Backing up a bit, TD Ameritrade has held one of the top positions in the US stock and bond trade for decades.  Even in the late ‘80s they were ahead of the curve, offering touch-tone phone trading.  Come the early ‘90s they launched into the online boom with a Windows-based program that utilized the Internet to connect you to the trading world.

In short, during the 2000’s Ameritrade had potential to acquire several other small similar businesses, often opting to do so and eventually becoming the powerhouse that it is today.

Currently, they have over six million customers worldwide and are only continuing to expand.  They specialize in offering preferred stocks, futures, ETFs, option trades, mutual funds, fixed income, margin lending, and cash management services.

They offer $10 broker commissions on trades, which is high by some standards, but given their stronghold on the market it’s well-deserved.  Their depth into the US market is essentially unparalleled making them one of the most viable options for anyone who’s going to get serious about investing.

Typically new customers are given a free 30 day trial run, which several of their competitors also offer.  Similar to the competitors, they also offer a vast array of information so that the consumer can educate his or herself on trading and the details on various stocks and bonds.

Their website is laid out specifically with customer service in mind, running the newcomer through crucial information, providing helpful resources, and offering tutorial services.

But what Ameritrade’s website really puts its emphasis on is their fair pricing.  With access to a wider variety of stock information than most sources, Ameritrade also charges a relatively low stock broker fee which brings in traders of all kinds, with all kinds of budgets.

Ameritrade’s site lines up objective research for the trader who’s wanting insight into the market.  This information is accessible from their main page, taking you into a separate program.  Furthermore, they include frequently updated webcasts to walk you through important breaking information, online workshops where traders come together and share information, and even a sort of brainstorming room called the “Idea Generation.”

Furthermore, their site includes an interactive trading platform that allows you to access current market information.  It’s updated by the second, so you always have a leg up on what’s going on in the marketplace.

Barron’s magazine named the TD Ameritrade web platform the best in the business in 2008 and has given distinctions to the company since then in some form or another.

As far as customer reviews go, Ameritrade usually gets high marks. People are particularly fond of their easy web platform and find the vast array of stock market information accessible from the website to be extremely helpful.

People tend to feel like Ameritrade is on their side, helping them make the best choices and to otherwise become as fluent in the market as they’d like to be.  They believe Ameritrade exceeds the call of duty for what they provide their customers.

It’s possible to find cheaper overhead stock broker commissions out there at other sources, which tends to turn some people off.  But the overall consensus is that Ameritrade’s depth into the market makes up for the slightly higher (although still considered to be on the cheap side, relatively speaking) broker fees.

With a company that’s succeeded so well in the past 30 years, it’s pretty safe to say that Ameritrade is a good bet for your stock market trading needs.

Banking and finance conglomerate Barclay’s used to own iShares.  Under its auspices, iShares grew to be the biggest player in the ETF world, offering over 400 different funds ranging from wide-ranging market index offerings to narrow niche-specific options.

In 2009, Barclay’s decided to raise cash in the face of the banking crisis by selling off the highly successful iShares unit.  At the time, experts thought that Vanguard, Charles Schwab or Northern Trust might buy iShares.  In something of a surprise, they instead announced plans to sell to CVC Capital Partners for over $4 billion.  However, during a 45-day period in which Barclays’ was allowed to shop iShares before the deal was finalized, BlackRock –a New York based financial management company–came up with a $13.5 billion offer for iShares and its parent unit.  In June of 2009, iShares officially became part of BlackRock.

The change in ownership hasn’t seemed to hurt iShares.  Even though the ETF field is growing increasingly competitive, iShares managed a significant increase in the total of assets under its management.  According to the Financial Times:

According to figures from BlackRock, assets under management for global ETFs reached $1,032bn (£639bn, €734bn) at the end of December, some 5 per cent above the previous all time high of $982bn registered just a month earlier. European ETFs also fared well, registering a record high of $223bn last year.

That boost put slightly over 50% of all EFT assets in the US under iShares management, an increase of around 4% for the year.

