Are The Signs Of The Turn A False Spring?

When Ambrose Evans-Pritchard writes an article intimating that we may be nearing a bottom of this brutal world wide recession you have to sit up and take notice. After all Mr. Pritchard has been as much the voice of doom and destruction of anyone who has written on the subject.

Yet here he is in the Telegraph citing the rise in the Baltic Dry Index, new debt issuance by corporations, improved home sales numbers in the U.S. and an emerging consensus that manufacturing has bottomed and will start picking up as companies run through accumulated inventories. A lot of it has been bandied about the last few days and I even wrote a short post on the subject. It’s bits and pieces but that’s usually the way a recovery starts and why most don’t realize it’s happened until things are well on the upswing.

Yet Mr. Pritchard can’t help himself in the end. He ends his article this way.

Veterans of Japan’s Lost Decade know that these moments of optimism can be intoxicating – and costly. Japan had four bear market rallies before investors finally had the stuffing knocked out of them. Global debt deflation this time may prove just as powerful.

“Nothing moves down in straight lines,” said SocGen’s perma-bear Albert Edwards. “There will be little bounces. But our view is that investors can afford to be lazy and wait. There is not a cat’s chance in hell that this really is the bottom of the cycle.”

Like me and everyone else, he ends up on the fence. It would be nice to believe that a turn is in the works but that’s kind of like a second marriage-the triumph of hope over experience. Maybe right now the best we should be hoping for is a bottoming process. If things do deteriorate further maybe we’ll be ahead of the game if they don’t just crash at the same speed as they did earlier. I’ll settle for that and I think that Mr. Pritchard probably would as well.


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