Well, no matter how this turns out, someone's gonna be really, really right.
And someone's gonna be really, really wrong.
The Panic Is Over
While some forecasters believe a rising jobless rate and more housing foreclosures could kill off a nascent recovery, we believe the panic is over and a V-shaped economic recovery is under way. It is in its earliest stages, which means plenty of economic indicators have yet to turn positive, but the signs of a strong bounce off the panic-induced lows are all around us.
As this unfolds in the months ahead, the stock market should rise back to its pre-panic levels. It took seven months for the Dow to fall from 11,000 to 6,500, and it is very possible that it could go back to 11,000 in another seven months. However, this would be unprecedented. A more reasonable forecast is that it will take until mid-2010 for stock prices to rise back to levels last seen in September 2008.
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30 comments:
keith,
For the record, I've enjoyed your site since HP and have learned a lot from you.
Also, for the record, you are calling a V recovery with this post. You also project "cash is trash". Both are dated June 9, 2009.
So you and I can keep score, I will say cash (USD) will not be trash over the next 2 years and we will retest the S&P bottom in the next 2 years.
It should be interesting to see how it plays out.
:)
Sandman, I'm posting a story in Forbes.
I'm more in the VL camp still. Big sugar high, followed by more trouble ahead (2012)
I'll give you five cents on your equity dollar IN CASH, want it or not?
Oh wait, is that sound of your crying hungry children?
Now, its Four Cents. Take it or Starve.
F*ck You. America IS DEAD.
Depression of '09 begins NOW.
Forget the "V". It's going to be a "L" recovery.
That's what it's going to be for the next 10 years.
Riiiight... And this is Forbes that didn't see the housing collapse coming and things this whole recession was some kind of "black swan event".
Give me a break.
-Gonzo
The secret to recovery in a market-driven, fiat currency economy -- like the secret to making money off the stock market -- is to steadily and believably convince enough people that it's a good time to start investing again.
Because it really is that mind-blowingly self-reflexive: economies do bad when people think they will, and do well when people think they will. Our social fabric (i.e. capital-based economy) is wholly dependent on a lack of ability to comprehend recursion.
There's no logical reason to have recessions and bubbles. They exist because people can't see past the second move on the chessboard, assuming they even see beyond the first move.
This sounds like the same crap leading economists were preaching in 2006. You'd think that as wrong as they were then, they'd never show their face again. But here they come, right on time (40% too late). It's DJIA 15,000 all over again. BUY, BUY, BUY!!!
Do you remember how forbes pumped the bubble?
Now their pumping the end of the suckers rally.
\/\/
You know, no matter who's wrong and who's right, it is an interesting time.
If the market keeps going up (as the dollar melts down), the big bears are gonna look very foolish. they already are after this massive rally.
If the market crashes, they'll look pretty smart.
I prefer Schiff's call (along with Jim Rogers) - sugar high market rally led by foreign markets, along with dollar destruction, followed by more problems down the road.
I think people who have been shorting this market are fools. But I figure they look at their statements and realize that too.
Let's see...we talk about monkeys and sheep...I'd like to add Buffalo to the conversation. V is the shape of the trap the Plains Indians used to force herds of Buffalo off a cliff:
The buffalo jump seems simple enough in concept: get a bunch of bison to fall off a cliff. But, in execution, the procedure demanded great craft, cunning and patience, requiring an advanced degree of organizational skill. Hunters had to be highly attuned to bison temperament, wind direction and local topography. Spiritual observances always preceded the event. Then runners – athletic young men – would try, using various strategies, to move the skittish animals in the desired direction, toward the V-shaped drive lanes in the gathering basin designed to funnel the bison toward the cliff edge. Stone cairns, placed along the lanes every five or six metres (16 to 20 feet), some fashioned into scarecrow forms with tree branches or brush to rattle in the wind, others with people twitching buckskin robes or lighting small smoky dung fires, kept the herd pressing relentlessly forward while other men – decoys – disguised in buffalo or coyote robes, lured the near-sighted animals toward the fatal precipice.
BEWARE of all this V stuff. We are dangerously close to a cliff. Don't be a buffalo.
I agree with Keith. VL (or maybe vL).
