WHERE'S THE RECOVERY?

A few well respected analysts have been predicting a V-shaped recovery. In previous posts I have expressed my scepticism.

Fans of the V-shaped recovery believe this recession was caused by the collapse of the financial system. (I would argue that the collapse of the Financial System was symptomatic of a long overdue correction.)

V-shapers argue that the banking system has been stabilised, and the upswing will be almost symmetrically as dramatic.

This is no more than wishful thinking.

First of all many enterprises have laid off workers and scaled back production - to perhaps 70% of capacity. Production and employment cannot be geared up quickly enough to create a V-shaped recovery. (One could argue that so much time has already elapsed that the possibility of a V-shaped recovery is moot.)

In addition to higher unemployment most real assets have lost real value... and millions of consumers are still hampered by a less buoyant attitude to consumption.

Players in Wall Street have benefited from volatility combined with rescued balance sheets and the prospects of a recovery.

But this is more than a bump in the road, and the current administration does not have a clue. Main Street is still waiting for the Real Recovery.

I expect a minor correction ahead... or at least a prolonged bottom.