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The Soup Ladle Recovery?

As mentioned in a prior post, I have begun suggesting that the recovery might be in the form of a soup ladle, think about its shape. Pretty stiff downturn followed by very slow but prolonged recovery. How do I know? I don’t. I simply sit in my armchair and pontificate. I’m not an economist (nor did I excel at economics at Wharton), and when I hear “chief economists” give speeches with 30 pages of charts I tend to listen by imagining myself on a quiet beach with the ocean lapping up in front of me.

But from my armchair, some thoughts. The economy will recover. There is no doubt. The business cycle will never be broken, despite some thinking that was the case during at least the last two recoveries. I’m sure people thought during the Depression that it would never end. And then there were not the many stopgaps and protections against crisis that now exist (although we had a little scare there for awhile last fall).  The stock market also will recover fully. Since 1929, it has always been better during any 10 year period to invest in large cap equities than just about any other thing.

So the only question: when will the economic and market recovery start and how long will it take to hit full steam? Some say it will be 5 years before things are better. Some say we are already beginning to come out of things. And everything in between. We have taken a big hit during this recession. No “soft landing” this. So yes there will be a recovery, but because of the damage done in virtually every sector (the last downturn didn’t effect real estate too much, for example), I think it will take longer to come back. But come back it will. So slow and steady is what seems to be in order. I hope to be proven wrong, and we shoot back in a “V” recovery as some have predicted, but that doesn’t seem likely. The stimulus will ultimately help, but not so much as to make the recovery come fast. And the cost in terms of future debt is for others to assess the cost-benefit.

I think a soup ladle recovery, which maybe starts around the end of this year, would be OK with me.