I've heard the market bottoms out 6-9mo before the end of a recession typically. is that true?

Is the unemployment rate adjusted for the 2 or 3 changes in definitions over the period charted? 

New homes sales will be down for quite some time. I think bake sales are our way our of this recession/depression.

Where's my pony. I already built the barn.

JP writes:

I've heard the market bottoms out 6-9mo before the end of a recession typically. is that true?
dafox | 01.04.09 - 8:19 pm | #

Paraphrasing: The stock market has predicted 9 of the last 4 recessions.
It's probably a good guess that it predicted 8 of the last 3 recoveries.

That's quite a record! But I'm having a really hard time following your reasoning....

Yellin: “The odds are high that, over the next few years, inflation will decline below desirable levels,” and the Fed must “emphasize its commitment to returning inflation over time to the higher levels.”

I think "inflation will decline below desirable levels" means that she thinks there is a good chance that we will have "negative inflation." So, they may try to inflate in order to cancel the deflation. Aren't these the same guys famous for overshoots on their interest rate actions?

Ultimately, war will likely either get us out of this one or bury us all under sand.

Comrade Bear (tj & the bear) writes:

... [Of course, both of those types also feel it necessary to "do something", which is why they're so in love with Keynes.]

Left alone, the economy will right itself. Unproductive activity will cease, productive & necessary activity will survive. Balance sheets will be restored, optimism will creep in, and the cycle starts all over again.
Comrade Bear (tj & the bear) |

Comrade Bear: A little too late now, don't you think?

Nero has long since put away his fiddle and the 'Economy that was once Rome' lies in ashes.

dafox writes:
I've heard the market bottoms out 6-9mo before the end of a recession typically. is that true?
dafox | 01.04.09 - 8:19 pm | #

Saturday, November 15, 2008
Recessions and Stock Market Bottoms
Relayed by Citizen Harrison of Minyanville:

13 recessions since 1929 lasted on average 10 months.
Longest - Great Depression, 44 months.
2nd longest - 1973-1975, 1981-1982, each lasted 16 months.

In 13 recessions median S&P bottom occurred 58% of the way through the recession.
Average return from each recession's closing low to the end of the recession was 20.3% while the average return for the year following was 15.9%.

If this recession started in the 4th quarter of 2007 and lasts as long as the Great Depression the bottom (58%) is the 1st quarter of 2010.

(And if it started 4Q2007 it is already the longest recession since the Great Depression even if last week was the low - AM)

Talking about S&P500 in 2009, FYI,
Robert Shiller writes in his prediction for 2009:

...
"
In terms of the stock market, the price/earnings ratio is no longer high. I use a P/E ratio in which the price is divided by ten-year average earnings. It's a really conservative way of looking at it. That P/E ratio got up to 44 in the year 2000, which was a record high. Recently it was down to less than 13, which is below the average of around 15. But after the stock market crash of 1929, the price/earnings ratio got down to about six, which is less than half of where it is now. So that's the worry. Some people who are so inclined might go more into the market here because there's a real chance it will go up a lot. But that's very risky. It could easily fall by half again.
"

Comrade Bear (tj & the bear) writes:
Comrade Bear: A little too late now, don't you think?
Samdog | 01.04.09 - 8:47 pm | #

Little too late for what? Reality???

I mean the system has been so fouled by gov't dollar-tossing, haven't the seeds been planted for a monetary crash?

Steven,

This is already happening--at least with wages. Unemployed who formerly made 6-figures are happy to take half or less just to survive.

Just taking a fast look at CR's nice chart, the home over-supply around 1980 and the peak in unemployment took almost six years to re-balance ; looks like a 5 year pattern in general, except for the latest pattern, where housing is booming for ten years. This would suggest that The Bush Push to turn the 2001 recession into The Ownership building boom Society and to re-write all the regulations (and Constitutional Powers) and allow banking to go into a state of chaos, with The Iraq War, pumped The Bubble to a point of systemic collapse, which may indicate that the correction phase will be double the prior periods, i.e, at least a decade before we return to the next bubble. I would also thing that with about $15 Trillion being wiped out, it will also take time to pay the piper.

[Since the cause of the current recession is different than other post WWII recessions, the dynamics of the eventual recovery might be different too.]

Yes, and the definition of what a recovery is might also be different, I mean, as long as things are changing and all that.

