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Question of the Day – When Will We Get Back to “Normal?”

By JLP | February 24, 2009

Okay, we have talked a lot about the current economic crisis and what caused it. Now let’s look to the future with the today’s Question of the Day:

When do you think things will return to normal?

By “normal,” I mean the economy starts growing again and people start putting money back into the stock market.

I have this nasty feeling that it’s going to be a long time before we get out of this mess. Several readers have mentioned the real threat of inflation due to the fact that our government is basically printing money in order to get stimulate the economy. That’s not good news. So my guess is that we are looking at 2-3 years before things return to normal (and that’s being optimistic).

My strategy now is to keep doing what I’m doing. Adding to our retirement accounts on a continuous basis and ignoring the account balances because all they do is make me sad.

So what about you? When do you think things will turn around? What have you heard or read?

Topics: Credit Crisis, Question of the Day | 24 Comments »


24 Responses to “Question of the Day – When Will We Get Back to “Normal?””

  1. Yana Says:
    February 24th, 2009 at 11:32 am

    I want to agree with you, but I’ve got this idea that there is going to be a new “normal”. Homes were not worth the price they have fallen from at all, but I think current prices will be the new high. We have a ways to go yet, and it is down. My guess is 2013, as to when we know what the new normal is.

  2. Joe Says:
    February 24th, 2009 at 11:38 am

    I consider “Normal” to mean free market capitalism, or as close as we were in recent history. I think it depends on the 2010 elections. The sooner we can toss these irresponsible, big spenders out and roll back the insane level of spending, government take overs and bailouts, the sooner we can get back to “normal”.

  3. Jeremy Says:
    February 24th, 2009 at 11:39 am

    I might have a different outlook if I were closer to retirement, but as it stands now, I almost hope things take a while to come back, return to normal, or whatever else you want to call it.

    I’ll use this time to make investments and choices with my money for the next few years that things are abnormal/depressed/etc. so that I’m well-positioned for what lies ahead in a few decades.

    Whether the bailouts work or not, and whether they are right or wrong, it doesn’t matter. I’m not very concerned about what will happen in the coming months or even the next few years. Things may get worse, get better, or stay the same. But I’m more concerned about taking advantage of the opportunity that is presenting itself and how I can position myself in 15-20 years.

  4. JLP Says:
    February 24th, 2009 at 11:46 am

    Jeremy,

    There’s no doubt a long-term perspective is important.

    Joe,

    I’m wishing we would have stuck to capitalism in the first place and not started this whole bailout bullcrap. We’re only making things worse.

    Yana,

    I’m hoping that housing prices stay normal. People shouldn’t be using their home’s equity for vacations and car purchases.

  5. Ray Says:
    February 24th, 2009 at 12:11 pm

    Everyday I am watching for signs that can signal a turn around but it’s just not coming. And all the money being throwout by the US government is just a set up for another very big failure not too far in the future, this whole mess was caused by the irresponsibility of the US government and will only make things worse. I am just hoping that all the bad news will slow down, who knows when the back to “normal” will happen.

  6. Beth Says:
    February 24th, 2009 at 12:17 pm

    Although I’d like to agree with you, JLP, I think it will be at least 5-10 years (emphasis on 10 yrs) before we’ll see any consistent improvement. We may have a few years till we start seeing things get better, but I don’t think we can call that ‘normal’ until it is consistently improving. Either way, I know that we’ll see at least one or two more major downward spirals in my lifetime…so I can’t worry about this one too much.

  7. JLP Says:
    February 24th, 2009 at 12:28 pm

    Beth,

    I mentioned that my guess was on the optimistic side. I’m with Jeremy that the longer the better (as long as it doesn’t get too bad).

  8. ObliviousInvestor Says:
    February 24th, 2009 at 12:29 pm

    No idea how long it will take. Luckily, I’m young, so I’m in a position where I’m literally not concerned at all. I’m just happily continuing to buy businesses.

