Article says it is a V Shaped Recovery

[smjsl]

Mostly I'd just like to see the folks who have been relentlessly negative the past 12 months at least admit that their past certitude was in error and that they may be as equally in error about the future.

I've been too negative and missed a lot from the rally. I was buying OK on the way down, but cashed in most of those buys for what looked like nice ST gains in the time of a lot of uncertainty in 09... and as a result missed a bunch of doubles / tripples / quadruples.

 

[Steve O]

I still agree with all of those statements

And Im still very cautious... I even bought a little Wellington at the close today

The Fed will keep this propped up and working until it doesn't work anymore...

When that happens plan B scares me...

The weather has definitely been improving

But I see a long hot summer ahead, there's gonna be a lot more hot air coming

 

[Gone4Good]

I still agree with all of those statements

Never wrong, just early.

 

[audreyh1]

I still agree with all of those statements

And Im still very cautious... I even bought a little Wellington at the close today

The Fed will keep this propped up and working until it doesn't work anymore...

When that happens plan B scares me...

The weather has definitely been improving

But I see a long hot summer ahead, there's gonna be a lot more hot air coming

How can you "Still agree with all those statements?"

The fact that your early 2009 predictions didn't come to pass doesn't matter? (The economy DID improve in 2009 and there was no big market sell off when the DOW reached 9500).

You just change the date of the of the predictions to the present and reaffirm?

You are instead really making new predictions:
"The economy has improved and the jobs lost/gained has improved since May '09, but now it's gonna get worse"
"Now that the DOW is almost 11,000 you see a huge sell-off."

Those may be perfectly valid new predictions. But I really don't see how you can claim that you are still sticking to your old predictions. Your old predictions didn't come to pass.

Audrey

 

[Steve O]

The last dip was down to 97-9800...

If we go below that to 9500 I think it goes lower...

I was wrong about the sell off because a lot of money sold off before that and went to bonds.

Most of that money never came back and the FED and the banks have been running the markets up on low volume.

None of the problems that caused this whole mess have been fixed.

In fact we just have a whole lot more debt and taxes to look forward to

Yes the employment situation has improved... But the only people I know that are better off are those with money in the stock market.

Many are working for less money.

But as we have seen the market isn't gonna care until it does so I gotta hold my nose and stay long...

That still has me very worried as I've been all along
I believe "they" are kicking the can up a hill that get's steeper with every step...

But I try to enjoy life in the meantime because I only have one vote

 

[plex]

Different people have different risk tolerances, the majority of people have a very low risk tolerance, that is why stocks have consistently offered a significant real return in the long run. Those near/at retirement also have very little need to take on risk, so they can lower the amount they take on, and don't have to bother monitoring it nearly as much.

That said, I will share why I think the markets improved last March in 2009. And that was the jobs picture. The markets react very quickly whatever is driving investment choices at the time. Lately, that has been jobs, because the jobs situation has been extraordinarily bad. From 2008 until early 2009, jobs were in a downward spiral, but in March, the downward spiral stopped. The actual jobless rate was at its worst at that time, of course, but the amounts of layoffs significantly dropped, this then continued on through the rest of 2009, and into 2010.

This is the primary reason I changed my allocation in March 2009 to 100% stocks and made my 2009 Roth contribution. On the flip-side, if the amount of jobs created starts to go into a downward spiral again, watch out, that should be a pretty strong indicator the market is going to tank for the upcoming months. There are obviously other factors to watch, but I think the amount of job creation rate is a primary driver. That said, jobs are in an upward spiral, and I think this will continue until the end of the year at least.

Once the job market gets back to normal, I will once again have no clue when the bottom will fall out, each recession seems to have its own unique traits to it.

 

[freebird5825]

I was curious about NY unemployment rates, so I went searching.
I found some interesting data presented in an easy to read interactive graphic form. Data sources seem to be sound and are current as of January and/or February 2010.
Databank USA: State Budgets and Financial Deficits — AARP Bulletin Today

 

[plex]

Google mapped unemployment rates, this is the one I like to use. I set it up to show NY.

Google - public data

 

[audreyh1]

The last dip was down to 97-9800...

