Retrospective economic evidence has now prompted most members of NBER to individually acknowledge that the US is in the midst of the worst recession since at least the Second World War. Jeffrey Frankel, a professor at Harvard University and member of the committee was interviewed by Bloomberg on November 10.

For about a year, we have believed that the US is in a recession. It started with housing and the financial sector and then moved to manufacturing and the auto industry. We know that the contagion continues to spread and that even the previously perky service sector is now in outright contraction. We are clearly still in the early stages of this recession which could last for another year, maybe more. I have long observed that based on anaemic wage and job growth, we really should have experienced a two year recession in 2001 and 2002. Had it not been for the plentiful supply of cheap credit and Home Equity Withdrawals that prompted consumption, we would have had our two year recession 6 years ago. In a sense then, the carnage now, is really just that same recession delayed and magnified.

Useful analysts could see that the economic injury from the credit crisis would be significant and long to heal. The stock market was reluctant and slow to acknowledge and re-price this realty. This fall it caught on at last, reacting rather violently. Based on the October 10, 2008 lows, after average losses of more than 40% on markets around the world, fundamental prices for stocks are relatively more attractive than we have seen in many years.

But relative valuation does not mean we have yet seen the lows of this bear market. It struck us as just a little suspicious that October 10 could be "the' low of this bear, when "the" low of the 2000-2002 bear was also October 10. Could it be that the markets had hoped October 10 was the low in wishful thinking and this had triggered some buying and a bounce? Today averages are putting the October 10 lows to the test once more. So far this morning the Dow has breached the critical 8451 and the S&P has dropped through the psychological 900 like butter. Today's close will tell us the next chapter of this tale...   more »