"a real, ugly, severe and protracted US recession more likely than ever." - Nouriel Roubini
This and the previous post are from Jim.
Oil and commodity prices are falling, fixed income is rallying and the stock market suckers’ rally has continued for a while but there are signals that the coming recession is finally making equities nervous. The Fed pause is a now a full stop and markets are starting to debate and price whether the Fed cutting rates will be in December or rather February. The global business cycle looks peaky based on many forward looking indicators. The housing market is in free fall and prices are already falling sharply (considering generous seller side subsidies and incentives). Banking stress is already evident in the sub-prime lending segment. The dollar is under weakening pressure; the US current account deficit is getting worse, net factor income payments are negative and foreigners’ purchases of long term US assets are faltering. I can thus comfortably argue that almost all of my predictions are well under way to become reality.
No wonder perma-bulls are going now into a perma-freeze as the markets are starting to price in a now inevitable US recession. Of course such perma-bulls will keep on deluding themselves that lower oil prices and lower long rates and a Fed cut will rescue the economy, not understanding that those price movements are bad news – rather than good news – as they reflect the severe US and global slowdown; they are systematically biased in their forecasts. But the reality check is coming soon as the onslaught of bad macro news make the reality of a real, ugly, severe and protracted US recession more likely than ever.
In the last three months I have been called all sorts of names and insults: “Dr. Strangelove of Global Macro”; “Eeyore”; “Doomsday Cult Central”; “Dr. Gloom & Doom”; “A combination of Count Dracula, Dr. Frankenstein and Godzilla together”; a lot of this from folks whose comparative advantage is in insults rather than in the serious and detailed economic analysis that I have performed in these pages. We have heard only wishful delusional dreams and insults from such perma-bulls.
To conclude, until now I have said that the only thing orderly and soft about the comatose housing market landing will be soon the undertaker carrying the coffin; I can now comfortably also say that the only thing soft or orderly about the economy landing is the undertaker carrying the coffin.
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