Watch the Market, Not NBER Stats

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Indicators: As if we weren't in enough of a funk, the National Bureau of Economic Research now tells us a recession started 12 months ago. Don't forget, though, that NBER could be just as long in pegging its end.

The NBER's sudden verdict no doubt came as a jolt to those who had held off using the "R" until they saw two straight quarters of negative GDP. But did that justify going the bureau one better by predicting things are going to get a lot worse?

We only just started. I can't see bottoming out until sometime in 2010," said one economist. "The fundamentals of the economy still look like things are going to weaken still further," said another. "This one," added a third, "has the potential to be longer and deeper than other postwar recessions."

All this in the first few paragraphs of a single newspaper story headlined: "Recession Could Last Into 2010."

Then Treasury Secretary Hank Paulson, architect of the government's financial rescue plan, had to chime in. "The journey ahead," he said, "will continue to be a difficult one" — a remark co-architect Ben Bernanke, chairman of the Federal Reserve, reworded thus: "I am not suggesting the way forward will be easy."

Even President Bush got into the act during an interview with ABC anchor Charlie Gibson: "When you have the secretary of the Treasury and the chairman of the Fed say, if we don't act boldly, we could be in a depression greater than the Great Depression, that's an 'uh-oh' moment."

No wonder the market plunged 9% on Monday.

It's worth noting, however, that two-thirds of that has since been recouped, and that before the big sell-off, stocks turned in their best one-week performance in 34 years.

This is not to say the bounce of the last two days isn't of the dead-cat variety, or that we think the market has bottomed or the recession ended. (Tuesday's follow-through, however, was the kind of action that really grabs our attention.)

Still, the deafening silence that has greeted the Dow's 1,142-point rally off its Nov. 21 low is testament to how far we've fallen, and how depressed we've become.

Savvy investors, however, try not to avert their eyes even when things get really ugly. They know how dark it can be before proverbial dawn — like at the market lows that coincided with the ends of nine of the last 10 recessions.

To repeat, we have no idea when this recession (if it has continued uninterrupted since last December) will end. All we know is that when it does, the NBER won't be there ringing a bell. That job usually devolves on the best indicator of all — the stock market.

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