When does Jupiter enter uranus?
Anonymous | 01.04.09 - 9:15 pm | #

Tell me, can you see Uranus with a simple telescope?

read thd fallows article in the Atlantic on profecy for 2009 bey9one (written nbefore election). A notional bankruptcy would take a Pattonesque kind of leade. That would be a true black swan. Obama is already cutting adeal for ~$300B in tax cuts reportedby WSJ. Cicil society simply doesn;t have the fortitiue to impose such pain. A leader rooted in discipline is the only hope. I agree with Fallows it will be a general that emerges.

As for the opening salvo, Japan wouyld be a good place to start the renegotiation.

"As Americans search for a safe place to put their funds, the vast majority - almost three-quarters of those polled by CNN/Opinion Research - said they would rather place money in a bank or stuff it under the mattress than invest it in stocks or bonds."

CNBC will be quoting this tomorrow as a contrary indicator BUY BUY BUY

Tell me, can you see Uranus with a simple telescope?
Samdog | 01.04.09 - 9:18 pm | #

Uranus is a planet and it's real big.

@tj

I'm aware of the arguments. It's different this time and I'm a fool.

The economy is Humpty Dumpdy, and we all know what happened to Humpty Dumpdy.

Average Joe writes:

That is the same argument for housing. The return path historically has to cap at some point oif the spread between income and asset growth diverges as it has. It is the equivilant of the $1M apartment seeing 7% CAGR to infinity. MRealistically Impossible. Be interested in any quants if there is a mathmatical explanation or distributin that simply has no right tail....

Thank you, BASIL!

I STAND CORRECTED!

In August of last year there were zero sun spots. The last time we went a whole month without sun spots was in 1913, the year the Fed was created. Perhaps the lack of sunspots foretells the destruction of the Fed.

Anonymous writes:
Re: Actually, Uranus was recently downgraded to 'subplanet' status.

No, it was Earth
Anonymous

No. Earth was recently downgraded to 'Junk' status.

I want my National Wealth Destruction Clock.

Conjure says, "mp, London thinks it may have a problem."

"Rates may sink to lowest since 1694"

Rates may sink to lowest since 1694 - Telegraph

"That can't be a real name..."

How about Alfried Felix Alwyn Krupp von Bohlen und Halbach?

Morocco Bama writes:
Allen Sinai....

That's where I stopped reading. I'm not reading anything written by a guy named Sinai. That can't be a real name, anymore than Wolf Blitzer can be a real name.
Morocco Bama

Of course 'Wolf Blitzer' is a real name. It's Nazi-German slang for "Whoa! I can see Uranus!"

Talk about cliff diving, I got that global cooling chart from here.
http://www.dailytech.com/Temperature+Monitors+Report+Widescale+Global+Cooling/article10866.htm

ova writes:
Ok, I worked with a Hispanic guy who converted. His new name is Mohammed Islam. He hates flying now.
nova

Yikes! Full cavity check....

Has he pawned his boxcutter collection?

No, but I told him to get a plain brown wrapper for his Koran. Better that people think he is looking at porn then reading that.

Michael writes:
Talk about cliff diving, I got that global cooling chart from here.
DailyTech Tempera...rticle10866.htm
Michael

Hey, Michael:

Thanks for the heads-ups. I'll be in China for the next 3 weeks.

Of course, this is obviously more proof of Global Warming.

Here are some nice pictures of last Augusts spotless sun event.
DailyTech - Sun Makes History: First Spotless Month in a Century

I would've just given the link, but it's behind the firewall; this is a company I'm involved with from Sunday's New York Times:

The expression “Will it play in Peoria?” has long been heard in marketing circles as shorthand for whether something will succeed or flop with consumers. One student is asking, Will it play in Dayton, Ohio — over the loudspeakers on buses?

Russell Gottesman, 32, is pursuing his M.B.A. at ­DePaul University in Chicago while running his new company, Commuter Advertising, which delivers, in his parlance, “short-form audio advertising” mixed in with announcements about coming stops on mass-transit vehicles.

One objective is to help advertisers reach potential customers; another is to help agencies and municipalities defray the rising costs of mass transit. The com­pany would share with them the revenue raised by the audio ads, which augment the panoply of pitches — signs, posters, wraps and commercials on video screens — already in, on and around buses, trains, trolleys and subways.

The idea came to Mr. Gottesman while riding on the El after a White Sox game.

