5 Ways You’ll Know the Recession is Over

While that day may not arrive for many months…

Months?!

The problem and solution for the economy revolves around lending and spending.

Well the first part is right. But the solution is in saving and reducing consumer debt. Credit can’t just magically appear out of nothing. Credit is borrowed money. Some of us need to save so that others can borrow. It’s going to be painful for almost all of us, but the alternative is to postpone and magnify the inevitable recession, pushing it ever closer to complete collapse.

Looking at the Expansion and Recession Timeline, the average recession time is 11 months. Currently we’ve been in this recession for about 11 months. This means that we should be at the bottom right now and the only place for the economy to go is up. The longest lasting recession was 16 months, so let’s say it takes us another 5 months (11 + 5 =16 months) before we start to see a rebound in the economy, that’s not that bad. This tells me one thing, that at the latest we should see the economy start to pick up no later than August 2009.

the stock market also tanked for the 2001 to 2002 recession
but surprisingly the tech stocks are much higher now. Take Apple, its around 100 dollars a share and in 2002 it was about 5 bucks a share? They now have the iphone but still the p/e value isnt there.

look at the top 100 tech shares, all in one conglomerate ticker “qqqq” its 27 dollars today, in 2002 it was 19 dollars and change. Compare the data from now to then. We didnt have 27 year record high unemployment in 2002. We didnt have large banks folding. this 2.2 trillion additional debt to bail out.
GM is talking about bankruptcy.

Dow and S and P are lower then 2002 but with the news out there we havent seen a wash out yet. I think the qqqq’s will go to near 10 bucks a share and companies that are high in debt will get washed out in the storm. then new companies can arise to take their place in the sun. Saving these greedy bankers who brought about this mess is only prolonging the agony. there needs to be a total wipe out of bad business so smart people can take their place.

Looking at an inflation adjusted Dow chart, we see that the 12 month ‘expansions’ and ‘recessions’ are not entirely accurate.

America experienced two 20 yr flat or drawn out economic periods within the last 100 years ‘35 on and ‘65 on.

Several factors point to a long drawn out recession followed by an equally long period of very slow growth.

I think you should save fortune telling to someone who at least does some detailed analysis…

http://market-ticker.denninger.net/archives/689-Where-We-Are,-Where-Were-Heading-2009.html

Chiko777, those figures for the duration of previous recessions don’t necessarily apply to this recession because, well, it’s not a normal recession. What makes it infinitely worse is that it’s due in large part to the collapse of the derivatives market. Banks and other financial companies created securitized investments on the mortgages (and many other instruments as well, including credit card debt, checks people wrote, etc.) and sold them to investors. The derivatives are so named because they derive their value from something else. They were wildly over-leveraged, by a factor of up to 30:1. Thus, a company with $1 million dollars of cash reserves could create guarantees for $30 million dollars of these investments. When the basis of the investment (mortgages bundled together, etc.) defaulted, these companies were not able to fulfill their contracts. Not only were they over-leveraged, but any company could make a derivative on any other investment. So, many, many derivatives could be created based upon the same asset. This would be the equivalent of, say, fifteen companies all buying in insurance policy against YOUR house. If your house burns down, all of them would have to pay out its value. The scope and scale of what they did is unimaginable to us. The best estimate is that financial companies and banks made up $43 trillion dollars of derivatives— ten times the amount of all the “real” money in circulation on the planet. Unfortunately, these fictitious dollars melded with real dollars, so loss in the derivatives created loss in real dollars. This has all happened on a scale vastly beyond anything that ever happened in the world before.

@Chiko777

People have been saying that this is the worst recession since the great depression, well if I remember correctly the great depression lasted 35 months…

Matt,
Going back to the 20’s, the longest recession was in fact 16 months and the average was 10 months. His number do appear to be on track for the longer history track to.

I agree that the “thaw” should come around in mid summer. Luckily the market forward looks about 4-6 months, and has already factored some of the future bad news in. We will probably see unemployment go to 9-10%. What everyone fails to note is when the US is “fully employed” the unemployment number is still 5%. It’s the margin of error if you will that those who create the numbers put in there.

Jack,
This time isn’t different and this is a normal recession. There is always some incident that people throw out that “this time its different.” Kennedy Assassination, Pearl Harbor, World War II. There is always something. We adjust for that last “something” and then prepare for the next something when the next recession hits. The market is cyclical any way you look at it.

I agree with you on all but the dollar recovery. Right now the dollar has recovered. I have personally gained 56% on all my invested capital thanks to pumping it all into dollar in the middle of july.
If you look at previous recessions and see what happens before during and after there is a strong and simple trend to observe: When crisis hits people flee to the safe haven; The US Dollar. It is the only currency that is thought to survive anything. When the economy restores people see investment opportunities in smaller currencies and feels hopefull about their domestic currency again.
This is why I am about to sell the dollar soon. I believe that the dollar will loose about 30-40% of its value by the time this crisis is over.
Hopefully it does

Sigh.

The recession has been going on since October of 2007, y’all. That’s the top o’ the market and we’ve been sliding / falling since then.

There’s really no precedent, outside of 1929-1930, for losing 12 years of stock value in 18 months.

“August, 2009″ is absurd.
“2010″ is optomistic.
“Never” might be more accurate.

To Peter and E –

While the dollar is strong now, that’s because the European and Japanese economies are extremely weak right now, and therefore their currency is less attractive than the dollar. The hope and expectation is that the US will be the first out of the recession, and if that’s the case, you’ll see the dollar skyrocket, if only temporarily.

