Story Comments

There is no such a thing as that a stock can not go lower. Why does everyone have to make money as a bull? You can always try to short stocks like I do. It might take you some time to get used to shorting stocks though.

Has anyone been to Best Buy lately? They're busy and not just returns. Nothing I was buying was discounted. Everywhere I look I don't SEE recession.
My heart, though, goes out to those poor souls who have lost jobs, probably permanently. They're not going to Best Buy any time soon. It's such a fragmented economy. Depending on which spot you occupy it can be a sunshiny day or nothing but doom and despair.

Ultimate contrarian indicator: Don Luskin!

When Don says it is all good... it is very, very bad. When Don finally admits it is horrible, we are at the bottom and it will turn.

Don, this is one of your weakest articles ever. You claim that when a person stops consuming then that money had to be invested somewhere by someone. Come on, Don! Most consumers are knee-deep in debt so when they stop over consuming and "saving" they actually first have to pay back a boatload of debt. And no, that money does not get invested anywhere. It is simp,y collected by banks and credit card issuers to pay back their debts. It's called deleveraging and it means precisely that everybody cuts leverage and yet you will not have more liquidity the next day because it takes time to pay back debts and actually start to accumulate savings. so yes, there won't be armageddon, imho, but to assume that the overleveraged consumer can just pause for a quarter or two and then go on a buing spree again is, frankly, outright silly.

These learned comments are all over the map. So, perhaps we should look to history to see if there are any valid parallels to guide us.

The first thing to realize is that we have just elected a Marxist president, and the world is now profoundly changed. The old rules no longer work.

In 1918, the Marxist-Leninist perversion of the Marxist ideology of "Scientific Socialism" was installed in Russia, of all places. There followed about 73 years of inefficiency, corruption, and death. One of the most telling statistics from the USSR was that during the time of the Czars, Russia regularly exported grain. Immediately after the establishment of the USSR, the Soviets had no grain to export, and in fact, about five million people starved in the Ukraine in the 1920s as a part of a program/pogrom of social control. The USSR regularly imported grain, much of it from the USA, throughout the Cold War. But after the fall of the Soviets in 1991, Russia again had grain to expo...(Read more of this comment)rt within a couple of years.

China, of all places, also installed their own version of Marxist/Leninist/Maoist thought in 1949 and thirty million died of starvation/execution in Mao's China before the Chinese adopted sufficient free-market economic principles to provide jobs for their population.

The Social-Democratic states of Western Europe have always been Leftist, and in fact are quite similar in nature to Marx's original plan for the world. But in the early 1990s, the European Union was founded on Marxist principles and promptly went into economic stagnation and demographic collapse. In the Lisbon Accords of year 2000, the EU pledged to match American productivity by the year 2010. They better hurry. Nine years on they have made zero progress toward their declared goal, and now they are faced with the global meltdown that will stop investment and, ipso facto, stop productivity increases.

North Korea and Cuba have retained their Marxist systems, and you know where they stand.

So now the USA, of all places, has elected a Marxist president. To be more precise, we have elected a president who is a follower of the Marxist/Gramscian perversion of Marxist ideology. Before Obama had even secured the election, investors were spooked and made massive withdrawals from the markets, $30 trillion and counting. The prospect of a Marxist president left investors concerned for their assets, and they did not want to leave their money exposed to Marxist inefficiency, corruption, or confiscation.

So, "when will the recession finally end"? My horseback estimate is that it will end sometime after we stop Socialist programs such as LBJ's War on Poverty (cost $6 trillion, poverty unchanged, collateral damage huge) and the Mortgage Follies (cost unknown, somewhere in the trillions, collateral damage huge) and get back to free-market, rule-of-law economics. And don't elect any more Marxists, that's stupid.(Show less of this comment)

Well, Mr Luskin, a well-written and -defended article, and I hope you will be proven right. And with one exception, thanks to your clueless responders for the comic relief! The exception is that since it seems from their comments as though your responders think you're sending them out to buy buy buy, it might have been an act of charity to have mentioned the upcoming earnings reports. I'm assuming that they will be chronicles of disaster... Although wait now; *there* might be a contrarian bet taking shape...

Don, more important then when this recession is ending is what is happening with this stock market. We're currently moving up and will probably move up 10-20% yet and the folks better take profits in certain sectors at that time. You should inform your "institutional investors" of this advice. As your potential consultant (if you had listened, your institutional investors would have loved you) this advice is a freebe but we'll have to write a contract for the future. Just post me on this comment board that you would like me to contact you

"Call me crazy..." OK Don, you're crazy. More happy talk from the State of Denial. Wait till the first quarter numbers come in and watch the market. Can you spell "sucker rally?"

I can't believe this clown still has institutional clients.

Next you will be giving the Bush Admin credit for this turn around. I do hope you are right but.......................

Stocks are not cheap. Keep on dreaming. 2009 will see new lows and your assumptions are based on what, Americans saving money? Our economy is based 70% on consumption. Good grief!

The credit markets are gradually improving and that is good. As a result the equity markets are less volatile and have temporarily stabilized. But the really bad earnings reports economic reports and housing market numbers from the fourth quarter have yet to be seen. When those appear this will turn out to be a temporary bull in a long term bear market. In terms of 10 year average P/E ratios the stock market is only fairly valued. As this recession has only just started in terms of falling output and rising unemployment expect the market to fall until 10 year average P/E ratios are 6-7 or another decline of 50-60%. It takes years to recover from a financial crisis. Rogoff just released a paper on financial crises. The link is here (I suggest you sit down while reading it):

http://ws1.ad.economics.harvard.edu/faculty/rogoff/files/Aftermath.pdf

The average length of time from the onset of the recession/crisis to the trough in GDP, equities, housing is 1.9 years, 3.4 yea...(Read more of this comment)rs and 6 years respectively. The average time from the onset of recession/crisis to the peak in unemployment is 4.8 years. This will take much longer than you believe. Your client's intuitions are probably correct. I have my money in cash (gold is due for a correction too). (Show less of this comment)

Don, my qualifications: 1. Went to 80% cash in my portfolio in Sept. 2007. When later you were surprised about the downturn and felt the market would move up, I informed you that we had a long ways to go and the subprime mess would be worse then the (experts) imagined. Also, in June's article informed you that you were misguided about the bottoming of the housing market which sinse has further disintegrated. Informed you about 4 weeks ago that this market had bottomed and we're moving up--put my money where my mouth is (75% stocks) and am up 10%, in fact 10% above the high of 1999. So Don, would love to help you out and my fees would be quite reasonable.

Don,I noticed in your article that you have institutional investors. Twice in the past I've offered to become your consultant-- if you had taken me up on it you would have saved your investors a lot of grief. I agree with you when you're correct and correct you when you're misguided. The issue isn't whether this recession is over or not the issue is whether we are currently at the bottom of this market(which we are). In my next post I'll list my qualifications for the consultant position. It will state my performance in this market in the last year and where if you had listened to wise advice you would have appeared to have inside information.

Jeez Loueez, Luskin! Why don't you take your opinions and shove them you know where. You and Kudlow have been tooting this wrong-headed horn all through this vicious bear market. You are your own personal bear-trap. Enough already!