Some interesting observations....over the last few weeks we have all heard about disappointing earnings and yet the talking heads keep saying that a recession will be averted. I doubt it. i don't see a recovery happening yet, and the CSCO earnings is a prime example of what is going on. What you don't hear however, is how this effect has trickled down to smaller businesses and the average joe. Take a survey and ask some people who are job hunting whether it is easy to find jobs. I'm sure you will find many having a difficult time or taking pay cuts to find something new. Ask around on some local busninesses and see how things are going. I think you will be surprised to hear what they have to say.
A friend of mine in Cincinatti who works for a computer firm had to find another job because the company was struggling. The company sells large computer systems for processing. They normally sell 2-3 of these per month. Do you know how many they have sold since January?...3. My brother who has a job that has close ties to the auto sale industry recently asked one of his clients at a large car lot how business was going. The lot sells on average of 30-40 cars per month. Last month, they sold 4.
V shaped recovery off the bottom for the economy? I don't think so. Anyone who does better take a look at the numbers and do a little asking around. The economy is still deteriorating by what I see and interest rate cuts are not going to help, in fact at this point, they may make things worse. Why? Interest rate cuts help the short term loans. If you check the 1 year to 30 year you'll see that the curve is in fact steepening in response to the interest rate cuts. What that means is that short term rates are going lower but long term rates are going higher. Now ask yourself... when anyone, corporate or individual, takes out a loan, what is the time length involved> when has anyone ever taken out a 2 year mortgage on a house? How many common people do you know that can afford to take out a 1 year car loan and make payments on this. If a corporation takes out a 10 million dollar loan, do you think they will be paying that back in 1 year or less? Ask someone who has bought a house recently whether that 2% rate cut was factored in to a mortgage and you'll be surprised how these rates actually responded.
Don't fool yourself....we have yet to begin seeing a recovery and it won't be happening soon. the market's current rise is being led by false hope for that 2nd chance to make big bucks. Whether we go higher from here or head back down, in the long term(1-2 years), stocks won't be anywhere near where they are now, and I am not talking about higher prices. |
