You Can’t Know Until You Know, You Know?

The New York times reports the market’s getting crushed on “fears that a recession may be imminent.” Maybe so. The dilemma is, a recession is defined by two or more quarters of negative growth. So you have to have the recession for six months before you can say you have it, by which time you’re likely headed out of it.
The last recession was in 2001, it was short and shallow. The average length of past recessions has been 11 months, counting the six months you were in it but didn’t know it.
I saw the following headline in Slate,

The "R" Word
Are we heading into a recession?
By Daniel Gross
Posted Monday, July 31, 2006

Note the date. That recession never happened.
The ‘what is’ of the situation, however, is that investors get panicky, pull a ton of money out of stocks, resulting in these slides. Then even more investors get panicky and keep the cycle going while everyone hyperventilates, then it quits. The ‘quits’ isn’t predictable. When the market does turn around, these same investors will buy back much of what they sold, likely at prices near what they sold it for in the first place. The only people who net made money are brokers and floor traders.
It’s one of the reasons Wall St. likes recession predictions. They know you’re going to panic. They get to rearrange your portfolio to something else. It won’t be any better than you had in the first place, you’ll spend a lot on commissions or fees and you’ll thank them for doing it. At Christmas, they send you a card.
If we are in a recession, well, that’s what happens. Things expand and contract. they get too fat, then they get too lean. Except in America, we only get fat.
We seem determined to jawbone ourselves into recession. It gives talking heads something to keep you tuned in for the next commercial, it gives politicians “issues,” it gives financial reporters a chance to do columns about the last recession, historical averages, blah, blah, to fill up the space between advertisements in the newspaper or magazine.
We need a recession, it helps sell stuff so we don’t go into a recession.