Comparing Recessions: Chart

Earning season is in high gear, so it is a good time to take a look at the earning performance of the S&P 500.

This chart from Standard & Poors, pointed out by Chart Of The Day, gives some perspective.

The graph compares the earnings performance of the current recession, shown in the solid red line, to that of the 2001 recession in the dashed gold line, and the earnings performance from 1936 through 2006, shown as the dashed blue line.

As today's chart illustrates, the current decline in earnings is several orders of magnitude greater than the average decline during a recession. The current decline is also more severe than what was the most severe earnings decline on record - the decline that began in 2001 (gold dashed line).

Comments

[Viper]

While I hate to mention his name... Krammer.. but he has said it best. We have come out of the Depression and into now just a very bad recession.

We came very close to having by now 40% unemployment... and we could fall back into depression...

Now we have to tread water and hope the actions done will work... it takes 6-12 months for monetary actions to work... and given our economy's structural problems caused by buying too many foreign products .. no industrial sector left... this could be much longer! If you bought those toyotas and stuff, then you are more of the long term part of the problems than the banks... and I guess that means most of us...

Yet everyone is yelling failure after just a few months... absurd. Employment will keep going down till September. And it will be 2011 before it picks up and it will be higher than it was since we have no way to replace the jobs that were tied to the cash generated by home refinancing or about 14% of our economy for past 5-7 years.. unless we start making stuff quickly and buying what we make.....

Regards

[unscum]

Toyota's are built in the US.

[blacknblue2]

It doesn't matter. God or AKA President Obama has said things are getting better. So it is settled. Get over this reality thing, just look at the shiny object.

[ObjectiveRealist]

He said we're now getting onto the right track, liar.

[blacknblue2]

Re-read ..... "Obama has said things are getting better. So it is settled. Get over this reality thing, just look at the shiny object."

And then you say "He said we're now getting onto the right track, liar." You exhibited exactly what I said about looking at the shiny object.

Now go and see what the unemployment figures are; the total deficit; is the FRB is printing more money; now go and look...look..look. Then ask yourself, "what has changed?" The only thing that has changed is what they are telling you.

GWB had his look at the shiny object and it was called the war on terrorism.

Are you starting to get it yet, the international banking system is playing their hand.

Maybe this will help you to get out from under the nightmarish dream brought to you by the international bankers.

http://blogs.ft.com/maverecon/2009/04/why-did-the-fed-the-bank-of-england-%20the-ecb-the-bank-of-japan-and-%20the-swiss-national-bank-announce-a-dubbel-%20openslaande-porte-brisee-deur/

Why did the Fed, the Bank of England, the ECB, the Bank of Japan and the Swiss National Bank announce a dubbel openslaande porte-brisée deur?
April 9, 2009 3:13am

The second strange feature is that the April 6, 2009 statement by the Fed is misleading.

Even better this may take the scales from your eyes.

http://www.iousathemovie.com/

[ObjectiveRealist]

quote:
You exhibited exactly what I said about looking at the shiny object.
/quote

It's a meaningless phrase, which you can always claim ex post facto that you _intended_ to mean anything. I recognize the reference about scales falling from eyes, and like your Bronze Age superstition YHWH, your claim that I "exhibited exactly what (you) said about looking at the shiny object" is perfectly unfalsifiable because it is perfectly meaningless.

quote:
Now go and see what the unemployment figures are; the total deficit; is the FRB is printing more money; now go and look...look..look. Then ask yourself, "what has changed?" The only thing that has changed is what they are telling you.
/quote

No. Real, important changes are occurring; the financial costs of both wars -- the defensive war against al Qaeda and the Taleban in Afghanistan and the war of imperialist aggression in Iraq -- are both on the books, and we are spending now on the real things we need for the future, beginning with infrastructure. Borrowing is okay, when spent on wise investment. Health care, education and clean energy are to follow, solidifying the foundation of a real production-based economy again, similar to the one built in the 1950s, but with electric motors in the cars of the future, charged with solar panels sitting atop our own homes, making the "rugged individualist" ideal of self-sufficiency more realistic than it has been since the Great Depression.

