Pages

Custom Search

Search Mad Money Fund Blog

Share Stock Picks

Showing posts with label Recession. Show all posts
Showing posts with label Recession. Show all posts

Sunday, August 29, 2010

Are we out of the Recession ? or are we in a double dip Recession

Federal Reserve Chairman Ben Bernanke has smoothed the ruffled feathers of anti-inflation hawks at the Fed by indicating he will only press for more policy easing if the U.S. economic slowdown worsens.


are we out of the Recession ? or are we in a double dip Recession .....

Getting that buy-in may eventually make it easier for Bernanke to rally the Fed to move more aggressively if it is clear that the recovery is stalling.



"The data is likely to do the work convincing more timid members" of the Fed's policy-setting committee, BNP Paribas economist Julia Coronado wrote in a note to clients.



Speaking on Friday at the Fed's annual conference in this mountain resort, Bernanke gave a detailed reading of the wilting economic outlook and a reminder of the weapons the Fed could use to bolster the recovery from the worst U.S. recession since World War Two.



It was a much more nuanced assessment than the statement released by the U.S. central bank on August 10 when it shifted policy by taking new measures to support the economy.



The Fed's move nearly three weeks ago to resume buying longer-term Treasury securities to hold its balance sheet steady, instead of allowing them to continue running off, was a controversial one within the bank's inner sanctum.



Some members of the policy-setting Federal Open Market Committee saw the change as sending a signal to markets that the Fed was closer to major new monetary easing than it was.



 Fed officials question whether recent weakness in the U.S. economy is not merely a soft patch in a recovery that will eventually gather momentum rather than an early warning sign that growth will be too sluggish to support new jobs.



Critics of the move on the Fed's policy-setting panel are wary of further bloating a balance sheet that at $2.3 trillion is more than twice its pre-crisis levels, just to bring down unemployment by an incremental amount.



To the critics, the Fed sent a wrong signal on August 10 when it said it would resume buying Treasury bonds "to support the recovery."



abcnews.com

Sunday, February 28, 2010

Double-Dip Recession Hits Wall Street & Banks ? ( Market News ) - GE,BAC,C,WFC,JPM,USB,AXP,GS,JEF,NYX -

A miserable week of economic news has rekindled a big question in the market: Is the economy headed for a double-dip recession?
What's Next?

Thursday's economic reports only fanned the flames: Weekly jobless claims jumped despite projections they would start easing, and orders for long-lasting goods excluding airplanes dropped 0.6 percent instead of the projected 1 percent increase, suggesting waning consumer demand."After the huge rallies of last year I think it's time for the markets to consolidate," Ashok Shah, CIO of London & Capital, told CNBC Tuesday. "There is a risk of a double dip recession around the corner," he added when discussing the economic outlook for Europe."
Watch Video
Those numbers followed reports earlier this week of a plunge in consumer confidence and the even more closely watched home sales, as well as a report from the Federal Deposit Insurance Corp showing bank lending at its lowest levels in nearly 70 years.

"These numbers are not stabilizing," says Kathy Boyle, president of Chapin Hill Advisors in New York. "We're two-thirds of the way through the first quarter and the jobs numbers are worse...I just look at all the signs of these things and I don't see us getting out of this."




It was just weeks ago that analysts were forecasting positive job growth any day now and were touting the 5.7 percent fourth-quarter GDP as evidence that the economy had shaken off recession and was reopened for business.

True to form, investors took the dour economic signs fairly well earlier in the week. But they had finally had enough of the bad news Thursday, sending the major averages down as much as 1.5 percent.

Boyle, who has held a bearish market position since the initial downturn in 2007, thinks things could get worse.

"The news this week should push the market further down than it is," she says. "The fact that we're not down 200 points means there's still buying interest out there."

The economic reports helping to bring the markets down primarily reflect the difficulties in the US, but investors clearly are growing more concerned with events happening around the world.

Ratings agencies startled the market Thursday morning by warning of a possible downgrade in Greek's debt. Moody's specifically mentioned the possibility of a double-dip recession as something that would cause a rating cut, which would be sure to have worldwide ramifications.
Men's

HDTV's
* Double-Dip Near: Market Pro
* Market Wants Higher Rates
* Bank Stocks May Lag Market
* Jobless Claims Up, Durable Orders Fall
* Fed to Examine If Wall Street Is Betting On Default by Greece

In remarks to Congress this week, Federal Reserve Chairman Ben Bernanke has sought to assuage fears and assure investors that the central bank would keep interest rates low for an extended period of time.

But in some quarters the chairman's comments also reflected concern of slow economic movement and the need to rein in the US dollar until real growth resumes.

"His fear is that the surging greenback will attenuate the demand for US exports and stall the recovery in manufacturing ..." Michael Pento, chief economist for Global Delta Advisors, wrote in an analysis. "Renewed weakness in the real estate sector and in the labor market along with a slowdown in global output should not only keep the Fed on hold in 2010 but also cause domestic GDP to stumble in Q3 and Q4."

