Posts Tagged 'depression'

Could an economic depression make us less depressed?

Published March 4, 2009 Deep , Universal 2 Comments
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The world is too much with us; late and soon,
Getting and spending, we lay waste our powers:
Little we see in Nature that is ours;
We have given our hearts away, a sordid boon!
This sea, that bares her bosom to the moon;
The winds that will be howling at all hours
And are up-gathered now like sleeping flowers;
For this, for everything, we are out of tune.

I don’t know many very happy people. I know people who are content enough, I suppose. I know plenty of people who do a decent job at hiding their discontent. (As for myself, I’m probably somewhere in between those two categories, leaning toward the former).

But in terms of truly happy people I see in my life, I’d put the figure at no more than probably 30 percent.

That’s not a shocking fact, really, considering that the government estimates that in any given year, 26.2% of adult Americans have some kind of mood disorder – nearly 60 million people.

It’s very tough to know how that rather large number compares to previous eras, as statistics on depression rates throughout time are very tough to find, mainly because the disease itself has only been recognized as such for the past 50 years or so. The actual clinical term Major depressive disorder – what we normally consider depression – was coined in the 1970s.

Not only was diagnosis of depression rare until fairly recently, but people were also likely less willing to admit to having the illness and get help for feeling low due to the attached social stigma.

But even accounting for these factors, it’s my assumption that more people in this country than ever before are suffering from depression, or at least a general malaise and discontentedness.

At least part of this phenomenon, if it is indeed true, could be attributed to this nation’s economic success as I believe increased wealth beyond a certain point can actually make people less happy.

In 1974, economist Richard Easterlin wrote a paper which showed that even though wealthier people within any given society tend to be happier, nations with higher GDPs weren’t on average ‘happier’ than their poorer counterparts (once a certain baseline level of wealth had been reached). The phenomenon became known as the Easterlin paradox.

The theory has come under some attack of late as more recent studies have shown that the data does show that happiness increases as a nation’s wealth increases – see chart below.

But DF knows how i feel about stats, especially when they’re based on rather subjective, completely self-reported datapoints.

Personally, I just think the Easterlin paradox makes sense. Wealth above and beyond a certain level can be a real drag for a variety of reasons:

1) Wealth increases our options past the point of optimality. And having too many options makes it more likely we hesitate before making a decision, waver when making a decision, and regret after making a decision. We wonder if we’ve made the right choice, and if we’ve taken full advantage of the opportunities given us.

2) Wealth gives us too much time for self-reflection. When people are forced to spend most of their waking hours finding food for their family or making a basic living, they don’t usually concern themselves with larger existential questions – why are we here? what does it all mean? why do people often suck so bad? – that can bring down the mood of any intelligent, thinking person.

3) Wealth makes us want more wealth. It’s the old ‘Keeping up with the Joneses’ phenomenon. Wealth is, after all, relative, and we often get discouraged when we see our friends and colleagues doing better than us. Why are we ‘failing’? I think it’s particularly likely that this country’s increasing income inequality has increased the importance of this particular phenomenon as more and more people feel like they’re falling behind.

So it makes me wonder, could we as a poorer nation feel more blessed for the things we do have, and understand that all of the striving and climbing and hustling isn’t worth it if we can’t enjoy our lives?

Would a prolonged downturn help us prioritize our strained resources, and refocus on goals and issues that matter more than the almighty dollar (on a subtle level, I feel that’s what Obama’s ambitious budget plan is trying to force us to do)?

Could it maybe bring us closer together as a nation?

Could a depression actually help us be happier?

Ok, Here’s the rally … Now what??

Published October 13, 2008 Trivial , Universal 2 Comments
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OK, so I was a day or two late with my short-term bottom and violent rally call, but it’s party time on Wall Street today with the markets almost up more than double digit percentages.

So where do we go from here? Well, my prediction that we could get back close to Dow 11K will likely prove far too aggressive, but it’s very likely this will have at least some legs. There’s just too many people bearish and short for it not to last a bit longer (People who are short are at least not in the market will worry that we’ve seen the bottom and will fear missing out if the rally continues).

But also remember that V-type bottoms (where we sink dramatically only to immediately recover all that ground and then some, such that the price charts resemble the letter V) are very rare beasts.