Why is iShares continuing to gain so much ground even in a market that’s exploding with new funds?  According to a recent Wall Street Journal analysis, much of it is the natural advantage of being an established player.  Most ETFs are index funds.  Their returns are easy to understand and they can be remarkably similar.  That makes it harder for new ETFs to distinguish themselves from the rest of the pack.  Additionally, ETFs are traded just like stocks, which means investors are attracted to funds that are established and that have high trading volume, which makes selling a quicker proposition. established funds with heavy trading volume—thus they know they will always be able to sell quickly and cheaply. That puts new players at a disadvantage.

The advantages of being the “king of the hill” are undeniable, but iShares also continues to attract investors because if offers such a wide range of funds.

over 400 funds globally across equities, fixed income and commodities, which trade on 16 exchanges worldwide.  A CNN/Money report noted that iShares runs over 400 different funds–across commodity, fixed income and equity types–that are traded on 16 different markets around the world.

Honesty.  Transparency.  Purity.  Tax and Cost-Efficiency:  Those are what iShares lists as the underlying principles governing their approach to business.  I’m sure they’d credit a commitment to those ideals a key component to their success, as well.

Regardless if the causes, the results are clear.  BlackRock’s iShares is continuing to gain popularity within the exchange traded fund world.  They’re well known, respected, experienced and offer a huge number of fund options for investors.  Anyone who is considering getting actively involved with ETFs should carefully consider iShares funds.  There’s no such thing as a sure thing in the world of investing, obviously.  However, it seems sensible to believe that a company who currently hols more than half of the US market is doing something right.

Owning a chunk of the action in “Texas tea” was a winner for Jed Clampett, but will sinking your invest dollars in an oil ETF be more likely to land you in a Beverly Hills mansion or looking like Jethro on the back-end of a scheme gone wrong?

As is always the case, the answer depends on who you ask.

How do oil ETFs work, anyway?

We recently provided a little overview of how an exchange traded fund (ETF) works.  When it comes to a commodity like oil, things are ever-so-slightly different.  The best explanation I’ve found came from ETFdb.com.  They explain:

At a high level, oil ETFs function just like any other exchange-traded product: they track an underlying index. But unlike traditional equity ETFs that hold a basket of securities comprising the underlying indexes, most oil ETFs achieve exposure in a very different manner. Because physically buying and holding most oil and gas products is prohibitively expensive (and in some cases, like natural gas, nearly logistically impossible), oil ETFs instead generally invest in near-term futures contracts on the underlying commodity to gain exposure to prices. While this strategy may track spot prices fairly closely in certain environments, it may be way off in others

That’s a great explanation because it explains what’s really in the fund, how it ties to the oil market and the reasons why it can be a hit-or-miss proposition.  But it doesn’t answer the question of whether or not you should be investing in an oil ETF.  In an effort to provide a balanced overview, we’ll look at both arguments.

Some reasons to consider investing in an oil ETF

A commentary at Zantrio makes a near-term recommendation for oil ETF investment.  There’s not much explanation for the thumbs up other than the usual “my sources tell me” and “all indicators point to…” rhetoric.  Interestingly, the piece notes that a strengthening dollar and other factors may actually have a negative longer term impact on oil, but the author thinks there’s still space for some upward movement.

The argument detailed by Josh Lipton at Minyanville is more persuasive.  He notes that Morgan Stanley analysts and others are bullish on oil and oil ETFs and that their excitement stems from two observations.  First, there’s a sense that we could be looking at a 4% growth rate for the GDP in 2010, which will not only increase short-term demand, it will also refocus attention on limited supply issues tossing even more fossil fuel on the “this stuff is running out and, thus valuable” fire.  Additionally, the article notes that demand for oil has been fairly inelastic, especially in many foreign economies, meaning that there’s plenty of space before a price correction would be necessary.

Some reasons to pass on oil ETFs

That same Lipton article also notes that there are plenty of analysts who disagree with the Morgan Stanley assessment and who don’t believe the fundamentals in place to predict a justifiable rise in the price of crude.  In other words, it may or may not go up but based on reality and logic, it should probably be cheaper.  The upticks in price are the work of rampant speculation, according to this perspective.  I think we’ve all seen enough bubbles pop over the last few years to be wary of another speculation-driven, overvalued investment opportunity.

