T.S. Eliot famously wrote in 1922 that "April is the cruellest month, breeding Lilacs out of the dead land, mixing Memory and desire, stirring Dull roots with spring rain."
Eight-seven years later, I find myself wondering if Eliot's remarks will seem like prophecy.
Sure, we're experiencing a delightful bull run in a bear market, and signs of an economic spring appear here and there. Best Buy sales, up 10%. Consumer spending, up. Housing starts, up.
Local merchants and business owners in the Upper Valley tell me similar tales after a frozen Winter that all wish to forget. A job here and there appears. A slight increase in customers occurs. People start to dine and purchase again.
I'm cheered by these observations, but also remain wary.
First, it's hard to imagine anything other than terrible first-quarter earnings numbers from most companies in the Dow, S&P 500, and Nasdaq. These reports will be made public between now and mid-April, and if most are as bad as I expect, this news will depress the market further.
Second, broader economic data suggests we're not thru this recession. Despite a decline in housing construction, housing inventories remain high and prices for homes continue to drop. The latest figures suggest 10-12 months of housing inventory still exist.
Third, for now at least, lending standards remain very, very high. In that light, I support Treasury Secretary Geithner's plan to bail out toxic assets, but also agree (with his own assessment) that it is risky and success not certain. Short of nationalization, it's the best alternative. What's clear is that something must get lending and credit flowing again in the economy. Without it, we're drifting for months, years, and maybe longer in an economic morass.
Fourth, oil prices remain low, but at the first sustained signs of an economic spring, expect gas prices at the pump in the US to quickly reach $3.00 per gallon and maybe higher. Such a move will pyschologically (and negatively) affect consumer confidence, and thus flatten any return to normalcy.
A host of thoughtful experts and practictioners in the economy -- everyone from Jeff Immelt to Ben Bernake -- suggest that true and sustainable signs of recovery will occur by late 2009 and clearly exists in 2010.
I hope so. My own sense is that the rest of Spring of 2009 could be very difficult indeed. It will try our patience significantly.
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