Ben Bernanke has declared the recession over.
This leads to one simple question: Why should you care what his recession forecasts are?
Based on his track record as a forecaster and his acumen in identifying economic problems before they exploded, his views on starts and finishes of recessions are, to be blunt, irrelevant.
Recall it was Mr. Bernanke who described the sub-prime situation as “Contained;” it was he who believed Housing would not spill over to the broader economy; and it was he who somehow thought the Bear Stearns situation was a one-off.
I don’t wish to single out Mr. Bernanke; After all, he is an economist, and if you were paying attention, you will note that the entire profession missed the oncoming recession, credit crisis and market collapse. You may also find it helpful to ignore what the profession that cannot forecast yesterday thinks about tomorrow.
Even now, the Federal Reserve Chairman said the recession was “very likely over” as consumers showed some of the first tangible signs of spending again. Never mind that all this retail activity has been driven by government subsidies.
Now, as an investor, you do want to be mindful of the Fed Chief’s economic views, particularly how they pertain to his interest rate policies. The ed has made it clear rates are staying low for the foreseeable future, so this becomes a non-issue in this context.
But his economic forecasts? Don’t bother.
Note that I have not been a particularly harsh critic of the Fed Chair. While he may not be Paul Volcker, he is also (thankfully) not Alan Greenspan. And we could have done much worse than having a student of the Great Depression, who is also an out-of-the-box thinker as Fed Chief.
But as a prognosticator? He is no better than his predeccessor . . .
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Sources: Bernanke: Recession ‘Likely Over’ SARA MURRAY and ANN ZIMMERMAN WSJ, SEPTEMBER 16, 2009 http://online.wsj.com/article/SB125301730771311713.html
Fed Chief Says Recession Is "?Very Likely Over' STEPHEN LABATON NYT, SEPTEMBER 15, 2009 http://www.nytimes.com/2009/09/16/business/economy/16bernanke.html
Gee, and I was so impressed with his depth of thought and foresight in calling the recession before it happened too.
Glad to have a captain like Big Ben at the helm. I sleep so much better at night.
well, the facts seems to be they are gaming the market, that’s the trend why would they stop, during some bad retail numbers they announce another “change in accounting rules for reits”, that helps oh me oh my, banks once again………………he got rehired and if he is the good man he portends to be he won’t stop until employment is back in the 6% range
could be over- technically for a quarter or two- but it won’t last- as he has been saying- unemployment is a big problem- and is not going away-
as past recessions have shown us- it is taking longer and longer to return to pre-recession levels- last recession took 5 years-
credit and spend is doomed- banks are restricting lending by tightening lending standards, cutting credit lines and raising rates-
credit contraction is reality- and with a large unemployed populace- demand has nowhere to go but down
[...] würde auch wie Barry Ritholtz meinen, dass man den Worten und Prognosen des Fed Chairman Beachtung schenken soll. Aber: Nur [...]
At this point, who cares? It seems as though even if the recession is “over” it is only by statistical fact, not by feel or by economic robustness. Making the GDP positive doesn’t make the economy healthy or even fully functional for that matter.
In addition, a need to separate the economic data from the market is now necessary because the market is on its own reality plane. One could say it is anticipating better future times, but as Rosenberg writes, it is anticipating a future that NO ONE is forecasting. NO ONE… The loser’s game is to try and game when the economy and market will reconcile. That game has massive career risk for those managing other’s monies. The real game is to manage in the current market while understanding they will reconcile and appreciating that fact and factoring for it… Easy to write, hard to do.
Factors to consider: we’re on the cusp of a seasonally strong period for markets (Oct-Apr); there are firms that are not encumbered by TARP and those working for them want bonuses this year…; there do not seem to be any exogenous events brewing (consider Bear Stearns gestated nearly nine months, Lehman for seven or so before “blowing up”), the massive bounce has many(most?) looking for a sizable retrace and Mr. Market likes to deny what most are looking for–short term; the market has be event and technically driven and technically we just chewed through 1050. Point and figure has 1140 as next resistance. Maybe a small pullback is order to regroup, but the ceiling has now been raised on the move up. It works until it doesn’t.
Don’t mistake me for a bull. I think critical errors are being made now in laying the groundwork for a sustainable recovery. These errors imho will extend/exacerbate an already devastating crisis. I hate it. It makes this career a lot less fun, but a lot more necessary.
To get us out of this mess, Big Ben can just print some more debt. What Does 11 Trillion+ Dollars Look Like? http://viewpointsofacommoditytrader.com/794/11-trillion-dollars-look-like/
Catch a wave and you're sittin' on top of the world "“ THE BEACH BOYS
Sooner or later that wave is gonna crest. Is Ben getting ready for that tsunami?
The recession is over,if the government remains fast and loose with the taxpayer’s money. If not, er, not so much….
http://www.nytimes.com/2009/09/16/business/16home.html?_r=2&ref=business
Fight Looms in Congress on Tax Break for Home Buyers
“DALLAS "” When Congress passed an $8,000 tax credit for first-time home buyers last winter, it was intended as a dose of shock therapy during a crisis. Now the question is becoming whether the housing market can function without it.
As many as 40 percent of all home buyers this year will qualify for the credit. It is on track to cost the government $15 billion, more than twice the amount that was projected when Congress passed the stimulus bill in February.”
Gee, housing for private citizens can’t function without government. American automakers….ditto Large investment banks…ditto Commercial Real Estate? Idiot graduate students? and so on….
I thought his job was to focus on that “dual mandate” thingy about maintaining employment numbers and “price stability” (whatever that means, I guess somewhere between deflation and inflation is valid)…
So what’s all this about getting into the game of calling “recessions”?
Is he trying to get some overtime pay?
Utter and absolute INEPT moron!
@Bruce
Probably a good chunk of those 40% who actually DO qualify for a home (based on their credit), are doctors that are now going to get shoved out to make way for healthcare reform…
…and the band played on!
http://bloomberg.com/apps/news?pid=20601087&sid=arvOShyr33pg
Barry – Thought you’d like to know:
“Moody’s, S&P May Face More Disclosure, Liability in SEC Rules” Bloomberg – Jesse Westbrook
Yup I agree.
Enter depression….
I’ve had a few more minutes to cogitate on the notion of recovery…after all that is what you have once the recession is over, isn’t it?
If we are now in recovery there are plenty of zebras still left where you should be seeing horses.
Recovery if the federal funds rate is left at zero? My what big muscles we have… Recovery if the taxpayer money to the car companies won’t be paid back. I believe we heard that admission from government within the last few days. Recovery if student loan funds must be increased next year? Yep, read about that too. Recovery if the government owns at least 60% of GM… Recovery with record high unemployment that, assuming this is a lagging indicator, is still increasing. Recovery with unemployed running out of benefits due to extreme length of unemployment. Recovery with a massive shadow inventory of unsold homes Recovery with CRE getting worse by the month.
…point is, this recovery thing, at least in my experience, has never before been government dependent. Yes, governments always spend more when recessions hit. But in this case, there appears to be no way to lessen government dependence probably for years. Faux recovery would be more like it…
You say that economists “missed the oncoming recession”. Remember that Greenspan warned about an upcoming housing mess in 2005 in a congress hearing.
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