Another piece at ETFdb notes that moves toward stabilizing post-war Iraq’s oil industry could lead to a bounce in overall output.  That would have a negative impact on prices.  That analysis points to one potential reason to be concerned about long-term increases in oil prices, but concedes that changes in Iraq are unlikely to have much of a near-term impact on oil ETF values.

So, is it a good idea to buy oil ETFs right now?

Well, I’d recommend reading all of the above-noted material, the sources they cite, the sources those sources cite, etc. before sinking as much as a Sacajewa dollar into an oil ETF.  There are interesting arguments on both sides and when you combine those differences of opinion with the inherent volatility of oil and the fact that oil ETFs don’t always actually track to real market prices, it feels like a crapshoot.

What’s your opinion?  Is it time to invest in oil?  If so, do you think that an ETF is the best way to make the move?

With the thousands of brokers out there and because it is your money choosing a broker is not only important but critical to your financial health.  If you ever watched the movie Boiler Room you see what can happen if you get tied up with a shady broker.  How do you guard against this?  One of the ways is to use FINRA Broker Check.  To best describe what they do I will take a quote right off of their website. “BrokerCheck is a free tool to help investors research the professional backgrounds of current and former FINRA-registered brokerage firms and brokers. It should be the first resource investors turn to when choosing whether to do business or continue to do business with a particular broker or brokerage firm.”

I decided to check out the brokerage firm that I currently have my IRA account with.  To begin a search all you do is put in the name of the broker or brokerage firm.  You do have to agree to the terms and conditions and then hit enter.  The first page that pops up will give you some general information about the particular firm or broker such as the profile, history and whether they are currently suspended with any regulator.  It was refreshing to know that my firm is not currently suspended with any regulator.  From there you can drill deeper and get a more detailed report so that’s what I did.

Well when they say detailed report they didn’t lie.  I now had a 108 page report in front of me all about my brokerage firm.  In this report you will get detailed listings of the owners of the company and much more information about the history and operations.  What was of particular interest to me were the sections talking about arbitration awards, disciplinary and regulatory events.  I looked closely at this section just to get an idea if there was any previous shady action going on that would concern me.  Though there were some events on the list there was nothing there that really was of great concern.  Most were very minor things that could even fall under the category of “misunderstandings” between the broker and the customer.  Overall I was satisfied and glad to know that my IRA and other investments are being housed with a reputable firm.  In a way I am glad because if they weren’t then I would have to find another brokerage house which I wasn’t really thinking about doing right now.  However if I did have to find another one at least I know where to go to get all of the information on the new firm.

At face value, it seems almost silly to think that IPOs would offer a quality investment opportunity this year. The market obviously isn’t in its best shape, there’s less money out there to inflate the value of new stock offerings and we’re in what some have termed an “IPO drought”.

In fact, a recent CNN/Money article noted that the “current drought is the second-longest on record, and the number of withdrawn or postponed IPOs increased 62% to 120 in 2008 from 74 deals in 2007, according to data tracker Dealogic.”

So, why would anyone think that this is a good time to hop aboard the IPO train?

There are a few reasons why 2009’s IPOs might work out well for the companies involved and their new investors. We won’t be witnessing massive IPO volume, but the state of the economy and the companies that do go public will team up to create some interesting opportunities.

As strange as it might sound, current economic conditions could actually improve the quality and potential of new publick stock offerings. In headier times, borderline companies might opt to go public in hopes of raising substantial capital in a hurry. Knowing that investors in the current climate aren’t likely to take the kind of risks associated with those offers “thins the herd”. The companies who remain in contention are thus you might vote “most likely to succeed”.

That’s why you can find a little cautious optimism in the recent Renaisance Capital report on 2009 IPOs. The authors of that report (which is available in full here) state:

“Historical precedent suggests that IPOs in periods of low issuance can generate very strong returns as companies are forced to become more realistic with their proposed valuations in order to successfully raise capital, thereby creating opportunities for investors”

Ken Schacter at Red Herring, who remarked that after a bad 2008, the IPO scene for 2009 “can’t be much worse” interpreted the Renaisance report as evidence that companies with “decent fundamentals and realistic prices” could put together credible IPO offers.

