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Ben Stein How Not to Ruin Your Life

Ben Stein, How Not to Ruin Your Life

Recessions Are in the Eye of the Beholder

by Ben Stein

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Posted on Thursday, May 8, 2008, 12:00AM

How many times have you been witness to an event and then read about it in the newspaper later? How many times would you say the newspaper reported the event as you witnessed it?

If you're like me, truthful, accurate reportage is a rarity in your experience when compared with, well, with your experience.

Reports of Recession Greatly Exaggerated

This is as true of giant national events as it is of neighborhood ones. I've been involved in many of these big events, from Watergate to the Drexel/Michael Milken junk bond scandal. The media simply never gets it right. They give an impression, highly colored by the inexperience, bias, and laziness of the reporter. Most of all, in national events, the reporting is based upon the reporter's urgent need to magnify his or her own importance. This is only human, but it's good to recognize it.

I've been thinking about this a lot because in the last few weeks, we've seen a barrage of data buried in the back pages of major newspapers telling us that the "recession" everyone said was a certainty, the "recession" that the reporters assured us would be about as bad as the Great Depression, is simply not happening.

The bond markets have rallied staggeringly. The stock markets had one of their best months ever in April. The rate of defaults on corporate bonds remains extremely low. And index securities that track mortgage defaults are saying that the fear of a colossal national mortgage default epidemic was ill-founded.

Ignoring the Data

Just as I am writing this, new employment data has come out showing only very small job losses in April -- 20,000 jobs out of a labor force of very roughly 160 million, meaning that 1 in 8,000 jobs has been lost. The actual rate of unemployment is falling to a very modest level -- 5 percent.

Yet the national media is still selling us fear of a recession. One of the major national newspapers has a reporter who's desperately trying to peddle a story of national economic collapse even as the economy stays afloat.

And the beautiful part is that it's now crystal clear that we're not in a recession (we could be later -- anything can happen). There was just a report that showed first-quarter 2008 GDP growth was positive, meaning that as a matter of arithmetic we can't be in a recession, any more than a man who's gained weight can also be losing weight.

The Economy's Still Afloat

No, that's not the beautiful part: The beautiful part is that because we're not meeting the definition of a recession -- two consecutive quarters of negative economic growth -- the pundits are trying to rewrite the definition, to make it just about anything they feel like making it. (Or, as I like to say, the new rules allow liberals to call a conservative administration's tenure a recession any time they have the urge.)

Ladies and gentlemen, the dogs may bark but the caravan moves on. Adroit moves by the Federal Reserve have saved the economy from a bad recession. The housing crisis was never anywhere near as bad as the media naysayers were trying to claim. The mortgage foreclosure problem was never the disaster hedge fund traders and their allies in the media were trying to say.

This big old leaky barge of an economy is still floating lazily down the river. It's not as strong as it was two years ago, but it's still above the water line. The big problem for most employers now (as they tell me) is getting decent labor. Any halfway skilled, halfway decent college grad can have her choice of jobs. Anyone with a real work ethic and an education can make a fine living.

Get Real Now

I've come to feel that you, my readers, are my family. So I hope you haven't been terrified by the media and didn't sell your stocks. I hope you've been buying while the market was down. It may have some further air pockets, but the direction sure looks like it'll be up for a while now. P/E's aren't at all high, and foreign stocks are amazingly cheap.

And I'll add another suggestion. My evidence is anecdotal at this point, but I'm hearing of an uptick in home sales in my beloved Southern California and my native Washington, D.C. I think the tide is hitting full ebb, and while it may ebb for a while, it'll turn before long.

The nation is still rich. Mortgage rates are low. Employment is high. Contrary to media reports, loans are easily available to qualified buyers. Houses are still tax-subsidized. Young families need homes. We old people need retirement homes. People are moving for many reasons, and they need homes, too. Clearly it's a good time to dip your toe in and see how you like the residential real estate water.

