Some Good News - Economic Rate of Decline Is Slowing

In our never-ending quest to find a bit of good news, we note that consumer credit picked up slightly in January. From EconomPic.

click to enlarge

On another note, once a month I receive an index of 22 economic indicators constructed by a money manager. According to the index, we had been in a depression since October. As of the last reading, the index has popped up from "depression" to "recession." In fact, the index had been trending up since January. The index had the economy in severe depression until February when it perked up to merely a depression. Also, the data suggests that deflation is abating. Sorry, but I cannot post the index. You will just have to take my word for it. (That's a dicey proposition.)

In other words, the rate of decline is slowing, which is consistent with what we have been seeing in the corporate bond market lately.

Currently, stocks are trading at 6x-9x earnings. Such valuations imply depression and deflation. If instead the economy is in a recession and prices are beginning to stabilize, stocks could have a powerful counter-trend rally.

Comments

[Jim Hawthorne:]

Why this, 'never-ending quest to find a bit of good news'?

We don't need 'good news' any more than we need 'bad news'! Just present us with the facts! We can make up our own minds from there, thanks!

Mar 09 09:14 AM

[Heaven, Hel...:]

While any good news is welcomed at this juncture, unfortunately credit default swaps have spiked up since the date of the referenced corporate bond issuance chart, with the CDX high yield index jumping approx. 350 bps (to 1890 bps) and the CDS investment grade index increasing approx. 25 bps (to 250 bps). While some technical factors likely are contributing to the jump, a prevailing sense of an increase in fear would seem to be the main driver.

Mar 09 09:31 AM

[Mad Hedge F...:]

The bottom has got to be close. The markets continue to behave like a spoiled child throwing a tantrum because the global response to date has been too little, too late. China did the right thing with a stimulus package amounting to 16% of GDP over two years. But the US has so far come up with a package worth 6% of GDP over three years, which is clearly not enough. $881 billion sounds like a lot of money, but in this world it is only the down payment. Treasury Secretary Hank Poulson promised to ring fence toxic assets but never delivered, buying into the banks instead. Policy makers are not equipped to deal with the globally synchronized nature of this melt down. In 1988 world trade accounted for only 5% of GDP. Last year it was 33%, but is going to hell in a hand basket with stunning speed. More global coordination is necessary, no matter how distasteful that may be.

Mar 09 11:59 AM

[PainfullyAware:]

On Mar 09 11:59 AM The Mad Hedge Fund Trader wrote:

> The bottom has got to be close. The markets continue to behave like
> a spoiled child throwing a tantrum because the global response to
> date has been too little, too late. China did the right thing with
> a stimulus package amounting to 16% of GDP over two years. But the
> US has so far come up with a package worth 6% of GDP over three years,
> which is clearly not enough. $881 billion sounds like a lot of money,
> but in this world it is only the down payment. Treasury Secretary
> Hank Poulson promised to ring fence toxic assets but never delivered,
> buying into the banks instead. Policy makers are not equipped to
> deal with the globally synchronized nature of this melt down. In
> 1988 world trade accounted for only 5% of GDP. Last year it was 33%,
> but is going to hell in a hand basket with stunning speed. More global
> coordination is necessary, no matter how distasteful that may be.

Why would we want to continue the subjugation of the future to save the past? We are currently placating the institutions for nefarious deeds.

Peace at all costs is not peace. Financial Stability At All Costs Is Not Stability.

Mar 10 03:07 PM