Has the Economy Hit Bottom Yet?

The economist John Kenneth Galbraith once said, “The only function of economic forecasting is to make astrology look respectable.”

Still, we have to ask: was that the bottom we just hit?

After months of punishing economic news, the gloom seemed to lift last week if only for a moment. The stock market shot up 12 percent in four days. Two of the nation’s biggest banks said they had returned to profitability. General Motors said it wouldn’t need another $2 billion in government help this month. And retail sales were better than expected.

Then again, perhaps that’s what passes for good news these days.

The market is still down by more than 50 percent since its high 17 months ago. Yes, the banks made money, but for just two months, and never mind the billions of bad assets that remain on their books. G.M. will still, in all likelihood, need billions in taxpayer help down the road and there’s no guarantee it will survive. And those retail sales numbers? They were still bad, just not as bad as analysts were expecting.

Still, there was a sense among some economists and Wall Street analysts that if the bottom was not touched, perhaps the freefall was at least slowing. No less than Lawrence Summers, President Obama’s top economic adviser, said on Friday that while the economic crisis would not end anytime soon, there were early signs that it was easing.

Which leads to a question: When we do hit the bottom — this year or years from now — how will we know?

There’s no easy answer.

Mr. Galbraith was not the first or last economist to acknowledge fallibility at predicting turning points. (Just think back to assurances by top government officials in early 2007 that the growing problems with subprime mortgages were “contained.”)

Forecasting the end of the current recession is even more difficult because it will hinge on how quickly and efficiently governments resolve the crisis in the banking system. Many investors continue to worry that the world’s biggest financial institutions are insolvent, despite assurances from Washington that those firms have plenty of capital.

How political leaders diagnose and fix the banks will be critical. Analysts say misguided and erratic government responses exacerbated Japan’s “lost decade” in the 1990s and the Depression of the 1930s. “The things that can screw it up are bad policies,” said Thomas F. Cooley, dean of the Stern School of Business at New York University.

In the end, there’s probably no way to know for sure that we’ve hit bottom until we’re on the rebound. Still, analysts say there are some key indicators that might help in spotting a bottom and recovery at a time when it can be hard to see past the despair.


STOCKS

History shows that the stock market usually hits bottom before the economy does.

In October, Warren E. Buffett, one of the world’s most successful investors, said he was buying American stocks because they usually rise “well before either sentiment or the economy.” But even he acknowledged not having “the faintest idea” what would happen in the next month or year.

Since then, stocks have dropped by another 20 percent, and with the market at levels last seen in 1997, stocks are cheap by historical standards. The price-to-earnings ratio — which investors use to gauge how much they are paying for each dollar of corporate profit — is around 13, about 20 percent lower than the average of the last 130 years.

But many investors remain on the sidelines. Money market funds have swollen to $3.8 trillion, up from $2.4 trillion two years ago. And the cash banks are holding in their vaults and at the Federal Reserve has more than doubled in the last nine months.

What has made the current recession so pernicious is the eroding pressure of deflation, the general decline in prices that has hurt both businesses and consumers. They earn less and the value of their businesses and homes has fallen, yet they still owe as much as they did before, said Russell Napier, a consultant with Credit Lyonnais and author of “Anatomy of the Bear: Lessons From Wall Street’s Four Great Bottoms.”

He said he believed stocks would not rise until deflation ended and businesses could charge higher prices to pay off debts. Early indications suggest that this may be happening and that the stock market may be near the bottom, Mr. Napier said. He pointed to three indicators that often signal that economic growth and inflation are on the way — the prices of copper, corporate bonds and inflation-protected Treasury securities. Prices for all three are higher today than they were in November.

“All the indicators suggest you should be buying and not selling,” he said. Still, Mr. Napier acknowledged that stocks, while cheap, could fall further. Measured by their 10-year price-to-earnings ratio, stocks were a lot less expensive in the early 1980s, when the ratio fell to less than seven, and in the 1930s, when it was below six.

Nouriel Roubini, the economics professor from New York University who predicted much of the current crisis, has warned that corporate earnings and stock prices could continue to fall, perhaps precipitously.

HOME PRICES

To determine whether home prices are still inflated, economist use ratios that compare the cost of buying a home to renting or to median family income. If the ratios move sharply higher, as they did in recent years, it suggests home prices might be inflated. When they are falling, as they are across the country and particularly in places like San Diego, Phoenix and Tampa, owning a home becomes more affordable.

Barry Ritholtz, a professional investor who writes the popular economics blog The Big Picture, has a simpler, more subjective, approach: Assume a young couple earning two modest incomes is looking to buy a two- or three-bedroom starter home in a middle-income neighborhood in your city. Can they qualify for a mortgage and afford to buy it?