Pento has been predicting a double-dip for months due in part to overly accommodative moves by global central banks.

"My prediction of a double-dip recession in late 2010 and early 2011 unfortunately looks on target and is underwritten by the troubles in Europe, Japan and the efforts on the part of the (People's Bank of China) to curb bank lending," he wrote.

Indeed, the US economic prospects seem as dire as the weather with yet another blizzard overwhelming the East Coast.

In fact, it could just be the awful weather that has stymied growth and is triggering some of the double-dip fears.

"The last six weeks or so have been a little different for most consumers. Nobody's going to work because they can't get out of the snow," says Kurt Karl, chief economist at Swiss Re in New York. "We have to get to spring before we get really confident as a public about the economy."

While jobs seem to be at the heart of the concerns, growth will be difficult without bank activity as well.

Noted analyst Meredith Whitney caused a stir on CNBC recently when she forecast difficult times ahead for banks because of loan portfolios that would shrink as much as 20 percent.

The FDIC numbers backed up that assertion at least inasmuch as lending continues to be anemic.

And lack of access to credit also erodes consumer confidence.

"It is disconcerting at the very least if not a bit of an eye-opener," Karl says. "Lending from banks has got to be happening soon to sustain growth."

In the face of such a scenario investors face tough choices of putting money into a stock market that has been going sideways for three months now or risk missing out on another leg up.

"We for quite a long time have been coining an adage: 'Hedge the cyclical and fund the secular,' " says John Stoltzfus, strategist at Ticonderoga Securities in New York. "Near-term there is significant uncertainty that can cause more than speed bumps but considerable choppiness in the economic recovery. More cyclical issues are worth holding onto and even adding to in the pullbacks to gain exposure to the secular story."

Such caution will be necessary until policy makers can help steer the economy toward recovery, particularly in jobs, Stoltzfus says.

"This is the kind of environment where if nothing is done we could get a double dip out of this," he says. "If Washington can cease with the political jawboning and rhetorical barbs and both sides of the table work together we can't but think something can be worked out." CNBC.com

The stock market going to 10,000 could simply be caused by investors realizing that we aren’t really going to the doghouse as badly as we initially thought. Good to know that so far, we’ve established the 6,000 level as “the bottom”. But really, is the Dow at 10,000 (or even 9,000) justified right now? I’m definitely in the camp that doesn’t think so.
As I review the fundamentals, I feel uncertain about this upward march in stock prices.
  • We’re supposed to be recovering from the worst recession since the 1930s. Somehow, I expect it to take more work for us to pull out of the depths of this hole.
  • In September of 2009, unemployment went up to 9.8% nationally, the highest levels since 1983.
  • Can inflation be around the corner?
  • What’s fueling the market’s rise? Improved earnings reports, apparently, but these are a result of business cut backs and company layoffs, rather than real growth.

Sunday, March 15, 2009

Watch Ben Bernanke sit down and talk about the financial crisis on 60 minutes









Three years into his term as Federal Reserve chairman, and fresh off the dedication of a highway exit in his name, Ben Bernanke is sitting down for his first television interview. The central bank chief will appear Sunday on CBS’s “60 Minutes” in a double-length segment about the financial crisis and recession.

Bernanke
In the first on-air TV interview with a Fed chief in two decades, CBS says, Mr. Bernanke will discuss “what he thinks went wrong with America’s financial system, how it caused the economic crisis, what the Federal Reserve is doing to help fix it and when he expects the crippling recession to end.” The program, which airs Sunday at 7 p.m. Eastern time, will include an interview in Mr. Bernanke’s hometown of Dillon, S.C., with a visit to his old high school. (No word on whether they’ll stop by his now-famous childhood home.)

Fed chairmen generally don’t grant on-the-record interviews, aiming to avoid settings that could confuse or unsettle markets. Of course, Mr. Bernanke delivers speeches regularly (with audience questions often carried on live TV) and testifies frequently before Congress. Last month, he took questions from reporters for the first time in a public setting in an appearance at the National Press Club. In addition, over the years select quotes from interviews with Mr. Bernanke (that were otherwise off-the-record) have occasionally appeared in news outlets.

Still, Mr. Bernanke — a former Princeton economics professor — has struggled throughout the financial crisis to counter claims from lawmakers that he’s helping Wall Street more than Main Street. The “60 Minutes” format, and a walk along Main Street in South Carolina, should help humanize the Fed chief.

It’ll also come at a particularly delicate time for his career. Mr. Bernanke’s four-year appointment as Fed chairman expires in January 2010. After what’s likely to be the longest recession since the Great Depression, President Barack Obama will have to decide by the fall whether to reappoint him.
Aside from the president he's the most powerful man working to save the economy, but you have never seen an interview with Ben Bernanke.

Bernanke is the chairman of the Board of Governors of the Federal Reserve System, better known as the Fed. The words of any Fed chairman cause fortunes to rise and fall and so, by tradition, chairmen of the Fed do not do interviews - that is until now.