My predictions:
The U.S. stock market will not do anything too spectacular during the next couple of years, but it will not retest its lows until after the 2011. As noted on iTulip recently, consumer confidence measures the Dow, not GDP, not unemployment, not another index.
Housing prices will continue to deflate more or less steadlily throughout most of the country until about 2012, and then a bit more after that, skipping along the bottom from 2015 and for the forseeable future.
Commercial real estate will begin to crash spectacularly this fall.
There will be a currency crisis in the fourth quarter this year, and inflation will start to kick in bigtime.
More bandaids and bailouts as far as the eye can see, each scheme getting more and more desparate. The Fed will be caught between a rock and a hard place.
It will have the choice between raising interest rates, which will save the dollar but crash the stock and real estate markets, or continuing with ZIRP until quarter 4 2010 to satisfy the needs of their incestuous congressional bedfellows who need reelection.
I bet that the Fed chooses the latter. ZIRP will continue until quarter 4 2010, and our current problems will be compounded.
"keith said...
You know, no matter who's wrong and who's right, it is an interesting time. "
PURE COMEDY GOLD.
When you need some Hard Cash, bring your valuables and we'll talk. Maybe. Depending on your attitude.
Otherwise, Starve Genius.
Keith, what fundamentals in our country are driving this now V shaped economy that you speak of? NOTHING, that's what. We have not increased our productive capacity, people are not rushing back to Circuit City buying up big screen TVs on their Visa Cards. New Hummers are NOT being sold with Zero Down to mental Dweebs. Housing is dead, construction is dead, lending and borrowing are dead, retail is dead, commercial real estate is dead. What are you smoking?
Keith,
You must clarify yourself on this one. Are you calling the 'recovery' in real GDP to be v shaped, or just the stock market? I tend to agree with your earlier posts that the stock market may take on the illusion of rising back up, but GDP in real terms? I think not. Rather, I would expect a flat to ~1.5% annual rise starting late this year/early next. Nothing like a "V" for GDP (again in REAL terms). GDP is a reflection of national income, and with the loss of all those juicy REIC jobs and just the deflation, in general we have had, I don't think Americans will be as well off as they were before the bubble burst (RE agents turned hooker/strippers not withstanding).
-JDF
When Keith starts quoting a Republican magazine like Forbes you know he has gone to the dark side! That or he contracted Mad Cow disease from eating British beef...
I maintain that everything that comes out of the MSM is at best "wishful thinking" and at worst a "complete lie". This financial crisis taught me that.
Remember, the media, economists, govt. officials, the Fed, and financial gurus were saying the world was fantastic right before we entered the biggest financial calamity since the GD.
Don't believe anything they say. Most of them are not educated enough to know what they are talking about and those that are can't say what they really think since they work for media outlets that are required to get quotes and info from independent outside parties and "experts"...that is, from the same people who completely missed this implosion.
S&P 500 PE ratio is above 100.
Hurray, we're saved!!
Keith,
This recent loud chorus against you is because you appear to be interpereting the recent stock market gains as a sign that the economy is improving, whereas the majority of the readers here see NO other signs of an improving economy.
We are firmly in the FEAR stage, and few people feel like spending. In a consumer-spending dependent economy, this means NO recovery yet at this point in time.
-Mammoth
"Gentleman, you have come sixty days too late. The depression is over."
- Herbert Hoover, June 1930
"Financial storm definitely passed."
- Bernard Baruch, cablegram to Winston Churchill, November 15, 1929
Keith, are you saying that the recession is over but there is more trouble ahead? If there is a currency problem, wouldn't that mean that things will get worse and the recession will get worse? I don't understand what you are trying to say here.
30 year Mortgage hit 5.7% today. This is a 100 basis point rise in less than 2 weeks. I think 7.0% by the end of summer is quite possible.
Obama may have reign in those stimulus dollars because the effects on interest rates can hurt the economy more than the benefits the stimulus money provides.
Simply put, higher interests rates pushes the prices of homes down. And lower home prices means more home foreclosures.
We are at the apex of an inverted V "pump and dump" market trend.
If you're not an insider...you're an outsider.
The coming (two weeks?) crash will be spectacular and devastating.
