Take a DOW graph 1929-1932 and overlay it with the last 18 months.
A big spike up in 1930 after the "Crash" of late 1929. Headlines about recovery and such all over the place.
The real Crash came the following year and proved that the 1929 drop was less than half of what was to come.
We're at 1930 right now.
Yup. That would be the "double-dip recession" theory of which there are many proponents.
We cannot however exclude the possibility that the economy will in fact recover at some point for real. One of the differences between now and the 30's is that the US economy is more dependent on external demand rather than internal consumption in order to right the economy. And, the Chinese economy is still booming away and beginning to recover from whatever hits it took. That translates into demand for US goods and actually helps with the balance of trade deficit because we dont have the money to buy their stuff.
China has us by the tu-tu because of our borrowing. At the same time they are dependent on us. If our economy fails they lose their prime customer. It all sounds theoretical but it isnt. OPEC and the speculators drove the prices up and helped to sink our fragile economy along with the mortgage crisis. Consequently OPEC shot itself in the foot and killed demand for oil, short-term anyway. Similarly, China could pull the plug on our economy and shoot itself in the foot.
Anyway, I think the expansion of the global dependency changes some of the dynamics that were in play at the time of the Great Depression. Although it is not all bad. I certainly would put more hope in being helped by China's recovering economy than I would with all the foolish stimulus package programs.
I'll be surprised if we go over 9000 yet - it's been almost 2 weeks of gains and my glas-half-empty take on the economy says that we're bound to fall a bit.
I'll be surprised if we go over 9000 yet - it's been almost 2 weeks of gains and my glas-half-empty take on the economy says that we're bound to fall a bit.
I am thinking we will do both. We will cross 9000 sometime in the next two weeks but also re-trace because there is still lots of fluffy bear market rally mixed in with the beginning of a true recovery. The economy is going to recover by segment not in unison so there will be good news one day and bad the next for the next eight months. However, this is better than when all the news is bad all the time, methinks.
Most likely I am wrong which would put me on at par with the economists .
forget the dow, its out of date ... S&P 500 is the bellweather and 950 is the resistance level.
Here's something to think about ...
We're already out of the recession ...
Indeed. That is my point although I think you have to have a strong stomach for a few segments that are still on a shakedown cruise. There are a pantload of foreclosures still to come for example and unemployment will be problematic for some time to come, lagging indicator that it is.
As I stated, most recessions last 18 months and we are almost exactly 18 months into this one. Add on six months to the normal recovery cycles because this one is a stinker and you will continue to have a bottoming in many sectors as we are already experiencing and then a have a slow recovery starting in 2010. To your point, several indicators are already past bottoming and indicating recovery.
Unfortunatley, this continues to call into question the wisdom of tossing a trillion in stimulus funds at a normal cycle. Most of it will not even be spent until long, long after we are out of the recession. One can argue that we are getting recovery due to the stimulus but then you lift up the curtain and find that only 20% has been spent so far and more often "spent" means it has just been sent to a bank that has not made any loans with it.
We should cancel the rest of the stimulus program and retrieve that money. I think using money to stablize the banks was good because we were extremely close to having a run on the banks in January and I think using funds to make more credit available was good except that it was never lent out so it is waste. Beyond that, the whole program is expensive and murky and as the dems are finding out, there may be limited tolerance for that level of spending. If they want to stand by the wisdom of the porkulus plan, then fine. The price they pay is that that may have been the same money that folks would have otherwise supported for healthcare but we have reached the enough-is-enough point. So, under lib programs, Wall Street has won so far, and health reform or the level of funding for it is at risk. Interesting. Not sure this is the change folks had in mind.
Also agree on the Dow vs. S&P. The Dow is a narrow, old, and crusty indicator. Unfortunatley much of an economies recovery hangs on consumer confidence and consumer confidence is often swayed by various indicators regardless of how indicative they may be overall. Certainly gas prices are another example of that. (not sure many people are looking at the fact that it raises the dow when GM goes bankrupt and gets booted off of it- not a good way to get there). That being said about the Dow, nevertheless up is still a better direction than down.
- - - - - - - - - - - - - - - - - -
Originally Posted by InsAgent007
I'll be surprised if we go over 9000 yet - it's been almost 2 weeks of gains and my glas-half-empty take on the economy says that we're bound to fall a bit.
Bingo!
We are at 9033 right now.
But we will see 8400-8500 again in the next couple weeks too. And maybe 9200 within four weeks as well. There will be some profit-taking on the 9000 and then a few bad reports and it will bounce around. We should be happy about anything that is not off a cliff at this point. The longer we can at least just stay in a holding pattern, the longer we can stablize, methinks.
Then you get into fall and all the earnings are based on Christmas sales projections which are always much better or worse than expected and all of that hoopla. I dont care as long as the overall direction is good.
And so it goes......
Last edited by Winter : 07-23-2009 at 09:59 AM.
Reason: Posts merged
We have something much more profound than a cyclical recession. We have the makings of turning our whole system upside down.
I don't really care what the market does over the next 12 months -up, down or sideways.
With the spending that has been done, the spending that is proposed, the crippling of free market capitalism, etc., I do not see any typical "oh good, the recession is over and now we will be in a few recovery years of a booming market.." in the forecast.
We have a perfect storm brewing of all kinds of pressures other than pressures directly related to economics. We have aging, migration, overpopulation, totally crappy public education, and a very large and quickly growing segment of our population that relies on government for everything.
Add all of that to the increased taxation and regulation that we know is coming which could alone strangle the economy, then how do things look?