The Federal Reserve controls the economy by setting interest rates. But after the crash of 2008, Bernanke invoked emergency powers, and with unprecedented aggressiveness has thrown a trillion dollars at the crisis.

Ben Bernanke may be the most important Fed chairman in history. The question is, can he help lead America out of this deep recession and when?


--------------------------------------------------------------------------------

"Mr. Chairman, I'm gonna start with a question that everyone wants me to ask: when does this end?" 60 Minutes correspondent Scott Pelley asked Bernanke.

"It depends a lot on the financial system," he replied. "The lesson of history is that you do not get a sustained economic recovery as long as the financial system is in crisis. We've seen some progress in the financial markets, absolutely. But until we get that stabilized and working normally, we're not gonna see recovery. But we do have a plan. We're working on it. And I do think that we will get it stabilized, and we'll see the recession coming to an end probably this year. We'll see recovery beginning next year. And it will pick up steam over time."

Asked if he thinks the recession is going to end this year, Bernanke said, "In the sense that this decline will begin to moderate and we'll begin to see leveling off. We won't be back to full employment. But we will see, I hope, the end of these declines that have been so strong in a last couple of quarters."

"But you wouldn't say at this point that we're out of the woods?" Pelley asked.

"No," Bernanke replied. "I think the key issue is the banking system and the financial system."

"Unemployment, as we sit here, is about 8.1 percent. I wonder, do you expect double digit unemployment?" Pelley asked.

"Well, it's hard to forecast exactly where we're going. Unemployment is rising. Job losses are still very severe. And no doubt, the unemployment rate's gonna go higher than it is. But I think, again, that if we do succeed in stabilizing the financial system, that we'll begin to see a slower pace of decline, and eventually, a stabilization that will set the basis for a recovery," Bernanke said.

"You seem to be saying that we're not heading into a new American Depression?" Pelley asked.

"I think we've averted that risk. I think we've gotten past that and now the problem is to get the thing working properly again," the chairman said.

Bernanke, age 55, has been chairman of the Federal Reserve Board since 2006. He had previously served as a Fed governor, then chairman of the President's Council of Economic Advisers, before being appointed as Fed chairman by President George W. Bush.

For this interview, he opened up the Fed headquarters, rarely seen by the public. It's a monumental building along the National Mall. Construction started in 1935 in the depths of the Great Depression.

"You know Mr. Chairman I think the Federal Reserve, for most people, is a mystery," Pelley remarked.

"Well, it's an institution that people don't hear so much about but it's a very important one. It manages monetary policy for the country. It's one of the main tools we have for stabilizing our economy and keeping prices stable," Bernanke said.

Asked when it was founded, Bernanke told Pelley, "The Fed was created by Congress in 1913. And its original purpose was to deal with financial panics, which is what we're doing right now."

Bernanke's crisis started in 2007 with the mortgage meltdown; lenders began to fail. Bernanke cut interest rates repeatedly. In 2008, the Fed stopped the collapse of Bear Stearns by arranging a sale to another firm.

But then came the end of Wall Street as we knew it. Mortgage giants Fannie Mae and Freddie Mac were seized by the government. On Sept. 14, Merrill Lynch was sold in distress. The next day, the 158-year-old investment bank Lehman Brothers failed

"You didn't rescue Lehman Brothers. It set off a worldwide panic when it went bankrupt. And I wonder, looking back, whether you think that was a mistake," Pelley asked.

"There were many people who said, 'Let 'em fail.' You know, 'It's not a problem. The markets will take care of it.' And I think I knew better than that. And Lehman proved that you cannot let a large internationally active firm fail in the middle of a financial crisis. Now was it a mistake? It wasn't a mistake for the following reason: we didn't have the option, we didn't have the tools. All the Federal Reserve can do is make loans against collateral," Bernanke replied.
The day after Lehman, Bernanke's Fed did something astounding: it loaned $85 billion to a company that wasn't a bank at all - American International Group (AIG), the global insurance giant that was also involved in backing risky mortgage investments. Bernanke says, unlike Lehman, the Fed could make the loans based on good collateral in AIG's portfolio.

"There have now been four rescues of AIG, $160 billion. Why is that necessary?" Pelley asked.

"Let me just first say that of all the events and all of the things we've done in the last 18 months, the single one that makes me the angriest, that gives me the most angst, is the intervention with AIG. Here was a company that made all kinds of unconscionable bets. Then, when those bets went wrong, we had a situation where the failure of that company would have brought down the financial system," Bernanke said.

"You say it makes you angry?" Pelley asked.

"It makes me angry. I slammed the phone more than a few times on discussing AIG. I understand why the American people are angry. It's absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets, that was operating out of the sight of regulators, but which we have no choice but the stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy," Bernanke explained.

By September, Bernanke and then-Treasury Secretary Hank Paulson went to Capitol Hill to urge a massive bailout of the banking system, which lawmakers soon passed.

