Out Fox The $treet

This has to be the least covered story of the day. With everybody focusing on the Bernack, Obama, and even China inflation today, everybody seems to have missed that not only has the recession likely been taken off the table, but most economists now call for around 2.5% growth this quarter. Even Goldman Sachs (GS) is going to likely raise their estimates for Q3 GDP from 1% to maybe as much as 1.5%. Remember they originally sparked a ton of fear when the supposed experts at GS reduced growth to such a meager level a few weeks back. Interesting that so many 'experts' had previously stated that the US was already in a recession or was definitely headed into one, but now Q3 will be back to near standard growth. Great interview with Jan Hatzius, GS chief economist. One very telling point was how the sentiment data factored into recession fears while the real data has turned out much better than expected. Clearly the sentiment data has clocked in much worse than normal primaril...

Mark Perry's Carpe Diem blog had a great little post on the recession predictive ability of the Treasury Spread. The New York Fed has a great chart that I've used in the past that predicts the possibility of a recession over the next year based on the treasury spread between the 10 year bond rate and the 3 month bill rate. As the chart shows, the possibility of a recession is below 1%. It just doesn't seem to happen when the treasury spread is this large. The market is increasing worried about a recession even though it just isn't likely under the current monetary circumstances. Clearly when an economy hits a soft patch as it did during April and May, the slant of the yield curve is hugely important in determining the next move whether up or down. With such a positive curve at over 3%, corporations and investors are encouraged to take on risks and in essence buy the dips. While a negative sloping yield curve causes the reduction in borrowing and business expansion...

This is a pretty stunning result from a CNBC poll. While Stone Fox Capital has been claiming that the recession was likely over in the June/July time frame, this poll suggests that only 20% of the people on CNBC think the recession is over 3 months later. On a purely technical basis, the recession is clearly over as Q2 GDP will likely grow at a 3-4% level. I'd guess that the respondents to this poll follow the jobs market which is one of the biggest mistakes made my investors. The jobs market is a huge lagging indicator. The ability for companies to regain growth while still cutting jobs creates gains in margins leading to higher profits. Those profits lead to jobs growth. Not the other way around. Nobody hires people until they can make money with what they have. To us this is yet another bullish sign as investors still aren't convinced that the economy has turned even after the NABE calls the recession over. Did the NABE make the right call, is the recession over? * 2139 r...

Good video from John Ryding, chief economist at RDQ Economics and CNBC's Steve Liesman. Great discussion about the huge inventory liquidation the economy has seen in the first half of '09 and the positive impacts it will likely have on Q3 and Q4 GDP numbers. Anybody against the V shaped recovery just isn't paying attention to the numbers. I agree though that the economy still has structural issues and the Obama administration to deal with to have a robust economy going into 2010. The long term play is still BRIIC markets, but for the rest of the year domestic plays should bounce back nicely.

According to the export numbers in May, the biggest economy in Europe might have already pulled out of recession. Of course, you don't see this new prominent in the media today. All I'm seeing is reports about how the initial jobless claims weren't as good as they were. More about that later. Germany is the largest economy in Europe so this is significant news, but they hardly match up with the US, Japan, or even China. Its a start though and much better then the relentless media coverage about how the recovery isn't taking place. The facts continue to suggest otherwise. Germany, Europe's largest economy, suffered a 3.8 percent contraction in the first quarter and is facing its deepest post-war recession this year, but a 0.3 percent rise in exports in May chimed with other data pointing to a recovery. May industry figures showed output growing at its fastest rate in 16 years, while orders surged to a near two-year high.

Back in early May we reported on how Brian Westbury was calling an end to the recession. At that time we thought the recession was more likely to end around July. On Monday, Brian wrote a market update that confirms his view that in spite of the weak June jobs report that the recovery was still on track. Several metrics reported below in fact typically only take place when the economy is recovering while the jobs report can continue to sputter. And when jobs do sputter it's likely because corporations are reaping huge profits from less employee expenses and higher productivity. The overall ISM Manufacturing index hit 44.8 in June while the production index hit 52.5.The economy is almost always growing when these indexes are at those levels. the four-week moving average for initial claims for unemployment insurance isdown 43,500 (or 7.1%), in the past 2½ months, again something that almost never happens unless the economy is expanding. In addition, personal consumption, new orders...

Reading all of the economic news of late, its become important to focus on the leading versus lagging indicators in this economy. The Economic Cycle Research Institute (ECRI) has long been a forecaster of economic cycles and was even very accurate that the 2008 recession would get worse back in March 2008 when a whole slew of economists thought we might even skirt a recession. According to their latest report , the weekly cycle indicators they use continue to show that the recession is in the process of ending. This is contrary to all the news you've probably read since the June jobs report was released last Thursday morning. Jobs of course are a lagging indicator and it amazes me how many economic 'experts' reported that the economy couldn't recover until the jobs improved. Yet every recession has ended long before jobs improve. That's why its so crucial to understand leading versus lagging indicators. I'll have to admit that I'm not all that familiar wit...

Just seemed like yesterday that the US economy was headed to a 2nd Depression, but now some people including Brian Westbury in this Forbes article think the Recession will possibly end this month. Its hard to argue his points though logic and the current media makes it difficult to believe that the Recession could really be over so soon. Didn't the financial system just about collapse? Hasn't our favorite professors talked over and over about zombie banks? Brian is also forecasting a V shaped recovery which is clearly not of the norm. Even Bernanke spent today talking about a slow recovery of only 2% in 2010. That little growth a year after a major Recession ends sure doesn't sound like a V shaped recovery. Lets explore some of his claims: New claims for unemployment insurance are probably the very best single indicator of the end of a recession. The monthly average for claims normally peaks one or two months before the economy bottoms--and it appears to have peaked in Mar...

According to this Reuters report, NBER has declared the recession is already 12 months old and within stricking distance of the longest post Great Depression recession on record. This isn't that surprising to anybody following the market. Though the surprising part is that the recession officially started in December of last year even though we had good, positive GDP growth in the first half of 2008. Alot on Wall Stree feared that the recession didn't start until the summer and would need as much as 18 more months to run its course. Now we likely are looking closer to the end then the beginning. Whats interesting though is that NBER has a history of calling recessions when they are just about to end. The last recession in 2001 was called exactly the month that they later declared as the end. Does their declaration put and end to the rampant speculation of the recession and force people to finally start thinking about the end? History definitely shows that the call a recession ...