Philip Gvinter

This Recession Will Be Anything but Deep

I disagree with the fundamental premise here. While government intervention is indeed finally becoming effective the recesionary effects of the restoration of sustainable credit standards and general common sense in the pricing of risk will still mean significant housing and commodity price declines. These declines will lead to a deep recession and an equally sharp recovery. We are however at least 12 months from the end of the recession and at least 6 months from its bottom. It will be time to buy stocks again once more reasonable earnings are priced in for FY 09 which will likely happen some time between Q1 and Q2 earnings reports. Bond yields also need to come back towards reasonable levels. Banks do indeed need to make money, and in order to do so they need to take risk. It is extremely difficult to make money by taking risk if the price of the risk is artificially deflated.