“If the answer is no, then you are not at a bottom in housing,” said Mr. Ritholtz, who estimates that the decline in national home prices is only half-complete.

Just as prices in the bubble did not go up uniformly in all parts of the country, they will not reach bottom together, said Ronald J. Peltier, chief executive of Home Services of America, a real estate brokerage firm.

In places like Riverside, Calif., and Miami, where homes are selling for half or less than what they sold for three or four years ago, real estate may be close to the bottom. One telling sign is that first-time home buyers and investors are snapping up homes, though they are mostly buying from banks selling foreclosed properties at deep discounts. Sales of existing homes in California jumped by more than 50 percent in January from a year earlier. But the median price was down more than 40 percent, to $224,000.

At the same time, prices have come down a lot less in urban areas like Manhattan and, not surprisingly, the number of homes being sold is down by as much as 50 percent from a year ago. Prices in these urban areas will have to fall much more before many young couples can afford starter homes.

Of course, those who bought at the peak of the market will suffer the greatest pain if they are forced to sell. But Mr. Peltier and other specialists say the current dismal market will only be resolved by lower prices, easier lending and an improving economy.

CONSUMER SPENDING

Americans like to buy things, and for at least the last decade, many economists assumed they would continue to spend on cars, clothes and the latest digital toy, good times or not. Consumer spending has rarely declined in the post-World-War-II era and when it has, it bounced back quickly.

The current recession is severely testing that article of faith. Personal consumption fell by about 1 percent in the second half of last year — the first sustained decline since 1980. Economists say consumption will be slow to recover because debt-saddled Americans are saving more or paying down debt. The savings rate — the amount of money consumers did not spend — jumped to about 3 percent late last year, from practically zero, still far below its postwar average of 7 percent.

A sign that consumption has hit bottom may come when the savings rate begins to flatten. Spending should then rebound as pent-up demand gives way. Car sales, for instance, have fallen to levels last seen in 1981, when the population of the United States was about three-quarters of what it is today. Many families are deferring car purchases and making do with what they have. Eventually, however, they will have to replace their aging vehicles.

In a study of economic cycles, Edward E. Leamer, an economist at the Anderson School of Management at the University of California at Los Angeles, found that auto sales and home building tended to lead recoveries.

An increase in international trade would be another early indicator that consumer spending here and abroad has hit the floor and begun to rebound.

After growing at an average of 7 percent a year for most of this decade, global trade was little changed from March to September last year, according to the Organization for Economic Co-operation and Development. Many large economies including the United States, Japan and China have reported a sharp drop in exports and imports in recent months. There was more bad news on Friday, when the Commerce Department reported that exports from and imports to the United States fell by about 12 percent in January.

“Seeing global trade pick up would be a very positive sign,” said Kenneth Rogoff, a former chief economist at the International Monetary Fund and now a professor at Harvard.

Tobias Levkovich, chief United States equity strategist at Citigroup, has another indicator for spotting when we have hit bottom: When we stop behaving like children in the backseat of the car asking their parents, “Are we there yet?”



