JDH Commentary on Depressions

[Bottomfeeder]

JDH....I think that it is an incorrect statement to call this current economic downturn a Depression.  I have done some research on this, certainly there are alot of disputes on what a depression is, but this does not appear to be one.

While the current downturn does have some symptoms of a depression, loss of credit, amemic consumer spending etc.,  GDP output and unemployment have not approached depression levels.  IE: The Great Depression had 33% contraction in GDP and 25% unemployment, annualized.

It appears that the US economy will outperform the annualized 6% contraction that appeared to be on the table in the third quarter of 2008, and unemployment should not get worse than 12-13%, making this a severe recession in line with 1980-82.  We may even get to 1973-1975 levels of economic performance.  Both of those periods are a long ways away from Depression numbers.

But for now, categorizing this environment as a depression appears to be a false premise.

I am thinking that we could go back to the 1100-1200 range on the SnP, before we have another steep steep decline, which would probably be about right from the 1476 top.

[Peter518]

Actually, XGD.TO has underperformed XIU.TO 20% YTD.

This year the best performers are those risking of bankruptcy, such as Auto Parts/Rental, and base metals.

In hindsight, if one had bought TRW,  DTG, CAR, ARM, TCK/TCK.B.TO, and FM.TO, and held up to now, one would have become a millionaire. 

The stock market seems want to say:  The economy is recovering...

That guy at Xtrends, Sol, almost goes to bankrupt due to his mistake: short ES   200   at 850.5   April 22, 2009 and held until now (paper lost about 1.5 M$), ...

http://xpositions.blogspot.com/

http://xtrends.blogspot.com/2009/08/lightening-doesnt-strike-more-than-once.html

[sidewinder]

Sol also went short with 500 contracts at 1015 the other day.  He may get some of it back if he is fast.  Don't think Atilla's doing all that well either but haven't looked lately.

[pinetree]

Can't remember how I discovered xtrends but it was early this year.  I was amazed at the following those guys had amassed, some blog posts would get over 1000 comments.  Atilla was being treated like a modern-day Livermore due to his short calls in the 08 crash. 

I guess a lot of their followers have taken major hits following their calls to short this rally.  Due to the success Atilla had up through March many people were simply taking his calls as sure things and throwing risk mgmt out the window.  I haven't been following them lately but I think they've been trying to short this rally every step of the way.  Ever since March Atilla was putting up these clever charts with multi-decade trendlines that seemingly signalled a top and the market would keep blowing through them.  I give him credit for having the unwavering confidence to stick with what got him there but damn... at some point you wonder if the market was just going where it was going in the fall and any short-biased analysis was going to appear brilliant.

Also agree we aren't in a depression.  Well, not yet at least.   I just hope that if the spx gets to 1200 that the U index will be up to that 300 level Merv has targeted.

[Bottomfeeder]

PT....yeah the operative words are "not yet".

The federal governments spending and now global coordinated efforts I think make depressions less likely than 80 years ago, plus at least there is some history of "what not to do", to try and keep things from happening.

However, one must notice that the recessions will likely get more powerful as a result of trying to control the outcome.  Maybe the next time government tries to intervene they will fail, or maybe it will be 3,4,5,10 cycles from now.   I do think at some point in time it will not work, but it may not be in our lifetimes.  Sure can't bet on it.  But when it does fail, it will more than likely be worse than what we experienced in 1929.

BTW...I am with you on the Merv 300 call.  I do have this week targeted as the move week for the U's, based on SnP and U charts from November 08 on looking at crossover timing from the indexes, it should be just about anytime now, if it is going to happen.  As long as we hold on to these levels though all is ok, just have to be patient and wait I think.