Asked how close of a call it was, Bernanke said, "It was very close. It was very close. The Congress passed the bill that gave Treasury the right to put capital into the banks in the first week of October. And it was in the second week of October that the crisis reached its peak. If we had not had those powers, we could have had a much, much worse outcome. So it was a very dangerous situation."

"Was anyone on Capitol Hill skeptical? Did they push back at all, you know, 'Mr. Chairman, it's probably not quite that bad'?" Pelley asked.

"Well, I do remember one conversation I had where I was addressing a caucus of congressmen. And a congressman said to me, 'Mr. Chairman, you know, I'm talking to bankers in my town. I'm talking to shopkeepers in my town. And they say things are normal. Nothing's going on. We don't see any problem.' And I turned to him and I said, 'You will,'" Bernanke recalled.

That second week of October, the Dow fell 18 percent - its worst week in history. At that point, $8 trillion had been lost.

In the crisis, Bernanke had freedom to act immediately - he doesn't need permission from Congress or the president. While they debated on Capitol Hill, Bernanke cut interest rates nearly to zero; then he used Depression-era emergency powers to launch a dozen rescue programs of his own. There was support for money market funds, mortgages, short term lending to small business, and support for auto loans, student loans and small business loans - commitments of a trillion dollars, doubling the size of the Fed's balance sheet.

Asked if it's tax money the Fed is spending, Bernanke said, "It's not tax money. The banks have accounts with the Fed, much the same way that you have an account in a commercial bank. So, to lend to a bank, we simply use the computer to mark up the size of the account that they have with the Fed. It's much more akin to printing money than it is to borrowing."

"You've been printing money?" Pelley asked.

"Well, effectively," Bernanke said. "And we need to do that, because our economy is very weak and inflation is very low. When the economy begins to recover, that will be the time that we need to unwind those programs, raise interest rates, reduce the money supply, and make sure that we have a recovery that does not involve inflation." He's not kidding about printing money: the Fed issues U.S. currency, which is why it says "Federal Reserve Note" on all the bills in your wallet. The Treasury Department's Bureau of Engraving and Printing is just a few blocks from Bernanke's office. It prints the money at the Fed's request.

The Fed's mandate from Congress is to put enough money i the system for maximum employment, but not so much that it sets off inflation.

The Fed actually pays for itself and returns billions in profits to the Treasury.

In a sense, Bernanke has been preparing for this emergency his whole professional life. He got a PhD in economics from MIT. He chaired the economics department at Princeton, where his specialty was the Great Depression.

He's among many economists who now believe it was the Federal Reserve itself that helped turn a recession in 1929 into a global calamity.

"They made two mistakes, basically. One was they let the money supply contract very sharply. Prices fell. Deflation. So monetary policy was, in fact, very contractionary. Very tight during that period. And then the second mistake they made was they let the banks fail. They didn't make any strong effort to prevent the failure of thousands of banks. And that failure had terrible effects on credit and on the ability of the economy to right itself," Bernanke explained.

Bernanke told 60 Minutes we were close to a second Depression and he is determined to not let the major banks fail on his watch.

"One of the things that I think many people watching this interview don't understand, is why there are multiple bailouts, four bailouts of AIG, three bailouts of Citigroup. There is a sense that this is a band-aid approach, that we're not getting to the root of the problem," Pelley remarked.

"Well, part of the issue is that, you know, the economy has gotten a good bit worse. You know, the first part of the crisis was subprime and other assets that were toxic. Now, we're in a second phase, which is that the economy is very weak," he said. "So the economy's weakness has meant that some of the initial attempts to stabilize the banks haven't been enough, and we've had to do more."

"You know, Mr. Chairman, there are so many people outside this building, across this country, who say, 'To hell with them. They made bad bets. The wages of failure on Wall Street should be failure,'" Pelley remarked.

"Let me give you an analogy, if I might," Bernanke said. "If you have a neighbor, who smokes in bed. And he's a risk to everybody. If suppose he sets fire to his house, and you might say to yourself, you know, 'I'm not gonna call the fire department. Let his house burn down. It's fine with me.' But then, of course, but what if your house is made of wood? And it's right next door to his house? What if the whole town is made of wood? Well, I think we'd all agree that the right thing to do is put out that fire first, and then say, 'What punishment is appropriate? How should we change the fire code? What needs to be done to make sure this doesn't happen in the future? How can we fire proof our houses?' That's where we are now. We have a fire going on."

Bernanke told Pelley that "fire" is still burning.

Asked if all the big banks the Fed regulates are solvent, Bernanke said, "I believe they are, yes. But we are doing a stress test right now, where we're looking at what the positions of the banks are under a tougher economic scenario than the one that we currently expect. And what we plan to do is to say how much capital would each bank need to be well capitalized. Not just solvent, but well capitalized, even in these more adverse scenarios."

"Are you committing in this interview, that you are not going to let any of these banks fail? That no matter what their balance sheet actually looks like, they are not gonna fail?" Pelley asked.