“We were in the Loop, passing Chinatown, and it dawned on me that a local restaurant interested in separating itself from other local restaurants in a two-block radius from the El stop could take 10-second advertisements and talk to a captive audience on a train,” says Mr. Gottesman, who is “a little bit under halfway done” with a master’s of business administration degree at DePaul, and on track to finish in 2010.

The concept was not far afield for Mr. Gottesman, who before going back to school for his M.B.A. to “focus on entrepreneurship” worked in sales and marketing for a Chicago radio station as well as Metro/Shadow Traffic. His wife, Katherine Hill, 30, recently left the Chicago advertising agency Leo Burnett to become chief operating officer of Commuter Advertising.

The pair began exploring the marketing possibilities with transit executives in Chicago in fall 2007 as Mr. Gottesman was “taking my first class at DePaul, a marketing class,” he says. Not long after, he was reading a request from the Greater Dayton Regional Transit Authority for proposals for ways to sell traditional ads in buses. “Buried on Page 48, Paragraph 2, was ‘If you have any other cool ideas we’d like to hear from you,’ ” Mr. Gottesman says. He did just that, and six months later began a 60-day pilot program on Dayton buses.

The test was deemed successful enough that selling started in October, and in the first 30 days, Mr. Gottesman says, more than 20,000 audio ads were sold. About 5 percent of the available inventory is earmarked for public service announcements from organizations like the Ohio Multiple Sclerosis Society.

The ads are being sold either by time (say, playing during morning and evening rush) or by location. For instance, a store can run a spot a stop before the one nearest its location and repeat the spot when the stop is reached. (“Hey, did you know a Dunkin’ Donuts is two blocks away? Come in Monday for a free cup of coffee.”) Or a college can buy commercials that are heard by students on their way to local high schools.

Although Mr. Gottesman and Ms. Hill decline to discuss finances, they say it costs about a penny to reach each bus rider, and that a dozen advertisers are being heard by riders or about to be. To check what Mr. Gottesman calls the “tolerance factor,” the audio ads are being tested with groups of riders and drivers before being played. There have been no complaints, he says. He estimates that a commuter who passes 100 stops in three or four days would hear 5 to 15 commercials.

The course Mr. Gottesman is now taking at the business school — which nicely coincides with what he is living each day — is “Finance 571: How to Finance a New Venture.” He is taking the class partly in person, partly online and partly through correspondence with his professor.

DePaul was “kind enough to set up a work-study program,” he says, because he operates Commuter Advertising from an office in Dayton — in a building named, appropriately enough, the Entrepreneur Center.

So, what is the answer? Ho about trynna keep
the ds
yje up

Sorry. Page not found.

I mixed it up with some wall streeters this weekend. They were claiming that greedy unions were ruining our country. No joke.

I pointed out that unionism has been in decline in America for decades against the rise of financialization. I also brought up the trillions in bailouts for the financial community. Blah, blah, blah, they told me "I didn't get it."

The arrogance is stunning.

From the NYTimes, office vacancy rates exceed 10% in every major city in the country...and are expected to continue rising....

As Vacant Office Space Grows, So Does the Crisis for Lenders - NY Times

From the Gothamist: Surprise, surprise:

Report: Record Number of Vacant Rental Apartments in 2009

According to a report from Marcus & Millichap, the Real Deal reports the rental apartment vacancy rate will be 4.7% next year, "topping the previous record of 4 percent in the fourth quarter of 2003," thanks to "mounting job losses driv[ing] renters from the city." Which may mean more bargaining power for renters—if they want to go where there excess supply is expected, like Long Island City, Midtown West, the Financial District and southeastern Harlem. Further, homeowners who can't sell their homes may opt to rent them out, creating extra inventory. Some other data: The vacancy rate was 2.1% in 2007 and 3.4% in 2008.

Report: Record Number of Vacant Rental Apartments in 2009 - Gothamist

Shiller's 10 year p/e is misleading as it includes the two biggest bubbles (stocks & houses) in American history.

Absent high leverage and insane household debt levels, corporate profits are going to get crushed.

We'll be lucky with an outcome like Japan had over the past 18 years.

This time it is different because the great proliferation/parabolic increase of the independent contractors during the housing/credit bubble (associated primarily with real estate) do not get counted as unemployed when they are in fact income less. As a result, the effective unemployment rate is almost certainly over 10% and will likey reach GD levels over the next few years without the official unemployment number reflecting the horrible reality...

