Despite the latest plunge in the markets (and the plunges have been historic), Jim Wiandt of Seeking Apha argues that the market feels like it just may be finding its sea legs again.

We are certainly not out of the woods yet, he states, and all signs point to a protracted economic slump. BUT, according to Wiandt, the current crisis it is not going to be the Second World Depression, and he outlines his rationale by stating five (5) simple points to consider:

• Credit spreads are coming in. As Matt Hougan details in his blog LIBOR rates are coming down quickly and the TED spread is beginning to seriously come in. Note: For more on TED Spreads, see our recent Blog on the subject. This is the fundamental constipation in our financial system that must heal before the economy recovers. Fact: Billions of dollars of government intervention appears to be doing the trick. Just look at that TED Spread chart from today—it’s dropped off a cliff.

• The dollar is seriously on the rebound. It’s clear that the U.S. must lead the fight out of the recession, and the dollar’s surge indicates that the market thinks it will, as it continues to see the

  U.S. as a safe haven.

• Commodities continue to stall. While you can argue that the falling of commodity prices are a reflection of the coming recession (and you would probably be right), lower energy and commodity prices ultimately will also lead to a recovery and some balance on supply and demand, which felt badly out of whack recently. Gold’s stalling despite the economic downturn is odd, and feels like it indicates that the world does not believe we’re heading for depression, but is in value-seeking mode for equities and other hard-hit asset classes.

• Real estate is finding reality; while other asset classes are catching up with the bottom real estate has set. A dynamic of hard falling prices is necessary and healthy to get the economy back in line with its actual productivity. Prices coming down on real estate, and credit becoming first impossible to receive and then more realistically tied to the prospects of payback, are good trends for economic stability.

• There is a ton of money looking for a place to go. Ultimately, the overall financial system is primed with potential as money is looking for a place to find bargains, and it will pour into the system once it’s clear that a bottom has been established.

Do you agree?

Tags: Economic Rebound

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