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1 Four stages of market recovery on Mon Nov 30, 2009 12:10 am

gypsy


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http://news.yahoo.com/s/usnews/the4stagesofamarketrecovery



The 4 Stages of a Market Recovery
U.S. News & World Report



By Katy Marquardt Katy Marquardt Tue Nov 10, 11:25 am ET

Talk about mixed messages. Stocks are blasting off, yet unemployment remains stubbornly high. The economy grew in the third quarter--posting the first increase in a year--so why all the gloomy talk? And exactly where are we in the current economic cycle? Jason Pride, director of research at Haverford Investments, believes we've entered a period of "true growth," when the economy begins catching up with the market. According to Pride, this is stage three of four in a market recovery. Here's his rundown of each stage.

[Why stocks are surging as jobs disappear.]

1. Extreme Sell-Off. Call it the panic phase. Buyers disappear in the market, and spooked investors start selling. "This selling pushes the market down further, hitting more investors' pain thresholds and leading to even more selling," Pride says. "This self-reinforcing cycle causes a downward spiral in the market where the decline actually accelerates on the way down." Consumers begin to delay big purchases, and companies start to lose confidence, reflected by cautious commentary and a more conservative outlook for their businesses, he says. They also start putting off inventory purchases, and perhaps they don't hire workers that they would normally hire, Pride adds. "The economy and the market are doing things at the same time," Pride continues. "Normally, the market and economy even accelerate a bit into the downturn, and at some point, stage two occurs."

[See how long it will take to recover your investment losses.]

2. From Burn to Turn. At this point, the market and economy look so bad that it doesn't take much to see improvement, says Pride. "Valuations drop to absurd levels for a number of stocks. Buyers start coming in, and people start to nibble." Pride believes this stage began in March, when stocks hit bottom and were trading around nine times normalized earnings (roughly half of the historical norm). "At this point, some investors' eyes open," he says. Companies start sounding more upbeat, as they've set the bar so low for earnings estimates that even a small dose of positive news allows them to beat expectations, according to Pride. "Those initial achievements come primarily from cost-cutting measures . . . and that starts getting investors' attention. The market starts to move off of that bottom, and you start seeing companies beating estimates. You start to see early signs of life," he says. "Remember, between March and July, people started commenting that things look 'less bad.' "

3. True Growth. This is the stage Pride believes we're in now: "We've seen slight improvements in housing, and initial jobless claims start turning. We've seen companies actually beating on the top line and not just the bottom line." Other signs: The economy begins to post growth, along with some international economies. "Everything is not completely back to normal, but the path back to a more normal economic environment is becoming more visible," he says. "Early indicators of employment--initial jobless claims--begin to improve, but unemployment is still rising and has not started to decline yet." Pride expects this stage to continue up to around the end of the year.

4. Sustained Economic Growth. "Here's where real, sustainable economic growth comes in," Pride says. "Top-line growth and overall GDP growth, having set in for a number of quarters, actually leads to job growth." Then comes inflation. "Everyone is worried about inflation now, worried that we're not going to see employment turning, but these indicators tend to be very lagging in nature. By the time inflation turns up, the economy will be in better shape, employment will be improving, and the Federal Reserve will have greater flexibility to contain inflation going forward without choking off a nascent economic recovery." But don't expect this growth period to mirror past recoveries. Pride believes it's likely to be subpar because of two factors: "First, the government did a lot to stimulate the economy, and there's a payback for this. The stimulus that was used to save us from a more dire economic scenario will have to be removed, and the deficits incurred will have to ultimately be reduced. The act of removing the stimulus and paying back these debts will restrain future economic growth," he says. "Second, the consumer remains overleveraged and needs to get their personal balance sheet back in order. This can only be done through higher savings, at the cost of their spending and the economic activity that results from it."

Even though growth will be somewhat muted, Pride says, "we don't think that means it's going to be a really bad economy, but it's not going to allow us to operate at 3.5 percent to 4 percent GDP growth . . . maybe more in the 2 percent range."

2 Re: Four stages of market recovery on Mon Nov 30, 2009 7:14 pm

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gypsy wrote:Jason Pride, director of research at Haverford Investments, believes we've entered a period of "true growth,"

I'm not sure if this person is actually living in the real world.

First we have to get rid of people turning on the money presses. First we had a lot of private debt, now the government has turned this into public debt. And at the same time they are paying this public debt with money that doesn't exist. If this doesn't end soon will end up with hyper-inflation. Not that the government would care, because that would inflate their debt right out the window. People with pension plans are screwed though.

3 Re: Four stages of market recovery on Mon Nov 30, 2009 8:09 pm

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Sandy P. Raakma wrote:
gypsy wrote:Jason Pride, director of research at Haverford Investments, believes we've entered a period of "true growth,"

I'm not sure if this person is actually living in the real world.