If we go below that to 9500 I think it goes lower...

I was wrong about the sell off because a lot of money sold off before that and went to bonds.

In March of '09 the DOW was well below 8000 - so to say "I see a huge sell off if it makes it back around 9500 or so" indicates that you expected it perhaps to get back up to 9500, but if it did then to have a big selloff to well below 9500. Not anything about any dips down to that 9500-9700 from some higher value.

Audrey

 

[Steve O]

I was wrong

Did I sell anything at 9500? No I didn't sell anything until the first week of Jan 10...

Do I wish I wouldn't have sold a bit? Yea I guess for the time being...

If I knew what was gonna happen I wouldn't be worried

Do I "Hope" the government can "Change" it for the better and save us all? Im not counting on it

 

[Ed_The_Gypsy]

People are of course entitled to their opinion. And I've (almost) learned that conspiracy theorists are impervious to empirical evidence and therefore shouldn't be argued with.

Never attribute to conspiracy that which can adequately be explained by stupidity. There is plenty of stupidity in DC.

 

[Ed_The_Gypsy]

Banana Ben will speak about rates going lower...

I give points to someone who knows what a "banana" is.

 

[audreyh1]

I thought it was "Helicopter Ben"......

OK - what's a banana?

Audrey

 

[MichaelB]

I give points to someone who knows what a "banana" is.

In this context it's a demeaning term for less developed countries in the tropics as in:

Helicopter Ben Bernanke has earned the new moniker of Banana Ben. He has earned the new name because of his desire to make the United States resemble a banana republic instead of embracing the policies that made the U.S. the greatest nation on earth. It is now abundantly clear to all that not only the Fed Chairman but also this administration will do everything in their power to create inflation. Their efforts are derived from the mistaken belief that inflation can solve everything.

Well, this tread certainly deteriorated - from a discussion on if/how/when the economy recovers to mindless babble.

My view of the next year or so

the economy is recovering and will continue to do so
the number of employed people is increasing and will continue to do so
public opinion of the aggregate debt and obligation of the federal gov’t will get worse but public finances will actually start to improve (2011)
inflation will rise significantly (>3%) in 2011
Employment for college grads will rebound
There will be lots of volatility in asset markets but no bears...Jan 09 levels will not be revisited.
Investors who cashed their equities waiting for the next shoe to drop won't be able to afford shoes and will end up barefoot

We’ve had it so good and so easy for so long that we’ve forgotten what it’s like when times get tough and how to look beyond the current gloom.

 

[Steve O]

Treasury auction's need to go well... They pull out Greece and a little market pullback

Turbo Tim is cooking up a deal in China...

Weekly jobless claims back down to 460,000 doesn't look too good...

Earnings are good though, I look for the banks to keep doing well as long as they can keep cooking the books with "mark to fantasy" accounting...

Housing market is fragile, higher mortgage rates wont help...

Kansas City Fed chief says he want's to raise the discount rate to a brutal 1% and the markets freak out...

I think were gonna be stuck between 1150 and 1200 for a while...

If employment doesn't pick up we could easily see 1100 again...

But all that considered the market probably keeps going up

 

[harley]

In this context it's a demeaning term for less developed countries in the tropics as in: Well, this tread certainly deteriorated - from a discussion on if/how/when the economy recovers to mindless babble.

And this is different from other threads how?

My view of the next year or so

the economy is recovering and will continue to do so
the number of employed people is increasing and will continue to do so
public opinion of the aggregate debt and obligation of the federal gov’t will get worse but public finances will actually start to improve (2011)
inflation will rise significantly (>3%) in 2011
Employment for college grads will rebound
There will be lots of volatility in asset markets but no bears...Jan 09 levels will not be revisited.
Investors who cashed their equities waiting for the next shoe to drop won't be able to afford shoes and will end up barefoot

We’ve had it so good and so easy for so long that we’ve forgotten what it’s like when times get tough and how to look beyond the current gloom.

I hope you're right. I'm concerned that job growth might continue to be dominated by the public sector. I don't see that as being sustainable in a supposedly free market society.