Bunk, More or Less

As for the financial journalists, take a cue from Henry Ford, who famously said, "History is more or less bunk."

I wouldn't say business journalism is all bunk. But I would say it's about glorifying the reporters and selling newspapers. And while fear sells papers, it doesn't make for good investors.

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  • Yahoo! Finance User - Tuesday, June 24, 2008, 9:13AM ET  Report Abuse

    • Overall: 1/5

    You're behind the curve, Ben. By the time you realize just how bad a recession we are in, it will finally be over.

  • Yahoo! Finance User - Thursday, May 29, 2008, 5:08PM ET  Report Abuse

    • Overall: 5/5

    Numbers are showing we are NOT in a recession. Stop watching the news.

  • Yahoo! Finance User - Monday, May 26, 2008, 11:50PM ET  Report Abuse

    • Overall: 5/5

    I agree with Ben Stein. The economy keeps buzzing along. People will always need homes. Educated people willing to work will always be hired. New energy efficient cars will be popular. Americans will save money on energy and gasoline. The economy will adjust and consumers will adjust. The market does provide a buying opportunity now. If you believe in the American economy, then now is the time to invest in equities. We can get inflation under control by reducing the demand for energy. In the meantime, the cheap dollar brings foreign tourists to America and reduces our trade deficit. America's exports are priced competitively now.

  • Yahoo! Finance User - Saturday, May 24, 2008, 12:46PM ET  Report Abuse

    • Overall: 3/5

    dear ben, i read this article just after reading the latest paul kellner article in marketwatch. whats a retired carpenter to make of the opinions of experts when those opinions are so different?

  • Yahoo! Finance User - Friday, May 23, 2008, 7:03PM ET  Report Abuse

    • Overall: 1/5

    Ben should be aware his commentary on the self importance of the reporter affecting the reporting--as this is just what he does now... It really isn't important whether some dept of the govt declares a recession or not. Perception is the reality. The numbers provided by the various govt depts are heavily massaged to the point of worthlessness. A paraphrase from 1984 that suits this situation is: The numbers mean what we say they mean. Ben Stein who, at least on the surface, appears highly intelligent, has regularly made the classic mistake of overstepping outside his area of expertise. Are you really going to believe his soothing read after he said that sub-prime was not a real issue? After he down played the credit crisis? And now this?! Please. He writes well and can be convincing, but I would caution anyone from relying on him for guidance or comfort. Don't read reporting from a newpaper, I agree. But there are numerous scholarly folk who have written fairly negative outlooks. We do not need fear mongers---but we don't need cheerleaders either.

  • Yahoo! Finance User - Thursday, May 22, 2008, 12:48PM ET  Report Abuse

    • Overall: 2/5

    Unless you can dispel the negatives, you cannot prove your view is right. I used to agree with you that most people i know have a job, therefore no recession. Now I am hearing more about how business are not buying new equipments (not from news), homes are deflating, and all the equity has been drawn down already. We are going to live lean for a while as a nation, and that's not good for stock.

  • Yahoo! Finance User - Wednesday, May 21, 2008, 2:00AM ET  Report Abuse

    • Overall: 1/5

    Look up these two men on Youtube for substanative financial advice: Peter Schiff Jim Rogers

  • Yahoo! Finance User - Tuesday, May 20, 2008, 6:03PM ET  Report Abuse

    • Overall: 1/5

    Perma bulls like Ben ignored the sad fact that the USA is a dying nation economically. The deficit has finally caught up with us. And to think Bill Clinton left office with a surplus. Dick Cheney should be charged with war profiteering.

  • Yahoo! Finance User - Tuesday, May 20, 2008, 2:41AM ET  Report Abuse

    • Overall: 1/5

    More "Ben Steinery". The only thing keeping this economy afloat now that the housing boom has collapsed is ever expanding credit card debt. But, that can only expand so far. $4 gas. $5 diesel. Inflation is over 10% if you calculate it the way it was figured 25 years ago. The new unemployment is under-employment. We're working harder/longer to make less while the cost of living only goes higher. So much "Ben Steinery" presented here to debunk but it's late and going to bed is a better investment. Good night, Ben.

