Hi Everyone,

Many people I have been talking to have been wondering if the recession is over soon and what I think.  I certainly don’t have a crystal ball, but here is what I think is where we stand:

• Comparing this economic downturn to a hurricane, I do think we are in the eye of the storm right now.  That means that it is relatively calm before the second part of the storm hits.  I have been thinking that the second part of the storm might hit Europe a lot more than us in the coming months and the worst might be over for us.  This does not mean that all is well, but the worst of the contraction in the economy has likely past and we might now move ahead at a fairly small growth or contraction.
• I do think there are still considerable issues with credit cards and commercial real estate (especially retail) for the banks.  Unemployment will continue to go up and be a drag on the economy.
• I don’t think the stock market has much up potential because simply the  earnings are not there.  Beside going sideways, what it pretty much has done after the spike from mid March through April, it is more likely to go down than up.

I think we can be cautiously optimistic, although there is still much work and adjustments to be done to get back to growth, and there is certainly a chance that the government with all its spending proposals will derail it.

Please feel free to comment.

Cheers,

Patrick