NEW YORK (CNNMoney.com) -- The National Bureau of Economic Research said Monday that the U.S. has been in a recession since December 2007, making official what most Americans have already believed about the state of the economy .
Well there is no need to argue whether we are in a recession or not in a recession. It's official now. By the time NBER announced this, normally it's too late, recession is over.
The average US recession post WWII is about 10 months, if the recession started in December 2007, we are right in the 12 months - we are outside that average now. One of the longest recession period is 16 months(73-74 and 81-82), which mean there are 4 months to go. We can get more pessimistic by saying there is no history to refer as this is going to be longer than 16 months. If you listened to one of the more pessimistic outlooks from RGE, it could last up to 24 months - December 2009.
Stock market typically rallying the strongest 3 months before recession end. If this recession were to end by Q2 '09, it should start to rally by December or January. If it were to end by December 09, it will only start to rally sometime in late Q3 '09 or early Q4'09.
The market will continue to be volatiles as they are trying to assess the length and depth. Historically, by the time you see happy faces on the front page, it's too late already, market normally already rally about 30-40%. That's why Buffett says If you wait for the Robins, springs will be over. We just need to pay attention to value and bad news which are our best friends.
A little marker for future reference.
Dow 8149, down 7.70%
S & P 816, down 8.93%
1 comment:
According to Keynes, the root cause of an economic downturns is an insufficient aggregate demand. When the total demand for goods and services declines, businesses throughout the economy see their sales fall off. Lower sales induce firms to cut back production and to lay off workers. Rising unemployment and declining profits further depress demand, leading to a feedback loop with a very unhappy ending.
90% of the time you can make statistics show whatever you want 50% of time
http://nomedals.blogspot.com
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