[EinChicago]

Anytime you look in teh byline and see the authors as "the Huffington Post" rather than a credible news source, one has to take it with a dumptruck of salt, as a pinch isn't anywhere near enough.

[olephart]

Credible news sources that predicted the current debacle 0. Please apply your dumptruck of salt where it belongs and on those credible news sources.

[ObjectiveRealist]

That beats the snot out of the Haz. Mat. crews one needs when subjected to the "reporting" by Fox News, townhall.com, heritage.org, et al.

[jerrypl]

But Larry Butthead Summers thinks we are no longer in freefall now that the banks are full capitalized.

http://eye-on-washington.blogspot.com

[OMG1109]

It does not matter anymore, goods news does not sell, only bad news makes for great headlines. Plus cable news, MSM, blogs, pundits, republicans will spin it anyway.

I heard this morning on a local radio news that the last 4/5 weeks of stock growth are the best since 1933. However, nowhere have I seen this picked up on and reported as GOOD news....

[deanfv]

Read this over and over:
As today's chart illustrates, the current decline in earnings is several orders of magnitude greater than the average decline during a recession. The current decline is also more severe than what was the most severe earnings decline on record – the decline that began in 2001.

[EinChicago]

"Read this over and over:
As today's chart illustrates, the current decline in earnings is several orders of magnitude greater than the average decline during a recession"

Why? No matter how many times you read it over and over, it won't become any less inaccurate and asinine. Th etrough in 2001 was around -50%, the trough for 2008 looking at that chart is around -60%. Only a m.o.r.o.n wo\uld think that qualifies as "several orders of magnitude".

[ObjectiveRealist]

d = r * t [distance = rate multiplied by time] therefore r = d / t [rate = distance divided by time]
The quote, originally from chartoftheday.com http://www.chartoftheday.com/20090409.htm?TT], not huffingtonpost.com, was part of an article that was _obviously_ focused on the most recent quarter.
quote:
Alcoa officially kicked off earnings season Tuesday after the close. Alcoa reported a loss of $497 million in the first quarter.
/quote
Obviously, what is meant by "current decline" is a 30% drop in three months, and the "average decline during a recession" (blue line) is a 10% drop over 18 months.

Substitute "% change from recession start" for "distance" in the rate equation. Now, it is obvious that as a percentage change, divided by the time in which it occurred, the _rate_ of the "current decline" is 18 times more rapid (three times more loss divided by 1/6 the time) than the average. Only a m.o.r.o.n. would think that -50% was being compared to -60% by the phrase "several orders of magnitude."

* Although an "order of magnitude" conventionally means a factor of 10, any "fixed ratio to the class preceding it" is correct http://en.wikipedia.org/wiki/Order_of_magnitudee]. And considering how economic "thinking" is dominated by the brainless assumption of perpetually constant growth, the constant known as "e" http://betterexplained.com/articles/demystifying-the-natural-logarithm-ln//] would be the most apropos ratio to choose.

[deanfv]

So someone tell me again why the stock market is up while earnings fall off a cliff?

The sheeple are being led to slaughter by the Cramer's and the Kudlow's, CNBC and CNN, and the Administration. No one owns stocks in a Depression. And we are not even 1/3 of the way through this pain.

Good luck.

[Viper]

Because stocks dropped 80-90% in many cases... they are now just down a mere 70% which is a 20% plus upswing. Nice gain, but 3-4,000 points below a come back!

Most business are not down as much as their stock price drop indicates. Just like the market over emphazied the drop in value of toxic assets... your mortgage, it over devalued many stocks. Just like it over priced oil at 147/BBL.

The toxic assets are not that toxic and neither are the stocks.... Markets tend towards extreme in the short term... and thats what the Krugmans of the world are over looking when they yell insolvency because at one point Mortgagee backed securities traded for just 10%... now 40-50%. And he neglected the cash inflow.. your mortgage payment in the valuation or the value of a foreclosed house.... 40-50%.

Regards

[Dredd]

A portion of the budget is classified and a state secret:

http://blogdredd.blogspot.com/2009/04/common-sense-about-state-secrets.html

And that is during "normal" times. How much is a state secret these daze?