That’s a perspective supported by one investment expert quoted in the previously-referenced CNN/Money article. She maintained that the right IPOs could be winners in the current economy:

“There really aren’t very many people on the buy side who have said to us ‘don’t show me any IPOs… But everyone has said ‘I need a good clean company, I need a clean balance sheet, I need visibility, I need good valuation, I need a reason to believe that I’m not taking a silly risk.’”

So, all things considered, it looks like there may be a little room for the right IPOs even in today’s shrinking market. The overall economic circumstances should separate the wheat from the chaff, giving investors who are looking for the right opportunities a chance to buy into new stocks.

The “glory days” of wild IPOs and billions in instant capital might be gone, but the down market won’t freeze out strong young companies with the right stuff. Considering how well many established companies have been faring, some investors might feel a little extra affection for the new blood, too.

I’m going to try to maintain that with this post, although the subject matter makes it tough to remain “above the fray” or non-partisan.

Here’s the deal.  President Obama and a Democratically-controlled Congress ran, at least in part, on the idea that it was time to pump some bucks into the economy in hopes of staving off a deeper and nastier recession.  Since his election, Presiden Obama has signed into law provisions creating more spending than anyone can truly comprehend as means of turning the economy around.

The economy isn’t turning around.  The stimulus doesn’t appear to be stimulating.  After reading a recent Associated Press article about the White House’s approach to the not-so-stimulating stimulus, I thought people might be interested in trying to figure out why it isn’t doing the trick.

Instead of giving you my personal take on why this is happening, I thought it might be nice to share a few possibilities.

It needs more time. Only a fraction of the money planned for stimulus spending has been pumped into the economy at this point and some supporters of the stimulus package will tell you that it will start working once the circulation of the cash begins to grow.  More of that money is supposed to be in action this summer, so if you take this position, you’re probably expecting progress soon.

It could be worse. You don’t hear this a lot, but I think that it might be fairly persuasive.  It’s possible that the stimulus hasn’t pulled us out of recession but that things would be a heckuva lot worse if we hadn’t done anything at all.  The President sort of hinted at that when he recently stated:

“Now, I know that there’s some who, despite all evidence to the contrary, still don’t believe in the necessity and promise of this recovery act.”

“And I would suggest to them that they talk to the companies who, because of this plan, scrapped the idea of laying off employees and, in fact, decided to hire employees. Tell that to the Americans who received that unexpected call saying, ‘Come back to work.’”

Rose-colored glasses have limited the stimulation. This seems to be a developing theme among those who are speaking on behalf of the stimulus package and the White House.  Basically, they’re telling us that the original plan was created based on estimates that were later shown to be a little too optimistic.  That’s why we’re not back down to 8% unemployment and it’s why the economic graphs aren’t yet showing an up-tick.  The apparent solution to this error in estimation would be a little patience and/or more stimulus spending.

It’s not going to work.  Period. While the other explanations assume that the core thinking behind the stimulus package is sound, maniy will argue that it was doomed from square one and that the programs and spending aren’t going to do solve any economic problems but will instead exacerbate them.  As you’d probably expect, most of these arguments seem to be coming from free marketeers and the loyal GOP opposition.  The fact that they’re biased doesn’t mean they’re not potentially right (that holds true for the previously mentioned takes, too).

So, if you’re trying to figure out why you’re wallet isn’t being stimulated and are questioning the whole shebang, you can take your pick from those explanations.  Regardless of which one(s) you choose, the fact of the matter is that things aren’t yet looking up.  Until they do, it behooves all of us to do our part to back the approaches we feel offer the greatest chance for success and to do our best to keep our own financial houses in order throughout this downturn.

