Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Intel Empire Fights Back with Rocket and Alder Lake! - 24th Jan 21
4 Reasons for Coronavirus 2021 Hope - 24th Jan 21
Apple M1 Chip Another Nail in Intel's Coffin - Top AI Tech Stocks 2021 - 24th Jan 21
Stock Market: Why You Should Prepare for a Jump in Volatility - 24th Jan 21
What’s next for Bitcoin Price – $56k or $16k? - 24th Jan 21
How Does Credit Repair Work? - 24th Jan 21
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

The Economy’s Real Problems!

Economics / Double Dip Recession Oct 01, 2011 - 05:23 PM GMT

By: Sy_Harding

Economics Best Financial Markets Analysis ArticleSome of this week’s economic reports provided at least small sparkles in the dark shadows that have dominated economic reports so far this year.

On Thursday, the Commerce Department reported the economy grew at an annualized rate of 1.3% in second quarter, a bit better than the 1.0% it had previously reported. The Labor Department reported new weekly unemployment claims fell by 37,000 last week to 391,000, the first time new weekly claims have been under 400,000 a week since April. And the University of Michigan’s Consumer Sentiment Index ticked up to 59.4 in September after tumbling to near a three-year low of 55.7 in August.


Consumers and investors could use some good news for a change.

I just wish I could be more enthusiastic about those reports.

But it was also reported this week that the Chicago Fed’s National Business Activity Index fell again in August to -0.3, its 5th straight negative monthly reading. Its closely watched 3-month moving average is now at -0.4, just fractionally above the -0.7 level that has marked the beginning of all seven recessions that have taken place since 1970. And the Dallas Fed’s General Business Activity Index fell further in September, to -14.4 from its already scary minus 11.4 level in August. It was also reported that durable goods orders fell 0.1% in August versus a gain of 4.1% in July.

And while the University of Michigan’s consumer sentiment index may have ticked up significantly as noted, the Conference Board’s Consumer Confidence Index remained at a dismal 45.4 in September versus 45.2 in August.

That seems to tie in with another dismal report on Friday, that consumer incomes adjusted for inflation fell 0.3% in August, the biggest decline in two years, while consumer spending adjusted for inflation was flat.

And from the important housing industry it was reported that new home sales fell 2.3% in August, and pending home sales fell again, down 1.2%.

On Friday the Economic Cycle Research Institute notified its clients that a recession is now unavoidable, saying, “The vicious cycle is underway where lower sales lead to lower production, which leads to lower employment, which leads to lower income, which leads back to still lower sales, and the cycle feeds on itself.” The ECRI said its call is based on dozens of its leading indicators. In response to the question of why should its warning be heeded, the ECRI replied, “Perhaps because, as The Economist [financial publication] has noted, we’ve correctly called the beginning of the last three recessions [1990, 2000, 2007] without any false alarms in between. In contrast, most of those who have accurately predicted a recession or two have been guilty of also predicting recessions that did not occur – in 2010, 2005, 2003, 1998, 1995, or 1987.”

Their recession call ties in with my own research firm’s prediction that the stock market also has unfinished business on the downside.

There has never been a recession that did not involve a bear market for stocks.

Separately from the high odds for a recession, our expectation of a further decline in the stock market is based on dozens of our own fundamental and technical indicators.

It’s also interesting that although the 30-stock Dow and 500-stock S&P 500 are down only 15% from their April peaks, the DJ Transportation Average, which often leads the rest of the market, and the 2000-stock Russell 2000, home of small stocks that are the favorites of individual investors, are both down 24%, across the 20% threshold that defines them as having entered bear markets.

It reminds me of an old analogy regarding how the blue chip Dow is often the last to catch on to what is happening in the rest of the market. It describes the 30 Dow stocks as the market’s generals, leading the troops up to higher ground. When the going gets rough and the generals begin stumbling, and then turn around to see their troops are already in sharp retreat, the generals belatedly rush downhill in full retreat themselves.

There also has to be skepticism regarding U.S. stocks being able to avoid a bear market when most other global markets, including those of ten of the world’s twelve largest economies, are clearly in bear markets, with declines so far of up to 35% and no signs their declines are over.

But the U.S. market and U.S. financial media seem to be fixated on the debt crisis in Europe, and specifically the prospects for another bailout plan for Greece, stocks and moods plunging each time a Greek default seems unavoidable, rallying back each time another bailout plan seems imminent, while pretty much ignoring the worsening economy in the U.S.

 A default by Greece would certainly be an additional negative for global economies.

But would prevention of a default reverse the economic slowdown in the US? Would it create jobs in the US? Would it have Americans rushing out to buy houses? Would it reverse dismal business and consumer confidence, and concerns on Main Street that U.S. policies are headed in the wrong direction?

It does seem that the U.S. market and financial media should be much more focused on the major problems closer to home than Greece.   

Sy Harding is president of Asset Management Research Corp, publishers of the financial website www.StreetSmartReport.com, and the free daily market blog, www.SyHardingblog.com.

© 2011 Copyright Sy Harding- All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

gAnton
02 Oct 11, 15:22
The Most Basic Problem of This US Economy

I am not a professional economist, but it seems to me that the most basic and most difficult problem of this current economy is maldistribution of wealth. When a miniscule percentage of the population controls a very large percentage of private wealth and receives a very large percentage of income, you are not only going to have severe economic problems, but you are going to have severe political and social problems (and social unrest)as well.

I am not sure that maldistribution of wealth actually caused the current economic malaise, although Bernanke's exacerbating foibles transformed a difficult-to-treat economic situation into one that's probably impossible to treat without starting all over.

So from a long term point of view, don't worry about such symptoms as the unemployment rate and GNP projections--rather think about how we can reestablish a just system of distributing wealth so that our once great county can become great again.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules