CapitalistMarks

How long to recovery? How about NOW!

Posted on 13. Apr, 2009 by scott in economic daydreaming, markets

I have heard (and read) a lot lately about how long a?recovery from the currrent economic crisis (recession) will take.? The ‘pan-dits’ (pundits with perpetually negative views–about 90% of those on TV and radio) have given us the discouraging estimates of anywhere from 2-3 years to 20 years or more.

Don’t believe it.

It is happening NOW!? In earlier posts I stuck out my neck and predicted an early?recovery of the markets (as in stock).? That seemed pretty aggressive a month or two ago.? No longer.? Markets are leading indicators.? A five week run on the positive side seemed unthinkable six weeks ago.? A 25% gain in that period was dream-stuff.? Now it is real and building.? A further 25% will put the Dow Industrials at the 10,000 level I wrote about as the target for June.?

Not so unthinkable is it?

Why is this all happening?? Is it the incredible stimulus and bailouts invested by our government?? Not really.? Only a tiny (and I mean a miniscule tiny here) of those have had time to take affect.? Capitalism works, without all the outside intervention, and we are watching it go on its merry way.

The markets are like a pendulum, and a wild one at that.? Almost always we can expect the market pendulum to swing (way) too far one way or the other.? This is caused by the herd mentality of our populace, enhance by far-out predicitions from the media.? This pendulum effect is far worse today than fifty years ago.? Blame that on the media, the internet, the Congress, the Fed (Reserve), the Treasury (Department), your local newspapers (if you have any left).

I remember once in college, I got to a class a little early and a couple of students were waiting outside the door.? I joined them, not even thinking about it.? After ten minutes the entire class was waiting.? Pretty soon the Professor arrived and started waiting too.? After ten more minutes someone thought to open the door and look inside.? The room was empty.? What a bunch of morons! And sheep.? These are the same people we are ‘following’ today.

Jeez Louise, how I wish we all thunk (plural of think in my odd universe) for ourselves.?That would be?cool, fool.

Yet, economically the tide is turning, the pendulum has started the move back, and it will pick up speed.? The new administration has stopped ‘nay saying’ and started to be more encouraging . . . on all fronts.? Confidence in building.? Spending will pick up and the economy will get back on track.? A whole bunch of American sheep will be piling on soon (most of them too late to enjoy the full benefits of the current upward?move).?

Follow the ‘crowd thoery’ and watch with wonder.? I won’t trouble you with analysis of all the leading indicators but they are swinging the right way too.? This I will reconfirm: Dow 10,000 by June.? Positive GDP growth in the third quarter for sure (I actually think we can see positive GDP in this, the second, qaurter).

The recovery has started.? The stimulus helped, primarily because it gave people hope and then confidence.? Did we need it?? Probably (but not for the reasons you think).? Do we need all the ‘rest’ of it now?? Probably not (let the free markets take over).?

It will take two years or so for all the stimulus and bailouts to take affect.? We will be far into the next expansion by then and frankly all that extra spending (investing) will be wasted.

I wish we could pull a bunch of the spending off the table.? Possible, and not likely.??When has Congress ever made a timely AND?right decision?? I read about one on December 8, 1941 . . . haven’t heard of one since.? Need I remind you that we need TERM LIMITS!? That would be the best change of all.

Stimulus?? Bailouts?? Tax cuts?? Deficit spending?? Fiscal and monetary action?? That’s the old news.? The new news is refininancing at much lower?rates, buying homes at 75% of their value from two years ago (and at rates as low as 4.5% for 30 years),?people saving for rainy days (and hopefully putting some of that savings into good equities?that will help protect against the coming inflation (yikes!).?On top of all that we stood up to the pirates and pulled a John Wayne on them!? Way to go BHO.? So!

Doctor, the patient is alive and well, just give him a few months to start running again.?

I’m fully invested and I don’t care about the ups and downs the market will experience in the next year or so.? But, I am sure it will be a good 50% or more higher in a year than it is right now.? I’ll hang on for that gain and count myself lucky to have had the opportunity.? By the way I bought some oil trackers and so as oil goes up (as it will) my profits will more than pay for the extra cost of gas.

This next year is going to be fun, exciting and provide a myriad of opportunities to the confident and brave.?

Cautionary note:? by 2010 inflation could be a bugaboo, by 2011 it will be awful (double digits is possible).? Then watch out for a whole new set of problems.

Ain’t life fun?

Thanks for the flick photo to army.mil

Tags: economic stimulus, gdp growth, recession ending, stock markets