Thursday, August 06, 2009

RateWatch - Summer Hatin', Not Having a Blast

Market: We're down another 9bps today, over 100 from Monday's open. Today, if things hold, we'll see four straight days of red candles on the chart. As previously mentioned, there has not been a five-red streak on the bond market for more than three years. Records are made to be broken, but...

Analysis: Economic news has been less bad than expected for most of the week. The gummint is auctioning off $75 billion in treasuries next week. Traders are still vacationing coming into the fall session, and Congress is about to go on recess. Combine all this, and the markets are less jittery than they were, which pulls money from bonds and puts it into stocks, making interest rates rise. That's the explanation.

The real question is: is the recession over? Newsweek says so, for what that's worth, and there are some signs that we may have reached the bottom of the trough. Personally, I'm not so sure. If by "the end" you mean that things are not going to go on getting worse forever, and that we are seeing a slowdown - even a stop - in the decline, then perhaps this could be the end. If by "the end" you mean that the economy is going back on the offensive and a recovery has begun, then no, I think you're out to lunch. Most people think of the end of something as the point where that something stops and something new starts up. By that definition, not only is the recession not over, it hasn't really gotten started yet.

Lessons should be learned from the Great Depression, which this recession mimics in many ways. The decline was steep and sudden, but that's what we usually call a "crash". The thing that put the "Great" in "Depression" was the length of time before things came back to where normal would have been. That's what makes me more cautious here. I think it likely that we could be in this trough a very long time. It takes some years to undo the calamity we spent 30 years getting into.

Keep saving, keep paying off your debts, keep working even if you don't have anyone paying you. That's the way out, no matter what the broader economy is doing.

Chris Jones
City 1st Mortgage Services
P.S. Apropos of this, I've finally posted something that's been percolating for a few months. It's called The Most Important Post of My Life, and I'd be grateful if you'll take a second to read it.

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Blogger earlfam said...

I think you're exactly right. Even if we're close to the bottom (and we certainly could fall a lot further) it's going to be a looooooong time before we start heading back up the other side. Especially here in Las Vegas where the depression is at it's worst. I no longer plan to be able to sell either of my houses before the mortgages are paid off. I think it will be that long before things "recover."

It's a good thing we can pay those mortgages.

12:42 PM  
Anonymous best bank rates said...

If we consider today's scenario of market, it is not at all stable and keeps on fluctuating daily. One cannot rely on the results of today for doing business tomorrow.

4:59 AM  

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