Appreciate the Riverbed

Over the river and through the woods
To grandmother's house we go
The horse knows the way to carry the sleigh
Through white and drifted snow!
- Traditional

It's been over two years since the extendible commercial paper issued by Ottimo Funding Ltd. extended — something it was never supposed to do. Though we can continue to debate the beginning of the "recession," the extension of this paper in August 2007 — the first such extension in the 12 years of the market's existence —marked the beginning of our economic downfall, although the debate continues as to the beginning of the "recession."

Though at times events seem to have moved rapidly, to me it's felt more like a slow-motion, downward spiral, like when something unavoidable and tragic is about to happen and everything seems to go in slow motion. People who've been in auto accidents know what I'm describing.

Many commentators like to describe the recession in alpha form — will it be a V, a W or the dreaded L? Because letters are so puny in size I don't believe they do justice to the length of our current economic fall.

Instead, envision crossing a riverbed. Normally, there is a downward slope, then a relatively flat portion to cross before a steep, upward slope. Today, it seems as though we've come down one side and are on the flat riverbed bottom. However, we can't really see the other side, we don't know how far away it is, and we are concerned, yet hopeful, about what lies between here and the upward slope.

Today, I'd like to take a breather from our economic stress and in the spirit of the season list the economic factors for which I am thankful. There are really too many to count, but for me these are the easiest and most obvious.

I am thankful for Federal Reserve Chairman Ben Bernanke who has always been a devoted student of the Great Depression, and obviously used those lessons to help us avoid a second version thus far in our journey across the riverbed.

I am thankful for President Barack Obama's leadership in crisis, including the commitment to renominate Ben Bernanke as Fed Chairman in January.

I am thankful for the motivations behind the Fed, specifically protecting its credibility as an inflation-fighter, which will encourage it to very aggressively rein in its stimulus programs once rising prices are on the way.

I am thankful for Sheila Bair, the head of the FDIC, who continues to build a war chest to be used in the near future, given the many small and regional banks that are at risk due to the depreciating commercial real estate market.

I am thankful for a flat currency which allows our government to adjust overall money supply, thereby encouraging growth and investment even while devaluing our currency overall at times.

I am thankful for the flexibility and creativity of both Fed and Treasury personnel who worked countless hours through many crises, successfully keeping open our payments system, trading exchanges and government agencies that support vital parts of our economy.

I am thankful for our profit-oriented capitalist society that, while creating volatility, is in my opinion the strongest wealth-creating, personally satisfying and socially responsible economic system ever conceived.

Key Developments
Retail sales in October rose by a greater than expected 1.4 percent after downward revision of September's decline. Net of revisions, there were few surprises as even auto sales seem to be holding their own. Overall, sales have been gradually building after plummeting in 2008.

Few inflationary pressures exist, according to both producer and consumer price indices. In fact, on a year-over-year basis both remain in negative territory, though much of that is due to price declines late last year and sporadically through 2009.

October housing starts dropped 10.6 percent and continue to wallow around with a 500,000 handle. Other housing statistics show few signs of potential recovery as prospective and current homeowners alike worry about both their job status and level of wealth. 



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