Tuesday, November 04, 2008

The Time for Good Times is Here

The flow through of Fed Action generally takes 12 to 18 months. For example, the inverted yield curve bottom of 4th quarter 1999 resulted in an GDP bottom during the third quarter of 2001; the curve bottom of May 1989 resulted in the GDP bottom in the 4th quarter of 1990.

The curve bottom this time was a double bottom in the 4th quarter of 2006 and again in the first quarter of 2007. It has been a long time since either bottom. The curve was still partially inverted as late as June 2007 and the European curve was inverted a few months ago, but it has been 17 months since the tail end of the inversion. It is time for good times. Stocks normally begin their rally months before the final GDP bottom. Some say this recession is going to be the worst in many years. I don't know if these guys have seen just how much money the FOMC has pumped into the system (not to mention other pumping from South Korea to India). The rally of the past few days is most likely the start of good times!