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The Downturnaround Is Here

“Well, that’s just the way it is,” he said. “That’s not the way I see it.”

But so many reasonable people disagree, I said. Are they all deluded?

“There are a lot of people who believe crazy things,” he replied. “People have believed crazy things all throughout time. When Galileo said the Earth revolved around the Sun, everybody thought he was crazy. Or when Columbus said the world was round, and they said, ‘Everybody knows the world is flat, what are you, an idiot?’ People can believe stupid things.”

The Recovery Is All in Our Minds.

Last Tuesday, I woke up in Peter Schiff–land. Maybe it was because I’d spent the weekend catching up on recent editions of Christopher Wood’s weekly newsletter, Greed & Fear. Sobering stuff: about the United States’ “appalling” monetary policy, the sustainability of the “countertrend rally,” and a forecast of gold reaching $3,000 an ounce (it’s below $1,000 now). Later that morning, when the new Case-Shiller index was released, indicating that the housing market had not yet hit bottom, my mood soured further.

Then, just an hour or so later, the consumer-confidence figure came in much higher than expected, and markets around the world went bananas. Wednesday morning, in the elevator up to my office, I read on the Captivate Network monitor that 75 percent of business economists predict the recession will be over in the third quarter of this year. That’s like, tomorrow. Sure, the consensus view of economists is often alarmingly wrong. But even .190 hitters don’t strike out every time. Maybe this is their moment. The world was starting to feel more like Robert Gordon–land.

Then I read a June 2009 report from the London outfit Absolute Return Partners: “The poorest two-thirds of U.S. households are effectively bankrupt, and the wealthiest one-third are facing substantial tax hikes. This combination is lethal for U.S. consumer spending, and what is poisonous for U.S. consumers is bad for the global economy.”

For all their expertise and carefully reasoned argument, these economists could not offer me the reassurance I was looking for. In fact, I will admit to simply being more confused than before, and exhausted.

But maybe that’s a good thing.

There is a term that stock-market veterans use to describe what happens to investors at the bottom of a market: capitulation. The idea is that people eventually tire of trying to understand the market. A series of illogical rallies and devastating crashes robs them of all conviction. Trading volume evaporates. People quit believing they have any clue what’s going to happen next. They give up. And then, gradually, a recovery begins. It’s almost imperceptibly slow because everybody’s too busy mowing their lawns and attending their kids’ piano recitals and otherwise trying to forget they ever heard of the stock market.

Perhaps this idea of capitulation applies to the economy as well. Maybe recovery won’t happen until people like me stop asking “Are we there yet?” Maybe the answer I crave won’t be fully understood for years after the fact, so I should just stop looking.

A good plan, except for this: Capitulation isn’t something you can just decide to do. It’s a process that happens to you. My belief that I can know what the world is going to be like tomorrow has to be wrung out of me, like beads of water from a towel.

Until that happens, my approach is a kind of default pessimism—so if the economy tanks, I have the satisfaction of being right; and if it doesn’t, I have the satisfaction of still having my job. Mostly, I’m just trying not to think about it quite so much. With luck, I’ll stop checking the futures on Bloomberg. I’ll read blogs about rock bands and ridiculous celebrities instead. And one day I’ll realize that I haven’t thought about the economy even once, and that’ll tell me the recovery is here.