Posts Tagged ‘banking.’

What Is A Double Dip Recession?

Like a mythic beast from a childhood story that magically comes to life, people are unexpectedly experienced with the very true chance that we may actually experience a double dip recession.

Investopedia defines a double dip recession as: “When gross domestic product (GDP) progress slides back to negative after a quarter or two of positive growth.  A double-dip recession refers with a recession followed by a short-lived recovery, followed by another recession.”

Keep in mind, in markets, perception is the one truth that matters.

Right now, market participants are truly concerned that the worldwide recovery is in serious problem.  As we experienced in the year 2008, recessions kill gain visibility.  And when institutions have no profit visibility, they sell shares.  That is really as simple as that.

Let us not step in advance of ourselves yet, though — this is still too premature to tell if the emerging economic recovery is finished or just taking a break.

We’re incredibly oversold, and definitely due for various type of relief rally.  But, it is difficult for me to view this pullback as a new buying chance.

My concern is that I’m struggling to see where the following wave of huge development will come from.

Driven through extremely lax lending standards, along with good old fashioned company thievery, China looks to be in the border of its own banking crisis.  Hence I don’t tell China coming to the rescue of a global economy.

The US is slowly crawling back, however the common US consumer is still 15-30% below water on their house, along with still mired in personal debt.  As all that’s true, yesterday’s consumer confidence records are pointing with a further confident customer.  Consumer Confidence rose to 63.3, up from April’s 57.7.  This was about 4 points better than expected.

A common problem with this figure is that it doesn’t consider the recent market weakness and also insanity occurring in North Korea currently.  (North Korea sunk a South Korean Ship, they deny it, has threatened war, and now have at present stop all ties with South Korea.)

The 3 keys for return of the US customer are job growth, job safety, along with having access to credit.

Almost everyone suspect that when they haven’t been let go yet, so therefore they perhaps won’t be.  This is helping people feel more secure in their jobs.  Then again, a crashing share market doesn’t bode well for improved corporate employment.

Latest economic system functioning their way through Congress may finish up restricting credit to small firms as well as individuals.  Thus I don’t observe the latest credit growth leading the best way forward anytime soon.

Therefore, without access easy credit and a steady supply of new nice paying out job opportunities, I can truthfully tell that I’ve no thought where the fuel will come from to have consumers spending again.

And then we’ve Europe …

The problems in Europe are very factual. These guys fired a trillion dollar missile on their sovereign debt problems, and it even now doesn’t appear to be enough.  The European banks are in serious, serious trouble.  If ever the European financial system slips back into recession, you will short the complete European bank sector into the ground.  I even now believe that the European financial institutions are a short on almost any prove of power.

Thus it is difficult for me to determine the bull case now, however but it always is while things look this bleak.  As oversold as we’re, I am not seeing the kind of total damage that one generally sees in a capitulation bottom.

So, long tale short, in lieu of an declaration of particular sort of transformative policy response, I’m probably going to address any rallies with uncertainty and err at the short side instead of the long side.

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