《国际先驱论坛报》经济，触底了没? 在景气反弹之前，似乎无法确认经济是否已达谷底，不过，在景气难辨的时候，仍有些重要指标可依循。
【颜嘉南摘译】
　　金融海啸横扫全球，大家不免猜想，经济到底触底了没？景气疲弱的新闻报导了数个月，3月上旬时似乎传来一点好消息，美国前三大银行宣布今年获利有望、美国股市也连续四天收红盘、通用汽车表示降低成本奏效，不需要额外的20亿美元贷款。此外，美国2月份零售数据亦优于预期。
　　仔细想想，前三大银行只是今年前两个月有获利，它们帐上仍高挂数十亿美元的不良资产；美国股市与17个月前相比，跌幅超过50％；再者，通用未来仍需仰赖纳税人的血汗钱，但这也不能保证该公司真能走出泥淖；至于零售销售数据还是很差，只是没分析师想象中糟而已。
　　部份经济学家和分析师认为，即便经济还没触底，但下滑的幅度已经减缓，如同白宫经济顾问委员会主席桑默斯所说的，虽然经济危机无法立即结束，但有逐步走稳的迹象。所以，我们不禁问道，景气何时才能触底？我们又怎么知道经济触底了没？
　　指标一 股市
　　预测目前的景气衰退是否触底着实困难，它取决于美国政府拯救金融系统的速度和效率，且政府的政策又至关重要。在景气反弹之前，似乎没有办法可以确认经济已达谷底，不过分析师表示，在景气难辨的时候，仍有一些重要指标可以协助观察。
　　第一为股市，历史经验显示，股市会比经济更先触底。去年10月，股神巴菲特表示，他一直投资美国股票，因为美股会在经济成长之前先上涨。
　　不过自去年10月后，美国股市又再下挫20％，股价低于历史水平，本益比约为13，较过去130年的平均值低了20％。即便如此，许多投资人仍采取观望态度，货币市场基金由两年前的2.4兆美元，膨胀至 3.8兆美元。
　　通货紧缩让目前衰退的经济更为致命，整体物价下滑，对企业和消费者双双产生不利影响。法国里昂信贷银行（Credit Lyonnais）顾问纳皮尔指出，通货紧缩让消费者所得降低，企业和房屋价值减少，但消费者的负债金额却不变。
　　纳皮尔表示，之前一些令人乐观的迹象，显现股市可能接近谷底，但他认为只有通货紧缩结束，和企业可以提高售价以支付负债后，股价才会上升。纳皮尔表示，铜价、公司债和国库券，为反映经济成长和通货膨胀的三大指标；目前铜、公司债和国库券的价格，都高于去年11月的水平。
　　纳皮尔表示，这些指标都建议投资人应该买进股票，而非出售，不过他亦承认，尽管现在美股很便宜，但日后可能会进一步下挫。纽约大学经济学教授暨经济铁嘴卢比尼亦警告，公司盈余和股价可能会持续下跌，且幅度可能极大。
　　指标二 房价
　　第二为房价，衡量房价是否膨胀，经济学家以购屋成本除以租金或是中产家庭收入的比率来看，若该比率如同近几年大幅上升，则表示房价可能膨胀，如果比率下滑，买房子就较容易负担。
　　美国热门部落格作者暨专业投资人瑞索兹用更具体的例子解释，假设一对年轻夫妇，两人的薪水皆是一般水平，正在寻找中间价位两房或三房的首购房屋，他们是否有资格取得贷款？以及是否有能力购买？如果答案是否定的，那房价还没到底。瑞索兹预测美国房价下滑趋势，还只走到半路。
　　房地产经纪人公司Home Services执行长佩帝尔表示，全国的房价在谷底时不会一致地上扬，所以也不会一起触底。美国加州河堤（R iverside）和迈阿密的房屋，售价较3、4年前低了一半，这些地区的房价可能接近底部。另一个指标就是该地区首次购屋者和投资人大举买进房屋，虽然大部份都是向银行购买的法拍屋，让1月份加州成屋销售额较去年同期劲扬50％，但是中价位的房屋销售额则下滑40％，降至22.4万美元。
　　在此同时，纽约曼哈顿等都市地区，房价跌幅更为剧烈，1月房屋销售数据较去年同期重挫了50％。在许多年轻夫妇有能力购买第一间房屋之前，都市地区房价将会大幅下滑。当然，那些买在最高点的人若无法付款被断头，将承受最大痛楚，佩帝尔和其它专家表示，唯有房价降低、贷款容易和经济环境改善，才能解决目前低迷的房市。
　　指标三 消费者支出
　　第三为消费者支出，美国人喜欢买东西，至少近10年是如此，许多经济学家假设，消费者会持续购买汽车、服饰和最新的电子产品，即便在二次大战后，消费者支出只有些微下滑，之后又迅速回稳。
　　目前经济衰退严格的考验过去的信念，去年下半年消费者支出减少 1％，为1980年后首度萎缩。经济学家表示，消费者支出恐怕会回复缓慢，因为面临沉重债务压力的美国消费者，将会存下更多钱，或是将钱用来还债。
　　当储蓄率开始持平时，可能表示消费者支出达到谷底，消费者不再压抑需求，支出将大幅上扬。举例来说，汽车销售额降至1981年的水平，当时美国人口是现在的四分之三，许多家庭延迟购买新车，旧车将就着用，不过他们最终都将换车。加州大学洛杉矶分校安德森管理学院经济学家李默尔，在研究经济循环时发现，汽车销售和房屋建筑都领先景气复苏。
　　指标四 国际贸易
　　此外，国际贸易也是判断消费者支出的另一个先行指标，包括美国、日本和中国在内的大型经济体，近几个月进出口数据皆大幅下挫。更糟的是，美国商务部日前发布的数据显示，1月份美国进出口重挫 12％。
　　国际货币基金（IMF）前首席经济学家、现任哈佛大学教授罗格夫表示，全球贸易攀升将是一个非常正向的指标。
　　花旗首席美国证券策略师列夫科维奇，提出另一个观察景气是否触底的指标，就是当我们停止像坐在汽车后座的儿童一样，一直问「我们到了没？」的时候，景气就已经触底了。
　　（原文刊于国际先驱论坛报，颜嘉南摘译）