Stock Market Investors Needn’t Fear A Double-Dip Economic Recession

The Market Oracle ^ | 11-9-2009 | Jon D. Markman

[blam]

Stock Market Investors Needn’t Fear A Double-Dip Economic Recession

Nov 09, 2009 - 05:56 AM
By: Money_Morning

Jon D. Markman writes: A new report contains some very good news for investors: Double-dip recessions are very rare.

That means that a drop back into recessionary conditions looks less and less likely even as unemployment creeps higher and has crossed the 10% threshold for the first time in a quarter century.

After reviewing U.S. economic history all the way back to the 1850s, Deutsche Bank AG (NYSE: DB) economists found that double-dip recessions are exceedingly rare: There have only been three episodes in which the economy has fallen back into recession within a year of a previous recession ending. And that’s out of 33 recessions that have taken place since 1854.

Indeed, when these double-dip downturns do occur, they happen under circumstances quite different from today’s situation.

Two of the three double-dips happened in the years prior to World War II – in 1913, and again in 1920. The more relevant example was the double-dip recession of the early 1980s, which was driven by the fight against double-digit inflation rates.

U.S. President Jimmy Carter imposed credit controls in March 1980, which resulted in a sharp but short-lived recession before the economy expanded again for 12 months. Then U.S. Federal Reserve Chairman Paul A. Volker hiked short-term interest rates to 20% in the summer of 1981, as he pushed the economy back into recession but dealt a death blow to inflation.

With deflation just as likely as inflation at the moment, a repeat of the 1980s just isn’t in the cards, as the Fed is set to keep rates at very low levels until the end of 2010.

[snip]

The DJIA closed up 203 points today.

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Stocks, Dollar or Bonds, Which Crisis Will Be Next?

Stock-Markets / Credit Crisis 2009
Nov 09, 2009 - 11:40 AM
By: Graham_Summers

As I wrote earlier this year, the US’s monetary policy has already laid the seeds of the next Crisis. Is now no longer a question whether or not another Crisis is coming; instead, it’s a question of which Crisis and when. I’ve detailed what I think are the three general options below:

Quite a few people wrote in last week telling me I was insane for even claiming that the US Dollar could rally. But in reality, this is the outcome Americans should all be praying for given the alternatives: a Dollar rally would only damage stocks and commodities, whereas a Currency Crisis would effectively destroy the economy and a Country crisis… well, that one is obvious.

Stocks, generally get all the attention from the media, but in reality they are relatively small fries compared to the Bond and Currency markets. As of 2008, the world stock market was roughly $36 trillion in size. In contrast, bonds were $67 trillion and forex (currency) which TURNS OVER $3.2 trillion PER DAY: ten times the daily volume of EVERY stock market in the world.

[snip]

[Ingtar]

No, they don’t. But that is because we are truly still in the first dip.

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Dollar Reached 15-Month Low In Wake Of G20 Meeting

[JasonC]

Option 4 - stocks continue to rally, with brief ordinary corrections along the way; interest rates stay low for another 6-12 months then rise modestly on economic strength; dollar initially weak, then stronger in a typical 50% retrace as rates rise.

Oh wait, right, you only care about doom mongering predictions. Reality is not wanted...

[AngelesCrestHighway]

L.O.L.!.....sure !....buy that chocolate dipped turd! Jump in the market!

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Stocks Rocket To Biggest Gains Of 2009

[eCSMaster]

Actually, they’re talking about $2,500 or $5,000 per ounce gold.

When talk like that happens, it’s time to start thinking about shorting gold.

[pacpam]

Guess you need to factor out the President remaking our economic engine into a bicycle to believe all is normal.

[gwilhelm56]

Chocolate covered s*** sandwich!!! We’re still in the first dip... as FUHRER OBAMA is following FDR’s economics to the letter, THERE WILL BE A SECOND DIP.. don’t need to know economics, just history,

[Oratam]

After reviewing U.S. economic history all the way back to the 1850s, Deutsche Bank AG economists found that double-dip recessions are exceedingly rare.

The Panic of 1837 gets no love.

[AngelesCrestHighway]

The big DIP in the White House will see to that!

[Neidermeyer]

You nailed it ... we are just having a short and light respite from the stimulus/tarp/stimulus2 body blows ... when the senate passes health care and we jump 5% on unemployment to 15.2% (or 22.7+ in U6 numbers) almost overnight then I stop paying on everything to conserve cash and protect my family because we are past the point of no return , China will call BS on Turbotax Timmy, and nobody will have the stupidity to foreclose or repo anything or call any loans when there is nothing but expense to it when it can’t be resold.

[Neidermeyer]

Actually, they’re talking about $2,500 or $5,000 per ounce gold. When talk like that happens, it’s time to start thinking about shorting gold.

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You're thinking all wrong about Gold pricing .. sure the numbers sound high in USD but what are those same people saying the price will be in Euros or Canadian Dollars, especially Canadian Dollars as they have a solid natural resource backed economy.

[Mike Darancette]

We are not out of the first dip yet. 4th quarter numbers will tell the tale.

[Mike Darancette]

We are not out of the first dip yet. 4th quarter numbers will tell the tale.

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Dollar Reached 15-Month Low In Wake Of G20 Meeting

[palmer]

it’s time to start thinking about shorting gold.

See all those step functions gold has been taking lately? Those are partly short squeezes. While you see those it's time to not think about shorting gold. Instead, wait for the exponential rise indicating that lots of idiots are piling on the gold bandwagon.

[palmer]

especially Canadian Dollars as they have a solid natural resource backed economy

But they also have a Goldman Sachs retread printing up currency. In general the U.S. will strong-arm as many other countries as they can to debase their currencies as we debase ours and we have a lot of influence around the world but especially in Canada.