"They are not gonna fail," Bernanke said. "But what we can do, should it be necessary, is try to wind it down in a safe way."

In other words, Bernanke thinks government should stabilize failed financial companies and take them apart slowly. "So, for example, in the case of AIG, we've prevented a bankruptcy, because of the chaos that would create. But we're also demanding that AIG divest itself, sell off its subsidiaries, and use the proceeds to pay back the government," he said.

"What are the dangers now? What keeps you up at night?" Pelley asked.

"I think the biggest risk is that, you know, we don't have the political will. We don't have the commitment to solve this problem, and that we let it just continue. In which case, you know, we can't count on recovery," Bernanke said.

The Fed estimates the wealth of American families fell 18 percent in 2008, the worst since the Great Depression
"Does the Federal Reserve bear any responsibility for missing what was happening to the banks, as it was happening?" Pelley asked.

"Well, like other regulators, we probably could have done more. We've already done a lot of - put a lot of effort into reviewing our practices. And reviewing the bank's practices. We are trying to strengthen our regulation at every point that we can. So, I don't want to deny that we certainly could have done a better job, and others could have done a better job," Bernanke conceded.

Now President Obama and the Congress have a fiscal stimulus plan of nearly $800 billion. There's that separate bailout for financial firms - at least $700 billion. And plans are developing for a way that would take on the bad debt of crippled institutions.

"There was a panic in 1907. So the Fed was created to prevent that from ever happening again. And then we got the Great Depression. And now we have this. How do we prevent this from occurring another time?" Pelley asked.

"Well, tougher regulation of large firms. It includes having a set of laws that allows us to wind down. A large, internationally active firm, without the adverse impacts on the markets that a disorderly bankruptcy would have. It includes possibly having a systemic regulator. A regulator that has some responsibility to look at the system as a whole," Bernanke said.

"Your response has been to do what the Fed didn't do in 1929, and that is pour money into the system. But there's an argument made today that that's not what the problem is. The problem isn't that there's too little money in the system. The problem is there's too much fear in the system. That with these companies being propped up by the government, no one on Wall Street can tell who's solvent and who's not. And therefore, business does not move," Pelley pointed out.

"Well, I absolutely agree that confidence is key," Bernanke said. "People don't know what's happening. And they're afraid. And they're not sure what, you know, whether or not the system is gonna recover. So, how do you get confidence, that's the question. And I think the way to get confidence is to show progress."

Asked if he's seeing any progress, Bernanke said, "I think all of our efforts, so far, have produced results. We're buying about $500 billion in mortgages, in package and securities by the G.S.E.s, Fannie Mae and Freddie Mac. And that seems to have brought down mortgage rates significantly. It allows people to refinance. To get out of high rate mortgages. We are seeing progress in the money market mutual funds, and in the business lending area. And I think as those green shoots begin to appear in different markets and as some confidence begins to come back that will begin the positive dynamic that brings our economy back."

"Do you see green shoots?" Pelley asked.

"I do. I do see green shoots. And not everywhere, but certainly in some of the markets that we've been functioning in. And we've seen some improvement in the banks, as well," Bernanke said.

Asked what the first signs of recovery will be, Bernanke told Pelley, "Well, I think that one sign would be that a large bank is successful in raising private equity. Right now, all the private money is sitting on the sidelines saying, 'We don't know what these banks are worth. We don't know that they're stable.' And they're not willing to put their money into the banks."

"If you had a message for the American People in this interview, what would it be?" Pelley asked.

"Scott, I'd say three things. I'd say, first of all, that the Federal Reserve is here, and is gonna do everything possible to support this recovery. The second thing I would say is that we have to understand, though, that recovery is not gonna happen until the financial markets and the banks are stabilized. And we do have a plan, we have a program for that. But it's gonna take some patience," Bernanke said.

"But the third and final thing I'd just like to say to the American People is that I have every confidence that this economy will recover, and recover in a strong and sustained way. The American people are among the most productive in the world. We have the best technologies. We have great universities. We have entrepreneurs. I just have every confidence that as we get through this crisis, that our economy will begin to grow again, and it will remain the most powerful and dynamic economy in the world."
cbs.com

How much money have you saved? US Savings Rate Starting to Recover ?


How much money have you saved?

US Savings Rate Starting to Recover During Deep Recession

Here is a graph of the U.S. savings rate as a percent of disposable personal income.

It looks like savings from lower gasoline prices is showing up as savings - as opposed to other consumption - and this process of increasing savings is a necessary step towards restoring healthy household balance sheets.

This is one of the areas some analysts really got wrong during the housing bubble. As an example, here is Larry Kudlow in 2006: Riding the Right Curve

"Despite the grim picture the mainstream media continue to paint about just about everything ... there's one thing they just can't taint: This U.S. economy remains very healthy."

"The latest chant is that ... a day of reckoning marked by a housing-price crash and an overwhelming debt burden is headed our way. This is utter nonsense."