I know I promised to try to keep my politics out of this, but I don’t want to be accused of surreptitiously spinning the issues here.  So, I’ll come right out with it.  While my vote is always in play, I vote with the Democrats more often than with the Republicans.  I voted for Barack Obama and would do so again against the same competition.  That being said, I am not convinced of the stimulus package’s wisdom and an unimpressed with the unwillingness of Americans to accept the temporary pain of market adjustments.  I’m hoping I’m wrong, though.  I’m hoping that we’ll start to see and feel that stimulus package kicking in soon.  Misplaced or not, I always hope for the best after something’s been done, even if it’s not what I would’ve done.

Keep your fingers crossed.

Here’s a brief overview of Zecco and what it’s all about.  If you’re looking for a place to buy and sell without broker assistance or huge costs, it might be a good option for you.  It’s a top option for $0 stock trades.

Zecco’s Legitimacy

Before you start signing up to invest your money with anyone, you should ascertain their legitimacy.  Zecco appears to be a legitimate, legal entity.  In addition to the their 3-year track record and a large number of happy customers, Zecco is a subsidiary of Equinox Securities.  According to Bargaineering:

Equinox Securities (CRD# 135398, SEC# 8-66916) registered as a corporation in California on 01/21/2005 and is located in Ontario, CA. It’s currently not suspended by any regulator and has not yet had any Arbitration Awards, Disciplinary and/or Regulatory Events. I downloaded the full Equinox Securities Report and you can see Zecco Trading listed on page 4.

CashMoneyLife gives us some additional reasons to feel confident about Zecco:

Zecco is a member of Financial Industry Regulatory Authority (FINRA), which is the largest non-governmental regulator for all securities firms doing business in the United States. Zecco is covered by the Securities Investor Protection Corporation (SIPC), which is an organization that acts as insurance against your broker filing for bankruptcy or otherwise going under.

Basic Structure

Finding that we should doubt the premise that Zecco might be a phony scheme operated out of low-rent motels by recent parolees is great, but being legit is only part of what makes an investment platform attractive.  The actual structure and standards for participation are pretty darn important, too.

Accounts at Zecco are free and there isn’t a minimum deposit requirement.  It takes just a few minutes to get things set up.

Right now, Zecco is charging $4.50 per trade.  If you maintain a balance in excess of $25,000 and make at least 25 trades per month, you qualify for ten free trades.  Options contracts cost an addition fifty cents.

$4.50 trades aren’t a horrific deal, but for Zecco veterans they may seem a little expensive.  That’s because the company was offering freebies to folks with balances of only $2,500 and it doesn’t appear as if there was a 25-trade requirement at that time.  The changing nature of the economy and overall decreases in stock market participation led Zecco to change their policy.  Keep that in mind when reading Zecco reviews–many of them were written before this policy change.

Overall, though, $4.50 per trade is a decent deal and the right combination of extras could make Zecco one of the best trading options available.  So, let’s look for some nice extras…

Zecco Extras

Let’s start with the Zecco Zirens.  Zecco went out and hired a handful of spokesmodels/actresses to record a series of trading instruction videos.  They named this crew the Zecco Zirens.  The videos themselves do contain some valuable information and can be really handy for newbie investors.

The cheese factor, however, is high.  I really can’t imagine that this approach is doing much to increase Zecco’s perceived legitimacy or seriousness.  If you need an attractive teacher in a little black dress to teach you about an option call, however, Zecco has that covered.   The photo accompanying this post features one of the ZZ’s.

Zecco also has a very active member community.  If you want your investment with a heavy dose of Web 2.0 interaction, it’s a pretty good choice.  The forums are hopping and Zecco makes it easy for folks to make contact and to discuss matters amongst themselves.

If you’re looking a place to manage your trades, Zecco seems like a pretty reasonable option.  They’re legit, they have a solid basic structure and at least some of their added options have real value.  If you’re on the lookout for a $0 stock trade option, you can get things started quickly, safely and easily.  Just open a Zecco account.

It’s true, the millionaire crowd has taken a massive whipping in the marketplace.  The stock market nosedive and all of the associated bad economic news has taken a toll on their investment holdings.  It’s never fun to lose money, even when you have some of it.  It’s probably more than a little frustrating to see your portfolio shrink faster than a 400-pounder on The Biggest Loser.

