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If Recession End is Here, is it Time to Get Into the Market?

August 19, 2009 by  

If Recession End is Here, is it Time to Get Into the Market?

Unless this turns out to be a double-dip recession and the economy is simply giving us a head fake with recent data, economists will eventually look back and mark this period as the end of the recession that began in 2007.

As I noted in the July 27 article, Summertime Doldrums return as Old Adage Holds True, a number of bullish economists were predicting that last month would be the first this year to show growth in industrial production.

But looking at arguments from both the bulls and the bears, I thought the end of the recession was at least a few months away.

But positive news on housing starts (up 3.6 percent in June; 582,000 vs. consensus
531,000) was the last shred of evidence I needed to convince me otherwise. And I’m not the only one: Based just on jobs data showing a dramatic reduction in new jobless claims and the very recent up-turn in the Ratio of Coincident to Lagging Indicators, Dennis Gartman (thegartmanletter.com) was the first to declare an end to the recession.

To be sure, Dennis has been way out front on this for some time, noting how important these two indicators are, and how reliable they have been in determining the precise ends to previous recessions. If they are to be believed, they have done so again.

So what does this mean for investors?

From an economic standpoint, we will still see bad news aplenty, including an unemployment rate that will continue to rise for some time.

As far as our approach to the markets, the technical end to the recession is also less important than you might think. Trading in stocks and commodities will continue to be exceedingly volatile, as speculation drives them to levels far ahead of the economic data, only to see profit-taking and the occasional dropping-shoe send them hurtling back downward.

For gold and the rest of the metals complex, it will continue to be a case of watching the bouncing dollar. Whatever drives the greenback higher or lower, will push gold quickly and decisively in the other direction.

China Takes the Gold
In the world of gold, China has seized the lead in the two most important categories: supply and demand.

The Middle Kingdom had already captured the title of world’s largest gold producer, thanks to its surging production and South Africa’s tumbling output. But now, according to the World Gold Council, China’s economic recovery has vaulted it to the top rung among gold consumers.

The council notes that gold jewelry demand rose significantly in the first quarter of 2009, while gold demand in India plummeted. This allowed China to overtake its fellow developing juggernaut in terms of gold demand.

Specifically, Chinese gold demand rose from 103.3 tonnes to 105.2 tonnes, in the first quarter, while Indian demand fell 83 percent, from 107.2 tonnes to 17.7 tonnes.

We’ll see if this trend can hold true for the rest of this year, but gold bugs should hope it does not. Last year, India soaked up 650 tonnes of gold, compared to China’s 400 tonnes. While rising Chinese demand is good news, we’ll need India to return to the market to underpin this bull run.

Brien Lundin

is the editor and publisher of Gold Newsletter, a publication that has ranked among the world's leading precious metals and resource stock advisories since 1971. To learn more about Gold Newsletter, visit www.goldnewsletter.com. Mr. Lundin is also the host of the famed New Orleans Investment Conference, the world's oldest and most respected gold investment event. To learn more, visit www.neworleansconference.com.

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  • Beepster

    If you think the end of the recession is here, you have a better Fairie Godmother than I have. The decrease in job claims is mostly due to no job availability, and the people seeking employment know it. Also, their time limit on drawing unemployment has been met. Also, you have the “never been employed” youngsters that can’t draw unemployment. Better take another gander around the block!

    • Jeff

      I agree. There is a point when new jobless claims will cease because everyone will have already lost their jobs. As of this reply, hundreds of my coworkers have lost their jobs because of greedy top level managers and executives. More are going to be laid off in the next month. Many at my palce of work are fearing that the entire facility will collapse in the next year. What is sad is that this business has been very successful. Yes, our business has had ups and downs with the economy, but we have always (and are) quite profitable. Execs of course insist that we must cut back, consolidate etc. because of these tough times. Well, the people who have worked at our facility shouldn’t be faced with tough times because it has been a good business. Now many are going to have to collect unemployment because corporate nerds think that billions of dollars in annual profits are not enough.

