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dredwerker

V Shaped Recovery

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Thoughts anyone???

I often like to look at how the Morgan Stanley Cyclical Index is performing relative to the S&P 500.

The past year has been a dramatic ride. Cyclicals led the market down, the led them back up. Here's the CYC divided by the S&P 500.

If the equity market is correct, perhaps we're in for a V-shaped recovery.

Linky

Much as I dont want to be in a downturn I cant imagine we have rebalanced the economy enough. Still the existence of postalgold.com must mean we are about to come out of the recession.

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Thoughts anyone???

Linky

Much as I dont want to be in a downturn I cant imagine we have rebalanced the economy enough. Still the existence of postalgold.com must mean we are about to come out of the recession.

Not so much "rebalanced the economy" as punted it into a new orbit!

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It won't be V shaped. It will be Saxophone shaped.

Econominx blog

lol :)

We can have all manner of musical instrument shaped recoveries - how about a piano shaped recovery - nope fresh out of ideas back to the serious stuff there is also a 'U' shaped recovery which I hadnt thought of now I am thinking 'J' or 'M'. Now J would be scary. or J Followed by V. The possibilities are endless but I am plumping for W.

Double-Dippers: Predicting a W-Shaped Recovery

By Catherine Rampell

Apture™

[Creative Commons Attribution] by megan soh

Once upon a time the biggest apparent risk in our economic recovery was that it would amount to an “L-shaped” or a “U-shaped” rather than a “V-shaped” recovery: That is, after the downturn ends, the economy would flatline rather than quickly surge back to its prerecession levels.

But now the economic forecasting alphabet has expanded.

In recent weeks, a small but vocal minority of experts have predicted a “W-shaped” recovery. Also known as a “double-dip” or a “second leg,” this refers to the risk of another free fall in economic activity after a very short period of recovery or stabilization.

This can describe the early 1980s, with the twin recessions of 1980 and 1981-1982. It can also describe the Great Depression, which the National Bureau of Economic Research’s official business cycle dating committee technically categorizes as two separate downturns (one from 1929 to 1933, and the other from 1937 to 1938),

Among the “double-dip” forecasters of late is Martin Feldstein, former head of the National Bureau of Economic Research and President Reagan’s chief economic adviser. Last month he told Bloomberg News that he feared the economy could “flatten out” or “even be positive” in the third quarter but would then contract in the fourth quarter as some types of stimulus spending ran out and businesses finished restocking their inventories.

Edward Harrison, a banking and finance specialist at the economic consultancy Global Macro Advisors, has expressed similar concerns on his blog, as did Juerg Zingg, managing partner at Q Investments, on CNBC and the Johns Hopkins University professor Steve Hanke in USA Today and Newsweek.

Paul Krugman, the Princeton economist and New York Times op-ed columnist, also warned in a Business Times interview that a W-shaped recession was “a real possibility” because “some of the support measures, especially fiscal stimulus, will reach their peak later this year, and then recede.” (Similar comments here.)

Nouriel Roubini, the New York University economist nicknamed Dr. Doom, also wrote in Monday’s Financial Times that “there is a big risk of a double-dip recession.”

He provides two reasons to doubt the optimism of those declaring the imminence of recovery. One is the sensitivity of unwinding the country’s large monetary and fiscal stimuli:

[P]olicy makers are damned if they do and damned if they don’t. If they take large fiscal deficits seriously and raise taxes, cut spending and mop up excess liquidity soon, they would undermine recovery and tip the economy back into stag-deflation (recession and deflation).

But if they maintain large budget deficits, bond market vigilantes will punish policy makers. Then, inflationary expectations will increase, long-term government bond yields would rise and borrowing rates will go up sharply, leading to stagflation.

Professor Roubini’s second concern relates to rising commodity prices:

Another reason to fear a double-dip recession is that oil, energy and food prices are now rising faster than economic fundamentals warrant, and could be driven higher by excessive liquidity chasing assets and by speculative demand. Last year, oil at $145 a barrel was a tipping point for the global economy, as it created negative terms of trade and a disposable income shock for oil importing economies. The global economy could not withstand another contractionary shock if similar speculation drives oil rapidly towards $100 a barrel.

All in all, 16 percent of private economists polled in the recent Blue Chip Economic Indicators survey predicted a “W-shaped recovery,” the same percentage that forecast a more robust “V-shape.” The majority surveyed, 65 percent, predicted a long, slow “U-shaped” recovery instead.

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As the Stimulii around the World are spent, so will the recoveries.

even Gordon has said so....he asked the G20 to keep the Stimululii going...

so, when they stop, what will happen to the economy...MEW is negative, that means the housing cash machine is now sucking money back in.

everything that was driving the economy...stupid lending, MEW, stimulus and government spend are all about to end.

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