Thursday, March 26, 2009

End of the recession

I'm in Cordoba with limited computer access. Can't post pictures, but I have had a look at the markets using a friend's computer. I see lots of signs showing up that could well mark the end of the recession. Weekly unemployment claims have been flat for the past 5 weeks. Banks are still lending increasing amounts of money. Commodity prices, particularly energy and copper, are moving higher. Equities have been up for over two weeks from incredibly distressed levels. Leading indicators of financial stress such as swap spreads and the VIX index, improved months ago. The news of course has been horrible for months, but the numbers aren't showing further deterioration; that means the economy has absorbed the bad news and has largely adjusted. Furthermore, tax increases are not imminent; cap and trade is going to have a big struggle getting through Congress; Obama has lost a lot of credibility and momemtum; Blue Dog Democrats are marshalling their forces to bring reason and moderation to the budget process.

Things could be an awful lot worse. I'm going to go out and do some sightseeing here in Cordoba. I think the markets will survive without me watching them!

11 comments:

CDLIC said...

Scott,

For some gut reason I would really feel better if you stayed and watched the markets --it just feels better knowing you are-- but I don't want you to spoil your vacation, so enjoy! :)

Tom Nugent said...

Scott,
Technically I think you mean the end to the bear market. The recession will take a while longer until the big stimulus packages kick in.

Tom Nugent

Bernard said...

The bankers and market, under the private/public partnership, just realized how many billions of dollars they are going to make off the taxpayers dole without congress or the public getting in the way. Of course the market is going to rally 20 -30%.

It is a one-way scam and a moral outrage.

http://www.ft.com/cms/s/0/b3e99880-1991-11de-9d34-0000779fd2ac.html

Donny Baseball said...

Well Bernard the private sector would have cleaned up this mess themselves but the government rushed in because it thought it could be a hero but then it became obvious that it can't shoot straight (AIG) so it sets itself up as a patsy for the private sector. Don't blame the private sector for working the patsy over, blame your government for getting involved out of its depth. Do you mourn for your tax dollars? Then vote for people who would have never gotten near any of this and would have let the bankruptcy system work.

CDLIC said...

Scott,

What a profound short paragraph.....

"You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it."
~~~~~ Dr. Adrian Rogers, 1931 - 2005 ~~~~~

Bernard said...
This comment has been removed by the author.
Bernard said...

I do not blame the "private sector" at all. This is and has always been, in my mind, a government run disaster that started long ago.

But do not think for one second the private sector isn't part of the government. The dilineation is almost impossbile to make and getting blurrier by the day...

Randy R said...

Donny, Bernard, et all -
As supporters of private sector freedom, do you have any reservations in regard to incentive based compensation plans that offer potential for scores of millions (or even ($100s!) for executives of mega financial firms that can have systemic impact on the US economy? I'm curious to what extent if any we think the private sector has lost the right to make such bets.

Randy

Scott Grannis said...

The best thing about the compensation caps imposed by the Obama folks is that that is the absolute best way to discourage banks and other financial institutions from asking for federal handouts.

Randy R said...

Somewhere between Obama's $500k limit and incentive based $50MM is a compensation figure that balances the need to attract quality managers without tempting them to bet the farm with shareholder money (or worse taxpayer money).

Randy

Tom Burger said...

Scott,

Your vacation posts are wonderful and make me wish I knew Argentina. Looks like you are having a very good time.

I wish I could could buy into your "end of recession" thesis, but I can't. Our government (and Fed) is doing its best to rekindle a credit expansion, and that is the root cause of our current problems. With interest rates so far below the "natural" rate, the malinvestments will continue to pile up - for later revelation.

Our leaders are also stealing trillions of dollars from productive elements of society and giving it to the most unproductive people in the country. When the stimulus "kicks in" it will cause tremendous capital consumption and misallocation.

Doug Noland's current "Credit Bubble Bulletin" has some good analysis this week. If anybody cares to read my thoughts on all of this, check out my blog.