  • Yahoo! Finance User - Monday, May 19, 2008, 3:41PM ET  Report Abuse

    • Overall: 4/5

    I applaud you Ben as a voice of reason and sanity amidst the daily panic attacks of the liberal media. You make a very perceptive point regarding certain pundits re-writing the definition of recession. Further evidence (not that we need it) of media complicity with the Democrats' hysterical obsession to win back the White House. Keep telling the truth Ben! You are one of the courageous few who can and do.

  • Yahoo! Finance User - Sunday, May 18, 2008, 3:53PM ET  Report Abuse

    • Overall: 1/5

    What an idiot! A year ago he was saying the subprime mortgage mess was going to be nothing, a blip on the US economic radar. He has lost all credibility for understanding anything related to economics. If anything, he is a contrarian indicator now. What a joke!

  • Yahoo! Finance User - Friday, May 16, 2008, 12:20PM ET  Report Abuse

    • Overall: 5/5

    The lengthy comment below is spot on. People are careless with their money trying to afford something that they shouldn't purchase (hdtv's, suv's, new homes, etc). People need not blame the economy for there own problems but rather budget their money to figure out what they can or cannot afford. I'm a struggling college student and everyday I plan my finances by determining what I can, should, and shouldn't buy. Also, Ben's title is solid. This "recession" is a great time to invest, although the dollar is weekend, the housing market is low and contractors are in a hustle. They want business and what a better time than this to build a new home. Pessimistic scrutiny is no way get through this era. Honestly, budget your money, purchase the 3000 honda civic to save on gas until you can afford something nice. I'm only 23 years old and I feel I have a better grasp on reality then some of those comments below.

  • Yahoo! Finance User - Friday, May 16, 2008, 11:58AM ET  Report Abuse

    • Overall: 4/5

    Wow, where to begin on all of these reader comments. I'll start with the mortgage bust. While I think that the lenders may have sometimes engaged in criminal activity, to let the buyers off the hook in this situation is ridiculous. We live in a capitalist system, thus the motto is "buyer beware". Every buyer gets a copy of the contract that they are asked to sign, and every buyer can do more research at the local library to determine if they are getting a good deal. Every buyer can call up charities that FOR FREE will give financial advice. For those who are so "outraged" by the mortgage brokers, I'd ask you, last time you sold your house, did you point out its flaws? Did you point out that its asking price might be too high? Do you do that when you sell ANYTHING, or do you just try to get the best price - not lying, but not putting your property in a bad light either? To me, that's exactly what the brokers did. And a lot of "wishful thinking" people suddenly decided they could afford more house than they could. And before you throw out the tired old "they are poor" cliché, let me give you an example...my grandfather. My grandfather was a poor farmer from Indiana (go on...say it..."redneck"...I know you want to) who managed through a lot of hard work to build himself a nice little nest egg by the time he passed away, and I will tell you, he NEVER took out a home equity line or a huge mortgage. The guy hated debt - he went through the great depression - and the only loan he ever took was for his house, which he paid off early. Contrast that with people today who so desperately want to have what they don't - who buy the lie the more money equals more happiness - and there is no surprise that people took out loans they couldn't afford. They wanted to look important, and nothing impresses more than a nice house with nice stuff. No one put a gun to their heads, no one make them sign contracts that favored the lender. They simply DIDN'T READ the contracts and now want someone to blame. And while I agree there are problems with the system that lead to lenders making loans to people who couldn't afford them and then just passing the buck, let's not forget that people SIGNED these mortgage contracts. And now, in grand Katrina style, we are just bailing everyone out. Lesson NOT LEARNED. Sigh.

