The ‘Whine’ Signal
Posted by hyperpat on April 28, 2008
Whine, whine, whine. Seems like that’s all we hear today when people are talking about the economy. Everyone seems to think that if we’re not in a recession already, we soon will be, and that it’s not going to turn around anytime soon. There are bank problems, housing problems, oil price problems, consumer confidence issues, inflation worries, the dollar valuation effects, the lingering occupation of Iraq, and whatever other perceived problems you want to add to the kitchen sink.
Now is all this whining about nothing? No, the problems are real, as far too many people can attest who have had their house foreclosed, or those living on minimum wage who are finding it even tougher to keep it together, or everyone finding their wallets all too light after filling up at the gas station.
So what can we do about it? I think most of the necessary actions have already been taken: the Fed has very aggressively cut interest rates, which has already had a definite effect on mortgage rates which will eventually translate into less pressure on current homeowners and make new purchases more affordable. The Fed has also effectively injected a large amount of money into the system so that banks will be more willing to make loans and keep creditor confidence up. New laws and regulations are on the table to provide better oversight of the banking industry so they don’t continue to make loans that are very shaky, while making sure that prospective loan applicants have a better understanding of just what they are signing up to pay. The dollar’s fall has been so severe that it has once again made American made goods very competitive in the global market, and that effect is already showing up in some companies financial statements. The steep price of oil is having multiple effects: more people are opting for fuel-efficient cars, people are driving less and taking other conservation measures, solar cell energy generation is becoming a real force, other alternative energy generation methods are receiving more attention and more research dollars. Now all these things won’t produce any instant cures for the current mess, but looking forward it’s clear that we are now establishing a solid base for future growth.
My take on all of this: it’s time to start aggressively buying stocks. This follows a well known rule about stock market strategy – when everyone is yelling ‘sell’, it’s time to buy, and vice versa. All this whining is precisely the signal that if we aren’t at the bottom yet, it’s not far away.