"Family net wealth, the nation's true savings rate, advanced 8 percent in 2005 to a record level of $52 trillion."

By focusing on net wealth (inflated by the housing bubble and excessive stock prices), Mr. Kudlow completely missed the biggest story of our time. As I noted then, the savings rate (as calculated by the BEA), is the true savings rate. The savings rate was too low then - and the rate remains too low now - but it is starting to recover.

Sunday, March 8, 2009

Why is The Market ( Dow Jones ) Getting a Chris Brown Beat Down in 2009 ?


Worldwide semiconductor revenue will decline by nearly 20% in 2009 to $199.2 billion, the high-tech market research firm says. The industry will not recover to 2007 levels until at least 2012.

“Declining confidence resulting from recent shocks and increased uncertainty about the future will lead to more conservative spending even after liquidity improves and the economic recovery is well underway,” says Jim McGregor, In-Stat analyst. “Restoring consumer and business confidence and overcoming excess capacity will be key to recovery and subsequent growth.”

Recent research by In-Stat found the following:

* Although recovery is expected to start in the second half of 2009, revenue growth in 2010 will be modest, at 11.8%.
* Digital Signal Processor (DSP) Revenue declined by 14.9% in 2008 to $6.6B, its lowest level since 2003.
* In its most recent cycle, semiconductor fab capacity utilization peaked at 90% early in 2008, and dropped to 87% in the third quarter.
* The downturn is expected to be deep enough, and long enough, for semiconductor capacity to ultimately fall, as a result of mergers, acquisitions, bailouts, restructuring, and other industry realignments.

Recent In-Stat research, Global Semiconductor Product Market Forecast—Help Wanted: Spenders and Lenders (#IN0904559SSF), covers the worldwide market for semiconductor products. It includes an in-depth global and regional economic analysis and resulting impacts on demand for semiconductors, how demand stacks up with projections for manufacturing capacity, and other factors affecting demand and pricing.

The research provides:

* Worldwide and regional GDP forecasts through 2013
* Semiconductor capital expenditure forecast through 2013
* Wafer fab capacity and utilization (includes trending for wafer starts)
* Worldwide semiconductor unit, ASP, and revenue forecasts through 2013
* Semiconductor revenue forecasts by region and by WSTS semiconductor product categories
* Top line semiconductor revenue forecast by end-use segment
Investors have gotten used to bad news, but layoffs topping 600,000 a month still made for a volatile day on Wall Street.

Wall Street ended another difficult week with an equally difficult session Friday: Stocks rose, fell, then clawed their way back to a mixed close after the Labor Department released its February jobs report.

But while the market finished well above its lows — the Dow Jones industrials had a modest gain after falling more than 120 points — many market watchers say there’s no reason stocks can’t slide further, even as the major indexes are near 12-year lows.

“My sense is we haven’t discounted all the negatives out there as of yet,” said Rob Lutts, president of Cabot Money Management.

Big institutional investors are still largely waiting for positive signs from the economy before making any major commitments. As a result, the market is largely being driven by “short” traders, who sell borrowed stock and then buy it back later in hopes that the price will decline in the meantime. That makes for a choppy, unpredictable market — one that analysts expect to stay erratic for the forseeable future.

“The shorts are having a complete field day in this environment,” said Kent Engelke, managing director at Capital Securities Management in Glen Allen, Va. “Right now you have everybody so fearful, and these shorts are controlling the market.”

Some of the week’s economic data, including retail sales and factory orders on Thursday, were better than expected but not enough to encourage investors to buy. The February jobs numbers on Friday were worse than analysts expected, but not as bad as some investors had feared; but that also didn’t motivate many investors to take chances on stocks.

Employers cut 651,000 jobs last month, and the unemployment rate jumped to 8.1 percent. The government also revised its December and January job loss figures up to 681,000 and 655,000, respectively.

News of continuing struggles in the banking industry and concerns about General Motors Corp.’s survival are only intensifying the market’s uneasiness. Wells Fargo & Co. became the latest bank to cut its dividend, and the market waited to see if GM would be forced to seek bankruptcy protection.

The Dow rose 32.50, or 0.5 percent, to 6,626.94. The Standard & Poor’s 500 index rose 0.83, or 0.12 percent, to 683.38, while the Nasdaq composite index fell 5.74, or 0.44 percent, to 1,293.85.

The Dow is down 6.2 percent for the week and the S&P 500 index is down 7 percent. Both have fallen more than 24 percent since the start of 2009; the Dow is at its lowest point since the spring of 1997, and the S&P 500 is at its lowest level since September 1996.

The Nasdaq is down 6.1 percent for the week, and at a six-year low.

Three stocks fell for every two that rose on the New York Stock Exchange. Volume came to 1.77 billion shares.

With uncertainty about the economy and financial system keeping the bulk of investors out of the market, even small advances have been difficult to maintain.