I don't see how inflation can be contained in the mid to long run at 3% with all the debt and newly printed cash floating around. Once again, I hope you're right.

I definitely hope we don't see Jan '09 levels in the market again, but I wouldn't be surprised to see one or more significant bear markets over the next 3-5 years. Based on " one generally accepted measure is a price decline of 20% or more over at least a two-month period". (Vanguard)

I've got no problem seeing beyond the current media induced gloom, but until I see significant improvement in productive job growth and housing I'm not anticipating happy days being here again. I'm talking in society here, not the stock market. The Dow is not the measure of economic and social health.

So, there are my thoughts. I'm sure this thread will be unearthed regularly over the next few years, so I'll be able to see how I did.

 

[audreyh1]

\
My view of the next year or so

the economy is recovering and will continue to do so
the number of employed people is increasing and will continue to do so
public opinion of the aggregate debt and obligation of the federal gov’t will get worse but public finances will actually start to improve (2011)
inflation will rise significantly (>3%) in 2011
Employment for college grads will rebound
There will be lots of volatility in asset markets but no bears...Jan 09 levels will not be revisited.
Investors who cashed their equities waiting for the next shoe to drop won't be able to afford shoes and will end up barefoot

That's a pretty nice forecast overall.

>3% inflation in 2011, eh? That would be a surprise to me, but I don't ignore the possibility.

I tend to favor the long market cycles theory that says we in one of those secular bears 2000 to 2017 or so, so I expect plenty of long-term volatility with no breakout above past peak levels until 2017 or so. We might not see Jan 2009 levels again, but there is plenty of room for at least one more 20% bear market type sell-off before the end of the period. Rebalancing has been a real sanity saver in this type of range-bound market environment.

ECRI has also convinced me that much higher unemployment rates are here to stay for a long time. Really back to what was more typical before the unusually high full employment of the 1990s and 2000s. This limits economic growth long-term, but also helps limit inflation. We'll see.

Audrey

P.S. I certainly understood the phrase "banana republic". I must admit I get a kick out of referrals to the US as a "third world country". If you have ever lived in one of those, you realize it's pretty far fetched.

 

[Gone4Good]

Helicopter Ben Bernanke has earned the new moniker of Banana Ben. He has earned the new name because of his desire to make the United States resemble a banana republic instead of embracing the policies that made the U.S. the greatest nation on earth. It is now abundantly clear to all that not only the Fed Chairman but also this administration will do everything in their power to create inflation. Their efforts are derived from the mistaken belief that inflation can solve everything.

Note: What's to follow is not a criticism of MichaelB who posted this quote as an explanation.

Begin rant . . .

The above quote is the kind of hyperbole that gets picked up and mindlessly repeated as if it is some kind of wisdom. This is becoming a pet-peeve of mine. Calls for hyper-inflation date back to at least the early part of 2008. And yet, what has inflation done? (See below)

Will we ever get the prophets of doom to come out and say they were wrong? No. They just roll their predictions forward without ever bothering to consider or incorporate any evidence that doesn't fit their specific narrative of the Apocalypse.

 

[Gone4Good]

>3% inflation in 2011, eh? That would be a surprise to me, but I don't ignore the possibility.

I tend to favor the long market cycles theory that says we in one of those secular bears 2000 to 2017 or so, so I expect plenty of long-term volatility with no breakout above past peak levels until 2017 or so. We might not see Jan 2009 levels again, but there is plenty of room for at least one more 20% bear market type sell-off before the end of the period. Rebalancing has been a real sanity saver in this type of range-bound market environment.

ECRI has also convinced me that much higher unemployment rates are here to stay for a long time. Really back to what was more typical before the unusually high full employment of the 1990s and 2000s. This limits economic growth long-term, but also helps limit inflation. We'll see.

Audrey

This all sounds pretty reasonable to me.

2017 to hit new highs makes sense. It took 5 years (subject to check) to get from peak to peak the last time around. A longer recovery this time makes sense.

High long-term unemployment also seems to be in the cards, if for no other reason than adding millions of new jobs takes time.

I also wouldn't rule out a 20% type pull back. Valuations for all asset classes seem to me to be "normal" for a good economy. But we still don't have a good economy yet. So there is certainly risk to the downside.