Many years ago, August of '58 to exact, Ed Bell, a friend of mine who was then vice president of the trust department at Crocker National Bank, wrote this:

"The Price-Future Earnings Ratio"

CFA: Error

Ed was a very bright guy; I suggest you read it.

Elvis writes:
"...increase of the independent contractors during the housing/credit bubble (associated primarily with real estate) ...As a result, the effective unemployment rate is almost certainly over 10%..."

Not just in real estate. A lot of software engineers are I/Cs as well.

And according to Shadowstats, unemployment is already over 16%.

"And according to Shadowstats, unemployment is already over 16%.
sm_landlord"

1 in 6 out of work sounds a little high to me right now, but probably not to some one who isn't making any money.

I think we see a 700K+ job loss number for January. Heard it here first.
badger boy | 01.04.09 - 11:17 pm | #

Some of us have a dead pool for the first 7 digit report. 

S&P 500 earnings have become utter fiction over the past 15 years.

Pensions and other benefits are severely underfunded, good will numbers have soared, options are still a scam, and mark to myth is now the norm.

To top it off, most of our eCONomy is founded on the deficit spending of over indebted consumers with declining real incomes.

"To top it off, most of our eCONomy is founded on the deficit spending of over indebted consumers with declining real incomes.
Angry Saver"

More of a reason to invest in life's fundamentals.

Do you think TARP was changing its game too often? WSJ just reported that Obama will use 40% of his stimulus plan on tax cuts:
"President-elect Barack Obama and congressional Democrats are crafting a plan to offer about $300 billion of tax cuts to individuals and businesses, a move aimed at attracting Republican support for an economic-stimulus package and prodding companies to create jobs.
The size of the proposed tax cuts -- which would account for about 40% of a stimulus package that could reach $775 billion over two years -- is greater than many on both sides of the aisle in Congress had anticipated."

[Some of us have a dead pool for the first 7 digit report.
Rob Dawg ]

If not in Dec then sometime in Q1. Dec had 2mm fresh claims. Can't imagine 1mm of them got jobs. Obama better save some of that stimulus for a jump in continued claims...

Over the past few weeks Sony has been cutting prices like crazy. Almost like a fire sale...

Could they be a 'little' cash strapped?

"Others possibly doing same in line of debt removal?"

Conjure says, "Cash is King."

"Liquidity in the household sector is drying up."

"Conjure says, "Cash is King."

How many kings are there these days? I'd feel better about cash if it were something better than king.

Global outlook worsens as confidence drops, top IMF economist - MarketWatch
Economic outlook worsens: IMF chief economist
No turnaround until 2010 is seen as confidence drops worldwide
The outlook for the world economy has clearly worsened over the past two months, hurt by a simultaneous drop in business and consumer confidence around the globe, Olivier Blanchard, the International Monetary Fund's chief economist, said Saturday.
The IMF's updated official forecast, to be released later this month, "is going to be more pessimistic" than the prior outlook, which was released in November, Blanchard said.

How many kings are there these days? I'd feel better about cash if it were something better than king.
Elvis | 01.04.09 - 11:52 pm | #

Cash is Czar?

"YLSP writes:
Anyone else think it's ridiculous an article from 1958 isn't freely available through the Internet?"

I thought the internet only went back to about 1981. They are still busy imputing the archives. The monkeys doing the typing are getting tired and, with the cutback in bananas due to the economy, I imagine they will soon strike. 1958 may be a pipe dream for awhile.

establish fire breaks were they make sense while letting the rest burn
crazyvermonter | 01.04.09 - 10:37 pm | #

Yup, got to save Hotaling's whiskey warehouse.

As Vacant Office Space Grows, So Does the Crisis for Lenders - NY Times
As Vacant Office Space Grows, So Does Lenders’ Crisis

"Because the S&P 500 earnings measures reflect a shifting market basket of corporations, the series for reported and operating earnings are discontinuous
over time. Thus, the estimates of growth derived from these series reflect changes in the composition of the index as well as changes in the actual earnings."

See Kenneth A. Petrick, "Comparing NIPA Profits with S&P 500 Profits," Survey of Current Business, April 2001.

Does that clear it up?

Article is available for $19; broken up into a $13 service charge and $6 copyright charge. It appears not to be online, guess this journal doesn't go back that far (or they don't show that on the order form). Airmail, fax, or 1st class mail...

Don't worry, I'm sure public demand for steamboat willie will be through the roof by the time it enters into the public domain... Disney going for that "hold to maturity" model...

