This jewel came from a recent Daily Reckoning Newsletter:
It is just a hunch, though. Perhaps not as worthless as a
CIA briefing, but still, we give fair warning: we don't get
tomorrow's paper any sooner than Alan Greenspan.
Yesterday, the National Bureau of Economic Research said
the recession that began in March of 2001 ended in November
of the same year. But it was unlike any recession the world
has ever seen. Like a hanging, there was the rope of
negative GDP growth... and the gallows of falling
employment... and the fresh-dug grave of excessive debt. But
when it was over, there was no dead man to put in it.
Instead, consumers had just kept digging deeper holes for
themselves. Debt rose - when everybody knows debt is
supposed to go down in recession. They bought more SUVs and
houses and boatloads of shiny new stuff from China. And by
the end of the recession, they had more things than they
had ever had before, and owed more money to more people
than ever before, too.
This is not the way it is supposed to work, dear reader.
Any recession worthy of the name is supposed to reduce
consumer spending and debt. And it's supposed to leave the
consumer with 'pent-up demand' for the things he didn't buy
while he was cutting back. It was this pent-up buying
pressure that was supposed to lead the nation out of
recession to 'recovery.'
"No decent recession, no decent recovery," we recall
guessing two years ago. Since, we have seen a recovery as
bizarre as the recession. No plume of smoke belches from
the nation's factories. No overtime pay increases the
purchasing power of its employees. Nor does any pent-up
desire increase their ardor.
Jobless claims are still over 400,000 per week. Corporate
profits are still weak. Yesterday, for example, GM
announced a 30% decline in profits in the 2nd quarter.
Consumers still dig deeper and deeper graves for
themselves, while buying and selling houses to each other.
And yet, few people bother to ask what is going wrong. Most
accept the fact that the recovery is underway... and thanks
to the easy money policies of the Fed, all will soon be
well. Almost no one believes that there is a serious
problem with the Dollar Standard system.
But here is our hunch: the recession may be over, but it is
not finished. The current rally is drawing to an end. The
Nasdaq lost 3% yesterday, with Nokia down 20%.
Meanwhile, the dollar's rise seems to have stalled at $1.11
to the euro... and the price of gold seems to have bottomed
out at $343.
Our advice (no better than our hunch, we remind you): use
this opportunity to unload dollar-based assets. Buy gold
and the euro.