Welcome to hump day! Today’s news cycle has been dominated by the Clinton/Obama race, but that doesn’t mean there isn’t recession-related news to bring to you. Today’s news has been a slew of positive spin. Here’s some of the headlines.

• The Daily Telegraph reports that US Money Market Fund Blackrock is buying the subprime mortgage debt from UBS. $15 Billion worth. Basically, Blackrock is betting we’ve hit the bottom of the subprime mess. The investment helps improve liquidity and may be a signal of the end of the crisis.
• Barrons: Take a Recess on the Recession Talk
• NUWire’s InvestorCentric Blog: The Benefits of Recession When there’s a recession or economic downturn, things usually get cheaper. Stocks, homes, products, etc. Of course, we still need to worry about inflation.
• Wall Street Journal: The Housing Crisis is Over (this is from yesterday, but I wanted to bring this good piece in as well)

Optimism continues to bubble up in spurts. We’ll continue to watch the news and blogosphere for trends and indications of what could happen next.

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Today’s roundup is unique, because a large chunk of today’s news has been about Fannie Mae. Fannie Mae is one of the giants in the mortgage loan industry, and it posted an abysmal quarterly report today, which is where we’ll begin.

• 24/7 Wall Street reports the $30 Billion+ company lost $2.2 Billion in the first quarter. It’s even worse if you compare it to last year: It earned $961 million during the same time period (Jan-March). There’s no way to spin this: the report is bad for the conditions of mortgages and is a dark indicator for the economy. Shares tumbled 15% before the open of the markets.
• Yet Fannie Mae’s share price jumped 9% today, reports Yahoo! Wait, WHAT? Apparently, the government also loosened restrictions on Fannie Mae (note: Fannie Mae doesn’t loan to home buyers, but buys and sells the mortgages from the banks that give out those loans.) This frees it up to better help stabilize the market, and gives it more leeway.
• Yahoo! also reports that Fannie Mae predicts steep drops in housing prices, of 7-9%.. Previous predictions were in the range of 5-7%. Again, this is a bad indicator for the health of the economy.
• The New York Times reports that there’s fear that Fannie Mae and Freddie Mac, the other big mortgage lender, may need some rescuing by the government. They handle over 80% of the mortgage securities market, and there’s the possibility of nearly $20 Billion in additional losses. The summary is this: Fannie Mae and Freddie Mac can help keep the mortgage market afloat all by themselves. But if they fail, there could very well be an economic meltdown.
  

  “We’ve taken tremendous risks by loosening these companies’ purse strings,” said Senator Mel Martinez, Republican of Florida and a former secretary of housing and urban development. “They could cause an economywide meltdown if they got into real trouble and leave the public on the hook for billions.”

  Loosen the regulations, increase the risk, increase the reward (or save the economy).

• Yet despite all of this, Fannie Mae is optimistic that it can capitalize on the instability, reports CNN. The Fed Rate Cuts, loosening restrictions, and a possible increase in market share are all contributing to this optomism.

Yes, I am just as confused as you are right now as I try to digest all of the Fannie Mae talk. The truth is that the indicators for the health of Fannie Mae and the mortgage market are mixed, and nobody really knows what will happen. It’ll probably get worse before it gets better, and Fannie Mae may reap some serious rewards from this mess. But if Fannie Mae or Freddie Mac are unable to pay their debts and turn things around, we could have a meltdown far worse than Bear Stearns.

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79%, to be precise, believe we’re in a recession now. According to the CNN/Opinion Research poll, this is up from 46% six months ago and 2/3rds of respondents back in February.

This is in contradiction with the technical definition of a recession, which is two quarters of negative GDP growth (simplified: the economy shrinks twice in a row). It grew last quarter, but only by 0.6%. Still, that’s growth, and it means we’re in a slowdown, not a recession.

So why does perception beat reality? Is it just a misunderstanding of the definition. No, I think this quote from the CNN piece sums it up pretty well:

“You probably don’t have 79% of economists saying that we are in a recession,” said Jeoff Hall, chief U.S. economist for Thomson Reuters. The country has “lost 260,000 jobs (in the first 4 months of 2008), so for those people it is not a recession, it is a depression.”

It’s about personal impact. And right now, high gas prices, job cuts, and uncertainty are playing their role. Perception can sometimes be stronger than reality. And sometimes, I think we need to change the definition of recession.

