Two Scoops

The keyword to watch for now is #doubledip.  Because with the recent uptick in the economy, the investing world is going to start looking for signs of a double-dip recession.

There’s every reason to predict another dip:

  • Profit taking from the current rally causes the market to drop again, possibly below 6500
  • Continued bad news in unemployment
  • Continued bad news in housing
  • Continued falloff in GDP
  • Failing auto companies

The list goes on.  Housing and auto sales are likely to have a double-dip feel to them as well.  Housing and auto sales have fallen far below their historical averages, so we should expect them to pick up, at least briefly.  But we shouldn’t expect strength in either sector as long as unemployment and overall GDP are falling.  That means a brief (1-2 quarter) uptick followed by another drop.

I’m expecting the current rally to end very soon as profit-takers force the market downward.  I don’t think we’ve seen the bottom yet.

The real question is: what is going to happen with the US auto manufacturers?  The government has shown little interest in helping out – about $12B in loans (compared to the trillions given to the financial sector).  The auto executives have gotten a bum rap.  Millions of jobs are at stake. Working class jobs.  Will these be saved?

If not, beware.