....we see in the 4 quarters after a recession (or material "adverse economic cycle"), starting with the first quarter of "strong" growth (5% or higher)? Here's what the statistics show us (conclusions to follow):
Conclusions: The first 3 quarters, off of a recession, are typically quarters of VERY strong growth. This upswing is particularly pronounced after particularly STRONG recessions (in modern times, that would be '74-75, '81-'82, AND the current recession).
The typical growth to be expected in the first 3 or so quarters (of 5%+ growth) after a moderate to strong recession is not atypically something on the order of 6-8% per quarter!
Note the 2001-2002 recession was particularly MILD, hence the weak growth coming out of that. This was similarly the case for 1990-91, generally considered a mild recession.
It must be emphasized that one can't look at numbers like these in a vaccum....the economic scenario of the particular recession needs to be looked at. Indeed, when I look at the CURRENT scenario we are in, and see a TON of excess capacity that needs to be soaked up, and the LOOSEST MONEY IN MY LIFETIME, there is every reason to believe that confidence will return, bank lending will return, and growth in 2010, for the year, will end up somewhere in the broad range of 5-7%. Could be even higher. (I can't IMAGINE it could be lower than 4%.)
Or, one can play the "this time is different" game, wring one's hands, play it "safe," and presume that it couldn't POSSIBLY be a "rip-roaring" recovery, when there is still so much "despair" out there. History would prove such a scenario wrong, though, and probably around 90% of the time.
Questions: 1) Why does excess capacity have to be soaked up? We have had excess Steel capacity for 40 years and it ain't soaking. Answer- It doesn't have to be. 2) You say simultaneously that banks will begin lending again and this is the "loosest money in my lifetime". Which one is it? Can't be both.
I don't see your Rip-roaring recovery. These are words of unbridled optimism rather than objective analysis.
Monetary stimulus and bank lending are not the same thing. Bank balance sheets are FLUSH (read this weekend's Barron's before you laugh). So, it is only a matter of bankers' CONFIDENCE returning....and that will happen after another few months of consistently "growing" economic data, which we WILL get. Even the lagging indicator that everyone is foolishly wringing their hands about (because it ALWAYS lags): employment
By excess capacity, I'm mainly talked about labor (but also facilities, broadly). Cheap money makes it attractive for companies to borrow and EMPLOY those assets (people and facilities), because they figure they can EASILY earn a decent rate of return on their investment, with such a low cost of funds. (That's partly the point of the Fed's "extended period" language.....to reassure everyone that it's "okay to invest"....and to remind people in T-Bills that they're going to be getting SHITTY returns, unless they do things like buy stocks...or buy junk bonds (hence the huge junk bond rally the last year...people "chasing" better yield).
Open your eyes. It may not be "rip-roaring" yet. And I may pay the price for thinking it will be as soon as I thought it would be. But it is nothing to sneeze at. And we AIN'T double-dipping.
Two things: Conviction that housing prices are "now turning up," and an attitude of "looser lending" among banks are what are REALLY going to turn this thing around. And these former two are really a reflection of a return of confidence. That is not always the easiest thing to predict. Especially when you've got stuff like Greece going on, and people wringing their hands about that....which is really nothing significant, when you look at the size of the Greek economy.
It should be emphasized, the average growth for the 4 quarters of "solid"(starting with the first quarter of 5%+) growth in the recovery after the 1974-75 recession was 6.0%. In 1981-82, the average of those same 4 quarters was 7.7%.
With this all in mind, I have a VERY hard time seeing the U.S. economy growing less than 5% in 2010. That's my (relatively conservative) projection.
What I really feel you're not looking at with your simplistic trend repeating approach is:
What took us out of all of those recessions where growth was over 5% in the past was real estate which was not down the crapper like it is now. CRE and RRE have another year of price declines without question, due to overbuilding in CRE and all the resetting ALT A/Option ARMs exacerbated by high unemployment. We need over 5% growth just to create jobs, n/w backfilling all the jobs lost of over 8mm. As you said, until the housing market returns no one will spend significant $ in this economy.
The other factor to support growth this year is foreign demand which is now waning due to China tightening, Japan in disarray (including Toyota's probs), dollar surging, EU growth at 0 with many member countries approaching default, requiring the healthy ones like Germ and France to bail them out instead of buying our products.
You can't rely on past trends for this recession my friend.
Besides, all the doves on the Fed are singing now and the hawks have landed.
It's still a good debate and I hope you don't lose any $ on your positions. Funny how GAXC is like a Fed futures int rate play but a permanant one with their base business and DVD play. Thought I understand why you see the risk here, no need to restate either. I think the piece you're missing here is any new ATM business they might gain since they have industry savvy salesmen that have been there a year already.