Two questions for the readers out there: Do these numbers surprise you? And do you think we should look into how we define a recession? Voice yourself by posting a comment!

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Scanning the headlines was very frustrating today. Why? Because it seems that the media has latched onto a new favorite buzzword:

Recession-Proof

What does that mean, anyway? Well, I assume it’s just like something that’s waterproof: It can “repel” or “keep out” recession. Funny enough, Wikipedia has no article for recession-proof, though they have a horrendous article on “recession-proof” industries.

Let me give you the recent “recession-proof” headlines.

• LA Times: Is Canada Recession-Proof?
• About.com: Is McDonald’s Recession-Proof?
• PC Magazine: Is the Tech Industry Recession-Proof? (catching onto a pattern yet?)
• Forbes: America’s Recession-Proof Cities
• And my personal favorite - LA Times Blog: Strippers Urged to ‘Recession-Proof’ Bodies. (it’s the lecture the clubs give that kills me)

Just do a Google Search if you haven’t had your fill of ridiculous recession-proof headlines.

The truth is that there’s no industry, city, or stripper that’s 100% recession-proof. Yes, some industries tend to fare better than others in hard economic times, but each market downturn is unique and thus which industries are affected changes as well. Industries move in and out of towns, changing the workforce makeup over time.

I can only speculate to the reasons for why the media seems to like this buzz word, but it probably ties in to people’s fear, as it often does. We are fearful of what the economy will do to us and our families and the term recession-proof is in opposition to recession. Fine, I understand. There are things you can do to better succeed in a downturn, yes, but remember:

Nothing guarantees your financial security. No city you move to, no industry you switch to will guarantee it. Recession-proof comes off as a guarantee, which is why it’s misleading.

My advice? Be aware but don’t get drawn into the hype. Do what you love and do with all your heart. Corny, yes, but that’s the best guarantee of success.

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Today’s daily roundup on news involving the economic slump:

• Asian stock markets mostly climbed higher on optimism that the U.S. has dodged a full-blown recession. My issue with this Forbes article, though, is that it’s impossible to pin the rise of every Asian market to one single factor, and then to discard the fall of the Indian market. Modest gains all around, though.
• HR World reports that average salaries are dipping, some as much as $10,000 ($105k to $95k for software design, $95k to $85k for product management, etc). A lot of the blame is on the falling dollar. Of course, the dollar gets weaker with each interest rate cut.
• Morgan Stanley is going to cut 1,500 jobs, or about 5% of the firm. Morgan has fared the subprime morgage crisis better than most firms, but it’s still feeling the pinch. After all, recessions tend to hurt harder and longer in New York than the average state.
• According to 24/7 Wall Street, the credit crunch is delivering some pain to small business. 44% of small businesses used credit cards for part of their financing, and small business loans dropped 18% in the last year. Combined, that spells trouble. High interest rates and defaults of small business, the backbone of the economy, is simply not a good thing.

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While reading the New York Times’s article on the April job loss figures (we only lost 20,000 instead of an expected 80,000), I had to scratch my head. Why? Well, let me show you. Here’s the opening paragraph:

The American economy shed 20,000 jobs in April, the Labor Department said on Friday in a report that many economists took as powerful evidence that the United States is ensnared in a recession.

You’d think that these figures spelled doomsday for the economy. Let’s prep for Armageddon! But then I read the next paragraph:

But the size of the loss was significantly smaller than many analysts predicted, and the unemployment rate nudged down to 5 percent.

Significantly smaller? 5% unemployment? Those don’t sound bad at all!

It seems as if the news media and the blogosphere are split on what’s going to happen next (and the NYT can’t decide what it thinks). Is the market going to recover and avoid outright recession? Or are we going to drop to deeper lows?

Here’s some of the debate I’ve found on the internet about the subject:

• President Bush, in press conference with reporters last Friday, stated that “This economy is going to come on. I’m confident it will.” Of course he’s not going to put down the economy, but Lawrence Kudlow makes a logical case that Bush will have the last laugh and that we will avoid recession.
• The Motley Fool seems to think that that we’re still headed for recession, despite the positive gain in GDP last quarter. It’s just going to take longer and developer more slowly. Interesting question they pose: Does that mean it will take longer to get out of it?
• Surjit Bhalla writes in the Business Standard that the recession talk is hype and that the actions of Fed Chairman Ben Bernanke averted a financial meltdown.
• Small Business Trends believes that inflation, not recession, is the looming economic monster.

