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Optimism Falls Short

Posted by: Michael Mandel on May 01

I had promised a week of optimistic posts, but only delivered 3. That means I owe you folks two more.

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Reader Comments


May 3, 2008 02:29 PM

How Bloomberg allowed its parent company Meryll Linch to make losses of $15 Billions when they advice on market economy every minute with tickers charts deviations?.
It means education in USA is an eye wash and mafia rules.
Transport Index is showing 5300 hence dow and economy is normalizing.This is conclusion of Bloomberg.
In USA people carry horse shit several hundred miles with no knowledge of dumpster is full or not?.This is their 16th century technology.They pay $300,000 to drivers.You cant find this any where in the world.
Still people are working on software programs.Changing cobol to C .From C to C++..Then C++ to VC++.From VC++ to Java.And not but least java to C# and C# to java.back and forth.How all these IT programs have not prevented this disaster of money reaching gangsters involved in home sales?.They got cheap hard working labor from Mexico.But those Mexicans spent money on telephones(talking to families) and drugs making Mexican telecom tycoon carlos second richest man in the world.
USA is worse than Italy in terms of planning and vision.Several thousands homes are gutted since there are no occupants in Ohio.There can not be any fool who will demolish existing and build new since it is their profession and do not want to any thing else.USA has gangsters and they have no patriotism.Military soldiers who ever is dying in Iraq should come back home and throw these gangsters in a open pacific Island making them find their food(not jail.they feed).They are un necessarily sacrificing their lives fighting for foolish cause of their leaders and gangsters.


May 3, 2008 08:23 PM

Yeah, I was wondering about that. I haven't read through the ones you did post in full yet but they didn't seem too optimistic on a first skim either.

Joe Smith

May 4, 2008 03:11 PM

test comment

Brandon W

May 5, 2008 07:22 AM

At this time, the only way I believe someone can be optimistic is if they are in the top 1 or 2% of income earners and (as most do) own substantial pieces of corporations. Real wages are dropping for workers - terrible for employees and a middle class but great if your company needs workers. The Fed is bailing out the banks - great if you're a banker, bad if you're an average taxpayer who has to foot the bill. The Fed has cut interest rates too low - great if you're getting money from the Fed that you can turn around and "resell" at a profit, bad if you're already financially stretched and inflation shoots through the roof (and the wealthiest have no problem absorbing price increases). Irresponsible fuel consumption, and a failure to invest in alternatives or an infrastructure that can function in a low-energy economy, means that energy prices will continue to rise for the foreseeable future - fine if you're wealthy enough to ensure your personal supply of energy at whatever cost necessary, bad if you can't financially absorb more costs and you live 40 miles from work because you couldn't afford a home closer in. I could go on, but I think I've made my point. Wealthy enough? None of these problems matter that much. Heck, they might even be a profitable trend for you. Be optimistic. The rest of us are on roller skates crashing down Lombard St (San Francisco). The only thing you may not be optimistic about is that the over-consumption which you've lured Americans into, which has driven your rapid consolidation of wealth, can't go on anymore. We're tapped out.


May 5, 2008 01:29 PM

I was all but convinced that we were in a recession, but the data of the last few days puts that in doubt.

An unemployment rate of just 5.0% is not a recession. Period.

The ISM Services index registered growth.

GDP is still positive, by a bit.

The massive rate cuts by the Fed have yet to work their way through the system.

It appears that the downturn was just 3-4 months long, if the uptrend continues.

I disagree with Brandon W's boilerplate gloomster leftism that the bottom 98% (anyone earning under $300K/yr) are in trouble. If that were the case, immigration to the US would be slowing down.

In fact, American society is SO prosperous that $115/barrel oil is still causing only minor pain. The pain is NOT major enough for massive changes in behavior (carpooling, major shifts to public transportation, etc.)

Brandon W

May 5, 2008 04:34 PM

Immigrants haven't been lured into taking out $3 trillion in debt in just the past few years. Personally, I'd be thrilled to be at $0... it'd be an improvement (as I'm sure it would be for most Americans).

Also, immigration not-slowing is irrelevant. That's like saying the economy is great because your dog doesn't have fleas. Immigrants to the U.S. are either 1) coming from worse conditions, or 2) hardly have perfect information regarding the financial state of the middle or lower classes, and thus can't be assumed to be making perfect decisions.