And while some of the dissatisfaction expressed by 46% of the millionaires may have been an attempt not to rub others’ noses in their cash heaps when times are tough, the resounding message coming out of the Fidelity survey could be expressed like this:  46% of millionaires have absolutely no sense of perspective.

Unemployment is around 9%.  Although we’ve slowed the slide toward economic armeggedon and will undoubtedly survive this downturn, things aren’t going to get better tomorrow.  Life is tough out there for many, many people.  It was tough before the downturn for many, many others, too.  While the millionaires are bummed about losing money, they should try to remember that they were fairly lucky to have some money to lose in the first place.

People have lost their homes.  There are over 100,000 people in chronic homeless nationwide–and that’s just “chronic” status, who knows how many people are temporarily in trouble right now?

While millionaires lament the status of their portfolio and the drop in their home’s value over a slightly smaller cut of Kobe beef, someone out there is sucking ketchup packages in the rain.  While the millionaires don’t “feel” wealthy, some kid is not feeling well because of malnutrition.  Who do you think is better-positioned to come out of this downturn in good shape?  I’m thinking the millionaires are.

Forgive me if I don’t weep a crocodile tear for the dissatisfied millionaires of America.

Don’t get me wrong. This isn’t some kind of crazed “eat the rich” populist rant.  I don’t dislike the rich because they have things.  I understand the role those with greater wealth play in the well-being of the overall economy.  I know that they’re people, too, and I want them to be happy.

HOWEVER…  Anyone who can look out over the economic landscape right now with a net worth in the millions and feel anything less than wealthy just doesn’t get it.  Hey, 46%ers, it’s time to recalibrate your perspective!  Maybe you shouldn’t “feel rich”.  Perhaps, instead, you should feel “wildly rich and much, much better off than so many other people that I thank my lucky stars fifty times per day”.

According to Fidelity’s survey:

Asked what made them feel wealthy, most said to “live within means with little or no debt and with spending under control.”

Here’s a solution, based on that response, for the sad millionaires among us.  Spend less and adjust your idea of what “living within means” really means.  That’s what everyone else has been doing for the last year or two.  Welcome to the party.

Let’s get things moving.  A better economy.  Let’s eradicate poverty to the extent possible.  If we can do that in a way that allows millionaires a little more breathing room, so be it.  I’m not just on the side of the poor.  I’m on everyone’s side–even the Thurston Howells of the world.

In the meantime, if you’re toting a net worth of a million dollars or more, develop some perspective.  You might not feel wealthy but you are.  If you’re not sure, ask someone who’s gone from a working class home to a homeless shelter.  Ask a few of the half million people who lost their jobs last month how you’re doing.  I’m sure they’ll let you know.

Quite frankly, the answer to that question will depend upon who you ask!

David Cornish blames unrestrained capitalism and exessive greed.

Gaynor Borade sees a link between oil price spikes and the onset of recession.

Tejvan Pettinger argues that tight fiscal policy and fast, unsustainable growth have both led to recession in the past.

Stormy Brain explains why so many people are happy to blame the Fed for recessions.

A Washington University news article maintains that experts blame excessive consumer debt for our current economic downturn.

Love a Recession has three lists of potential causes.  The “mainstream” outlook, the authors personal opinion and other potential causes.  The range from speculation to underwhelming consumer confidence to Satan.  Take your pick, right?

Love to Know has an article with the title, “Causes of Economic Recession” that doesn’t even bother to list a single potential cause of recession.  Instead, it maintains that it’s “difficult to predict the causes of economic recession”. 

Another vote for high oil prices in this video.

How about government spending overseas, inflation and the fear of a recession.  Maybe FDR was onto something with that “the only thing we have to fear…” thing, huh?

Those crazy kids who don’t mind being associated with Lew Rockwell blame excessive government regulation.  No.  Really.

Are you getting the gist of this yet?  NO ONE REALLY KNOWS WHAT CAUSES A RECESSION.

That doesn’t stop them, however, from pretending as if they do have an answer.  Not so coincidentally, the causes they uncover are often linked to specific governmental programs of which they don’t approve on other grounds, too.  

