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Blog : Is the Recession Ending? Can Penny Stock Investors Rejoice?
by John Whitefoot on March 27th, 2009
Yup, the clouds are parting and the sun is warming things up. According to the ‘experts’, the recession will soon be over - by year end! Or it may start to recover in 2010 or 2011. Or it could take longer. Really, it depends on who you listen to.
Earlier this week a group of financial oracles said the recession will ease by the end of this year and companies will begin adding workers; signaling the end of the worst economic downturn since the Great Depression.
Chicago-based Dow Jones Indexes assembled a group of financial experts (not sure who truth-be-told) to assess the impact of government actions, whether they will work to stem the recession and what opportunities that might present to penny stock investors.
While the recession has impacted every region of the country and virtually every sector of the economy, the good news is – there’s an end in sight.
“The economy will pull out of the recession at the end of this year, marking a duration of 24 months, about twice as long as the average post WWII recession,” said one economist.
The unemployment rate is expected to peak at close to 10% in the first half of 2010. Without the $787 billion government stimulus package, he estimated job losses would have continued into the second half of the year and peaked at about 12%.
He also believes we are at or near a stock market bottom and stock prices should soon stabilize. No firm commitment, though, who’d want to go on the record? If the recent economic melt down has taught economists one thing, it’s to be even more generous with vague terms.
Still, the close to $1 trillion stimulus package, will provide investors some opportunities in penny stock companies that are either directly or indirectly, connected with infrastructure (companies that own bridges, toll roads, and utilities) and areas of green energy production (wind, electricity, solar, etc.).
“The infrastructure class currently offers a unique and compelling investment case with trillions needed to be spent across the globe in coming years,” he added. Stimulus packages have rolled out recently in Canada, Europe, Australia, South America, and China.
While President Obama wasn’t quite as eager to say the markets had bottomed out and the markets were ripe for the plucking, he did optimistically ask Americans to have patience, saying the country will recover from the recession, but that it will take time.
Addressing the nation, Obama said, “The road to that prosperity is still long, and we will hit our share of bumps and setbacks before it ends.”
The first step to recovery, he said, is to pass the recovery plan, jump-starting job creation. The second step was to stabilize the housing market, “and help responsible homeowners stay in their homes.”
His third step is to restart the flow of credit to families and businesses. And the fourth step is to ensure that we do not return to an economic cycle of bubble and bust: “An economy built on reckless speculation inflated home prices and maxed-out credit cards does not create lasting wealth. It creates the illusion of prosperity, and it’s endangered us all.”
Not a simple four step process…but it is an action plan. And admitting there actually is an issue is the first step. At least you have something to work toward. Way, way back in October 2008, when the rest of the world was reeling from a global melt down, Canadian Prime Minister Stephen Harper glibly noted that investors should look for potential “buying opportunities” amid falling stock markets.
“…when stock markets go down, people end up passing on a lot of things that are underpriced,” Harper intoned. Then, like a puppy looking for the Alpha Male, Harper changed his stance - following the cues of President Barack Obama.
US Federal Reserve Chairman Ben Bernanke predicts that the American recession will end this year and that economic recovery will gather steam in 2010; noting the “green shoots” of economic revival are already evident.
But those young shoots need a lot to grow. If the latest $1 trillion plan to buy up toxic assets from the U.S. banks works, it will restore confidence and growth. If it doesn’t, many economists think we could be in trouble for a long time.
Are we on the road to recovery? I suppose we are, in that, eventually the markets will rebound. When it comes to economic predictions, I’d really like to have seen what these same Wall Street Wizards predicted before the markets tumbled.
The same goes for all the penny stock sooth sayers that seem to be making the rounds on Fox et al. They too are predicting a (vague) market recovery and are telling us to avoid all the junk penny stocks.
For starters, I’d like access to their W2 forms and see just how well they were predicting things before the markets fell. I’d also like to see how they do over the next couple years.
It’s seems the more you start to understand penny stocks the more you realize just how much there is you need to learn, and how much you don’t really know. When it comes to the average investor, the less they know, the easier things are to predict. Knowing nothing about airplanes, you can’t imagine how many UFOs I’ve come across over the years.
Knowing something about the markets and penny stocks, I’ve learned there are too many factors at play to ever guess or predict when the markets are going to recover. And frankly, I don’t think the average penny stock investor will get all that excited when Bernanke actually tells us that we are out of a recession.
Most penny stock investors will know it’s over when we can dip into our bank accounts, pay our bills, pull out our heavily folded penny stock wish list, and delve back into the markets with confidence.