Recession

Today the international stock markets collectively took quite a dive. Bears dominated the markets. Fears of a US led global recession are gripping the planet! Expectations are running rife of a full blown market recession. Perhaps a major stock market crash!

And all of this because a number of ‘highly intelligent’ investors invested without brains!

While on the subject of the sub-prime crisis, the simple fact is that it should never have happened! It defies logic. Why would anyone invest $1 million to something that is only worth $100,000? The only possible reason is a promise of disproportionate returns. Does anyone remember the dotcom boom – and crash? A simple case of widespread greed as investors chased easy money. If you haven’t seen the John Bird and John Fortune explanation, then click here to see it now. Hilarious but true.

Back to the impending recession.

John Smith is a rep for a large company. His first appointment for the week is with Samantha Froggins. Samantha usually places a substantial order from John. Today the order is for less. Much less.

"I'm being cautious" she says. "I heard that we’re going into recession. I don’t want to be saddled with dead stock. The reports are very worrying. I'm not sure that I've cut enough".

Not all of John's clients have cut back, but there are enough to cause concern.

At 4:00 p.m. John finally arrives at the BMW dealership. Fred is there to meet him. The papers are ready for John’s new 5 series BMW. The commission is substantial, and in anticipation Fred has booked a table at the exclusive La Vie en Rose.

Fred can't believe what he hears next. "Fred, we are moving into a recession. I have had three cancelled orders today and another five were reduced. I'm really sorry, but we'll have to put the car on hold. The Golf will have to do for another year."

Fred is devastated. If ever there was a done deal, this was it. He calls the restaurant and cancels his booking.

Soon La Vie en Rose will be laying-off staff. And so the cycle goes.

For a recession to happen, there have to be participants. No participates - no recession. As they say, markets, and the economy, are driven by sentiment.

Barry