“When you get this precipitous of a fall, you are always due for some sort of rally, but a rally will be unsustainable,” said Jeff Buetow, senior portfolio manager at Portfolio Management Consultants.

And the market, analysts say, needs more clarity about the troubled financial sector before buyers come back into the market with any force. Until then, Engelke said, a sustainable advance is impossible.

“You can’t have a healthy economy without a healthy banking system,” he said.

Wells Fargo cut its dividend to 5 cents a share from 35 cents, following last week’s move by JPMorgan Chase & Co. to reduce its dividend to 5 cents as well. Citigroup and Bank of America Corp. had already slashed their quarterly dividends to a penny per share. The banks are expecting loan losses to increase because of the recession.

Wells Fargo shares rebounded Friday by 18 cents, or 2.2 percent, to $8.30. Citigroup, which fell below $1 a share for the first time Thursday, rebounded by a penny to close at $1.03.

But most other financial stocks slumped. JPMorgan dropped 67 cents, or 4 percent, to $15.93, Bank of America slipped 3 cents to $3.14, Goldman Sachs Group Inc. fell $6.07, or 7.4 percent, to $75.65 and Morgan Stanley fell 80 cents, or 4.5 percent, to $17.18.

GM shares continued their freefall as speculation about the automaker’s future swirled. On Friday, members of the Obama administration’s auto task force met again with the company’s stakeholders.

GM dropped 41 cents, or 22 percent, to $1.45.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note rose to 2.89 percent from 2.81 percent late Thursday. The yield on the three-month T-bill fell was fell to 0.18 percent from 0.20 percent.

The Dow Jones industrial average closed the week down 435.99, or 6.2 percent, at 6,626.94. The Standard & Poor’s 500 index fell 51.71, or 7 percent, to 683.38. The Nasdaq composite index fell 83.99, or 6.1 percent, closing at 1,293.85.

The Russell 2000 index, which tracks the performance of small company stocks, fell 37.97, or 9.8 percent, to 351.05.

The Dow Jones Wilshire 5000 Composite Index — a free-float weighted index that measures 5,000 U.S. based companies — ended at 6,935.38, down 538.61, or 7.2 percent, for the week. A year ago, the index was at 13,164.99.

I saw Buy Low Sell High ! I am putting 1/2 of my money in the market now !!

Tuesday, February 24, 2009

How does this financial collapse compare to the 1929, 1973 & 2000 bear markets?



Look at this image to see: How bad is this market ???

Your Thoughts ??

Sunday, December 14, 2008

What is a recession ?


In economics, the term recession generally describes the reduction of a country's gross domestic product (GDP) for at least two quarters. The usual dictionary definition is "a period of reduced economic activity", a business cycle contraction.

The U.S.-based National Bureau of Economic Research (NBER) defines economic recession as: "a significant decline in [the] economic activity spread across the economy, lasting more than a few months, normally visible in real GDP growth, real personal income, employment (non-farm payrolls), industrial production, and wholesale-retail sales



Attributes of recessions
In macroeconomics, a recession is a decline in a country's gross domestic product (GDP), or negative real economic growth, for two or more successive quarters of a year.

An alternative, less accepted definition of recession is a downward trend in the rate of actual GDP growth as promoted by the business-cycle dating committee of the National Bureau of Economic Research.[1] That private organization defines a recession more ambiguously as "a significant decline in economic activity spread across the economy, lasting more than a few months." A recession has many attributes that can occur simultaneously and can include declines in coincident measures of activity such as employment, investment, and corporate profits. A severe or prolonged recession is referred to as an economic depression.


[edit] Predictors of a recession
There are no completely reliable predictors. These are regarded to be possible predictors.[6]

In the U.S. a significant stock market drop has often preceded the beginning of a recession. However about half of the declines of 10% or more since 1946 have not been followed by recessions.[7] In about 50% of the cases a significant stock market decline came only after the recessions had already begun.
Inverted yield curve,[8] the model developed by economist Jonathan H. Wright, uses yields on 10-year and three-month Treasury securities as well as the Fed's overnight funds rate.[9] Another model developed by Federal Reserve Bank of New York economists uses only the 10-year/three-month spread. It is, however, not a definite indicator;[10] it is sometimes followed by a recession 6 to 18 months later.
The three-month change in the unemployment rate and initial jobless claims.
Index of Leading (Economic) Indicators (includes some of the above indicators

[edit] Responding to a recession
Strategies for moving an economy out of a recession vary depending on which economic school the policymakers follow. While Keynesian economists may advocate deficit spending by the government to spark economic growth, supply-side economists may suggest tax cuts to promote business capital investment. Laissez-faire economists may simply recommend that the government not interfere with natural market forces. Populist economists may suggest that benefits for consumers, in the form of subsidies or lower-bracket tax reductions are more effective and serve a double purpose including relieving the suffering caused by a recession.[citation needed]

Both government and business have responses to recessions. In the Philadelphia Business Journal, Strategic Business adviser Carter Schelling has discussed precautions businesses take to prepare for looming recession, likening it to fire drill. First, he suggests that business owners gauge customers' ability to resist recession and redesign customer offerings accordingly. He goes on to suggest they use lean principles, replace unhappy workers with those more motivated, eager and highly competitive. Also over-communicate. "Companies," he says, "get better at what they do during bad times." He calls his program the "Recession Drill."