  9. David Says:
    February 24th, 2009 at 2:01 pm

    My guess is that it will take 3 years. Even if the economic picks up in 1 or 2 years, it’ll take another year or two for the effects to trickle down.

    Like Oblivious Investor said, I’m young, so I don’t mind. As long as I can stay employed, and keep taking advantage of the down market, it’s better for me in the long run

  10. YoYo Says:
    February 24th, 2009 at 4:33 pm

    If you’re young, this is the time to get in on the Stock Market, Do your research, you kids can clean up if you play the game right. Now that we’re all living in a “depression”, look for the same signs in the future – if the stock market rises too quickly, housing values sky rocket, people are getting 20% returns—move out slowly.

  11. Loan Modification Says:
    February 24th, 2009 at 5:27 pm

    Well analysts said that everything will return to normal 2 years from now… I am not sure about that though. But for me, I’ll just relax. Continue my everyday work and not panic. Everything will truly be messy when everybody is panicking.

    Buying my everyday needs still helps the economy stable. More consumers more businesses alive.

  12. Jeff@StretchyDollar Says:
    February 24th, 2009 at 5:49 pm

    I agree with some of the above comments. I don’t know if we’ll ever go back to the ‘normal’ we knew before this all started happening, but hopefully the journey to a ‘new’ normal will be quick and relatively painless.

  13. balbrain Says:
    February 24th, 2009 at 6:09 pm

    I disagree with the negative sentiment of how all this will not work. I understand arguments from both sides on the merits and demerits of doing what the government is doing. But, there are some very smart people who are trying to get us out of this mess and I’d like to at least give them a chance before I pronounce my judgment upon them. I mean, we have had an overtly capitalist party for the last few years and its widely acknowledged that we are where we are (at least partly) because of that. Its easy to say that I don’t care as I have decades left to retire, but if things deteriorate too bad then we all will suffer one way or the other.

  14. balbrain Says:
    February 24th, 2009 at 6:11 pm

    Just to clarify – when I say ‘party’ in my post above I mean it in the literal sense of the word and not as a political party :)

  15. Stacey Says:
    February 24th, 2009 at 8:12 pm

    IMHO: 4-7 years before things improve.

    There will be a new “normal”, w/higher taxes for those who are working and plenty of safety nets for those who like to make excuses for why they’re not productive members of society.

    I wouldn’t be surprised if the cap-gains tax on housing profits would be reinstated as a way to generate some income when things do improve. If this does happen then I certainly hope our “smart people” that balbrain refers to change the tax code so that all these mortgage bailout refugees have to adjust their home’s tax basis downward by what was forgiven and have to pay tax on this margin of gain down the road. Better yet, the government should put a lien on the house for the monetary level of forgiveness so that when and if the house sells, we the taxpayers, get this handout/handup or whatever you want to call it back.

    Balbrain, are these “smart people” the same ones who bailed out the banks (i.e. Northern Trust) with no guidelines or demands on how the TARP money was to be handled (responsibly and ethically)?

  16. bob Says:
    February 24th, 2009 at 10:06 pm

    Things are much worse than we are being spoon fed.

    The second wave of mortgage rate resets is coming. Starting beginning of 2010 and lasting through 2012. That will be the blow. What has happened so far is rough, but it will get much worse. Seriously, most people have no idea what is in store. And it cannot be stopped. It is a snowball that is building every day.

    If you are relying on the new administration to fix things, I feel for you. You can’t fix what you can’t control, and “they” can’t control it. Ask Japan how successful govn’t efforts are to control the economy by artificial inducements and regulations.

    Just like the administrations of the past couldn’t control other booms, busts, bubbles, etc.

    It is reversion to the mean. Statistics trump agendas every time. We are reverting to the statistical average. Go way up, get to come back down. The way back down seems harder though, doesn’t it.

    Pendulums swing wide both ways as well, so expect the swing back down to be just as overly excessive as the swing up was.

