In case folks haven’t noticed, posting is light here as I’m traveling.

Unrelatedly, I’m troubled by how people are messing around on the “this is the worst economic downturn since …” game. First it was the worst recession since 1980-82, and then it was the worst in thirty years, and now it’s the worst since World War II.

Trouble is, there was no recession during World War II, and the immediately preceding recession was the Great Depression. Has this just become a convenient way for people to avoid saying the painfully obvious, that this is the worst economic downturn in the U.S. since the Depression? I understand the instinctive unwillingness to use the “D” word, but playing semantic framing games is paternalistic and wrong.

Some quick links to a few items of interest:

• Bill Ackman argues GM should file for prepackaged bankruptcy (Bloomberg)
• Toll Brothers withdraws 2009 guidance entirely (Bloomberg)
• Goldman declares mattresses, newspapers, and its own sector all dead (FT)
• Is the U.S. credit line running out? (Barron’s)
• Steve Waldman vents about AIG (Interfluidity)
• Snowbird resort in Utah is open for ski season (SLT)

Loooong Michael Lewis piece in Portfolio on “the end” of the old Wall Street, and how it all came down. Like me, Lewis left the financial brokerage game years ago thinking it was absurd and about to end. I was a decade too early, and Lewis left almost two decades early. Who knew the madness could go on so long?

Good piece. Read it.

Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.

In the two decades since then, I had been waiting for the end of Wall Street. The outrageous bonuses, the slender returns to shareholders, the never-ending scandals, the bursting of the internet bubble, the crisis following the collapse of Long-Term Capital Management: Over and over again, the big Wall Street investment banks would be, in some narrow way, discredited. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces?

At some point, I gave up waiting for the end. There was no scandal or reversal, I assumed, that could sink the system.

People who do selective data analysis should be beaten with sticks. Case in point: I got into a discussion with someone today who argued that the U.S. is far from monolithic in its economic downturn, with some states doing worse than others.

It was hard not to agree with that first point. It is, or should be, self evident. Some states were hit first and harder. But that doesn’t mean everyone won’t feel the pain eventually.

He disagreed, and here is the data he used. Not only are some states doing better than others, but more than half of the U.S. saw unemployment decrease in September, despite the gloom and doom of people (like yours truly) who say that unemployment is on a speedy ride to higher levels. Half! he said.

That caught me by surprise. Half went down in September? Really? So I went and had a look at the BLS data. And he was right: Unemployment rose in 21 states month-over-month in September, but fell in 23 states.

Q.E.D., right? Not really, or at least not in any meaningful sense. While more than half of U.S. saw unemployment decrease in September, unemployment is up in 47 U.S. states year-to-date, and national unemployment has risen from 4.7% to 6.1% over the last twelve months.

The upshot? Classic selective data analysis. Unemployment is up across the U.S. and it’s going higher: Anyone who says otherwise is selling something -– probably a line of patter.

There are at least three serious issues with the Freddie/Fannie mortgage modification programs. First, they are fundamentally offensive to anyone who bought a house with a reasonable amount of money down, some conscientiousness about the price paid, and the cash flow to support it. Granted, sometimes you have to hold your nose and go along with such things if a credible case that the alternative is worse – i.e., mass defaults – but that doesn’t make it materially less offensive.

Second, unless I missed something, the mortgage mods didn’t actually, you know, modify the most vexing part of the mortgages. Interest can be lower, but principle will be repaid at the end of the loan? What the f**k does that do that’s useful for people who owe more on their mortgages than their houses are worth? Those are most of the people walking away right now. Simply being able to (currently) muster the cash flow to hang in doesn’t make it materially less likely that many people won’t walk away from their home.

Third, the 38% debt to income cap is, in a word, high. Sure, it’s better than being really, really high, as is the case when you made no down payment on a mortgage that has now reset, but that’s sort of beside the point, isn’t it? These are still people highly levered to fixed payments in an environment where their incomes stand a greater chance of declining than increasing over the next twelve months.

Maybe I’m wrong, but I think we’re setting the stage for mass judicial review/rewriting of many U.S. mortgages early in 2009. This plan doesn’t strikes me as if it will stick.

Each month one percent of our survey respondents decide to change how they shop, signaling there are lots of opportunities for the more progressive retailer.
     -- Source: NPD

That somewhat surreal quote comes from an NPD analyst in a report on how the percentage of people plan to change shopping to save money has climbed seven points – from 28% to 35% – in the last seven months.

Interesting David Levy piece in the current issue of Institutional Investor. Here is the money ‘graf(s):

Without the government’s containment the economy would indeed ace another Great Depression, but fortunately, nothing so dire will occur. The government will prevent a collapse of the financial system and partially buffer the damage to the economy, containing the depression. The government will succeed not because it is wise about economic affairs or because it won’t make mistakes. Rather, it will have no choice but to keep patching holes in the financial sector, and its sheer size and presence guarantee a sizable fiscal stabilization. The government has virtually unlimited power to intervene to protect the basic functioning of the financial system, and in an emergency can spend whatever is necessary. Although government solutions will not fix the fundamental problems that will cause the depression, they will limit the financial fallout. By the end of the contained depression, the government will likely have committed trillions between rescue operations and running huge deficits. And although some may complain about the price tag, it will be a bargain for enabling us to avoid another Great Depression.

Levy thinks we will be out the other side in late 2009 or early 2010, albeit out in a tepid way.