Archives For david

A month ago we took stock of the economy, noted some welcome positive news, observed the crosscurrents that were still threatening us, and advised watching some key areas (economists’ estimates, homes sales, jobs, the WTO-China conflict, consumer spending, stimulus money) as we focused on the future.

Things are a notch better in the ensuing month as a broad economic recovery seems to be creeping along, and while we aren’t in favor of irrational exuberance, we are in favor of a clear-eyed assessment of the facts.

So how are we doing so far? Is the worst recession in 70 years over?

The answer is yes it is! A growth rate of 3.5% in GDP for the third quarter signaled the end of the recession. Remember, a recession is defined simply as two quarters in a row of negative GDP growth.

Having said that, it is important to recognize that many people who saw the value in their investments, retirement and college funds and equities drop in value are still suffering from the effects of the recession. Likewise for the many people who lost jobs or contracts, whose hours were slashed or whose benefits were chipped away in company cost-cutting moves. The loss of 6.5 million jobs since December 2007 has spurred the sharpest rise in the unemployment rate since the 1930s, and it is expected to rise above 10%. We are not surprised, as we predicted this rate some months ago.

But there have been a few indicators that tell us the recession is indeed over. Home sales have risen for a few straight months, the stock market has rallied since March, the economy is expanding, and Federal Reserve chairman Ben Bernanke told Congress economic activity “will increase slightly over the remainder of 2009.” Continue Reading…

No matter one’s political leaning, it seems obvious that we can draw a few basic conclusions from the current economic situation.

First, Federal Reserve chairman Ben Bernanke’s nonitary policies were successful. Most of Bernanke’s term, which began in 2006, has been spent battling the recession and indeed the possibility of depression. Therefore he was reappointed for a second term in August by President Obama. Second, President Obama’s stimulus program is working, even though it has been roundly criticized for all of the following reasons — having insufficient programs, being a budget-buster, and supplying too little or too much in the way of immediate stimulus.

Recent positive news gives us hope

Businesses are doing more with less: We learned that nonfarm payrolls fell by 247,000 in July, and 217,000 in August, the fewest since last August, indicating further moderation in the trend of job losses. These figures were less than expected and way down from the 700,000 in monthly job losses that we were experiencing at the beginning of the year. Additionally theaverage workweek increased to 33.1 from 33.0 hours, the first increase since last August. Also, nonfarm productivity surged at a 6.4% annual rate in Q2, the biggest increase since Q3 2003 and larger than the 5.5% expected increase. Manufacturing productivity rose at a 5.3% rate, the biggest increase in four years. Continue Reading…

Monitoring the Market News

david —  July 2, 2009

As we take stock of the market trends – which we do regularly – we like to highlight some of the most important recent economic activity. Given the continuing market turmoil, it is important to do so to gain perspective and context.

First, a salient quote:

“A bear market is a period of time during which people who think this time is different sell their common stocks – at prices which will never be seen again – to people who know that this time is never different.”
–Nick Murray Interactive, 3/13/09

I want to touch on a few developments that shed light on the positive direction the market seems to be heading. Most of the following is either not reported or under reported by the everyday news media.  Continue Reading…