First we have to get rid of people turning on the money presses. First we had a lot of private debt, now the government has turned this into public debt. And at the same time they are paying this public debt with money that doesn't exist. If this doesn't end soon will end up with hyper-inflation. Not that the government would care, because that would inflate their debt right out the window. People with pension plans are screwed though.
....as posted here before by MOST of us. Unfortunately, the fawning,blind, stupid adulation of Obama shades reality beyond view. "Obama-ism" is a new religion vigoroulsly practised and preached. This entire economic "crises" was precipitated by do-gooder Democrats (Frank,Dodd) effectively "printing" fake money by removing any reasonable restrictions on real estate loans at Fannie and Freddie mac. We were duly warned of the unintended consequences but now,as then, do-gooders don't care about the real costs. After all, can't the government just print more money to fill the buckets back up? A circular argument that generated an economic whirlwind. We have reaped it. Sadly,the truly stupid don't have the capacity to learn and THAT is good argument for some people to be disqualified from voting. We don't allow children, the insane, felons, or chimps to vote; why dumbasses?

4 Re: Four stages of market recovery on Mon Nov 30, 2009 9:01 pm

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meemoon wrote:This entire economic "crises" was precipitated by do-gooder Democrats (Frank,Dodd) effectively "printing" fake money by removing any reasonable restrictions on real estate loans at Fannie and Freddie mac.

If I were American I'd want to go back to the gold standard, so that no fake money-printing would be possible anymore. Ron Paul would have my vote.

I think that blame can be placed almost anywhere on the political spectrum. This already started with the previous administration believing that everybody (even those with no income, no assets, no job) "deserved" to own a home. I think you only deserve to own home when you can actually pay for it or have a decent job to get a decent mortgage.

As to your suggestion to only allow 'qualified' people to vote...it may not be PC...but I agree. Let's think of some criteria. Who would be allowed to vote and who wouldn't? I'll go first:
- you must at least make $1000 a year to be allowed vote

5 Re: Four stages of market recovery on Mon Nov 30, 2009 11:01 pm

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"If I were American I'd want to go back to the gold standard, so that no fake money-printing would be possible anymore. Ron Paul would have my vote." /// I cannot agree. A 'gold standard" does not make sense when we are dealing with an expanding population and expanding economies. It would never work because gold supplies are limited to mining results,not need. There is nothing wrong with you or me buying a new car on credit if we can make the payments. Or a house. Or consumer goods.

"I think that blame can be placed almost anywhere on the political spectrum. This already started with the previous administration believing that everybody (even those with no income, no assets, no job) "deserved" to own a home. I think you only deserve to own home when you can actually pay for it or have a decent job to get a decent mortgage." /// Factually incorrect. It did NOT start with the last administration believing as you said and I can't for the life of me understand how such nonsense comes to be believed. The doors at Fannie and Freddie were opened by Senators Dodd and Frank long before Bush climbed on that bandwagon. You're just repeating ant-Bush propaganda. Try doing a fact check. The Republicans NEVER,nor would they EVER, support such lending practises. Even the Democrats would deny such practises as being acceptible,but they did support them, nevertheless.

"As to your suggestion to only allow 'qualified' people to vote...it may not be PC...but I agree. Let's think of some criteria. Who would be allowed to vote and who wouldn't? I'll go first:
- you must at least make $1000 a year to be allowed (to) vote." $1000? That's less than a month's pay at minimum wage and would exclude women who stay at home and some retired/disabled people. Nope, I think if one cannot pass the tests given to those who are applying for citizenship you don't deserve the right to vote any more than they would if they fail it. One can always take a verbal test if you have limited literacy skills and they can also keep trying, eh?.

6 Re: Four stages of market recovery on Tue Dec 01, 2009 12:00 am

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As shown, the doors to the bad loan money were opened in 1977. So why did it take so long for the boat to sink? It took that long for the Wall St. parasites to design and start trading in "derivatives" and other instruments that transformed mortgages into just another commodity. These events had NOTHING to do with the "last administration" and EVERYTHING to do with Democratic efforts to "share the wealth". "Community Reinvestment Act"
From Wikipedia, the free encyclopedia
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The Community Reinvestment Act (or CRA, Pub.L. 95-128, title VIII, 91 Stat. 1147, 12 U.S.C. 2901 et seq.) is a United States federal law designed to encourage commercial banks and savings associations to meet the needs of borrowers in all segments of their communities, including low- and moderate-income neighborhoods.[1][2][3] Congress passed the Act in 1977 to reduce discriminatory credit practices against low-income neighborhoods, a practice known as redlining.[4][5] The Act requires the appropriate federal financial supervisory agencies to encourage regulated financial institutions to meet the credit needs of the local communities in which they are chartered, consistent with safe and sound operation (Section 802.). To enforce the statute, federal regulatory agencies examine banking institutions for CRA compliance, and take this information into consideration when approving applications for new bank branches or for mergers or acquisitions (Section 804.).[6] /// Christopher Dodd was chairman of the Senate Financial Services Commitee that was mandated to oversee and enforce "sound loan practises" We have seen the results.

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