As I’ve just thoroughly enjoyed the opening weekend games of the NFL, I thought I’d start with a football analogy to make my case.
Here is a bizarre but true factoid that exemplifies the drawing of flawed conclusions based purely on logic:
If the Detroit Lions win a single game in the 2009 season, their record will be a 100% improvement over the previous season.*
Someone bearish on the Lions would say “Wow, so they lost every single game last year and managed to eke out one victory this year…big deal, the team still sucks.” And this would be correct.
Someone bullish on the Lions would say “They just doubled their wins from last season to this season!” This would also be correct-ish, although a foolish, narrow and ultimately misleading extrapolation of the true performance of the team.
(* mathletes: I’m aware that zero doubled doesn’t equal one, we’re just trying to illustrate a point here, not win a Nobel prize.)
Where this relates to the economy and markets is that we’re coming up on the anniversary of the 4th quarter of 2008, aka The 90 Days That The Wheels Fell Off. There will be improved metrics, economically speaking, almost by default when you consider what went on this time last year.
Just as they’ve begun calling September of 2008 “The Month That Shook the World”, I think those of us with our sleeves rolled up and both hands deep in the dirt of capitalism would say that the initial tremors of last September weren’t really felt in the broader economy until last year’s Q4. Lehman‘s demise, the AIG rescue and the near-death experiences of Wachovia and Merrill Lynch certainly made the front pages of many local papers, but they were still “Business” stories.