      • Buzz

        new unemployment claims have gone up for the last two weeks. Housing starts are down 37.7% from last year, and new building permits are at an all time low. Is this guy smoking something funny?

  • Jon

    This recession is far from over. Don’t trust the numbers coming out. They are all rigged. Cash for clunkers is a scam to improve the economic numbers yet it destroys real assets and puts coinsumers further in debt. History also shows (if we can look back to the great depression) that bumps will happen followed by larger and longer declines.

    • http://aol Don

      Then I won’t pay attention to the numbers that said we were in a recession. Do you only pay attention to the bad numbers and not the good numbers? So if the numbers don’t support your theories, they must be wrong?

  • Mary Harris

    The recession is far from being over. We have a lot of foreclosures to come on the market. What about GE and all the employees losing their jobs in about 1 year. The liberals are putting a spit on the economy. I don’t believe it is over.

  • DixieConnie

    Don’t you know nothing is ever over until the fat woman sings, and I haven’t heard her yet.

  • DixieConnie

    On this healthcare reform, why don’t we let the people in Washington DC making all of the decision, pay for the ones that don’t have the opportunity to have health care. They seem to have all of the money and answers. “Put their money where their mouth is.”

    Or better yet, maybe we should all just send our paychecks straight to Washington DC and let them pay for everything. They can pay my health care insurance, my mortgage, put gas for my car and I won’t have to worry about another thing. I am beginning to think that is what they (the liberals) want to happen. Then what?

    • Jeff

      DixieConnie,I think that is what they want. This is one way in which they can control you and I. Yes, we won’t have to worry. The goverment will take care of us, and…..they will tell us where to work, how much we can earn, what kind of health care we can have…on and on. And you know what? A time is coming very soon where they will attempt to mark each of us with a micro-chip. This could happen soon, some want to do this (check out Revelation in the Bible also, chapter 16 I believe, chapters around this). You can research “veri-Chip” online. THis technology is real. I work in a technology related environment, and I can tell you that much is possible if we are to be marked with tiny micro-chips. Bad news, even if you don’t want to believe as Christians do. It won’t be good. And its real and possible.

      • DixieConnie

        Jeff: I do agree with you. Only time will tell what is in store for us. I’ll keep praying.

    • Buzz

      Dixieconnie, historically it works like this,
      The government decides that it should take your money to help others (the elderly the feeble etc)
      This has a detrimental effect on the economy(more and more need help)
      Then the government must take more control of everyones lives to make sure that those which can pay do and those that receive aren’t cheating.
      In a democracy this type of control is impossible and leads to chaos. Then out of the chaos a strongman comes along to fix the system.
      In the last century their names were Adolph, Benito, Mao, Pol pot, Tojo, And Vladimir.
      Whos next?

  • don’t worry be happy

    I hope you are right about the recovery but I have my doubts. If you take all the money being dumped into the economy by the Feds and subtract that from the small gains we have seen you have to conclude that things are actually getting worse. Without the artificial uptick from the stimulus there is no net gain.

  • chris

    BS

  • David

    It’s a temporary blip at best. Stock market is happy because the dems are getting beat up on health care, cap/trade and card check.

    • http://aol Don

      You are correct. I’m making a lot of money right now off my stocks. Monday was a bad day, but the rest of the week I made up for it and then some. The stimilus is working for me, but I control my own stock. You can too by buying the internet stock and buying some magazines. You will also learn more about the economy and businesses rather than through the political channels even though I do both.

  • woodburner

    Dude, you should know better. They can’t keep printing and flooding the market place with worthless dollars and then say the economy is turning around. No way.

  • Glenn

    Yep, the recession is over. Now the depression begins.

  • DaveH

    There is a strong possibility that stock prices will go up, but most of that may be purely a reflection of the dollar being worth less. More dollars chasing fewer investments.