In the short term, I think this rally could last a while but that the downtrend will remain in place and that we will revisit the lows from last week sometime in the next few months, if not sooner.

In the medium-term, if this winds up being just a normal recession, we have seen the lows and will probably start to move higher as much of the bad news and lowered profits have been discounted by the market. Remember, during your garden-variety recession, the stock market tends to do well since it begins to anticipate the recovery period.

Unfortunately, I think we are in for something far worse and we will likely meander in a range near the 8-9K level on the Dow for a year or more, and we could even end up breaching those lows from last week.

The problem is unless you’re an active trader or will need a lot of your invested money sometime in the near future, you should probably mostly sit tight and ride out the storm. I’ve said it many times, this could end up being economic Armageddon but it’s not the likeliest scenario and panicking or changing your long-term investment strategy won’t do much to help you.

Add some gold (or gold ETFs or gold stocks) to your portfolio if you’re really worried.

For an insightful, more positive take on the long-term prospects on the market, this provides some great analysis.

Merrill saw the light … now, maybe we can to

Published September 15, 2008 Trivial , Universal Leave a Comment
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I just wanted to offer my immediate, quick, bullet-point take on the flurry of GIGANTIC market-related news today, which i briefly referenced last night.

  • Lehman Brothers’ brankruptcy obviously sucks for the company’s employees and shareholders, but this HAD TO HAPPEN. Over the past year, starting with Bear Stearns, the U.S. government has spent hundreds of billions of dollars, and will likely spend hundreds of billions more, bailing out numerous large financial institutions. The process had to stop as there will likely continue to be a stream of companies, in the financial sector (hello AIG) and then elsewhere (hello GM), that ask for bailouts or other financial assistance from a federal government which just doesn’t have the balance sheet to support any more albatrosses. The obligations it has already taken on will bring the U.S. economy to the brink of disaster, and the government had to make a stand that most companies from here on out would be on their own.
  • Merrill Lynch CEO John Thain is no dummy. He saw the government playing tough in the Lehman negotiations, and decided now was the time to pursue an exit strategy – while he still had the time. Without a doubt, Merrill would have been in the bears’ crosshairs next. The deal he signed with Bank of America was an extremely savvy one.
  • Can’t say the same for Bank of America and its CEO Ken Lewis. He is already dealing with the repercussions of unwisely taking on Countrywide Financial, a large home lending organization that was among the worst of the worst in terms of bad apples. Now, he’s paying a healthy premium for Merrill when there is little doubt the stock would have fallen much, much lower in the coming weeks. Fifty billion dollars is nothing to sneeze at. Perhaps the only explanation for the timing of the transaction was that the U.S. government placed some pressure on Lewis and Thain to make a deal – though that was denied in a press conference.  Or perhaps Lewis is just a patriot who feels a company named Bank of America should do its part to bolster the confidence of the economy (and knows deep-down his own institution will be threatened if things don’t turn around soon).
  • All this news is obviously causing turmoil on Wall Street. The markets are down big as I write this, yet I think there is a possibility that a short-term rally occurs in the near future. I’m encouraged that the financial stock index as well as the other major market indices are still holding above their all-time lows. The market is already hugely bearish, which is a good contrarian indicator (when everyone’s already bearish, that can mean that there aren’t many people left who want to sell)
  • This is not the end of the story. There will be more fallout. The long orgy of easy credit days are over, the U.S. consumer is on life support and will remain there for years, and the world economy will continue to feel the pain of our exuberance for some time.  I still worry about a significant, deep, prolonged recession or even mild depression. I worry that the global markets are now so complex, so intertwined, that even one failure like Lehman could cause a systemic collapse. I worry that a geopolitical event pushes us over the edge. I worry that the aging demographics of the U.S. and the country’s enormous and growing budget deficit will make it tough for us to pull out of our current malaise. But I now also have at least a glimmer of hope that I haven’t had for a long time. The government and the Fed can’t bailout, or rate cut its way out of this mess. We have to feel some pain, maybe a lot of it.  But it’s true that things look darkest before the dawn.  We’re not there yet, I don’t think, but we’re certainly closer.

 

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