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Nouriel Roubini
Jim Rogers
April 26, 2009
VOL 26 NO 17
Will things get better, or will they get worse?
We are either on the brink of the biggest bull run since World War II or staring into a financial abyss not seen since 1929. It all depends on who you believe. Here is the Sunday Tribune guide to the global bulls and bears.
George Soros
Ben Bernanke
Barack Obama
Anthony Bolton
The bears:
Nouriel Roubini, professor of economics at New York University
The stock market's latest dead cat bounce may last a while longer, but three factors will, in due course, lead it to turn south again. First, macroeconomic indicators will be worse than expected. Second, the earnings of corporations and financial institutions will not rebound as fast as the consensus predicts. Third, financial shocks will be worse than expected. At some point, investors will realise bank losses are massive and some banks are insolvent. Deleveraging by highly leveraged firms, such as hedge funds, will lead them to sell illiquid assets in illiquid markets. And some emerging market economies, despite massive IMF support, will experience a severe financial crisis with contagious effects on other economies.
Roger Bootle, British economist,
adviser to Deloitte
It is far too early to talk about a recovery. Indeed, the fact that pay is already falling on some measures means that a deflationary spiral remains a significant risk. The worst of the falls in output may be behind us. But it will be a long time – quite possibly not until the end of next year – before the economy is expanding again.
Jim Rogers, legendary US commodity investor and chairman of Rogers Holdings
When you see a rally like this coming off the bottom, it lasts longer than anybody expects. I would expect to see more problems, probably this fall.
Mike Duke, chief executive, Wal-Mart
Talking to our customers, I think there is still a lot of stress. It's not a V recession, where we'll just bounce out. This is one that is going to take a sustained change in the way families live.
Joseph Stiglitz, professor of economics at Columbia University
This year will be bleak. The question we need to be asking now is, how can we enhance the likelihood that we will eventually emerge into a robust recovery?
George Soros, investor and philanthropist
I don't expect the US. economy to recover in the third or fourth quarter so I think we are in for a pretty lasting slowdown. You hit bottom and you automatically rebound, but then you don't come out of it in a V-shape recovery or anything like that. You settle down, step down.
Instead of stimulating the economy, banks will draw the lifeblood, so to speak, of profits away from the real economy to keep themselves alive. This is the zombie bank situation.
Paul Krugman, Nobel prize winning economist, Princeton University
The 2001 recession was declared over in November of that year because industrial production and gross domestic product turned slightly upwards at that point.
Unfortunately, unemployment continued to rise for another year-and-a-half after the recession had supposedly ended. There will be no recovery until the private sector can repair balance sheets enough to start spending again.
The bulls:
Anthony Bolton, legendary stock picker and president of investments at Fidelity International
A bull market tends to climb a wall of worry. At the bottom, it is easy to find reasons not to buy – all the negatives are known. Gradually, as the market recovers, these become less convincing to investors. Remember that bull markets paper over the "cracks" while bear markets expose them.
Bear in mind, too, that the stock market is an excellent discounter of the future. It normally moves on what investors expect to happen in six to 12 months' time. So, if you wait for the news to get better or worse, you will miss the market's turning point.
Ben Bernanke, chairman of the US
Federal Reserve
Recently, we have seen tentative signs that the sharp decline in economic activity may be slowing, for example, in data on home sales, home building and consumer spending, including sales of new motor vehicles.
Crispin Odey, renowned London
hedge-fund manager who last year was shorting banks
In a little over a month much has changed. Stock markets have shot up, led by the financials and the base material sectors. As the story moves from the balance sheet to the earnings potential for the likes of Barclays, the bull market will also extend from its narrow base to encompass other industries where capacity has been sufficiently reduced as to allow pricing power to come through. Since on my numbers these banks are trading on between two and three times future earnings, two years out, I am not afraid of the volatility in the share price.
Barack Obama, US president, in a speech at Georgetown University, Washington DC
There is no doubt that times are still tough. By no means are we out of the woods just yet. But from where we stand, for the very first time, we are beginning to see glimmers of hope.
Larry Kantor, head of research at
Barclays Capital
We believe the recent rally in financial markets signifies an inflection point. We are recommending that investors become more aggressive and take risk over a broader range of assets.
Mark Faber, investor and publisher of the 'Gloom, Boom and Doom' report
You have essentially a government that gives financials free money at the expense of the taxpayer. With this free money, they may actually have decent earnings in the near future.
Mark Mobius, chairman of Templeton Asset Management and investment guru
This is the best time to invest, when investors are nervous, pessimistic. Valuations now are very, very attractive. The fastest economies are in Asian markets. That economic growth is going to be reflected in stock markets as we go forward. Asian countries also have pretty good foreign reserves they can use for developing their countries and domestic markets.
April 19, 2009
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When you print up a trillion more of Fiat money and pump it out into an ailing economy, when you throw pearls to swine, when you embrace Wall St. and the doctrine of "too big to fail", when you buy your own government bonds with recently printed, hot off the press money, You are not on the verge of one of the biggest bull runs in history. You are tottering on the brink of a precipice staring upwards at a bull run, but only one step from disaster. Of course Roubini is correct, only fools would believe that massive structural imbalances in trade between the U.S. and China can be papered over with more fiat money. Oh! Mr. Obama if only it was all that easy!