In these days of economic doom and gloom, I would like to be one of the first to climb on my soap box and take a big risk by saying that: I think that the worst may be over. That's a bold statement with the stock market in the pits, the unemployment rate projected to climb up to 10% by next year, and some big name companies on (the wrong side of) the brink of collapse. Still, I am getting a hunch, and its nothing more than a hunch at this point, that the worst may be behind us. Here are my reasons:
The world isn't ending - yet everyone is acting like it is. Back in September and October (seems like eons ago), it seemed like we were on the precipice of disaster. Personally, I was concerned that the banking system as we know it might completely cease to function. It looks like this is not happening. While some big name banks have gone under in a massive wave of bankruptcies and fire sales, the system is still here. I have been tracking the LIBOR rates - which show the interest rates that banks are charging each other, and rates have been progressively going down since the worst of the crisis. Is some semblance of confidence returning to the markets?
Stocks have slowed their descent - month over month my Quicken reports still show that our portfolio has lost value. However, on a weekly view, for the past few weeks the market has been moving more or less sideways, and in the past 14 days the direction has been up. Could it be that the low of 741 we saw on the S&P 500 just a few weeks ago might be the illusive bottom? Or is this a bear trap we're looking at?
Liquidity galore - the amounts of money that governments around the globe have been throwing at the economy are simply staggering. We are talking multiple trillions here. You gotta believe that all this money has got to make a dent in the problem. Now whether this is a good thing in the long run and whether we'll see rising inflation and a crumbling Dollar in the future is a different question that we should leave for another day, but all of this stimulus should be... stimulating.
The shock is gone - I talk with a lot of people. Over the past couple of months everybody wanted to talk to me about how the economy was horrible and things were going to hell in a hand basket. Over the past few weeks it seems to me that the shock has worn off. These days I don't hear a lot of chatter from folks about how they are losing a ton of money in the stock market and how the latest news will mean disaster for the economy. I think people are more or less resigned to the situation and in their own careful way, are getting back to business. I think this will eventually translate into more robust economic activity.
I don't know, I may be imagining things, but I think that the worst may be over. Don't get me wrong, things aren't going to be great all of a sudden, and if you are out looking for a job in this climate, you are not going to have an easy time. However, I think we may be going from a class 5 hurricane to a class 3 hurricane. It's still pretty bad, especially when it hits you directly, but it's just slight less horrible. Thoughts anyone?