What I've really been trying to get at with several recent comments is that spending is already contracting - and will continue to contract - because most Americans are in scary levels of debt. They can no longer borrow to spend - the primary driver of economic growth for the past 20-some years. Not only can't they borrow, they must now repay the debt, PLUS finance charges. So spending will be cut back by several hundred billion dollars, annually, from what it was in the past 7 years or so. And with quickly exploding energy and food costs eating away at discretionary income, it will drop even further.

Try and tell me that isn't going to hurt. Well, it'll hurt for everyone except those who have accumulated so much wealth that they can absorb it. And there ain't many.


May 5, 2008 06:26 PM

Brandon W,

No, it won't hurt 98-99% of people. It will hurt those who were foolish enough to not save for a rainy day, and they deserve it. Call it tough love, but these people have to become reacquainted with the concept of saving, deferred gratification, and self-control.

That, in the long run, is a good thing.

Immigration is a metric of how good things are in America vs. the rest of the world. I am not interested in some utopia where everyone is rich. As long as millions want to come here, even illegally, from a diverse array of countries, then conditions in America are still very good relative to elsewhere. America is SO wealthy that millions want to come here, the 'poor' people are obese AND $115 oil is not causing a real widespread hardship. That is remarkable.

So if the only lament is that people who managed their finances stupidly are finally going to learn a lesson, I welcome that as a necessary market adjustment.

It is also absurd to say that 98-99% cannot absorb the higher costs of gasoline and their debt. I don't see even middle-class people adopting carpooling/public transportation en masse. Some are, but not that many. Hence, they are not quite hurting yet.

US Net Worth continues to rise - this accounts for your debt number. Michael posted this chart just a few weeks ago. I know that believing in gloomster leftism requires ignoring this data, but I find in uncompelling.


May 5, 2008 06:28 PM

Real adjusted net worth per capita.

Mike Reardon

May 6, 2008 07:56 AM

The good news this week is Federal Reserve Chairman Ben Bernanke starting a dialogue on a needed Congressional response to housing foreclosures in his speech at the Columbia School of Business in New York. Maybe forcing lenders to admit to a negative return with a promise of a mechanism that salvages their principle without total default can be reached as a workable economic instrument. His supporting suggestions for a form of standard national loan moderation for housing going forward were the market can not support negative price equity on housing is welcome. And starting a discussion is a first step for new responses that gain real forward traction next year.

Brandon W

May 6, 2008 09:02 AM

And one more reason - out here in the REAL world - to not be optimistic:


May 6, 2008 11:45 AM


Italy's economy is in serious trouble, still managing immigration is one of the top issues because millions of people from non-EU countries want to immigrate what's your point???

Living conditions in USA of course are still better than the average Indian that lacks even basic sanitation or the average Salvadorian...again what is your point?? That should let us all feel better??? Ask to the average EU citizen or the average Australian or Canadian if he wants to come here to live and you may have a very different answer...

The anemic GDP growth of 0,6% for the first quarter will be very likely be revised down in the next months, that is at least the consensus among the experts.

You said "American society is SO prosperous that $115/barrel oil (read $121 today) is still causing only minor pain. The pain is NOT major enough for massive changes in behavior

Nonsense. Sales of smaller cars are at an all time high (which is a good thing by the way). Carpooling is picking up here in Seattle, supposely one of the city that is doing better than others.
I would like to let you have a nice chat with my friend Dylan, he is a sales manager at a big Chevrolet dealership..ask him how long since they sold the last Suburban....

The real adjusted net worth per capita graph you mention doesn't mean anything to me, I need to know all the details on how is the old say there are lies, damned lies and statistics....

Do you even bother to mention the "official" stats on unemployment and inflation?? These numbers are starting to be questioned even in the mainstream media. I suggest to you to get a primer how these stats are calculated and maybe we can have a chat later.

If Brandon suffers from "boilerplate gloomster leftism" maybe you are affected by "boxed gullible foxism"

I told you before, do not watch Fox news too much...


May 6, 2008 12:23 PM


This link is for you

Educate yourself....

