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MOP

What Shape Is It To Be Then? An L Shape, U Shape, W Shape

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The Shape of the Recession/Depression

I set up a poll here but it vanished soon after. Anyway, a few options I gave:

V - Whatever happened to that? :rolleyes:

U - Roubini

L - Japan

W with higher second leg

W with lower second leg

Saw Tooth

Saxophone

A combination of shapes

Select a shape and give a reason. :)

Edited by MOP

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We haven't had a recovery, but it is impossible to pump $5 trillion into the world economy and notice some masking effect.

Governments are realising they can't carry on doing that so we are going to resume trending downwards until the crap is out of the system or system collapses.

After the crap is out we will carry on along the bottom or maybe growing very slowly until a new boom in something comes along. To get back up to 2007 levels quickly without large amounts of wage inflation it will need to be a big, world changing boom. IE fusion breakthrough, world war etc

So I voted combo :)

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This depression is going to be L

I'm going for a W with a slightly lower second limb followed by an L. I reckon we have had the last throw of the dice in terms of sensible stimulus and they may be able to produce a couple more small up ticks before the whole thing goes Japanese.

I believe that we are so structurally imbalanced that it will all completely unwind at some point, though perhaps they have staved things off this time albeit briefly. The next downturn will be worse and they can no longer drop interest rates.

The way I see it is that in an inflationary economy (like the 1970s) you have higher interest rates and people perhaps have smaller initial debts. If the interest rates work, the inflation gets reduced as will then rates, but come the next boom people think they can borrow more as now rates are lower. This cycle has been repeated a few times, each time rates, inflation getting lower and debts getting bigger - but this time we have pretty much hit the bottom.

At some point, and we have seen this already, its not whether you can afford the interest at 0.5% base rate, but whether you can even repay the capital. In such an environment, even a small up tick in rates will spell disaster.

Edited by mikelivingstone

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flatline.jpg

+1

The blips up and down will occur as sentiment swings from blind optimism to stark reality, and from stimulus high to 'fundementals' low. The big question is whether there will be a big leg down due to state failure, the IMF getting involved, IR hikes, Pandemic, Ttrrorist atrocity or war.

Edited by Hip to be bear

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Pear Shaped :P

Remember you can't buck the market, but you can effect the gradient and timing of the slopes with massive stimulus packages. It just prolongs the paid (except goldman sachs) for everyone on.

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We haven't really had a recession, just a massive credit binge followed by a return to normal. Unemployment, lending, house prices (nearly) are back to where they would have been exected to be if the credit binge hadn't occurred. Unfortunately the muppets still believe the binge was normality when it was in fact extraordinary.

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03 07 09 11 onwards

Edit: well the formatting clearly worked really well.......................

Edited by the end is a bit nigher

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Why?

Well you correctly identified the double top and that as a result the market would fall, but that was in 2007, and fall it did. However it has since bounced of the 3,300 - 3,500 level as in 2003 giving a double bottom i.e. opposite the double top. For it to continue to fall it need to break that 3,300 - 3,500 level. If it did that then panic would most likely follow. The further it starts to pull away from that level the more likely it is not to return. Shorter term it needs to break 4,500. If it does that convincingly then I am sure it will attempt 5,000 within a month or less.

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Well you correctly identified the double top and that as a result the market would fall, but that was in 2007, and fall it did. However it has since bounced of the 3,300 - 3,500 level as in 2003 giving a double bottom i.e. opposite the double top. For it to continue to fall it need to break that 3,300 - 3,500 level. If it did that then panic would most likely follow. The further it starts to pull away from that level the more likely it is not to return. Shorter term it needs to break 4,500. If it does that convincingly then I am sure it will attempt 5,000 within a month or less.

On the other hand the higher it rises now, and the quicker, the more some people are going to be relieved to get some return (or reduce losses) and withdraw from the market before another fall.

Isn't a long gradual rise more sustainable than the sudden rebound we had recently?

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On the other hand the higher it rises now, and the quicker, the more some people are going to be relieved to get some return (or reduce losses) and withdraw from the market before another fall.

Isn't a long gradual rise more sustainable than the sudden rebound we had recently?

I would agree that it is. But since hitting 3,500 we have failed to get through 4,500 on at least 3 ocassions, so the brakes have been put on at that level for the moment.

You also have to remember why we dropped so low in the first place e.g. why did Barclays drop to 60p but then shoot back up to £3? And why did Aviva trade as low as £1.60 but then shoot back up to £3.60? Both in the space of a couple of months.

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Out of all those an L but characterised by a reported series of rises and falls of small proportions.... however I don't think it will be overly extended. I think we'll see a few months of down, perhaps totalling 10% and then maybe two to three years of bump along the bottom.............. I know lots disagree and are still hoping for 40/50 % or more falls but I just cannot see that happening and never have. I was worried I had backed the horse during some of 2008 but I don't think so now.

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