Give me a sign, why don't ya?

(3 Feb) While doing my wrap-up report on the radio last night, the gentleman who is the host commented that what most people are asking is "when will we know the market is recovering?" I tried to answer in the few seconds I had but didn't do as good a job as I would have preferred. So, I'll expand on it now.

As I talked about previously, the Q4 GDP was down but not as much as many had expected. It was a good news bad news thing since the reason it didn't fall as much was due only to the fact that there were unused inventories. This suggests that our Q1 data won't be so hot.

Add to that the really bad weather we had all across the country in December and it becomes pretty hard to say that the biz activity then is representative of what's to come this year.

So, if that's not a good indicator, then what is?

The US monetary policy is the key to the deal going forward. The historically low interest rates and the first dribblings into the economy of the TARP money are good indicators that the current policy is quite relaxed, shall we say.

We definitely are continuing with challenges in the financial markets but there are other early indications that we're getting ready to rumble. So, let's look at those so you can track them.

After peaking in July, commodity prices went down faster than they had appreciated. This was showing that the economy was definitely slowing at the time. Metals, such as copper, aluminum and gold have all stabilized now. (Some say the big run up in gold is a flight to safety thing but US Treasury bond yields having appreciated a bunch of late say no.) If there was this depression that the media has decided to try and talk us into, the prices would not have settled in here.

This time, it's different

That's what gets said in every up or down market. It's never true - really. Sure, the details of how we got here and things change, but the underlying "stuff" remains the same.

About every 5 years, in the normal scheme of things going back to, at least, 1805 in this country, we have a recession/bear market. If you do the quick math, our last bad market was 2003, so it looks as if we're tracking fairly closely. Since the bad recession of the early 80s, it seems to have been the typical response of investors that the monetary policy of the time wouldn't work and that the world was ending, etc.

It's my firm belief and conviction that this time is not different and that the policies being put into play will have the intended positive effect. (This has nothing to do with this so-called "stimulus" plan.") Like all things governmental, the time between implementation and action lags. The impact of these low rates and easy money will begin to lift us before too long.

In the current scheme of things, we'll probably see tangible proof by mid-year and, since the markets anticipate things, an improvement in the market numbers ahead of that...