Britannia Radio

The New Script for Economic Recovery By Dr. Steve Sjuggerud Wednesday, September 29, 2010 DailyWealth readers made a fortune following our original Economic Recovery Script in March 2009… Today, you may be scared. But if you're still following that same script, you know there's nothing to fear… We have a rare instance where our proven indicators are giving the "all clear" sign – but investors are still scared of stocks. This is a moment we hope for as a stock investor. It's time to speculate in stocks. Let me bring you up to speed… In March 2009 – at the worst of the crisis – I laid out the Script for Economic Recovery. I explained what we would see in the market and in what order. And most importantly, at the bottom of the crisis, I specifically said, "Now is the time in the script you want to buy stocks." When we go back to the script and use it to size up today's conditions, we see an "all clear" sign. Let's take a look: Investment-grade corporate bonds rally. CHECK! I use shares of the big bond fund LQD as my measure for this. It's not in the dumps – it's in a bull market. It's hitting five-year highs right now! Stocks rally. CHECK! The S&P 500 stock index is around 1,150 as I write, within spitting distance of its two-year high around 1,200. If not a bull market, it's at least a bull run. The price of copper recovers. CHECK! Right now, copper is in a solid bull market, sitting at two-year highs. The recession "end-icator" goes up for three months in a row.CHECK! That happened back in the summer of 2009. It told us the recession ended back then. The recession ends. CHECK! It's officially over. Last week, the official pronouncement (from the National Bureau of Economic Research) came that the recession ended in the summer of 2009. Consumer confidence indexes rise. Well, a small "check" here… Consumer confidence just came out yesterday, and it's about double its early 2009 lows (from 25 to 48). Double the March 2009 lows is good… but it's certainly still low by historic standards. House prices recover. A very small "check" here, too… Home prices were up for the fifth straight month, according to the Case-Shiller 20-city home price index, which came out yesterday. Year-over-year home prices are up 3.2%. Hey, at least they're not down. In sum, bonds, stocks, and copper… they're all in bull markets. The recession is over. Consumer confidence and home prices are better today than they were in 2009. Times have improved – and for the most part, the improvement is pretty dramatic. But people don't do a great job looking ahead. What's in their head is what's in their memory. And what's most current in their memory is the worst recession since the Great Depression. So again, we have an unusual circumstance… Investors are scared. But the indicators are good. This is the kind of circumstance you want to invest in. This circumstance REALLY doesn't come along every day. And it is the exact circumstance you want to take advantage of. It's time to buy stocks. Typically as an analyst, I have to look under a lot of rocks before I find treasure. But today, the opportunity is hiding in plain sight… Many major blue chips are as cheap as they've ever been. I hate to say you can hardly go wrong… but I can say don't shy away from investing in stocks right this moment. I am a conservative investor. But this is the moment to step up and speculate. Good investing, Steve Further Reading: Back in March 2009, Steve's Script for Economic Recovery said buy stocks. "To make the biggest gains here," Steve wrote, "we have to own stocks well before the script has completely played out." Stocks were up about 25% three months later… and they kept climbing. Since then, Steve has stuck with the Script… and the Script has stuck with the market, move by move: when consumer confidence bottomed, when the recession ended, and when home prices stabilized. Now, the Script is giving the all-clear. Trade accordingly. ONE HECK OF A STOCK MARKET COMEBACK Our chart today shows a whopper of a stock market comeback… In late 2008, every stock index in the world was smashed at least 50%. And while the world has enjoyed a solid relief rally, stocks in large "developed" countries like France, the U.S., and Japan are still well below their old "boom time" highs. That's not the case in India, however… This market is in the midst of an incredible comeback. India falls into our big "Asia up, the West not so much" idea… the idea that developed countries with massive debt and social-entitlement overhangs will struggle compared with dynamic, less-developed economies that don't carry those heavy burdens. India, with itsoutstanding dependency ratio, is one such dynamic Asian economy. You can see India's dynamics at work in the chart below. It's the past five years of trading in the "Dow Industrials of India," the BSE Sensex 30. As you can see, while "developed" stock markets struggle below their highs, the Sensex has staged a huge rebound from a low of 8,400 to reach pre-crisis levels near 20,000. It's another angle on the big "Asia up, the West not so much" story that will last for decades.