  • Yahoo! Finance User - Friday, May 16, 2008, 8:23AM ET  Report Abuse

    • Overall: 5/5

    Ben is spot on again. We are not in recession. You need 6 periods of negative growth to be in a recession. We are currently 0 yes zero of negative growth. Why should the media let facts get in the way of a good story. Reminds me of a saying in college, "if I fail out of here, I can always go to Journalism School."

  • Yahoo! Finance User - Friday, May 16, 2008, 12:15AM ET  Report Abuse

    • Overall: 1/5

    So the media is responsible for all the negative reports on the economy. Well, where does the media pick up these negative stories? From the Big Names in the investment world, like Warren Buffett, who says we definitely are in a recession. And the Freddie Mac official who said we can expect 1.5 million foreclosures this year. The media reports that and the media gets blamed for being negative. Get real, Ben.

  • Yahoo! Finance User - Thursday, May 15, 2008, 8:58PM ET  Report Abuse

    • Overall: 1/5

    This article does not provide comprehensive factual information. There are far more than 1 in 8000 people out of work. People who have worked their whole lives in the building trades. You know... the people who actually swing the hammers and bend the pipes on those mansions executive America takes for granted. Sure if you add in all the corporate jobs and non corporate jobs it might be a far reaching possibility that there are only 1 in 8000 people out of work. However, what about REALLY being honest and not glazing over the realities of this 'recession' with pink paint so that the wealthy can continue living in their 'bubbles' and irresponsibly set up more and more predatory lending schemes only to get bailed out by the Fed. Funny how the actual homeowners, people who were in fact eligible for fixed rate mortgages were never told they were eligible but were instead told the only mortgages they could get were Adjustable Rate Mortgages. AND WHY weren't they properly informed at time of closing that their house payments would double???? The home owners were preyed upon by scheming mortgage lenders and are now left homeless and forgotten while the Fed bailed out the culprits who engineered the entire scam. If you're going to report Mr. Stein.... TELL THE TRUTH!

  • Yahoo! Finance User - Thursday, May 15, 2008, 7:22PM ET  Report Abuse

    • Overall: 5/5

    Well stated!!

  • Yahoo! Finance User - Thursday, May 15, 2008, 5:17PM ET  Report Abuse

    • Overall: 1/5

    Articles run just yesterday show how inaccurate employment data is.With wholesale prices rising,the dollar deflating,home forclosures rising is this an economic boom?Time to get real Ben..You sucked on Ferris Buellers Day Off and you still suck..

  • Yahoo! Finance User - Thursday, May 15, 2008, 2:17PM ET  Report Abuse

    • Overall: 1/5

    Yes, the economy is still viable, meaning it will surely get out of this current mess, a few years down the road. But now the country is in a visibly run-down state. Do not look at the dollar-to-dollar GDP comparisons - look at how much food, gas, housing, education, entertainment and health care these dollars can buy in the amount of middle-class income. We used to pride ourselves on being more prosperous than other developed nations. Where is this pride now?

  • Yahoo! Finance User - Thursday, May 15, 2008, 1:13PM ET  Report Abuse

    • Overall: 4/5

    There is a lot of hype in the media. To the guy who said that there will never again be a government calculated recession. Well, I'd trust this numeric measure (which any economist could calculate) more than random media stories. You can argue CPI both ways. Say for the sake of illustration that cars are getting expensive faster than wages, but that repair and fuel costs go down enough to more than compensate. Is that factored into CPI? If you're making claims about the veracity of inflation numbers, you need to know answers to questions like this in gory detail.

  • Yahoo! Finance User - Thursday, May 15, 2008, 1:07PM ET  Report Abuse

    • Overall: 1/5

    I guess things will always rosy to a multi-millionaire, huh Ben? Who cares about whether or not we are technically in a recession, accept an academic like you? Middle class wages are flat and have been for years, yet necessities such as food and gas relentlessly increase in cost. Housing takes more and more as a percentage of income every year. And when jobs are created, they tend to be in low-paying service sector jobs. Ben, you live in an insulated little world and do not have a clue.