The present economic predicament is probably one of the few thing where leftist and true conservative agree....

Brandon W

May 6, 2008 01:49 PM

Thanks for the reply and defense. Kartik can't go through a thread without calling me a "leftist" or some other dishonest tactic to frame my discussion as communism. It's both a straw-man debate tactic and a veiled insult attempt; I'm not so simple to bait.

What Kartik often fails to acknowledge is that aggregate and average statistics mean very little. If I make $400,000, he makes $20,000, and you make $25,000, our per-capita income is $148,333. But we know that gauging everyone's quality of life using that number is dubious. E.g. if energy costs go up $2500/yr for everyone, it may not matter much to me, but that's 12.5% of Kartik's income and he's likely in a very bad situation.

My major issue with arguments by Kartik and other macro-only-economists is their failure to look at reality, instead of aggregate and average numbers. Even medians can be deceptive. As for government statistics, as you, I, and others have noted, they are tremendously deceptive and growing moreso all the time.

Brandon W

May 6, 2008 03:03 PM

Another great description of how deceptive economic statistics from the government are, including a somewhat prescient commentary from March 3, 2006.


May 6, 2008 03:30 PM


Your flimsy anecdotes are unimpressive, as is your minimal knowledge of economics.

The facts are :

1) The unemployment rate is still just 5%
2) The stock market is still at respectable levels.
3) The ISM Services Index grew in April
4) Real adjusted net worth per capita is strong, negating the 'debt' angle.

I think a recession started in December, and has ended in May. 6 months, and it is now finished.

That is a much stronger set of data than you saying "I know someone who isn't happy with how much money they have". That is illogical, and not representative of aggregate conditions.

I maintain that American society is SO prosperous that even $115 oil has not caused hardship. Deciding to go for a Civic instead of an SUV is not 'hardship'. If you think that is hardship, you are fat and pampered, and deserve the Great Depression that exists in your mind.

"....need to know all the details on how is calculated..."

It is Mike Mandel's chart. I guess you don't believe his data when it conflicts with gloomsterism.

"...I suggest to you to get a primer how these stats are calculated..."

Obviously, facts that are inconvenient to the leftist gloomster narrative have to be minimized.

The stock market is also 'rigged by Fox News', perhaps? Do you scream at your monitor "crash, damn you, crash!!!" so that the stock market stops contradicting your narrative?

And you actually consider yourself the educated one. Read this superb article from Ace of Spades on the intellectual insecurity of leftists :


May 6, 2008 03:34 PM

Brandon W,

"What Kartik often fails to acknowledge is that aggregate and average statistics mean very little."

I don't think utopian equality is desirable. 100 million people died trying to implement it, and yet some still think it can be done.

"is their failure to look at reality, instead of aggregate and average numbers. "

What is 'reality'? Why is your 'reality' true if there is not even data to support it? This is why data that disobediently refuses to conform to the gloomster narrative is somehow faulty.

And if the data is faulty, does that also mean that the economy was poor under Clinton? His data was great, but you say the data is faulty..

Brandon W

May 6, 2008 06:40 PM

Again with the baiting. I'm still not biting on your tactics.

You've failed to acknowledge several points made by myself and Dominic regarding the government statistics. It's interesting that you're vehemently against the government being involved in the economy, except when it comes to statistics they issue which support *your* notion of a Utopia. I've noticed you have always dodged a discussion of the reliability of government statistics.

For the record, those statistics have been substantially manipulated under Carter, Reagan, Bush I, Clinton, and Bush II. I'm not playing your politically partisan game.


May 6, 2008 07:46 PM


Your lack of intellectual curiosity is truly appalling...
Just because me, Brandon and others find holes so big you can drive a tank through it in your childish blabbering are we communist???
So everybody that points to the problems we have and the more we will likely endure because excessive consumption and leverage is a gloomy leftist...(Michael be dared to mention the 3 trillion extra may be a socialist sympathizer too)
Paul Volcker is a commie, Warren Buffett and George Soros were best boddy with chairman Mao right?? The Economist is a red propaganda magazine I'm sure...
You do not even make a connection between the stock market doing "fine" and the dollar the Dow is calculated in??? Yuan?? Euros?? Cracker Jacks??