We have something much more profound than a cyclical recession. We have the makings of turning our whole system upside down.
I don't really care what the market does over the next 12 months -up, down or sideways.
With the spending that has been done, the spending that is proposed, the crippling of free market capitalism, etc., I do not see any typical "oh good, the recession is over and now we will be in a few recovery years of a booming market.." in the forecast.
We have a perfect storm brewing of all kinds of pressures other than pressures directly related to economics. We have aging, migration, overpopulation, totally crappy public education, and a very large and quickly growing segment of our population that relies on government for everything.
Add all of that to the increased taxation and regulation that we know is coming which could alone strangle the economy, then how do things look?
Oh, there are no boom years ahead unless you are in an industry in cahoots witht he government. That is how socialism works. We are headed toward a true European socialist economy where there are more benefits for everyone but overall everything is very flat and private ownership is very limited. I do think we can recover from what was an impending collapse. That is not the same as saying that I think we can stablize and then start booming because I dont believe that. I do believe that some countries will though. Unfortunately, it is no longer us. Lots and lots of great business opportunities out there in the coming years. Just not in this country.
Maybe some genius can come with a "cronie index" fund to put together some of the equities that will profit from government butt-kissing. GE comes to mind immediately. Then, of course, the companies that will never be profitable but will prosper because Obama & Co. owns them. Government Motors comes to mind.
S&P index funds down 929 points.
European index funds down 500 points.
The Cronie Fund up 20,000 points.
We have two bull markets in our lifetime. 1946 to 1966 and 1980 to 2000.
The catalysts were: lower taxation including corp taxes, spending by baby boom parents starting out and babyboomers starting out, decreasing energy costs per household, manufacturing boom.
The manufacturing boom in 1980 to 2000 was in technology and in productivity gains by applying cheaper technology to manufacturing. The post WW2 manufacturing boom was a shuft from war time to consumer plus the rest of the world had been destroyed.
You have pretty much the opposite of all those things now.
A large swath of the middle class is hanging by a thread using meager savings to stay afloat. Obama wants to wipe out the middle class and the stimulus and all this other marxist crap is a RADICAL redistribution of wealth and stealth reparations.
3173 ... there will be very little or any job recovery, Its a new economy with less jobs, paying less for a long time.
However here are some indicators our economy is no longer receding and dont forget banking and housing is the cause of the slowdown everything else is just symptoms ...
Higher numbers of building permits for new homes, declining claims for jobless benefits and rising orders for consumer goods
Inventories are low and demand has increased for material such as steel and cardboard ...
And finally GDP will see a year over year gain this quarter.
Just because the recession is over doesnt mean we'll get a boom anytime soon.
3173 ...dont forget banking and housing is the cause of the slowdown everything else is just symptoms ...
I would agree with that but believe that OPEC was/is a contributing factor, perhaps the related speculators are equally or more responsible. When they jacked up oil prices as our economy was increasingly beginning to sink it was just like tossing a drowning man a big rock. Of course OPEC shot itself in the foot when it did that because it killed worldwide demand.
Similarly, it is clear that low oil prices are not enough to drive a recovery which depends on banking and housing and consumer demand, as you say, but if OPEC or speculators suddenly jacked up prices it would delay the recovery for much much longer.
Sometimes Americans make me want to puke. You can look at the calendar and just about tell when we will be back in the "drill-baby-drill" drama. Then it goes away. Friggin attention deficit nation. It many ways we are worse off because the low price of oil has killed all the exploration for the timebeing and the Canadians need at least 65 dollars a barrel to break even on their tar sand deposits.
Tell Joe to hold off on the second Stimulus package. Not spending 90% of the first one yet seems to be working.
We need to cancel the rest of that package and redirect it toward extended unemployment benefits and easing the consumer credit situation at banks. The banks would be required to actually lend it out, which is a radical idea I know.
3173 ... there will be very little or any job recovery, Its a new economy with less jobs, paying less for a long time.
However here are some indicators our economy is no longer receding and dont forget banking and housing is the cause of the slowdown everything else is just symptoms ...
Higher numbers of building permits for new homes, declining claims for jobless benefits and rising orders for consumer goods
Inventories are low and demand has increased for material such as steel and cardboard ...
And finally GDP will see a year over year gain this quarter.
Just because the recession is over doesnt mean we'll get a boom anytime soon.
Good concise answer. The economy is technically no longer receding, but has "reset" lower, with an expectation of short term growth.
The cost of living has gone up and wages and salaries of mid-level staff jobs, in real terms, have gone down. The average person can no longer spend like a redneck on payday.
The Chinese (the equivalent of our landlord) economic commissars are finishing up their meetings with our equivalents to assess whether their investment in the U.S. may have been a bad choice.
I think soon the U.S. and China will be like two guys on the edge of a cliff with their hands on each other's throats -both afraid that they will be the one to go over the edge when in fact the odds are that both will.
To sort of quote the Chinese in their most recent report on why they wanted the meeting: "Our first duty is to the Chinese people and we have to be sure our investments here are sound."
I think Obama and the dem Congress scares the crap out of them.
To sort of quote the Chinese in their most recent report on why they wanted the meeting: "Our first duty is to the Chinese people and we have to be sure our investments here are sound."
I think Obama and the dem Congress scares the crap out of them.
Oh, no doubt. Problem is, another more likely scenario is that the Chinese will just continue to shift from treasuries over to direct ownership or equity investments in American corporations. Another less-than-pretty picture.
Dow at 9000?
Linear Mode
