There is some debate about whether the recession is over. The National Bureau of Economic Research (NBER), a non-governmental organization made up of economists, has a committee that meets and decides after the fact when recessions begin and when they end. Martin Feldstein, the former president of the NBER, focusing on the job market, said last November that "the current downturn is likely to last much longer than previous downturns ... We will be lucky to see the recession end in 2009."
I have called this recovery a Statistical Recovery, in that some of the normal metrics are only getting better in comparison to very bad numbers a year ago. It is likely that we will still have not recovered to the level of economic activity we enjoyed at the peak of the last cycle over two years ago on a nominal basis. This is highly unusual and lengthy for a recession.
William Hester of the Hussman Funds (www.hussmanfunds.com) has written a very thorough analysis of what the NBER committee will be looking at to tell us whether the recession is over or not. Not surprisingly, the data is to as conclusive as one might like. Some of the tings which they look at seem to clearly suggest the recession is over, and was over last summer. Others are not so clear, which is why Feldstein is not ready to say the recession is over.
I think you will find this Hester's analysis interesting as this week's edition of Outside the Box. I especially liked the charts, as it gave me some insights into past recoveries. All the best, and have a great week!
"Everything, including the market, is ultimately empty of a separate self. One market can only be understood and analyzed in the context of other markets and conditions. Supply and demand, in particular, should not be considered in isolation."
Long time Outside the Box readers are quite familiar with Dr. John Hussman, as he is a frequent choice for this column. But this week I think he has written one of his bests essays ever. He cleverly weaves in quotes from a Zen master who is his friend and gives us a very fresh look at market analysis. This is a thought piece and you should set aside some time to absorb the lessons. You will be well rewarded.
Dr. John Hussman is president of Hussman Investment Trust. You can find out more about the mutual funds he is involved with at http://www.hussmanfunds.com/.
And I recorded three sessions for Yahoo Tech Ticker in New York this morning. You can go to Yahoo and see them. All the best,
Your on the road again analyst,
This week I offer you two short pieces for your Outside the Box Reading Pleasure. The first is from my friends at GaveKal and is part of their daily letter. They address the real difference between those who think we will have a consumer led recovery (Keynesian) and those who think we will have a corporate profit led recovery (classical economics or Schumpeterian). This is actually a very important debate and distinction. I find that GaveKal pushes me to think almost more than any other group, as they constantly challenge my assumptions. (www.gavekal.com)
The second piece comes from Dr. John Hussman of Hussman Funds (www.hussmanfunds.com). He offers us some very insightful analysis on the potential for growth going forward, which goes along with what I have been writing: We are in for a longer period of below trend growth, which does not bode well for corporate profits in the long run. I think you will get a lot out of these two items.
This week we visit some very thoughtful analysis by an old friend of Outside the Box, Dr. John Hussman of the Hussman Funds (http://www.hussmanfunds.com/index.html). Is the new PPIP program and related activities likely to help or hurt the situation? Will this help keep banks for bankruptcy or will it push the FDIC into insolvency requiring massive tax payer cash. This week's Outside the Box is brief, but poignant.
This week we visit some very thoughtful analysis by an old friend of Outside the Box, Dr. John Hussman of the Hussman Funds (http://www.hussmanfunds.com/index.html). Is it 1932? Are we in a Depression? Where is the bottom? John gives us a very balanced view and actually offers some positive insight on the markets. There may be light ahead.
(Note: there is a chart from Ned Davis Research that is, as John notes, not to be distributed further. I did call Ned Davis Research and they graciously gave me permission to use it as well.) Have a great week, and enjoy some positive thoughts below.