A recession is coming unless somehow we have achieved the elusive soft landing. I don’t think it is a matter of if a recession is coming, it is a question of when and how bad will it be.

We are in the middle of the longest economic expansion on record and some indicators are getting soft. Recession come when the consensus is the economy is over extended. When most investors think the expansion is at its end. While markets don’t seem to have created huge bubbles, valuations are high and some popular stock values are only supported by good will not fundamentals. We are clearly just a single shock away from a stock market crash. It maybe as bad as the great recession but I am thinking it will not crash that hard unless the shock is like a major war or market snafu like the mortgage crisis. I don’t see a dot.com bubble, the current tech bubble is not as crazy.

A recession is coming, I expected it a year ago. The President and the Fed are trying to delay the recession but I don’t think recessions will only be something for the history books. If we really thought we knew when the recession was going to happen we would all get out of the market before that time and that would start the recession before its time. Recessions are like a stampede, they happen in a flash, everything is fine until they aren’t. It just takes a trigger.

If the Fed keeps cutting rates, does it send the signal that the Fed can hold off the recession or does it signal that the Fed believes we are about to fall off the cliff. Recessions are more triggered by phycology than by fundamentals. Once the stampede starts the markets will fall until the drop is clearly overdone and ripe for recovery.

TEK