Oh Zach Chen, it’s because of you that the recession continues to linger. The media and all the naysayers out there are scaring everybody into not spending or hiring. The manufacturing base is not gone — in fact it’s huge. We just need to get money flowing again. The US is actually still the largest manufacturing industry in the world — yes bigger than China. There’s no official distinction for what turns a recession into a depression, but we’re no where near the levels that were seen during the Great Depression. Stop trying to scare everyone into keeping the recession around.

You, and people like you, are what is wrong with the economy right now.

zach, you do realize that we are still the most productive country and we still lead the world in manufacturing?

http://wiki.answers.com/Q/What_country_has_the_largest_manufacturing_industry_in_the_world

this is the problem, people simply don’t realize how good of a base our production in this economy really is. i’m a ron paul libertarian, and i agree that overall the system is fubar’d, but the main structure of our economy is still in great shape.

100 bucks says that the fair tax act would be like a rocket boost into the right direction for fiscal policy. combine that with a balanced budget amendment and a return to the gold standard, this country would be booming like never before. the mid nineties wouldn’t even be able to shake a stick at the kind of economic boom that could be expected.

I fail to see any logic behind the data presented. Each recession offers a variety of economic conditions that cause, drive and sustain it. Simply evaluating the durations fails to take into account those factors and the subsequent mitigating factors or events that lead to the recovery from a recession period.

Time most certainly is on our side as there is a near infinite amount of it. The question, more importantly, is whether or not time will be a mitigating factor for the current crisis. From what I’m reading, previous models don’t adequately describe the current situation or take into account the unprecedented steps that the Federal Government and States are taking.

@Chiko777: You’re an idiot.

It is my opinion that the BEST way to look at trends is to take 50 years of economic data, mangle it a bit, simplify it in chart form, and call it a cycle.

I mean, c’mon, past results ALWAYS indicates future performance.

Surely the only variables we ever have to work with are ‘a’ and ‘b’… which always add up to ‘c’.

/sarcasm

Jim: you write “Before you jump to conclusions and call Howell a socialist”.

It’s useful to limit hyperbole when offering advice–even when you’re writing a blog. It takes more (a lot more) than a call for partial nationalization of sick banks to label someone a socialist.

(Also, to your copy editor, “permanent panacea” does not contrast with “temporary and necessary solution” the way you might think it does.)

I’m inclinde to agree with Zach. We have destroyed our manufacturing base in favor of a “service oriented”
base. It’s not that services aren’t of value but everyone
can’t be in a service. What would we be doing, washing
each other’s clothes? Our industries turned their backs
on their employees and the American consumer. I guess they
thought they could make it big without us. Guess not.

I don’t care what the economy is like!
But this is some good insight…
I look at a down economy as more opportunity myself…

thanks for the post!

Dbk

What a total fantasy. During previous recessions we did not have a narcissistic megalomaniac Marxist as president, a zillion retiring baby boomers, the impending bankruptcy of GM, and an eviscerated financial industry. How long has Argentina’s ‘recession’ lasted? Or Zimbabwe’s? When we see the Dow fall to 4000 by May, and 2000 by December, what then? The United States’ will not survive 0bama. He will be remembered as the Gorbachev of America, the leader who caused the collapse of his nation.

While I do appreciate someone trying to be cheerful while the economy spirals downward like a plane in flames, I must point out the basic predicate that this isn’t a normal recession which is caused by an over abundance of inventories. This is what is known as an end of the world scenario, the economy might be likened to a freeway – it functions fine as long as most people do the same thing, follow the same rules, drive the same direction, you know kind of organized. What happens when everybody makes up their own rules? When everybody is going 75 mph and the bridge got sold and shipped to china, guess we are driving on thin air right now, kinda like a cartoon. Gravity has begun to grasp this static model and shake into chaos. The banking system is boned, the banking system is denominated in U.S. currency, therefore the default reserve currency of the world is boned. All the system that function as a result of a viable currency system, stuff like farming, oil production, factories, etc – are disrupted or shut down.

I’m gonna say, you’ll know the recession is over when no one will no longer accept your U.S. Dollars for anything other than toilet paper. This will be a sign that a new currency or barter system is developing, supplanting what had come before it. This will mean a new economic system is developing. This will mean the recession is over.

I hope I am completely wrong, but it is raining sh*t in my neighborhood and you can’t get an umbrella to save your life. I have no faith in governments, corporations or currencies, and until we can transcend or transform these instruments we are in a death spiral. Thank you Wall Street for making America a swear word for the next hundred years or so. How many Americans does it take to destroy a world economy?

The Media is fueling the recession. They’ll only stop when people start tuning out. Then we’ll have a chance at recovery. We do have issues with the economy but when all we hear is how bad things are we stop spending. I’m all for people saving money and cutting costs but when an entire country does so in unison we’re really in trouble.

Many people are hurting right now. But, c’mon guys…we had to see this one coming? On what sound premise did real estate property values triple in, say, under 5 years? And, to make matters worse, what would make someone think that securities backed by these “smoke and mirrors” mortgages (and other forms of credit) were really secure. This thing was orchestrated, some people made a killing, and many more turned a blind eye to the obvious. The good news is that it’s going to be OK. Life as we once knew it in America with overindulgence, waste and materialism likely won’t return, but how much does one person need anyway?

Seems that crisis will not recovered in short time. At the east part of the world, crisis in real sectors even just begun now on and situation will be worst up next several months.
Need good cooperation among nations in the world.