Rumor Starts On Wall Street the Recession is Over.
Searching for explanations for how well the markets are behaving despite the overwhelming gloom of unemployment, bank insolvency, government interventionism and the worldwide collapse of trade, manufacturing and resolution, I ran right into the blunt, unexpected, fresh rumor among the traders at the end of the day that the recession is over. This startling measure was not on an idle blog. This was a respected tout at the grim tidings Calculated Risk. These folk are snappy. I would call them bright and cocky like Somalian pirates if this was not momentarily a negative.
Market action at the end of the day was incredible. I’m missing the rumor…
Rumor is the recession is over…
Done. Recovery starts now. I know it is anecdotal, but there it is. In markets, anecdote is what you get before the thundering herd shows up. All metrics are rear view mirror stuff. The future is a rumor. Wells Fargo reports profits, Goldman Sachs does a secondary stock offering, POTUS makes his “glimmers of hope speech,” Ben Bernanke says he is “fundamentally optimistic,” and there we have it, rally time. The contrary evidence is everywhere. The chief of the NYSE says the March rally was day-traders gaming volatility. UBS just cut its global workforce by 11%. The US has “disinflation,” whatever that means (and it sounds like politically correct deflation), with an overall price decline not seen since 1955. The California high-end real estate market is a tomb. Credit cards are blowing up like AQ cells. TARP banks are refusing to lend. Where is the good news?
No New Bad News Does Not Mean Good News.
The US economy looks to be paralyzed and that might be generous. The declines continue if perhaps at a slower rate than the cliff-diving of Q1 ’09. It’s more like an out of control somersault. The sweaty political class has done the worst damage, with the TARP and stimulus package and grotesque $1 trillion budget all in train to retard recovery for decades. The markets are halved from October 2007 and showing the profile of a major and even historically frightening bear market. The 12% unemployment number in California and Michigan and elsewhere by this summer is generally accepted. There is no crippling jolt that we have not already imagined. Perhaps we are getting used to the abyss. Perhaps this looks like a handhold on the way down. Of course this makes no sense. Mitigating metaphors are meaningless in a depression. Is this a bottoming? Is this a claw back? Of course I do not believe it. No new bad news is not good news at all.
Sunspotlessness and the Markets.
NASA correspondent Bob Zimmerman and I have been watching the solar minimum for the last months. It is a puzzling tale of NASA predicting that we are any month now going to return to the 11-year cycle of minimum to maximum to minimum that we have recorded for two hundred years. Then it doesn’t happen. The sun has not been this inactive since 1913. We may be in a deep solar minimum. No one can be sure. There is a surprisingly limited amount of information about the sun and its sunspots, dating back at most to the 17th century. Does it affect life on Earth? Yes. Lack of sunspots is associated with climate change, even a mini ice age during the Late (Baroque) Renaissance. I know it is folly to connect the lack of sunspots for 2009 with the strange behavior of the markets for 2009. I also know it is folly to say that the recession is over. I also know it is futile to predict what happens next to the markets. This is my way of reminding myself that we don’t know what we don’t know, and we never did know what we don’t know. We are blind into the deep solar minimum. We are blind into the deepening recession. How long can the solar minimum last before it is worse than 1913? One more year. There is a horror prediction. One more year of a sagging bear market, of falling house prices, of climbing unemployment, of vanishing credit, of withering trade. Of missing sunspots.