Through the market's weakness over summer and its recent strength, it's been wise for investors to maintain perspective and not chase the tape too closely.
As folks most likely know by now, the National Bureau of Economic Research announced last Monday that the recession had ended in June of 2009.
Is the recession really over?
If you ask me, the hangover certainly lasted into 2002 and perhaps a bit into 2003 (though the ending date doesn't matter much), meaning the bureau's analysis may not be all that great in the first place. (Of course, if that recession ended in 2001, it's fair to wonder why it took until the spring of 2004 for "Easy Al" Greenspan and the Federal Reserve to raise interest rates. But that's a different issue.)
The plunge that the world economy saw in the wake of the 2007-09 financial crisis was an extreme reaction to weakness that had already set in, and much of the improvement since then has been recapturing that lost ground.Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 300, 213, {"configCsid": "MSNmoney", "configName": "player-money-articles-16x9", "player.vcq": "videoByUuids.aspx?uuids=2d0e2445-6070-432b-a60f-398d537f08cc,3226238a-4f0d-456d-b8c6-b254f35a17b1,77b83d5e-c987-40c0-8350-dfdb9705398a,514d612b-7cbd-42db-b9a2-6a8c74bb8849,f5672a8a-75c8-45c8-954a-3ab2b9eb7217,2423e426-892c-4c89-bbd7-780b6e478550", "player.fr": "iv2_en-us_money_article_16x9-investing-contraianchronicles"}, 'PlayerAd1');Msn.Video.createWidget('Gallery4Container', 'Gallery', 304, 150, {"configCsid": "MSNmoney", "configName": "gallery-money-articles", "gallery.linkbackLocation": "bottom_left", "gallery.numColsGrid": "3", "gallery.categoryRequests": "videoByUuids.aspx?uuids=2d0e2445-6070-432b-a60f-398d537f08cc,3226238a-4f0d-456d-b8c6-b254f35a17b1,77b83d5e-c987-40c0-8350-dfdb9705398a,514d612b-7cbd-42db-b9a2-6a8c74bb8849,f5672a8a-75c8-45c8-954a-3ab2b9eb7217,2423e426-892c-4c89-bbd7-780b6e478550;videoByTag.aspx%3Ftag%3Dmoney_dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3Dbest%2520of%2520money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1"}, 'Gallery4');The real contributors to world gross domestic product, and very important ones, are those parts of the world that didn't act like fools and ruin their financial systems via rampant real-estate speculation -- namely, Asia and the BRIC nations (Brazil, Russia, India and China). They are seeing strong growth, and our economy has benefited from that growth as well.
Find a broker and trade nowWall Street Wobegon: Where all the charts are above average One place where those benefits seem to be showing up is in the charts for the major stock indexes. For those who don't do a lot of technical analysis, I can tell you that the indexes are not only over their 200-day moving averages, they are starting to look like they are breaking out of the range they have been in since June.
Over the course of the summer, as so many were worried about a stock market crash, I felt such an outcome was unlikely. I now expect that with September tracking to the upside (and the market up for the year), positive momentum alone may force the hands of many people -- namely, the professional investing crowd -- who essentially try to hug the various indexes.
If the bulls succeed in taking stocks higher during the next six weeks or so (despite whatever scary setbacks occur along the way), the market could set itself up for some decent-sized damage to the downside, especially if folks get overly excited about the prospect of throwing out incumbents in November, combined with the potential for more quantitative easing.
Now that the market has spread its wings, I think it's important to keep in mind that beneath the surface still lie lots of problems and potential land mines. To a certain extent, that means if the stock market keeps on chugging upward, there may be some opportunities for selective short positions, betting certain stocks will go down. Keeping your head in the game
Getting short won't be an appropriate tactic for most people, though, and I don't want to get too far ahead of myself. But I do want to make the point that just as it was wrong to get carried away by the market action on the downside over the summer, similar advice will probably be worth keeping in mind now that the indexes have done better and the charts look "prettier."Managing your own psychology is an important part of successful investing, and, for me, these sorts of reminders help keep the tape from persuading me to be overly complacent about stocks when the market is up, just as I tried not to become overly pessimistic last summer when things looked down.It's a mad world I did an interview last week with the colorful John Thomas, aka the Mad Hedge Fund Trader.