In other words, if someone tells you that George Bush caused the recession, that someone probably doesn’t have a “W” bumper sticker.  

If someone tells you that the recession is a direct results of government policies designed to promote minority home ownership via subprime lending, you can probably guess how they’d feel about that policy even if we weren’t in a recession.

For every so many people who blame deregulation for the recession, there is at least one person out there who will take the contrarian view that regulation caused it.  

As far as I’m concerned, you can spin the wheel and embrace whichever pet “cause” it stops on, because your causal analysis isn’t going to amount to a hill of beans anyway.  

The more important consideration at the moment is the fact that we’re in a recession and we might wanna think about how to get out of it before too many more people end up losing their jobs and/or homes.

Which is why I’m proposing the Big Omnibus Recession Elimination Solution (BORES).  Basically, it boils down to developing alternate energy sources to reduce the price of foreign oil and our exposure to price spikes while we engage in less restrictive monetary policy and encourage increased consumer spending (but not debt).  We do this while cutting foreign aid to our allies and banning speculative stock trading.  We’ll deregulate all business by drafting better regulations that will make us more recession-resistant, even though we’ll recognize the inevitability of recessions as part of the business cycle.  Oh, we also need to find a way to defeat Satan.

That’s BORES.  And that’s what you end up with if you start believing the various single (or even “one or two”) issue explanations of the underlying causes of economic recession.

The idea of examining the benefits of a recession seems a lot like marveling at the great clown performances John Waye Gacy turned in at various children’s parties, in a way.  No matter how many kids he made giggle, it couldn’t possibly make up for the corpses in the crawlspace.  So it is with a recession.  On-balance, it’s such bad news for so many people that it feels a little unsavory to talk about the upside.  There is, however, a real potential set of advantages to be gleaned from this current economic mess and we should recognize them before we become completely convinced that the we’re approaching some kind of Apocolypse.  

First, if you’re relatively insulated from the economic downturn and have sufficient security to make purchases and/or investments with some element of risk, there are real bargains to be had out there.  The stock market features a slew of undervalued issues (no, I’m not going to provide specific stock tips here) and houses are cheap at the moment.  If you’ve got a little room in your finances or have a great credit score, you might want to go shopping.

Second, the Fed’s efforts at staving off a recession have largely consisted of pushing down interest rates.  So, if you fall into the aforementioned group, you’re going to see lower price tags on major purchases and lower price tags on the money you’ll borrow to make them.  Between these two factors, you can get a whole lotta house on the cheap these days.  Just in case, though, buy something you plan on living in, okay?

Third, there’s a big picture reason to at least partially embrace the recession.  It’s going to clean house.  It will force businesses to become more efficient and will reward creativity and quality while punishing the fat and lazy.  In the U.S., everyone claims to love a free market until they see this part of the cycle.  It’s necessary, though.  It prunes out those who made poor decisions and creates openings for smarter, leaner businesses.

Fourth, sticking with the big picture theme, a recession creates an impetus to evaluate the way we’ve been doing things as a nation.  Sometimes, you can actually learn a lesson or two from the consequences of your bad behavior and this could be such a situation.  Maybe it’s not bad for us to come to grips with the fact that credit overuse/overextension and a pollyannish belief in perpetual growth weren’t the best ways to run our financial houses.  

Fifth, if you take it down to the personal level, this economic downturn can be viewed as an opportunity for a little personal development.  Even if that isn’t really part of the benefits of a recession, it is an opportunity to do something worthwhile.  Look at these lists.  Some of the alleged “benefits” aren’t too impressive, but others do offer some potetial to come out of this mess a better and smarter person than the one who entered it.

I’m sure there will be those who disagree, but I happen to think that periodic contractions of the economy are natural parts of a cycle of growth and correction.  I think that they’re inevitable when you are talking about an economy that retains at least some traits of a true market system.  When things go up, we overshoot and come back to the “right” place.  When things go down, we overshoot in the opposite direction before bouncing back.  

This recession isn’t a good thing by any stretch, but there is some good in it.  You just have to look carefully to find it.