Getting better

In a brave and sensible move, the Reserve Bank of Australia has ridden to the economy's rescue with a big 0.75% interest rate cut just as some negative types have been predicting a recession. Mind you, they might end up being right, but this action by the RBA increases the chances of making them wrong.

The listed 12 positives that had mounted up and happily the local and global stock markets have come in on cue to swing to the positive.This is the summary:

- Deutsche Bank research said over the past 80 years a bottom of a bear market has been created in the last week of October.

- November has a great track record for stock markets, and historically November to April has been good for share prices.

- This bear market has run longer than the average bear market.

- The 3-months LIBOR versus Fed Funds rate spread has fallen to around 200 basis points, but it was 330 basis points.

-Stock markets look 6-9 months ahead and things might look crook now but in 6-9 months the US economy could be coming out of recession.

- The US consumer confidence measure dropped to the lowest level ever, which sounds bad, but there's history showing that there is usually a big 20% plus bounce of the stock market after the consumer confidence reading hits rock bottom.

- The roll out of the rescue package for the banks has been well-received.

- Co-ordinated interest rate cuts worldwide are raising hopes.

- Valuations for great companies look attractive.

- The volatility index or fear index is falling.

- A range of US companies have reported surprisingly good numbers.

- The US election will take away uncertainty and that should be good for share prices.

Memories of 1991

We were hit by recession headlines. Leading these warnings is the chief economist from J.P.Morgan, Stephen Walters, who has pulled out the dreaded R-word."Australia faces its first recession since 1991 as prices fall next year for iron ore and coal, the nation's largest exports," he said.He thinks the economy will contract in the six months to March because of weakening export growth, which will cause companies to put off or even KO investment spending. And he has dragged down his calendar year forecast for growth from 1.4%, which he made on October 22 to 0.7%.The good news was that he argues the Reserve Bank will have to be more aggressive with their interest rate cuts to minimize the damage. And that's what the Big Bank has done with its surprise 0.75% cut in their cash rate of interest.

In the opposite corner

Against Walters we have the CEOs of ANZ and St. George - Michael Smith and Paul Fegan - who have predicted that Australia will dodge a recession.Even the Deputy Governor of The Reserve Bank Ric Battellino has argued we will avoid a recession.If the Big Bank was as negative as Walters, it would be shooting for a 4% cash rate, but this would also be in the context of rising unemployment and bankruptcies.At this stage, the RBA's view is more preferable to J.P.Morgan's. So, who is more likely to be right?Walters thinks the December quarter will be negative 0.3% and 0.4% for the March quarter. He thinks the 40% plus of the stock market, frozen funds and negative headlines will spook the consumer.

What the chief economists think

By the way, none of the big name economists at the big four banks are out there claiming their crystal balls are revealing a recession.Bill Evans, Westpac's chief economist, can't see a negative December quarter. "We are expecting zero growth in the March quarter and then only very small growth as the effect of the stimulus dies away," he said.And NAB's chief economist Alan Oster also has tipped no recession.Meanwhile, ANZ's respected chief economist Saul Eslake dismissed the speculation about a recession here in Australia.Finally, CommSec's Craig James has weighed into the argument criticising doomsday merchants and also insisting that we can avoid a recession.So at the moment, good stuff is outweighing bad stuff - to put it very simply - but we still have a long way to go.

What we have to hope for is some really smart government decisions right around the world and central bank decisions that help keep confidence as high as it can be, given the economic problems that are still out there.

The good news is...

This week's credit markets kept improving and European governments talked about a co-ordinated fiscal policy response to try and kick-start the Eurozone economy.Then along came the US election result with a win to Barack Obama, which should be another positive for the US economy.The good continues to outweigh the bad!