"U.S. economy entered a recession in Dec 2007 marking the end of the 73 months expansion that began in Nov 2001 (previous expansion of the 1990s lasted 120 months). The decline in economic activity in 2008 has met the standard for a recession. The 1.2 million fall in employment in 2008 was the biggest factor in determining the start of the contraction".
Growth forecasts by OMF and OECD are evised downward.. and financial institutions, economists, fortune tellers have been predicting a gloomy Q4 and 1H 2009. Goldman Sachs forecatsed that growth would contract -5% in 4Q08; -3% in 1Q09 and -2% in 2Q09; 9% unemp rate by end of 2009.. Merrill Lynch is predicting that growth will shrink -4.5% in Q4-08 and -4% in Q1-09.. and the ever bearish Roubini makes an intimidating prediction that U.S. will experience most severe recession since WWII, much worse, longer and deeper than 1970s and 80s recessions. Recession will continue until at least 2009-end with a cumulative GDP drop of over 4%, unemployment rate will likely reach 9%. And, gropwth figures from Bloomberg survey - -3% in Q4 and -1.5% in Q1-09 ..
Over the weekend, I was talking to Shakib about the markets and told him that the worst is not yet over and last week's rally was a holiday euphoria... I did want to short the market on Friday, but well,, if only I had enjoyed a little less on Thursday night!! :)
With todays drop of 679 points, DJ and S&P have given up most of the last week's gains.. Now, INDU stands about -39% YTD, NASDAQ -47% and S&P -44%. How far will the stocks fall from here!!.. well., at current levels the indices are still up about 9% from the october bottom.. And there is not sign of any good news from any corener.. Todays manifacturing data from both US and UK was pathetic.. US manufacturing data showed weakness not seen in 26 years, while the UK manufacturing sector suffered an "unparalleled blow" in November according to the latest report on the sector. For US, the report showed that the index of activity in the manufacturing sector fell to 36.2 in November from 38.9 in October, with a reading below 50 indicating a contraction in the sector..
In addition, news from the other corner of the world, China: Surveys of manufacturers suggest that the sector, which accounts for 40% of China's GDP, is in contraction as external demand for Chinese goods falls and domestic demand is depressed by the decline in housing prices and construction sector. Export orders, output and new orders all shrank. Crude steel (-17% y/y), electricity (-4%, the first fall in a decade).. Federation of Hong Kong Industries predicts that 10% of an estimated 60- 70K Hong Kong-run factories in the Pearl River Delta will close this year.
The market, my view, would continue to test the support levels of October.. As Dow reaches 7500, I would start buying the 3X Etfs, though I do fear that even 7000 levels might be breached...
Like always, thought I will compensate for my long weekend posts.. but well..
Song: "Leave out all the rest" - Linkin Park.
Mood: 'Need a hug!!'
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