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Where is the 'R' Word?

I don't hear the "R" word mentioned much these days. The "R" word isn't for "resilient" as in "gee Bob (Pisani), the stock market is really resilient". The "R" word stands for "recession". These days you are more likely to hear commentators talking about the European sovereign concerns than the possibility of an oncoming recession in this country. It is as though Europe is the cause of our economic weakness, and if it wasn't for Europe all of the troubles in this country wouldn't exist. The fact that the US economy is vulnerable to such shocks speaks volumes. Make no mistake about it, the US economy is on the edge of or in a recession.

The Federal Reserve has already told us to expect economic weakness through 2013 as the Fed Funds rate is going to be kept near zero for 2 more years. Such an historic action isn't a sign of strength but one of weakness. This was two FOMC meetings ago, but because the announcement only "juiced" the markets for a couple of days, I am sure this point has been lost on most. I guess we can call it selective filtering -- we only like the good announcements but not the bad.

Similarly, Lakshman Achuthan of the Economic Cycle Research Institute made the media rounds last month stating that "the risk of a new recession is quite high." Back in 2009 at the market bottom, ECRI's indicators were widely followed as they lent credence to the turn up in the markets. It was the "economic indicator dujour". Today, we don't like Achuthan's message (click for video). So let's pretend it doesn't exist and just bury our heads in the sand.

Where is the concern? Looking at Google trends, the search engine feature that tells us what is hot and what is not, we note that internet surfers really are not all that concerned about a recession either. As the graph in figure 1 shows, there was a brief spike (red oval) here in 2011 in Google search engine activity for the word "recession", but it has been nothing like 2008. For the record, the i-phone currently occupies 2 of the top 10 hot searches, and the Ellen Degeneres Show seems to be capturing people's attentions as well. Wooooo boy!

Figure 1. Google Trends/ Recession

Google Trends - Recession
Larger Image

Where is the "R" word? Honestly, I don' t know. It has somehow disappeared. Maybe bad news isn't wanted. Then again, I always thought bad news sells. The stock market's recent 6 day performance has given hope that things are getting better. But does our economy really turn on a dime? Listening to the bulls, there must be some meaning or significance as to why the stock market is up 6 days in a row.

In the future, I suspect we will be talking about the "R" word with much consternation as though the market never saw it coming. For now, we will just bury our heads in the sand and hope.


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