Stock market and recessions
This article or section deals primarily with the United States and does not represent a worldwide view of the subject.
Please improve this article or discuss the issue on the talk page. (September 2008)

Some recessions have been anticipated by stock market declines. In Stocks for the Long Run, Siegel mentions that since 1948, ten recessions were preceded by a stock market decline, by a lead time of 0 to 13 months (average 5.7 months). It should be noted that ten stock market declines of greater than 10% in the DJIA were not followed by a recession.

The real-estate market also usually weakens before a recession.However real-estate declines can last much longer than recessions.

Since the business cycle is very hard to predict, Siegel argues that it is not possible to take advantage of economic cycles for timing investments. Even the National Bureau of Economic Research (NBER) takes a few months to determine if a peak or trough has occurred in the US.

During an economic decline, high yield stocks such as financial services, pharmaceuticals, and tobacco tend to hold up better. However when the economy starts to recover and the bottom of the market has passed (sometimes identified on charts as a MACD [18]), growth stocks tend to recover faster. There is significant disagreement about how health care and utilities tend to recover. Diversifying one's portfolio into international stocks may provide some safety; however, economies that are closely correlated with that of the U.S.A. may also be affected by a recession in the U.S.A..

There is a view termed the halfway rule according to which investors start discounting an economic recovery about halfway through a recession. In the 16 U.S. recessions since 1919, the average length has been 13 months, although the recent recessions have been shorter. Thus if the 2008 recession is an average one, the downturn in the stock market should bottom around November of 2008. However some economists fear that this recession may last longer.


[edit] Recession and politics
Generally an administration gets credit or blame for the state of economy during its time.[22] This has caused disagreements about when a recession actually started.[23] In an economic cycle, a downturn can be considered a consequence of an expansion reaching an unsustainable state, and is corrected by a brief decline. Thus it is not easy to isolate the causes of specific phases of the cycle.

The 1981 recession is thought to have been caused by the tight-money policy adopted by Paul Volcker, chairman of the Federal Reserve Board, before Ronald Reagan took office. Reagan supported that policy. Economist Walter Heller, chairman of the Council of Economic Advisers in the 1960s, said that "I call it a Reagan-Volcker-Carter recession. The resulting taming of inflation did, however, set the stage for a robust growth period during Reagan's administration.

It is generally assumed that government activity has some influence over the presence or degree of a recession. Economists usually teach that to some degree recession is unavoidable, and its causes are not well understood. Consequently, modern government administrations attempt to take steps, also not agreed upon, to soften a recession. They are often unsuccessful, at least at preventing a recession, and it is difficult to establish whether they actually made it less severe or longer lasting.[citation needed]

Understanding of the word "recession" differs between economists, newspapers, and the general public. Generally speaking, a recession is present when graphs are sloping down in respect to production and employment. Consequently, a politician can truthfully say "the recession is over," even though little has improved. This may imply to the public that the economy is in recovery, suggesting the graphs are sloping upward, though there may actually exist a period of stagnation, when numbers remain low even though they are no longer dropping.[citation needed]


[edit] History of recessions

[edit] Global recessions
There is no commonly accepted definition of a global recession, IMF regards periods when global growth is less than 3% to be global recessions. The IMF estimates that global recessions seem to occur over a cycle lasting between 8 and 10 years. During what the IMF terms the past three global recessions of the last three decades, global per capita output growth was zero or negative.

Economists at the International Monetary Fund (IMF) state that a global recession would take a slowdown in global growth to three percent or less. By this measure, three periods since 1985 qualify: 1990-1993, 1998 and 2001-2002.


United Kingdom recessions
Main article: List of recessions in the United Kingdom

United States recessions
Main article: List of recessions in the United States
According to economists, since 1854, the U.S.A. has encountered 32 cycles of expansions and contractions, with an average of 17 months of contraction and 38 months of expansion[27]. However, since 1980 there have been only eight periods of negative economic growth over one fiscal quarter or more[28], and four periods considered recessions:

January-July 1980 and July 1981-November 1982: 2 years total
July 1990-March 1991: 8 months
March 2001-November 2001: 8 months
December 2007-December 2008: 11 months and counting*
* Note that this latest recession doesn't meet the traditional two quarter drop in GDP, yet it is considered a recession by the NBER.

From 1991 to 2000, the U.S. experienced 37 quarters of economic expansion, the longest period of expansion on record.

For the past three recessions, the NBER decision has approximately conformed with the definition involving two consecutive quarters of decline. However the 2001 recession did not involve two consecutive quarters of decline, it was preceded by two quarters of alternating decline and weak growth.