  • Mtmtman

    The recession is over? Chip, what in the world have you been smoking?
    With the true unemployment rate about 19%(and going higher), the arm’s on commercial real estate about to reset, 80%+ of the stimulus money going to the bankers/cronies of the federal reserve, manufacturing index way down, any reported slowdown in unemployment is a result of more hiring by the federal government who produce NOTHING but regulations to destroy capitaliam, the cap and trade fiasco and it’s effect on the economy etc, etc. With sincere respect for your intelligence and writing ability, I would strongly suggest that you take at least one good course in Austrian economics. It will take at least 3 to 4 years to undo the damage done by Bush’s stupid wars and push for a one world government and Obama’s Marxist push to destroy the US to even start to turn the corner toward recovery. And that is assuming the American people are mad enough through out Obama’a Marxist and 99% of the crooks in DC in the next year. ol griz

  • http://personalliberty,com Ray Reynolds

    12 for 12…No one is buying that the economy has turned around. Rise in stock prices with cheaper money sounds reasonable, but the looming factor is the spending/income ratio, now dropping to 60%, far worse than even the Bush years. We are spending like we have it, but the income (taxes) are dropping like Paris H’s panties. No income, lots of outgo… try to build an economy on that.

  • gmiller

    Dennis Gartman is an idiot, for saying the recession is over and for being nearly always wrong on his gold calls. Look at the REAL fundamentals. The government, Fed, Fannie Mae, Freddie Mac are bankrupt, the banks are walking dead (when you use mark to market, realistic reserves, true bad loans, and unexecuted foreclosures/sales). True unemployment is over 20% per Shadow Government Statistics, true GDP shrinkage in 2Q09 was triple the phony govt. numbers.

    Chian and Japan are ready to foreclose on deadbeat Uncle Sam. Got gold and silver?

  • http://personalliberty.com James C.

    You have got to be a fool to believe this recession is over and the US economy will return to robust growth. The US govt. is spending money far in excess of tax revenues. Printing money we don’t have. Additionally, the govt. has no way of paying for future Social Security and Medicare payments it has promised. Higher taxes are inevitable, which will depress business activity further. Hyperinflation is not too far away either, given the huge increase in money supply.

  • Norm

    The recession is not over by a long shot. But the economy has improved greatly from where it was at the end of last year and the beginning of this year. The stock market has stableized and has improved in many areas. The Bush and Obama loans, as vile as they were, have halted the “hell in a handbasket” scenario that we were in. I believe job creation will eventually occur, but employment gains will be slow and full employment may never happen. The bailout loans may actually prove profitable for the treasury. The biggest problem is the huge federal defecit. The upper tax rate needs to be raised toat least 45% from its present 35% (It was 90% when Ike was president).

    • DixieConnie

      I don’t believe anything about the economy recovery. I believe people have stopped with all of the panic attacks. One can stay in a state of hysteria for just so long. Anyone and everyone can spin anything and everything anyway they want to but unless it affects you personally, it really doesn’t mean much. Just look at Mr. Obama and his family, the down turn in the economy sure does not seem to be bothering them, they are once again on vacation. Must be nice to be the King & Queen.

      • http://aol Don

        You might be correct about vacation time for Obama. He will never get close to Bush and Reagan. Bush totaled 2 years out of 8 and Reagan even more. I’m an independent, and feel they all take too much time at our expense. Clinton was horrible at his end. He spent more of our money than anyone on vacation. They should have a contract about how much time they have to put in. In all they probably average 4 hours a day, if that.

    • eyeswideopen

      Norm, you and Don are the only ones in here that truly understand the stock market, and basic economics.. I guess most of these people have not ridden out the many recessions that we have. This younger generation wants immediate fixes to everything,and has no patience to delay their desires. We were lucky our parents taught us to save,and not to extend ourselves to the breaking point. Economics used to be mandatory in high school. That’s where most of us learned that true capitalism non-regulated will cave in on itself. These kids are so much smarter than we were, but they arenn’t learning basic living/survival skills. Maybe that’s why they are so angry? Probably it’s justified.

      • DaveH

        You must be kidding eyes. You honestly believe you are going to learn about free markets in a government-run public school?

        • eyeswideopen

          No, Dave, I learned about economics from a government owned public library and a government funded college. But the first exposure was in a government run public high school.

