When Will the Economy Rebound?

2008, One of the toughest years since the invention of money, is drawing to a close. The sharp downward momentum for the last few months in the Dow Jones index has reflected the dwindling corporate and consumer confidence in the current economy.

On the other hand, there are many tempting opportunities to buy stocks and follow Warren Buffet’s advice to Be greedy when others are fearful and fearful when others are greedy.

Although for most trading days the market hasn’t dipped below 8,000 points, how can investors and non-investors alike really know that the worst is behind us.

Here are 3 time-tested indicators that would signify the end of the recession:

1) The TED Spread(T-Bills and the EuroDollar futures), which is the difference between the interest rate that the banks borrow from each other and interest rate on 3-month Treasury bills. The larger the TED spread, the less likely are the banks to deal with each other. The spread is currently at 2.18 and a figure of 1 or lower would signify a recovery.

2) Follow the Real Estate market since currently the housing inventory levels are at more than 10 months worth and a recovery would have less than 6 months worth.

3) The unemployment rate has been relatively high in the last year, now at 6.7%. A consistent trend toward 5% and lower would indicate a recovery.

So hang on tight and follow the data, as the economy eventually will bounce back.

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