I wish I could be light hearted like you are (you know ignorance is a bliss...)
Unfortunately I'm aware of nasty little surprises awaiting for us in the shadows like the derivative tsunami heading toward our shore for example..I bet you do not have any idea of what they are...don't you....

I suggest you this book by Satyajit Das "Traders Guns & Money"..You know Mr Das is another Commie Komrade consulting for State Owned enterprises like GE, Merril Lynch, Siemens..he is one of the guys that actually helped to engineer these things. When a journalist recently asked to Komrade Das if we where in the "third inning" of the credit crisis, after a long laugh he answered.."we are in the middle of the national Anthem for a game destined to go into extra innings..."

Just today my wife had a presentation lunch with the Chief Investment Strategist of Charles Schwab, and the material exposed pretty much point to more pain on the way...I'm just flipping through the pages right now, if you want I can fax it to you but I'm sure you do not want to read such socialist propaganda...

Finally couple of gems in pure Kartikesque style:

When I said:

"...I suggest to you to get a primer how these stats are calculated..."

Your answer:

"Obviously, facts that are inconvenient to the leftist gloomster narrative have to be minimized."

Nice try...
Avoid the pricky question with your nonsensical leftist bla bla bla because you do not actually know how official stats are calculated..

What kind of pain or "hardship" you expect from $120 dollar gas??? People still have to go to work don't they??(our public transportation infrastructure is not exactly the envy of the world) and they try to cope with it the best they can, for example downsizing their cars, carpooling and using public transport when they can, which is happening right now....public ridership is at an all time high in all major urban something you can literally see if you bother to stick your head out (I use the bus to go to work) but for you all this are "flimsy anecdotes"...and low income people sometimes have to choose between a tank of gas or more quality food...and guess what?? they cut on food or prescription drugs.

When I tell you that you are intellectually shallow I'm right am I???

Then you accuse others of minimum knowledge of economics..

I bow down to the prestige of your University of Phoenix degree...or is DeVry???


May 6, 2008 07:59 PM


"And if the data is faulty, does that also mean that the economy was poor under Clinton? His data was great, but you say the data is faulty.."

You see how you jump to conclusions?? (again intellectually shallow over and over...)
Anybody said that data under Clinton was not faulty??
The Boskin commission was formed under Clinton watch.
And under Cinton presidency the unemployment rate calculation was outrageously doctored....

Then some economists are surprised that monthly unemployment claims are low compared to historical levels in previous downturns...they do not realize that a lot of people, especially after the last recession, the outsourcing ramp up, etc... found a way to make ends meet outside the boundaries of traditional employement...(massive "independent contractorization" anyone??) so when these people struggle, they cannot file for unemployment....connecting the dots...

Our financial problems trascend party lines and are deep rooted in the past...

Joe Cushing

May 6, 2008 11:48 PM


I'm testing to see if the webmaster fixed my ability to comment.

Joe Cushing

May 7, 2008 12:28 PM


If they have always been cooking the books; doesn't it kind of even out over time? I mean, wouldn't you still be able to identify trends in the numbers? They can't keep cooking them more and more over time can they?


May 7, 2008 05:28 PM

Yes they can keep cooking more and more...of course, eventually the game is up but there is enough rope to keep spinning for a while...

Brandon W

May 7, 2008 05:57 PM

They haven't always cooked them. And yes, they've been increasingly cooking them for the past 25 years. Last 10 years on an even greater scale.


May 8, 2008 12:18 AM

Rest assured that our greatest current concerns will be of no importance in 10 or 15 years. Alas, we will have other things to worry about then.


May 8, 2008 11:30 AM

oops I think we turned off Kartik for good!!..too bad, I miss his posts....


May 8, 2008 03:26 PM


Turned off? Hardly.

Your points are clearly weak, because :

1) You insist the data is faulty, but you don't have hard counter-data. This means that if it is faulty, it could just as easily be showing an economy that is STRONGER than the data, rather than weaker.

Mike Mandel did an article in 2006 about how the economy may be stronger than the data suggests :

2) Your examples of 'hardship' are purely anecdotal AND subjective, which is a double whammy against any pretense of unemotional analysis. The best you can offer is that "I heard that someone doesn't like paying $4/gallon for gas to drive to work every day". That is weak, and if anything, proves my point that the US is so prosperous that such high prices are not causing enough hardship to make dramatic changes in behavior.