  • Yahoo! Finance User - Thursday, May 15, 2008, 11:30AM ET  Report Abuse

    • Overall: 5/5

    It is as if the financial media has an agenda? Thanks Ben in a sea of lies you sail on above it all.

  • Yahoo! Finance User - Thursday, May 15, 2008, 8:26AM ET  Report Abuse

    • Overall: 1/5

    This guy is a clueless idiot. If you're going to take the manipulated government data at face value, and look only at trailing indicators while you're still in the early stages of a recession, then I guess it's true, you won't see it. Adroit moves by the Federal Reserve created the mess we're in, so they want more power to 'manage' the economy. We need to wake up and abolish the Fed.

  • Yahoo! Finance User - Thursday, May 15, 2008, 7:48AM ET  Report Abuse

    • Overall: 1/5

    Ben: Thanks for the feel-good message, Ben. But you got blinders on, man. The media are covering up the truth, all right. But not the way yu suggest.They are trumpeting the government's propaganda about GDP, inflatio,. and just about everything else. This nation has underproduced, overspent, overinflated, over taxed, overregulated and overconsumed for an entire generation. What the free market is trying to tell us is that it's got to stop.

  • Yahoo! Finance User - Wednesday, May 14, 2008, 11:44PM ET  Report Abuse

    • Overall: 5/5

    Ben, I wish I could give you more than 5 stars on this one. It is so true that the media are fueling the fear for the benefit of talking heads. Much of the market's behaviour really boils down to the prevailing psychology of the day among the masses of the lemming investors. The media are not only inaccurate in their use of the term "recession", but blatantly irresponsible. So about that family statement - I'll be at your door on Thanksgiving with a big appetite. See you then!

  • Yahoo! Finance User - Wednesday, May 14, 2008, 11:28PM ET  Report Abuse

    • Overall: 2/5

    We will never be in a government calculated recession again. They do not accurately calculate inflation. You simply cannot trust the government figures. The working class standard of living will continue to shrink. Raise your hand if your 2008 raise was greater than 2007 CPI-U (which is a low ball figure).

  • Yahoo! Finance User - Wednesday, May 14, 2008, 10:08PM ET  Report Abuse

    • Overall: 1/5

    Typical of the rich like Ben to see the economy thru rose-tinted glasses. Ben is not among the 60% of Americans who live paycheck-to-paycheck or the 46 million without health insurance. Ben said little about the 100% rise in oil prices, the 80% rise in gas prices, and the 15% depreciation in housing values. Ben also did not mention the negative savings rates for 6 months (first since the great depression). Sure you can live comfortably now with combined income over $100k but what if the spouse gets sick and income drops to $50k. Ben wont admit it but these price accelerators are cutting disposable income to almost all americans below high level managers.

  • Yahoo! Finance User - Wednesday, May 14, 2008, 9:11PM ET  Report Abuse

    • Overall: 4/5

    Ben's right , things may be a little worse then then he thinks , but over all I think things are just fine . My wife and myself have done well following and reading Ben's books on investing and have done well . Live well with in your means , stay out of debt - increase your investments every month and you'll do just fine .

  • Yahoo! Finance User - Wednesday, May 14, 2008, 8:42PM ET  Report Abuse

    • Overall: 5/5

    Thank goodness, to sum up Mr. Ben perception is reality !

  • Yahoo! Finance User - Wednesday, May 14, 2008, 8:30PM ET  Report Abuse

    • Overall: 3/5

    Since the economy is growing more slowly than the US population, that is a recession of sorts. Per capita GDP is smaller now than it was 2 quarters ago. The U.S. population grows about 1% per year. The last two quarters saw the gdp grow 0.6%, annualized. Losing 20,000 jobs in a month doesn't sound to bad, until you figure the population went up by 300,000 plus of minus during that month. It's not an "official" recession, but that is why it feels like one to many of us.

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