There’s a lot to debate, so I ask you: what do you think? What’s next: Recession, economic recovery, or inflation?

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Former Fed Chair Alan Greenspan spoke in a television interview this morning, and he had some interesting comments. From Reuters and Bloomberg:

“We’re in a recession,” Bloomberg news agency reported Greenspan had said in a television interview. “But this is an awfully pale recession at the moment. The declines in employment have not been as big as you’d expect to see.”

The key words of the quote: at the moment. He’s stated before that he believed the U.S. is in a recession, but this quote makes me think he’s not convinced we’re anywhere near being out of the woods. Those three little words are important.

Do you think Greenspan’s a bull or a bear?

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Do a quick exercise. Raise your hand in the air (no matter where you are) if you’ve done any of the following in the last month:

• Cut down on your driving because of the cost
• Stopped or changed a daily ritual like buying a morning latte at Starbucks
• Worked just a little harder at work to keep your job secure
• Intend to use your rebate check to pay off a credit card or mortgage instead of spending it
• Put off on buying that new Flat Screen T.V.
• Pulled some of your money out of the stock market (even if you shouldn’t) to make sure it’s still there three years from now
• Stayed in for dinner more often, or simply just cut your budget
• Know a friend or family member who has lost his or her job

Get the picture yet? I don’t even have to tell you how many people have their hands waving in the air; it is a lot. Clearly the collapse of Bear Stearns, the housing crunch, and increasing job cuts are on everybody’s minds. Nobody’s sure what is going to happen next, but until they know, most people, probably including yourself, are taking steps to minimize the impact of a possible recession on their lives.

Let me make it clear: we are not in a recession yet. We’re in a period of slowed growth, but the possibility of recession looms. Regardless of the definitions, it’s time to do something more than cut your spending. It’s time to arm yourself with knowledge.

This is where BucktheSlump.com comes in. We are a news aggregate, a blog, and a community dedicated to topics and issues stemming from the economic downturn and, yes, the looming threat of recession. If you look at our About page, you will find some of the things we are going to do: bring you the major news and talk on the recession, provide analysis. But we’re out to do more. We’re going to bring in great minds and the struggling worker to share their insight and personal stories. Tips and information on how to better prepare yourself, tools to help your friends, and personal stories from those who have been hurt by the slump and those who have risen from great lows.

We made Buck the Slump for one reason: to help people through this. We hope this information will be useful to you now and in the future, whenever hard times hit. The information we will provide here will be useful you to you for the rest of your life, even long after the economy recovers. So please, visit the site, join the community, or tell your own story to our readers.

In the meantime, if you have any ideas for topics we should cover, important news stories, or ideas to improve Buck the Slump, we encourage you to email us or, better yet, leave a comment.

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Since we’re new, you may not know that we do a daily roundup on the news and blog talk on the recession. Now you know!

So here’s today’s roundup:

• Prolific investor Warren Buffett says (once again) that the economy is in a recession. Of course, this conflicts with how economists and the Commerce Department define recession. He uses his own definition of recession:
  

  I would define that as a situation where people are doing less well than they were three months, six months or eight months earlier and most businesses find themselves in that position too.

  Not exactly an easy-to-measure definition, but I have little right to criticize Buffett.

• The Christian Science Monitor has a new article on the college job market. Specifically, that the college job market has deteriorated. I find this interesting because it was only two months ago when the USA Today wrote that the entry-level market is still very strong. Oh, and according to the Chicago Tribune, college towns seem to be doing fine.
• Apparently, Bear Stearns nearly collapsed twice. You learn some interesting stuff looking through the regulatory records, it seems.
• Finally, Andrew Carroll of the Washington Post has a wonderful suggestion for what to do with your tax rebate: donate it to our heroic troops.

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Buck the Slump officially launches on May 5th. Things to expect:

• A daily round-up of the talk, news, and blogging around the web on recession related topics
• Analysis
• Information on how to better prepare yourself to succeed during the upcoming recession
• Information on how to help others, because you never know when you will need help.
• Guests posts on a variety of topics related to the economic slump
• Personal stories of people’s hardships and success despite adversity. Learning from the stories of others will help all of us.

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