The Triple Bottom Threat

As a contrarian, this story about a double-dip recession adds to my confirmation that this current rally has legs. As a market observer, two things make me think the story may have some merit.

First is the historical context: If this recession is as bad as people say it has been (and by all accounts, it is), historically similar recessions have seen the triple-bottom. That is, one severe drop (i.e. October 2008), an even-worse drop (March 2009) and a third drop that is bad, but doesn't retest the previous drop's low point. I don't think that third drop has happened yet.

Of course, history doesn't have to repeat itself, but then there's the second thing, which is the enormous debt load the U.S. government carries. This debt will need to be repaid, and unless the economy roars to life and increases tax receipts, the only alternative will be to raise income tax rates. Such a move would inevitably kill off any recovery, since money that would fuel an economic rebound would be rerouted to extinguish debt.

Putting those two things together, I think it's safe to say that a triple-bottom remains certainly in the realm of possibility in the next year.