Quote:
Originally Posted by ADL Colin
I bet that GDP bottoms between April and June 2009
I bet that US unemployment (rate) bottoms between October and December 2009
I bet housing prices bottom between now and March 2009
I bet the the stock market (S&P) has already bottomed
|
So what are you all thinking as to the whens and whys?
Here's what I am thinking.
The 2nd longest recessions in the 20th century were 16 months long. 1974 and 1982. 16 months would bring the current recession to April 2009. Given the depth of the housing crisis and the credit bubble somewhere in that same time frame makes sense to me.
As far as unemployment, unemployment historically continues to rise well past the end of the bottom in GDP. In a white paper a few years back someone interviewed a large number of employers and discovered that even once the general economy starts to recover employers are slow to rehire on the concern that there will be a "double-dip". So instead they increase hours and overtime.
As far as housing, john Stumpf the CEO of Wells Fargo said a few weeks ago that he thinks he's seeing signs of a bottom coming in now in housing. Wells Fargo handles 1/8 of all mortgages in the US so he had a pretty good look at that. He and others report multiple bids per property for the first time in a long while - just since dec 1. Mortgage rates are down to a 37 year low now. 5.1% this morning. There is a plan to push rates to 4.5%. Which is extraordinary. Inventory is dropping rather substantially in some major markets. In Boston MA the inventory is down 24% in the past 12 months. LA's inventory is down 17%. A number of markets have shown improvement in the Nov 15-Dec 15 period. See
http://www.housingtracker.net/
As far as the stock market it is a forward indicator not a lagging one. For deep recessions the market typically rises over 30% in the 12 months from the bottom. Buffet has been incredibly prescient over the years (1974, 1982, 1999 articles were spot on) and his bull signal just a few months ago is more likely to be on than off.
If one assumes this is going to tie as the 2nd longest recession in the past 100 years then it would bottom in April 2009. The market as a forward indicator (5 months on average) should have already bottomed.Unemployment, if history repeats itself, will continue to rise - probably substantially - until the end of next year. 8-9%?