Late buying on Tuesday (Mar. 4) cut deep early losses, though the major stock indexes still closed lower on the day.
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The financial powers that be have long said that a recession is two consecutive quarters of negative GDP growth. If we overlook the several problems with this definition and go along with it for the sake of argument, it's still doomed by a fatal flaw: You have to wait several weeks until the data comes out, and even then the numbers are subject to "revisions" at later times.
In other words, the process amounts to "Exhibit A" for why economists are too often little more than historians with math skills. The "latest" GDP figures don't even tell you where you are, much less where you're going. For anyone who'd paid attention in the previous three months, GDP only tells you what you knew already.
The end of this month will conclude the first quarter of 2008. We'll learn if GDP growth was negative for Q1 near the end of April. If it is indeed negative, then we'll find out if Q2 was negative toward the end of July. Not before then could the economy be "officially" in a recession.
And that's as ridiculous as it sounds, especially if you're an investor who wants information to help make decisions now. Warren Buffet didn't become a billionaire by waiting for anyone to confirm the obvious, which may be why he has publicly said the U.S. economy is already in recession by "common sense definition."
Candor like that is in short supply, but maybe not for much longer. In the U.K. Telegraph, Ambrose Evens-Pritchard said, "The verdict is in. The Fed's emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation."
These remarks seem true enough about the present, but consider how useful warnings to that effect would have been, say, three years ago.
In truth, such a warning is exactly what The Elliott Wave Financial Forecast did provide its subscribers in March 2005, by saying that a reversal in social mood from extreme optimism to extreme pessimism was at hand. EWFF also said that, in turn, the reversal would drive the next phase of housing, one in which "demand wavers, supply spikes higher and sellers ultimately sell at lower prices."
That was back when the weekly news magazines ran cover stories with headlines with titles like "Home $weet Home." (Time magazine, June 2005.)
Once again, the just-published March 2008 The Elliott Wave Financial Forecast offers subscribers analysis and forecasts that could soon prove to be "tomorrow's news today" -- such as the bond auction on February 21, when 395 out of 641 publicly offered bonds "failed" due to insufficient bidding. That's nearly "10 times the number of failures recorded in the entire 23-year life of auction rate bonds."
EWFF does more than offer facts like this -- it explains what those facts mean for the future. The entire March issue of The Elliott Wave Financial Forecast, can be on your computer screen within moments.