    Think about this for a minute. The govn’t is so panicked at what has and is and will happend they are “rushing” through billions and even trillions of dollars try and stem the problem, yet it keeps getting worse. $350 billion spend already in TARP and NOTHING has changes. In fact it has become worse. That is AFTER half of the TARP has already been spent.

    Companies are hemmoraging cash faster than they can recieve bailouts. Big banks, big auto,big insurance are wobbling. The largest companies in our country are dying, DESPITE the govn’t efforts toprop them up. AIG needs 65Billion MORE. GM & Chrysler willrun out ofmoney in two months AFTER they already rec’d nearly 20 billion already.

    BofA and Citi, the largest and third largest banks in the United States are essentially penny stocks. Down 80-90% in the past year.

    Forget outside markets or economys. Focus on your economy. Your household economy. Invest in yourself. Your family. Your future security. Your business. Not someone elses that you don’t understand. Invest in what you know, and what you can control.

    The stockmarket at this point in history is pure speculation. It is gambling, not investing. Professional investors know this. That is why the market is down. The pros are on the sidelines

    Take your money and pay down your debts, build up your cash, and provide for your family’s future.

    Focus on what you can control and what you can do to make your situation morestable. Then getout the popcorn.

  17. Neal Frankle Says:
    February 25th, 2009 at 8:47 am

    I also would love to agree with you but my fears are that in deed, it will take much longer. From a personal standpoint, I agree with your actions.

    The only one I’d add is to get politically active and voice your opinion to our elected officials.

    Thanks

  18. Tim Manni Says:
    February 25th, 2009 at 10:31 am

    I completely agree with Yana, “there is going to be a new “normal”.” There’s likely to be all new standards and all new perceptions. I’m one of the lucky ones who at the moment still has a job. All I can do is what many of you have said, “just keep doing what we can do” to get by and preserve our futures. If I happen to lose my job, that mindset may change very fast. I’ll have to stop worrying about the long term, and concern myself with tomorrow, and the next day. We’re years away from working ourselves back to where we were. But things will never be the same.

    Tim

  19. Ken Says:
    February 25th, 2009 at 12:49 pm

    I agree with Bob’s assessment. But, I’ll also say that I like to plan for the worst and best of times. This means you need to pay down your debts, save and have money in commodities and diversify across several stocks. Diversification is still a good rule.

    I think the results of the Iraq war could answer questions about our economy. All the negative news for years finally ceased after we increased the number of troops and the number of deaths consequently declined. The media quit talking about Iraq and things have seemed to smooth over there. The answer was the troop surge at the borders of cities and the country and the US paying bribes to the tribal leaders.

    As long as there is bad news about the economy flooding the media, and it all hasn’t flushed out yet, then we will continue to see a decline. We have 24 hour news media rehashing every negative news byte reminding us to not spend money because you might lose your job.

    Similar to Iraq, we need an influx of cash directed at the appropriate places in our economy to stop the downward spiral. I’m not convinced any of the “intelligence” in Washington really know the correct places to point the cash. So instead it’s directed at all the failed businesses. Seems like we are throwing money down the drain.

    Oh, 10 years out, just like Japan.

  20. thomas Says:
    February 28th, 2009 at 9:18 pm

    November 2012.

  21. Mortgage Loan Modification Says:
    August 18th, 2009 at 6:09 am

    Recovery in 2-3 years from sounds like an accurate assessment. Ben Bernarke recently said that he anticipates another recession and that it will be worse than this one. Am I the only person that wasn’t aware that we were out of the recession? Lol. It certainly is simultaneously wonderful yet frightening time to invest in anything, real-estate, companies…

  22. gyors ügyvédek Says:
    October 9th, 2009 at 9:23 am

    Thanks for posting this review!

  23. jó masszázs Says:
    October 9th, 2009 at 9:27 am

    acc to some analysts second wave of crisis coming…

  24. Chip Says:
    December 29th, 2010 at 3:51 am

    It’s a hard question…I think we are still in the middle of the crisis so we have to wait until this situation recovers.

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