 

[harley]

Not that I agree with Michael Pento (Banana Ben Bernanke) but I don't think you can negate the ptential for in flation by showing a chart covering 2 years. As long as the interest rates are artificially held down, inflation may be able to be controlled. But they can't hold them down forever. Hopefully Ben and Tim are right when they assure us they can sloooowwwwly increase rates while keeping inflation in check. I just worry it they will react to slowly and it will get away from them. Tune in next year (or so) to find out!

 

[ziggy29]

High long-term unemployment also seems to be in the cards, if for no other reason than adding millions of new jobs takes time.

Not to mention that "voluntary attrition" rates seem to be very low right now. So not only are new jobs not being created rapidly, but also people are "guarding" their current j*bs with their life and not leaving (this board is an outlier in terms of saving for the future). The net result is that job openings -- whether a new job or through attrition -- look to be minimal in the next several years.

 

[audreyh1]

But I think the phrase

It is now abundantly clear to all that not only the Fed Chairman but also this administration will do everything in their power to create inflation.

is valid. Because of course you want SOME inflation! You don't want deflation! Specifically you want 2% inflation. Below that things are just not so great economically. Of course you don't want to go way above that either - other problems. But there is an inflation "sweet spot" that is justifiably sought after by the Fed, etc. IMO no administration wants to see sub-2% inflation.

The problem with the inflation rants is the leap from any inflation at all to hyperinflation. Completely different situation. But of course regular inflation and hyperinflation get lumped together for all those black-and-white thinkers out there.

I'm not saying hyperinflation can't happen. But I don't see the germs of it now, so until I do it's not going to be on my list of major concerns.

Audrey

 

[ziggy29]

But I think the phrase is valid. Because of course you want SOME inflation! You don't want deflation! Specifically you want 2% inflation. Below that things are just not so great economically. Of course you don't want to go way above that either - other problems. But there is an inflation "sweet spot" that is justifiably sought after by the Fed, etc. IMO no administration wants to see sub-2% inflation.

IMO, the "ideal" inflation rate is precisely zero. But it's better to have a little inflation than to have deflation, so I think monetary policy understandably errs on the side of inducing a little inflation given the bad economic impact of deflation.

Of course, none of this accounts for the idea that inflation is good for the federal government's debt load as the "real" debt shrinks with high inflation. Of course, they have to balance that with [-]cooking the inflation statistics[/-] creating inflation in ways that don't fully materialize in the CPI so they don't have to pay out all the "reduced real debt" in I-bonds, TIPS, SS and COLA'd pensions...

 

[Gone4Good]

Not that I agree with Michael Pento (Banana Ben Bernanke) but I don't think you can negate the ptential for in flation by showing a chart covering 2 years. As long as the interest rates are artificially held down, inflation may be able to be controlled. But they can't hold them down forever.

I agree, to an extent. Inflation is a threat. But so is deflation. And while I can't negate the possibility of inflation forever and always, many of these hyperbolic predictions had dates attached to them . . . 2009, 2010 etc. etc. And now those dates have moved back. But what we see is that inflation has declined, and the trend for median inflation is still heading downward.

Consider what would have happened had policy makers listened to Peter Schiff and his supporters back in 2008. Instead of the moderate deflation and disinflation shown in those charts we'd have an outright depression. But never mind that Peter and his parrots were dangerously wrong, just give it time and eventually he'll be right (and just don't consider what wreckage there would have been had we listened to him initially).

Look, I'm not asking for unanimity of opinion. All I'm asking is for people to walk back the hyperbole. We can have legitimate concerns about Fed policy without drawing stupid parallels to "Banana Republics" and Weimar Germany.

 

[audreyh1]

IMO, the "ideal" inflation rate is precisely zero. But it's better to have a little inflation than to have deflation, so I think monetary policy understandably errs on the side of inducing a little inflation given the bad economic impact of deflation.

Maybe 0% inflation would be great for a retiree. But for economies - I don't think so! There is a reason even the super conservative Eurozone targets 2%. Sub 2% inflation is usually associated with economic hardship.

Audrey