    • TeresaE

      Your tax plan will cost JOBS.

      There is NO MAGIC money tree and higher taxes equate to fewer American jobs and higher costs for the few left working.

      It has been shown/proven, time and again, that HIGHER taxes create LOWER tax collections.

      Finally, don’t lose sight of the FACT that the more the “rich” pay, the more they write the laws.

      They already do that, don’t give them MORE power. Class warfare is being used by the Democrats to steal from the working. Not the “rich” but the working.

      The rich, just like in Russia & China, will still be rich. We will just be collectively poorer.

      • DaveH

        Right on Teresa,
        If eyeswideshut would spend a little more time reading about free markets, instead of wasting her time patting herself and Don and Norm on the back, she would know that.

  • Rich

    eyeswideopen I have to agree with you on this 100%, but I don’t consider myself older at 36 heh. I took economic classes and did stock away some money, unfortunately I got laid off in 2002 and went through that and then some trying to keep up and am just now getting back to even and trying to rebuild what savings I had. We all go through rough patches, but I believe in Capitalism, though I also am not foolish enough to believe that government can sit idly by and not regulate it at all. Hopefully the worst of the recession is over and the growth trends are back on the way. I am not saying they are or are not, just I hope that the article is right, as I may have taken personal econ classes I am about as clueless as a nun in a dildo factory when it comes to national or international economics.

    • eyeswideopen

      I hope so too, and I would like to apologize to you younger kids, I was not responsible with my vote and I am sorry. It took me way too long to get upset and actively get involved. Us dildo’s are all running loose looking for somewhere to go!! You are not alone. The rough patches us older folks have previously endured, is nothing compared to the mess we have today. We were just a little more prepared. Good Luck, keep the faith.

  • TeresaE

    I own an industrial fastener company.

    The real recession, for the readers of this site, is not over.

    It is accelerating as are our expenses.

    These same pundits were telling us in July of last year that there was NO recession and that the problems were oil speculators.

    Well, cost of gas fell and guess what? We are still in a recession.

    Michigan has been touting recovery being around the corner for 6 years, anyone else know how great it is here?

    • DaveH

      Teresa,
      I’ve said this before in other comments, but this isn’t the first time that the oil companies or the speculators took the blame for recession and high prices. The government is like a magician distracting us with one hand and doing the dirty deed with the other. When they print an excess of money (through their proxy the Federal Reserve) the result is more dollars chasing fewer goods, thus we get inflation. Somehow the oil companies have managed to get people in high places on their bad side and then get blamed for what is strictly a monetary phenomenon.
      The oil companies are saddled with an abundance of regulations and extra taxes and must navigate an extroadinary maze of obstacles to find and get that oil to the gas pump and other destinations. When I see all the cars on the road and the tremendous amount of fuel they are using, I am amazed and thankful to the oil companies for all they do to supply us with that oil.
      I really don’t hold much hope for our country, as I believe that we have nearly reached the end of our republic/democracy as predicted over 200 years ago by Alexander Tyler.
      But maybe enough self-proclaimed experts like eyeswideshut will start using their intelligence to learn about free markets and the dynamics of liberty. And maybe we can get this freight-train stopped before it runs off the cliff.

      • eyeswideopen

        You must be pissed off because you read what I put in the site,” They swallowed the Mouse”, which Bob, took off the main menu.
        I only did the research which proved that we aren’t a representative republic, which you kept quoting. I haven’t held myself to be an expert, unlike you, I just research statements made and come back with the facts. Facts are facts, just like truth is truth.
        You have a problems with Norm and Don, Smilee, and me because we call you on your stuff. You are also mad because you accuse people of name calling when you do that yourself.
        I understand the dynamics of liberty, I have watched as Bush hijacked the laws of this country, where was your voice against: wire tapping, torture, the war, profiling innocent Americans, and letting wall street run wild.?
        From your comments it sounds like you really hate this country and for that I am sorry.
        It is strange that you have such a kind heart towards the oil companies, oh, you must work for them.
        A Libertarian who thinks we should be dependent on oil companies?

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