US Recession: How Far Along Are We?
The long and short of the U. recession, which was identified one year after its onset by the National Bureau of Economic Research, is that it almost certainly is destined to be long. Or at least longer than the U.S. post-World War II average downturn of 10.5 months.
Take the New York Times’ quote of the day from economist Allen Sinai: “We will rewrite the record book on length for this recession.”
Or the paper’s economics blog, Economix, which proffers this rundown of the longest recessions of the past century. Hint: the longest were much longer than the oft-cited 16-month recessions of 1973-75 and 1980-81.
The Wall Street Journal’s front page highlighted the same statistics in full graphic color, along with price charts of Monday’s plummeting stock prices and bond yields:
Speaking of stock prices, Bill Gross, managing director of Pacific Investment Management Co. just posted “Dow 5,000 Redux” that warns investors not to be too hasty to view US equities as cheap based on traditional valuation measures such as price-to-earnings.
My transgenerational stock market outlook is this: Stocks are cheap when valued within the context of a financed-based economy once dominated by leverage, cheap financing, and even lower corporate tax rates. That world, however, is in our past not our future.
Gross predicted back in 2002 that stocks would fall to 5,000 on the Dow Jones Industrial Average. That proved to be nearly the bottom of the 2001-02 bear market.
And in a new 47-page country outlook report for the US from 2008 to 2012, the Economist Intelligence Unit said stagnation in the business environment caused it to lower America’s global ranking as an attractive business location to 10th place from 6th place.
Its rank deteriorates to 10th during the forecast period as the business environment in the U.S. stagnates but improves in many other countries…and will be overtaken by Australia, Hong Kong, the Netherlands and Sweden.
With so many seeing so much doom and gloom, there has been little attention paid to the “glass half full” crowd. First Trust Economics’ Brian Wesbury opines that a brisk post-Thanksgiving holiday shopping shows that things aren’t all that bad.
Now, consumers, who usually lag other economic indicators, may be an early sign that the bearishness went way too far.
Or a sign that consumers are seeking a little retail therapy to counteract all the bad news.
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