Interested readers can listen to it here.More from MSN Money
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So thanks to the High Numbness, there have been TWO recessions that have lasted longer than any recession since WWII. It was no accident that the market went nowhere for a decade, median personal income went down, the divide between the top and the middle class is now wider than anytime since the 1920s and the nation is so divided (although I wonder how much of the divide is secretly funded PR illusion - you can thank the Bush SCOTUS for this last part).
Until the trust issues are resolved, this is a useless conversation.
1 1ReportSpamWorking MondaySat 9:34 PMCompanies accross the board with good product pipelines are meeting segment sales 'and' are profitable --- regardless of taxes and political winds on the horizon.....continue to buy selectively & strategically......build to the 'newer' economy. 4 0ReportSpam9083745kjhautf834hSat 11:51 AMLynn X, I agree that is a very important point, but it's a few days early yet to declare that S&P will hold above the 1130 level for any appreciable amount of time. 2 1ReportSpamLynn XSat 6:07 AM
Bill Fleckenstein: Perhaps more important, the S&P surged back above the key 1130 level. Market technicians consider the move rather bullish, considering 1130 was a level where the S&P failed in both June and August. They say it confirms the theory that what was once resistance has now become support.
Lynn X
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For those who don't do a lot of technical analysis, I can tell you that the indexes are not only over their 200-day moving averages, they are starting to look like they are breaking out of the range they have been in since June.
Over the course of the summer, as so many were worried about a stock market crash, I felt such an outcome was unlikely. I now expect that with September tracking to the upside (and the market up for the year), positive momentum alone may force the hands of many people -- namely, the professional investing crowd -- who essentially try to hug the various indexes.
If the bulls succeed in taking stocks higher during the next six weeks or so (despite whatever scary setbacks occur along the way), the market could set itself up for some decent-sized damage to the downside, especially if folks get overly excited about the prospect of throwing out incumbents in November, combined with the potential for more quantitative easing.
Now that the market has spread its wings, I think it's important to keep in mind that beneath the surface still lie lots of problems and potential land mines. To a certain extent, that means if the stock market keeps on chugging upward, there may be some opportunities for selective short positions, betting certain stocks will go down. Keeping your head in the game
Managing your own psychology is an important part of successful investing, and, for me, these sorts of reminders help keep the tape from persuading me to be overly complacent about stocks when the market is up, just as I tried not to become overly pessimistic last summer when things looked down.It's a mad world I did an interview last week with the colorful John Thomas, aka the Mad Hedge Fund Trader.
Interested readers can listen to it here.More from MSN Money
The Bush Administration probably pressured the NBER to fake the recession dates. The recession caused by the TMT Bubble popping started at least by the summer of 2000 (that was obvious in the manufacturing numbers long before the official enunciation) and lasted until at least the summer of 2003 (basically 3 years) when the distraction of the Second Iraq War got going. During that time, if anyone remembers, scandal after scandal on Wall Street and the corporate suites popped up and were NOT addressed (a handful of perp walks did NOTHING). SO, here we are again (surprise!).
So thanks to the High Numbness, there have been TWO recessions that have lasted longer than any recession since WWII. It was no accident that the market went nowhere for a decade, median personal income went down, the divide between the top and the middle class is now wider than anytime since the 1920s and the nation is so divided (although I wonder how much of the divide is secretly funded PR illusion - you can thank the Bush SCOTUS for this last part).
Until the trust issues are resolved, this is a useless conversation.
Bill Fleckenstein: Perhaps more important, the S&P surged back above the key 1130 level. Market technicians consider the move rather bullish, considering 1130 was a level where the S&P failed in both June and August. They say it confirms the theory that what was once resistance has now become support.
Lynn X
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