It has been a while. My last blog was posted more than seven months ago. Seven months! Wow. I would have thought that I would have had something (anything!) to say over a seven month span. But like most Americans over that period, I have had my head down focused on the day-to-day ups and downs of a recovering economy. Yes, the recession has ended and it was one for the record books. Labeled the “Great Recession”, this one lasted almost two years. Before this recession officially ended in June 2009, a few things happened; we got a new President, the New Orleans Saints won the Super Bowl (and Brett Favre retired and unretired twice), we lost Michael Jackson, Farah Fawcett and Patrick Swayze, and we were slowly moving our way into what President Obama declared the “New Normal.”
If you are older than 40, you remember the New Normal as the Old Normal. That Old Normal is the daily default for a good percentage of our population. My 95 year-old grandmother lived through a Great Depression, two World Wars but not a credit card to her name and a perpetual smile on her face. Her husband was injured in World War II and lived the rest of his life with a brace on his right leg, care of a bullet that severed his sciatic nerve and sent him home on a stretcher. My father’s parents emigrated from Italy and his father took whatever work he could to raise his family of eight in a house he owned outright at the time of his death. My parents lived under this umbrella of fiscal responsibility and simple common sense; don’t spend what you don’t have. Somewhere along the way, my generation, and others that followed, missed that lesson. We over extended ourselves with credit cards, homes we couldn’t afford, stuff that we didn’t need and little concern for how to pay for it. We saw our savings rate dip below 0%!
Granted, that excess fueled a great boom in our economy but it also filled the air for the technology bubble in the beginning of the last decade and the real estate bubble in the middle of it. Our government followed suit (or maybe even led us down the path). Except for a flash of sanity at the end of the Clinton administration through to the beginning of the GW Bush administration, we have been funding growth (and paying for simultaneous wars) with debt since JFK (our parent’s President). The future doesn’t look any better. And while the Great Recession is over, the hangover is still felt today. The recovery is jobless and while the numbers don’t support it; there is still a fear of a double dip recession. And you only need to look as far as the price of gold to see how investors have responded. Gold prices are at all-time highs but more disturbing is the desire of high net-worth individuals to have that gold close to them. JP Morgan has just reopened gold vaults that were closed in the late 1980’s and, as the Financial Times reports a crisp confirmation of our generation’s focus on excess, “Many historic vaults cannot be reopened as they have been converted into restaurants: one New York vault built in 1902 for John Pierpont Morgan is now home to a steakhouse.”
So welcome back. Welcome back to the Old Normal where hyper-growth seemed like science fiction; saving for a rainy day wasn’t so “un-cool;” individual, corporate and government fiscal responsibility were the ultimate goals; and nothing was taken for granted. Welcome back to a time where businesses are valued on actual, not forecasted, cash flows and market multiples are down as a result of slower growth and an extended recovery from the last Great Recession.