Forbes is incredibly retail investor focused. That means they're always perma bull. You'll never hear a negative thing about markets from Forbes. It's rah-rah, cheerleading central like CNBC.
In other words, it's investing and economics dribble.
And for Anon @ June 10, 2009 3:03 PM ....the 'fundamentals' driving this stock market and economy is massive deficit spending (sugar smacks)...and the sugar water spicket is about to be cut off.
Invest accordingly.... this is a great, GREAT rally to SELL INTO TO!! (if you didn't already sell all before).
We are firmly in the FEAR stage, and few people feel like spending. In a consumer-spending dependent economy, this means NO recovery yet at this point in time.
-Mammoth
Or at any time in the future. The national credit card/Heloc/Refi spigot is tapped out. Add to that the Baby Boomers retiring and pulling on the entitlements whilst producing nothing guarantees a future just like Japan.
Sitka Pacific take on our future here in Newsweek:
http://tinyurl.com/lzmglw
Fed survey sees signs recession is easing
Fed survey: recession eased, some regions report improved expectations for business activity
WASHINGTON (AP) -- The economy's sharp downhill slide eased in the late spring and hopes for future business activity improved, suggesting that the worst of the recession has passed.
A Federal Reserve snapshot of economic conditions issued Wednesday found that five of the Fed's 12 regions said that the "downward trend is showing signs of moderating."
In addition, "several" regions said that their expectations of future business activity have improved, although they don't see a "substantial increase" through the end of the year, according to the Fed report. In the last survey, several regions simply noted signs of some stability at low levels.
The world can "decouple" all it wants, it won't stop what is coming for the USA.
Sitka Pacific take on our future in Newsweek:
http://tinyurl.com/lzmglw
Mish may not run for the Senate and yell back on Fox News at the talking heads (great entertainment), but the truth has a funny way of turning up in all the quiet little places.
Mish always tells the truth whether you like it or not. No other agenda there, just the truth,
WITH charts and graphs and data.
I read Europac everyday. I don't see any data, just Peter's opinions.
Gimme data or gimme death.
I cleaned up my 95 year old father's place and threw out quite a few Forbes magazines. It's always interesting to look back at old predictions. Most of the writers, even their investment quide, had no clue as late as 2008 as to what was coming down the pike. AIG a good buy?? I could go on. Why should I listen to them now?
There are too many mortgage resets and credit card problems coming down the pike. How will the banks make money on this?
I wish they had not cut Elizabeth Warren short on the news this morning. She was not painting a pretty picture.
Elizabeth Warren says "let's face it, the numbers are bad and they're heading in the wrong direction"
http://www.cnbc.com/id/31188389/site/14081545/for/cnbc/
She sees all the Tarp dirt and is her own woman, beholden to none, seemingly speaking her own mind. I would trust her.
Hey Virtue Rewarded,
Well of course they cut Elizabeth Warren off... They don't want people to actually start thinking now do they.
Everything is fine, everything is good, Obama is doing an A+ job, he's different, times are changing, change, change, and more change, and ohhhh, we're headed for a recover. Also, let's not forget the time-old, "its a great time to buy" and "this time its different".
Hell if it were up to the politicians they'd still be saying "what recession?" Or does anyone need reminding?
"Positive thinking leads to positive action..." or something like it. You remember those commercials, one of which shows a few people on a sky lift going up the mountain, when all of a sudden the power shuts off. As the gondola (don't know what its called) hangs in mid-air swaying one way and the other, everyone starts to panic. Then as the lady among them starts to nervously comb her hair with a brush, one of the guys says "positive thought leads to positive action..." (again, I don't recall the exact quote, but I'm gonna search for that clip now). As everyone nervously looks around and nods their heads, one of the guys in the back, grins, starts looking around and finds an emergency switch to turn the thing back on. Then of course the guy making the statement smiles and says "you see".
Unfortunately for us, they guy in the back is around, but the switch isn't there and we have tons of "positive thinkers".
-Silly Monkey
But what about the the Bull Trap you predicted some time ago? Isn't this it? I haven't seen any other significant dead cat bounce until this.
I think we've got some more depths to reach. What is this ecomonmy riding on?
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