The Recession is Over... Say What?

“The Recession Is Over,” reads the headline of The Globe and Mail today. The staff leaves the paper in front of our rooms here at that Fairmont Vancouver. When we cracked the door open to retrieve the rag, the headline caught our eye… and we thought of just tossing it back in the hallway. If there is any one single theme of this year’s Investment Symposium, it’s that despite the warm feelings and “green shoots” of summer, this contraction is far from over.

“I think this is really serious, and it’s just beginning,” Doug Casey said during his presentation yesterday. “Forget about the green shoots. They are weeds. This is the biggest thing since the Industrial Revolution. Stocks will be a good value when dividend yields are around 10%.

“Real estate? Way too early. Bonds? The bond market is much bigger than the stock market. Interest rates are being artificially depressed. They have to go back up to higher levels to encourage people to save and get out of debt. When interest rates assert themselves, the bond market will collapse, which isn’t good for the stock market, or real estate, either.”

So what’s Doug doing? Going long precious metals, shorting U.S. Treasuries and buying real estate in Thailand and Argentina.

“We are looking for eight signs before we get bullish again,” added Eric Roseman in his presentation:

1) Unemployment must stabilize

2) Home prices must stabilize

3) Domestic consumption must rise

4) Bank lending must grow

5) Toxic assets and bank balance sheets must be fixed

6) Auto sales must stabilize

7) Credit spreads must narrow

8) The dollar has to decline

“Only the last two have occurred. That gives us a very bearish outlook going forward.”

By the way, what did the G&M mean in their “recession is over” headline? Heh, the Canadian central bank predicted that the economy would grow 1% in the current quarter. Forgive us, but our faith in central bank forecasts ran out a long time ago.