Excuse me - where did I say the UK is in recession?
The UK is holding up well. Perhaps that's why I am shorting the US, not the UK?
However I thought this thread was about the Dow and the US.
Yes, US unemployment is still at historical low levels. Is this supposed to be a bullish argument?
Yes, the average length of a recession for the last 50 years has been about 18 months. Can you please point me in the direction of a recession preceded by a period of growth as witnessed between 1992 and 1999? Growth reached 8% at the end of 1999. There is a lot of averaging out to do to even approach long term trendlines for GDP.
US consumer spending has been partially inflated over recent months by steep discounting, cars with 0 finance and discounts, all retailing except electronics.
They have already mortgaged some of next years sales at a loss. How many new cars is a family supposed to buy?
Where are the profits going to come from?
Consumer spending has been given a recent boost by lower interest rates and re-financing. There will be a lot of belt tightening, if people perceive unemployment as a threat though.
Hey - it was even on bubble vision to advise people to manage their spending and debt levels.
Yes, there are massive amounts of liquidity out there. It is not being used for investment for the future though. Capacity is being reduced not increased.
It will be interesting to see if there are a lot of layoffs announced after xmas. (There may still be some xmas spirit out there with businesses waiting until Jan to tell people their jobs have gone.)
Historically market bottoms for p/e ratios are around 10. There have been 2 occasions in the last century where they reached 5.
See S&P p/e chart posted earlier. An average p/e of 20 for the S&P is historically been considered over valued. Current p/e around 40.
Take a look at the chart for 1975 to 1983 where p/e ratios remained below 10 for 8 years.
This market "bottomed out" in Sep at a p/e ratio of 24 on the S&P. Some bottom or do you expect the average earnings to more than double for 2002?
Argentina and Japan will affect the US.
Japan will also affect other Asian economies.
China is the only bright spot in the whole global economy. However their growth is coming from internal consumption and cheap exports. Will this help the rest of the global economy in the near term? How much are they importing?
Again China's growth is likley to have a negative impact on Japan and the rest of Asia. Are they importing from Japan. No. The factories are being set up in China to make it themselves.
And as for Bin Liner - is he slightly annoyed at the moment? How much has he got to lose? I am not saying there will be another terrorist attack, but the risk still exists.
The terrorist cells in up to 65 countries appear to be intact?
As for your last comment on depression and the end of the world.
It will not be the end of the world, just that the yanks will have to get used to lower GDP. Remember the UK in the 70's with large scale unemployment?
Meanwhile, hopefully I will have bought a nice cheap house in Barbados or somewhere and retired.
In summary, I agree with you entirely. The hope of recovery is based solely on the fact that for the last 50 years recessions have not lasted very long.
There are no economic indicators to support this.
I remember seeing a quote from Anatole Kolensky in the times Sep/Oct. We have got to hope there is a quick recovery. The alternative is too horrible to contemplate.
The first stage for human psychology of a catastrophic or extremely unpleasant event is denial.
Do you remember the last 2000 pt Dow rally in the Spring?
Economists were unanimous that the US would not see a recession. It had already started in March.
The charts, the economics, the fundamentals, the recovery in 6 months, all look carbon copies of the Dow at 11,400 in May. The overall situation is a tad worse though.
We will see how long this recession lasts and if it is 18 months or less, please come back and say I told you so. I think I might see you first though with the Dow at 7,000.
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