3) "... found a way to make ends meet outside the boundaries of traditional employement..."

This, too, is a sign of a robust economy - more people have become entrepreneurs, and have small businesses. Did you know that about 1 million people earn their living online now, via eBay, Google Ads, or even playing MMORPGs. The number is not huge, but that is still 1 million people who now do this fulltime, instead of a traditional job. This is a CHOICE that was not possible even 6 years ago.

4) US per capita net worth is high, from Mike Mandel's chart. I see you steered clear of this inconvenient fact.


May 8, 2008 03:29 PM

".....I bow down to the prestige of your University of Phoenix degree...or is DeVry???"

Aha! You gave away your leftist insecurity. I went to the Univ. of Michigan and Stanford University, BTW.

I think this superb article will explain to you why you (the intellectually insecure) view the world the way you do :


May 8, 2008 08:51 PM

Kartik my dear...

Welcome Back!!

I noticed you toned down a little bit your condescending attitude...very good we are improving....

Let me answer to your points

1) I already gave you some data to look at, for example: Spend 5 minutes of your precious time then we will talk.

2) Cost of transportation "hardship", if we can call it that way (some aspects of this "hardship" are positive indeed)

* Public ridership at an all time high..verifiable and quantifiable.

* Sales of small cars and unsold SUV and pick-up trucks at an all time high..verifiable and quantifiable

* Several intersection of data points make the case for changes in food and prescription drugs buying patterns because of high gas price.

Anecdotal example of changes in behaviour?? (As i said I would not call it real hardship so far) my friend the data you seem to love so much, do your homework.

3) For this point you basically agree with me from a different perspective. So the inusual low number of unemployment claims at this point in the downturn, as I said in my previous message, should not baffle economists too much since many people found a way to make a living outside of traditional wage jobs BUT at the same time you lose track of these people hardship when things go you track it?? Retail sales can be an indicator..guess what?? numbers points down.
By the way when people become "entrepreneurs" because forced to do so and they lack steady streams of income, health insurance and live in a state of perpetual insecurity that is not a sign of a robust and healthy economy firing in all cylinders in my book...

If i take you for a city tour in Mogadishu you will see thousands of "entrepreneurs" and "business people" the economy of Somalia healthy?? Hardly....

Ohh I almost forgot...delinquency rate, bankruptcy and personal debt default are way up...

4) I still wait for all the details on how the net worth is calculated in that chart...

I had so many labels attached to me in my life but believe me being a leftist is the first time!

About my "insecurity"...Psychology 101: arrogance and aggression are clear sign of insecurity and you showed this kind of behaviour in spades towards me and Brandon.

Wow if you really went to Stanford, education in this country is really really overpriced...


May 9, 2008 08:21 AM

Hi Gentlemen,
Coming from Australia (where being called a leftie is more a term slightly patronising endearment than an insult) I find the debate looks a little too vigorous and personal. Rather than play the man I'd just like to show you a single chart that suggest there is a problem: By my reading this chart indicates commidity price growth of around 225% since 2002 (an average of around 15% pa). During this time wages - US and Australian - have been rising by around 3.5% per annum. It looks pretty clear that this situation is not sustainable over the longer term. Judging by the big swings in commodity prices starting to be evident in the 2008 we may be close to some sort of crisis and the results could be rather painful. If that pans out we will need governments that are strong, clever and compassionate. I'm pretty pleased with the one we have in Australia right now. I hope your election pans out well.


May 9, 2008 10:48 AM


You nailed it, interesting chart.
The combination of letting the printing presses run wild (we export inflation) and the rising worldwide demand for commodities is an explosive mix...

Mike Mandel

May 16, 2008 03:24 PM

Very interesting discussion. Looks a lot like the internal debate I'm having.

Thank you for your interest. This blog is no longer active.



Michael Mandel, BW's award-winning chief economist, provides his unique perspective on the hot economic issues of the day. From globalization to the future of work to the ups and downs of the financial markets, Mandel-named 2006 economic journalist of the year by the World Leadership Forum-offers cutting edge analysis and commentary.

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