The monkeys doing the typing are getting tired
Elvis | 01.04.09 - 11:57 pm | #

I thought that they were all working for Nemo.

n terms of the stock market, the price/earnings ratio is no longer high. I use a P/E ratio in which the price is divided by ten-year average earnings. It's a really conservative way of looking at it. That P/E ratio got up to 44 in the year 2000, which was a record high. Recently it was down to less than 13, which is below the average of around 15. But after the stock market crash of 1929, the price/earnings ratio got down to about six, which is less than half of where it is now. So that's the worry.

No, the worry is that earnings keep falling off the table at a stunning rate through 2009 and 2010.

Look, how do you compute a P/E when earnings are negative, as they are now for the Russell 2000?

By the 3rd or 4th quarter of next year, earnings could be negative for the whole S&P 500 ex-energy.

Thanks for the comparable articles anon...

So everyone looks at these S&P indexes (and Dow Jones Index) and is led to believe that "stocks are a great investment over time" yet fail to realize the composition of these indexes varies greatly over time.

In reality the conclusion should be, "Your stock certificate for that company will eventually be 0?".

“By the 3rd or 4th quarter of next year, earnings could be negative for the whole S&P 500 ex-energy”.
Rich | 01.05.09 - 12:14 am | #

Sounds like a good bet to me.

YLSP(Excellent) writes:
Don't worry, I'm sure public demand for steamboat willie will be through the roof by the time it enters into the public domain... Disney going for that "hold to maturity" model...

They are attempting to protect Mickey Mouse's likeness rights -- they don't give a crap about the actual film. They just want to make sure that nobody can say the image is in current usage.

Oh, and some crap about "creator's rights" that somehow gives you the right to profit for a century off a good idea. Your civil rights, they don't mean a thing -- they'll dog your car trunk without a warrant, spy on you via the Patriot Act in the name of curbing tax evasion. Now, private corporations trying to protect their cashflows, THAT is what is important.

dryfly(Excellent) writes:
Ya that is what they taught in public schools 1958 - and all boomers everywhere adhere to the plan and work hard to keep our contempt of culture at 100% full throttle. Just to piss in you cup. Hope you enjoy.

I guess that part where you live in a morally and financially bankrupt culture that they're in charge of is just one of those weird anecdotal things.

"Look, how do you compute a P/E when earnings are negative, as they are now for the Russell 2000?"

Creatively.

squeezed(Unrated) writes:
Joe 3 pack has yet to really panic.

Agreed. By all evidence, the average sucker is still waiting for their ship to come in and their 401k / real estate investments to make them rich.

Madoff hearing Monday. Get your popcorn.
Madoff Chasers Dug for Years, to No Avail - WSJ.com
WSJ - Madoff Chasers Dug for Years, to No Avail
Regulators Probed at Least 8 Times Over 16 Years; Congress Starts Review of SEC Today

I guess that part where you live in a morally and financially bankrupt culture that they're in charge of is just one of those weird anecdotal things.
Comrade Byzantine_Ruins | Homepage | 01.05.09 - 12:23 am | #

I just get tired of the bigotry - if someone blames it all on J's or N's  - WHOAAA! Racism... no F'ing difference. Bigotry is bigotry. Race, sex, religion, age... etc. I get just as tired of boomers who 'rip' Xers as 'slackers' or whatever - totally empty & also 'bigotry'. People here mostly know better. Some individual tools don't.

"Not sure if there's any such thing as "smart money" any longer - most of it seems to have been lost. The irony!
Hugh Jass"

The money that was lost was illusory money, not smart or dumb. Some might argue that it impossible to lose money that doesn't really exist at all. Not me, because I ate nice steaks with it.

and he also came clean tried to take care of his employees at the end. you'd never see that kind of behavior from jamie dimon. wonder why?
bgates | 01.05.09 - 12:32 am | #

LOL!!! He's mighty good to us - that Massa Madoff.

"But your corporation has double taxation unless it is an LLC or similar S corporation."

Unless. It sounds like your an accountant. Please figure it out and get back to us.

"What does this say about the society, and what does it say about government social engineering?"
It says in a corporate/capitolists society it's every man for himself.

It says in a corporate/capitolists society it's every man for himself.
Uffish Thought | 01.05.09 - 12:36 am | #
"every man for himself" is, almost by definition, the opposite of a society.