.
By all counts it seems clear that the odds of the U.S. falling into a double-dip recession have increased. If you just look at the charts of the DJIA alone, you can see the breakdown in prices, but there are other factors, too.
1. State Anti-Stimulus Programs Larger than Federal Stimulus Programs. I think this was pointed out by Robert Reich on the Business Insider. States are cutting back costs hard. Case in point: California’s trimming state workers’ wages down to minimum wage until it can get its budget back in place for the upcoming year.
2. We’ve already run through about 75% of Federal Stimulus Money. Reich made this point, too. And there seems to be mixed sentiment for the urgency and desire to push for more stimulus. Analysts have been expecting a slump following stimulus funds for a while now, though, so this is nothing out of the ordinary. The question will be how long it lasts and how deep it hits.
3. Unemployment has not improved. As time goes by, some people stop looking for work and they are no longer reported in the numbers, creating the illusory effect that the numbers are getting better. Don’t buy it. Average real unemployment is around 11% and in some places, like Trenton, NJ, – and Michigan – is closer to 20%.
4. Retail sales have slumped again and less people are planning vacations. Enough said. This doesn’t bode well for the recovery of an economy supposedly 70% dependent on the U.S. consumer. Recent numbers show that the consumer recovery has not been sustained.
5. Dow back below 10,000. Remember getting excited when the DJIA finally climbed back above 10k, getting closer to where it was just before the second shoe dropped in October 2008? Well just forget all of that rally that we had in between, because it’s effectively been wiped out for all you buy and holders.
Add your own observations below. Decoupling of world economies has clearly begun. The U.S. will certainly drag down other countries again, but not so severely as before, because this time everyone’s awoke to the challenges and have increased capitalizations, deleveraged and diversified.
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{ 3 comments… read them below or add one }
Hey ME – I think the odds are better now too, but that’s not so bad for people like us right? We’re going to buy some more US blue-chips if things get lower! Yes? Good post :)
Decoupling of world economies has clearly begun. The U.S. will certainly drag down other countries again, but not so severely as before, because this time everyone’s awoke to the challenges and have increased capitalizations, deleveraged and diversified.
Decoupling indeed! If the DOW sinks below 10, 9 or 8,000 like some doomsdayers are saying it will later this year (Red October), time to make cash king again.