http://www.telegraph.co.uk/finance/c...ic-crisis.html
We're not yet at the moment of maximum pessimism in this economic crisis
The old adage is that buying shares in a falling market is rather like trying to catch a falling knife.
Trying to judge in advance when the much-vaunted moment of maximum pessimism has finally hit home is also pretty much impossible.
Nevertheless, Tuesday was another demonstration of the fact that although we are undoubtedly still trapped in a bear market there are glimmers of optimism that occasionally shine through the economic clouds.
Still more remarkable was the fact that share prices climbed in spite of a barrage of yet more dismal economic news.
For while hopes about the future of Citigroup helped buoy the financial side of things, there was unremitting gloom on the nuts-and-bolts side of the economy. First there was the industrial production data, which underlines the fact that although this started off as a financial crisis it has well and truly metamorphosed into a fully-fledged economic and manufacturing collapse.
Meanwhile, the National Institute of Economic and Social Research has done its calculations and worked out that the economy has now effectively given up all the growth it achieved since summer 2006, contracting by a full 4.3pc since the peak in April 2008.
The simple truth, then, is that the recession is deepening. Having slashed his economic forecasts by more than any Chancellor in modern history last November, Alistair Darling will have to take a knife to them again at the Budget next month.
Meanwhile, the feel-bad factor will intensify later this year as the final, lagging manifestation of recession – unemployment – properly takes hold.
In previous downturns the market has tended to pick up before the wider economy, and although this ought to be the case again this time around, the scale of the economic contraction is such that it is probably too early to hope that the worst is now through.
Remember that throughout the early 1930s there were a series of major "suckers' rallies" which were later given up as the economic gloom continued.
Some may take some solace in the fact that economies other than the UK are suffering a similarly dismal fate – indeed although the UK's manufacturing production is down by the biggest amount since at least 1968, our neighbours in France, Germany Italy and Japan have all suffered even worse.
The IMF may be warning about a "Great Recession", but its prediction that the UK would suffer more than anyone else in the G7 looks wide of the mark.
Moreover, even China – the great hope for the world economy - has now slid into deflation. Its industrial production is sliding perilously.
Trying to wring any consolation from this is futile, since the deeper they plunge, the worse will be the consequences for everyone else, including the UK.
Catching a falling knife is one thing. Trying to catch 20 of the things as they hurtle down towards you is quite another. Take care before leaving cover.
We're not yet at the moment of maximum pessimism in this economic crisis
The old adage is that buying shares in a falling market is rather like trying to catch a falling knife.
Trying to judge in advance when the much-vaunted moment of maximum pessimism has finally hit home is also pretty much impossible.
Nevertheless, Tuesday was another demonstration of the fact that although we are undoubtedly still trapped in a bear market there are glimmers of optimism that occasionally shine through the economic clouds.
Still more remarkable was the fact that share prices climbed in spite of a barrage of yet more dismal economic news.
For while hopes about the future of Citigroup helped buoy the financial side of things, there was unremitting gloom on the nuts-and-bolts side of the economy. First there was the industrial production data, which underlines the fact that although this started off as a financial crisis it has well and truly metamorphosed into a fully-fledged economic and manufacturing collapse.
Meanwhile, the National Institute of Economic and Social Research has done its calculations and worked out that the economy has now effectively given up all the growth it achieved since summer 2006, contracting by a full 4.3pc since the peak in April 2008.
The simple truth, then, is that the recession is deepening. Having slashed his economic forecasts by more than any Chancellor in modern history last November, Alistair Darling will have to take a knife to them again at the Budget next month.
Meanwhile, the feel-bad factor will intensify later this year as the final, lagging manifestation of recession – unemployment – properly takes hold.
In previous downturns the market has tended to pick up before the wider economy, and although this ought to be the case again this time around, the scale of the economic contraction is such that it is probably too early to hope that the worst is now through.
Remember that throughout the early 1930s there were a series of major "suckers' rallies" which were later given up as the economic gloom continued.
Some may take some solace in the fact that economies other than the UK are suffering a similarly dismal fate – indeed although the UK's manufacturing production is down by the biggest amount since at least 1968, our neighbours in France, Germany Italy and Japan have all suffered even worse.
The IMF may be warning about a "Great Recession", but its prediction that the UK would suffer more than anyone else in the G7 looks wide of the mark.
Moreover, even China – the great hope for the world economy - has now slid into deflation. Its industrial production is sliding perilously.
Trying to wring any consolation from this is futile, since the deeper they plunge, the worse will be the consequences for everyone else, including the UK.
Catching a falling knife is one thing. Trying to catch 20 of the things as they hurtle down towards you is quite another. Take care before leaving cover.
until the Tories win the next election (not that they'll be much better)
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