Thus far in 2008, we have seen declines in the US stock market indexes erase (as in wipe out) all the gains from all of 2007. This is pretty much true across the board, whether one is describing indexes segmented/ specialized as industrial, technological, utility focused, transportation, or service industries. The same is the case for the broader indexes - be they the NYSE, the Wilshire, or the Standard & Poors’. Traditionally what happens to the equity markets in the first weeks sets the pace for the entire year. Market analysts define a “correction” as a 10% decline. We’ve just had that. Are the downs behind us?

While there have been such corrections before in my adult lifetime, the swings of the pendulum have been very lopsided mostly in the wrong directions. I graduated from RTHS in 1968. I will use that as a benchmark. A year’s tuition AND fees at the U of I was just over $250. Gasoline was $ .25 a gallon. An “equipped” new car could be had for $ 2,500. The median priced home sold for $17,000. Gold was officially priced at $ 35 an ounce and silver was around $ 1.40. A full fast-food meal was a buck or less!

The US Dollar was king! The United States was the largest creditor nation on the planet. We invented and manufactured the goods that the world wanted to have. This was reflected in a huge global trade imbalance which was in our favor. “If” a family had ONE credit card, it was probably for some oil company and the entire balance was paid-in-full each month. Our TOTAL National Debt stood at $345 BILLION. Just TH*NK about where we are now some 40 years (or roughly two generations) later.

A recession is defined as two consecutive quarters with negative growth - which is the nice way of saying “a decline.” The dreaded “R” word has been surfacing a lot lately. But… all the trends and indicators suggest an “R” is now not a matter of if, but when? And… how bad? We have NEVER… not experienced a recession shortly after unemployment jumped by .5% in a given month. Unemployment jumped .6% in December of 2007. Last week saw 10,000 applicants line up for 350 jobs at a new Wal-Mart in Georgia. No incumbent (nor majority-controlling political party) wants to seek election/ re-election in a recession year. 2008 is no different. Change/ fixes thus become the focus of all campaigns.

I just looked back on what I have just written, and Oh, my God… I’ve finally morphed into my parents describing to me the 1920’s, the 1930’s, the Great Depression, FDR’s New Deal, and the need for another “therapeutic” World War. Brace yourself folks, we are in for quite a year! I’m Fred Cederholm and I’ve been thinking. You should be thinking, too.

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