Sense on Cents

I have tried to highlight that markets correct by price and time. While the National Bureau of Economic Research (NBER) has pinpointed that our current recession started in December 2007, the downturn clearly accelerated after the failure of Lehman Bros. in mid-September. You do not need me to remind you that our equity markets were down 35-40% last year.

Against that backdrop, the question on everybody’s mind is how quickly can the incoming Obama administration turn the economy around. A question I receive from friends and former colleagues is “how long” will this last. Wall Street insiders are in the business of selling products so throughout 2008, and from what I see so far in 2009, they are hedging on what I believe will be an extended downturn.

I am an optimist by nature and not one to promote a doom and gloom scenario, but let’s look at the cards that are already on the table and review past recessions that were financially driven rather than manufacturing driven. Let’s also look at forecasted earnings and what they portend for our equity markets.

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