibility of a breakup first was announced - then turned around and sold the next day after Steve reminded me that spinoffs would be very difficult due to a morass of pension obligations.

Took a small loss, but I figured it was better to recognize a mistake quickly and move on.

I locked in some gains by selling a successful ETF position the same day, so I felt better, anyway.

;-)`
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If it was a flop for Buffett and Berkshire
Buffett made a 8.67% on his loan not great. But at least he didn’t lose any money.

Buffett:”Don’t cry for me MrCheeryO”


https://www.cnbc.com/2013/10/16/warren-buffetts-berkshire-ha...
Rather than have Berkshire spend $3 billion to buy the stock and then sell or hold onto it, GE agreed to give Berkshire stock that's worth as much as Berkshire would have realized by exercising the warrants and then immediately selling the shares.

It's a smaller stake, but Berkshire doesn't have to put out any cash for it.

It's a relatively small payday compared with similar warrants Berkshire received as part of its investments in Goldman Sachs and Bank of America.

(Read more: Buffett on JPM: Dimon will survive fine)

Earlier this month, when Goldman's warrants expired, Berkshire received stock worth more than $2 billion in that net share settlement. The investment bank's stock had soared 43 percent above the strike price, and the warrants were for $5 billion worth, versus just $3 billion for GE.

Berkshire's Bank of America warrants from its 2011 $5 billion loan deal could turn out to be even more profitable—and would be worth $5.2 billion if they were exercised now.

But don't look for a similar "net share settlement" of those BofA warrants anytime soon. They don't expire until 2021.
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2001 through 2008 only +2.1 net new payrolls while 2009 through 2016 +11.3 million net new payrolls.

That was a specific point I posted some years ago.

The US economy was adding about 2-million *additional* workers to the workforce *every year* 2001-2008, but the economy only added 2.1-million *additional* jobs 2001-2008. This created a massive and ongoing "surplus worker overhang" of the job market, depressing worker wages and benefits.

That began to change in 2012, when the boomer generation began to hit FRA (Full Retirement Age) and retired from the workforce, thus creating additional job openings. The boomers retired at a rate of 10k/day, but business had known of that reckoning and had prepared for it. Many businesses rearranged their workforces in order to take advantage of technology and outsourcing, thus reducing their need for direct employees. Realistically, the demand for *additional* employees has dropped about 40%-50% or so (which I predicted in those previous posts). The current demand for *additional* employees is running at about 75k to 100k/month, exactly as I predicted and posted.
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