Let's Talk About R

We had it coming for a long time. All the signs have been there for anyone who cared to look or listen. The writing was literally on the wall for all to see. Today's release of the December employment report confirmed Wall Street's worst fears. R is just around the corner, if not already here. Yes. The much feared R. Not Raila Odinga of the infamous Kenyan presidential elections but the recession of US economy.

Falling house prices, $100 per barrel oil , higher inflation, weak Christmas retail numbers, rising foreclosures, dropping corporate profits, stinking sub-prime mortgage mess, softening capital expenditure spending and rising debt screamed nothing but RECESSION. Even the much despised former chairman of the Federal reserve, Alan Greenspan, has recession tattooed on his forehead.

Instead the market choose to believe the current Federal reserve chairman's interest rate cutting efforts aimed at keeping recession at bay. In the face of all these signs, wall street expected the strong overseas growth and the weakening dollar to save the US economy from a hard landing.

My expectation is that the Feds will not take Friday's results lying down. Like they have done in the last few months they will leave nothing to chance. The odds of further interest rate cuts have risen despite the fact that all the Federal Bank's efforts to inject liquidity in the credit markets. With the US presidential elections slated for this year, you can imagine how desperate the politicians are getting. Not only does the Republican party have to contend with the thought loosing the presidency to the Democrats but also loosing more seats in the Senate and Congress.

As I've been saying for the better part of last year, the US economy is on crutches and the band aid solutions by the Fed will only delay the inevitable. Unfortunately the Feds determination may have exacerbated the situation. Not only do they have to fight the slowing down economy and rising debt levels but they now have to contend with inflation . In essence we have witnessed a bubble in every asset class and this has spilled over into commodities which now has consumers paying high prices for essential goods.

For diligent investors, recession serves as a good point to take a break from the equity market unless they have the nerve to take short positions. Right now the traders are hoping that sovereign wealth funds will wand off a bear market. I will continue fighting the temptation to buy any stocks until there is a positive change in the index of leading economic indicators and other economic sensitive numbers.