Inital jobless claims jumped to 407,000 today. These types of jumps have been signals for recession in the past. Tomorrow's jobs report may cement that view. Ben Bernanke admitting the possiblity of a slight recession basically means thats what we're in. But I raise the question of, if we're in a recession, does it matter for stocks at this point? The possibility of at least a mild recession has been priced into many stocks. Throughout history, its been hard for investors to get out in front with cautious sentiment like they have the past couple of months. To me, that limits the downside risk. Now if things really deteriorate, which many are prediciting, thats another story.
I saw some interesting stuff from the WSJ's Economics blog, with Ted Kennedy trying to go after Bernanke a bit. What's interesting to me is just how out of touch congress really is. Kennedy speaks of all these financial issues over the past few years, and now he's worried about it? When the real estate bubble was inflating, no one worried, and the average American benefited. But now that its gone, everyone wants to point the finger. I think Bernanke is right. We won't see financial problems like the 1930's because the Fed will step in an stabilize, like they did with Bear Stearns. But this has to be allowed to level itself out over time. That's what people like Kennedy don't understand. He thinks government can solve this problem with regulation. The best they can do now is to prevent it from happening again.