Thursday, April 29, 2010

The Big Picture -- Better Late Than Never .....

Barry at the Big Picture makes the following call:

1. The Economy is recovering; The recession is over: Of that, we have no doubt, as the data is clear. The free fall of 2008-09 is over, and a gradual improvement is seen across the board. Industrial manufacturing, exports, autos, retail sales, durable goods, travel all confirm the economy is “healing.”

2. But, the recovery is “Lumpy”: — Part of the reason some people doubt the recovery story is how unevenly distributed the improvements are. Geographically, much of the country is still soft. In retail, it is pent up demand plus luxury goods. In technology, its mobile devices and consumer products. Financial firms are taking advantage of the steep yield curve and ZIRP to arbitrage profits, as opposed to actually lending. Profits are not evenly distributed either.

3. Government spending is only part of the story: In the midst of the crisis, Credit froze, the consumer panicked, and business spending looked to be going extinct. Uncle Sam temporarily bridged the gap.

But the argument that government spending is the only game in town is overstates the case. Private sector CapEx spending and hiring is improving (albeit slowly); Consumers have come out of their bunkers and are dining out, going to the movies, hitting the malls, traveling.

We have not returned to the Home ATM days of 2004-07 — and probably wont in our lifetimes — but the present environment is a massive improvement from the 2008-09 contraction.

Barry should have been reading us; we called it over last August:

1.) The Leading Economic Indicators are pointing up strongly.

2.) Housing sales have bottomed

3.) Housing starts have bottomed

4.) Home builders confidence is increasing

5.) The stock market is rebounding

6.) Credit spreads are at low levels

7.) Traders have moved out of Treasuries and into corporate, junk and mortgage backed bonds

8.) The manufacturing indexes have been improving since the first part of the year and are now printing positive numbers

9.) Initial unemployment claims -- while still high -- have dropped and the rate of job losses has decreased.

10.) Other countries are now printing positive GDP numbers.

Since then we've seen continued improvement.

I should also add the economy is currently expanding in pretty much the manner I outlined last August.