Jump to content
House Price Crash Forum
Sign in to follow this  
1929crash

Worst Is Yet To Come Says Roubini

Recommended Posts

The Worst Is Yet To Come

Nouriel Roubini, 01.22.09, 12:01 AM EST

The bear market sucker's rally is losing its steam.

I have been predicting for a while that the most recent bear market sucker's rally would lose its steam and, like the previous bear market rallies in the last 18 months, U.S. and global equities prices would head again toward new lows. Here's why.

As my work and the work of our research team at RGE Monitor predicts (we will publish, later this week, our 2009 Global Economic Outlook, a 75-page research piece for our clients), this will be the worst U.S. recession in the last 50 years--and the worst synchronized global recession in decades.

For a few weeks since late November, equity markets ignored the onslaught of much-worse-than-expected macro news (and all the news was really worse than awful) and had a nice 25% bear market sucker's rally. But the drumbeat of worse-than-expected macro new--and earnings news, and financial news--has finally taken a toll on the delusional market belief that the worst was over for financial markets and for equity markets and that the U.S. and global economy would recover in the second half of 2009. So equity prices have already reversed more than half of their most recent bear market rally as the lousy macro news has finally shocked the wishful thinkers.

Indeed, the retail sales figures just published confirmed that a shopped-out, savings-less and debt-burdened U.S. consumer is now faltering as job losses, income losses, falls in home wealth, falls in equity wealth, high and rising debt and debt-servicing ratios and a severe credit crunch take a severe toll on the ability of consumers to spend. And reduction in spending and deleveraging of the U.S. consumer will take years to rebuild the savings rate of a household sector now hit by a severe shock to its net worth (as equity and home values fall while debts have been rising), and shocked in its inability to generate income as job losses mount and the unemployment rate surges.

Our research at RGE Monitor suggests that the U.S. and global recession will continue at least until Q4 2009 (a nasty, 24-month, U-shaped recession) and that the recovery in 2010-'11 will be very weak, with growth around 1%--well below a potential of 2.75%. And we cannot rule out that a more severe L-shaped stag-deflation (as in Japan in the 1990s) will take hold. Indeed, as I have argued, while the odds of a systemic financial meltdown have been reduced by the actions of the Group of Seven and other economies, severe vulnerabilities remain.

The credit crunch will persist and spread beyond mortgages. Deleveraging will continue, as thousands of hedge funds--many of which will go bust--and other leveraged players are forced to sell assets into illiquid and distressed markets, causing price declines and driving more insolvent financial institutions out of business. Credit losses will mount as the recession deepens, and a few emerging-market economies will certainly experience full-blown financial crisis.

So 2009 will be a painful year of global recession and further financial stresses, losses and bankruptcies. Currently, the probability of an L-shaped, stag-deflation is now rising to one-third, while the probability of a severe U-shaped recession is two-thirds. Only aggressive, coordinated and effective policy action by both advanced and emerging-market countries can ensure the global economy starts to recover, however slowly, in 2010, rather than entering a more protracted period of economic stagnation.

So while our benchmark scenarios see a severe U-shaped global recession with very weak growth recovery in 2010, we cannot exclude the possibility of a worse outcome--i.e. an L-shaped recession that, in our view, has at least a one-third probability. So the worst is ahead of us rather than behind us, both for the real economy and for financial markets.

With my forecast of 2009 earnings per share for S&P 500 firms being in the $50 to $60 range, and with price-earnings ratios likely to be in the 10 to 12 range, given a severe global recession, the S&P 500 could bottom at some point in 2009, at best at a level of 720 and, in a worse scenario, as low as 500 or 600.

So, the worst is indeed still ahead of us.

Nouriel Roubini, a professor at the Stern Business School at New York University and chairman of Roubini Global Economics, is a weekly columnist for Forbes.com. Analysts at Roubini Global Economics assisted in research for this week's column.

From http://www.forbes.com/2009/01/21/bear-mark...122roubini.html

Share this post


Link to post
Share on other sites

If you're going to try and use a post to ridicule me, you may want to start with a source that doesn't agree with my predictions.

Just a thought.

In case you wanted to avoid more public humiliation or anything...... :P

Roubini.

Our research at RGE Monitor suggests that the U.S. and global recession will continue at least until Q4 2009 (a nasty, 24-month, U-shaped recession)

the probability of a severe U-shaped recession is two-thirds.

So pretty much exactly what I have repeatedly predicted then. Further declines in 09, slowing towards the end, and a recovery starting in 2010.

Nice.

Edited by HAMISH_MCTAVISH

Share this post


Link to post
Share on other sites
If you're going to try and use a post to ridicule me, you may want to start with a source that doesn't agree with my predictions.

Just a thought.

In case you wanted to avoid more public humiliation or anything...... :P

Roubino.

Our research at RGE Monitor suggests that the U.S. and global recession will continue at least until Q4 2009 (a nasty, 24-month, U-shaped recession)

the probability of a severe U-shaped recession is two-thirds.

So pretty much exactly what I have repeatedly predicted then. Further declines in 09, slowing towards the end, and a recovery starting in 2010.

Nice.

So where does Roubini predict a recovery in 2010?

Share this post


Link to post
Share on other sites
I don't care no matter how bad it get's it will get better sooner or later !!!

Why do you think it will get better? Standard of living in the UK has been inflated using free and easy credit. When the credit is taken away, standard of life will fall. Remember the massive debts have to be paid back too, with interest. A decade or more of austerity awaits BXLONDONMAN, theres no guarantee the UK will ever recover.

In my opinion it won't recover; the weight of debt, dwindling resources, brain-drain, aging population and competition from the far east and eastern Europe will make the UK the sick man of Europe.

Edited by Quagmire

Share this post


Link to post
Share on other sites
Why do you think it will get better? Standard of living in the UK has been inflated using free and easy credit. When the credit is taken away, standard of life will fall. Remember the massive debts have to be paid back too, with interest. A decade or more of austerity awaits BXLONDONMAN, theres no guarantee the UK will ever recover.

In my opinion it won't recover; the weight of debt, dwindling resources, brain-drain, aging population and competition from the far east and eastern Europe will make the UK the sick man Europe.

we will end up as cheap low cost base in europe very soon i would say in the next year or 2..at some point we will hit bottom then the only way is up as the song says...it's all on the pound now i'am thinking it will go to one euro=£2 by the end of this year if that happens we will get to bottom by 2010..then things will get better 2011 or 2012 in 2012 things will get a boost we all know why...

we had our boom our day will come again we have had it bad before !!! we came out of it, we shall once more i am sure of it...time give it time that's all it cures most things !! :)

Share this post


Link to post
Share on other sites
Does anyone think Roubini really expects there will be growth by 2010?

The house price futures also indicate recovery starting at the end of 2010. It wouldn't suprise me at all.

Of course, this is after the biggest, fastest house prices crash since Pompeii.

Two more years (dec 2010) of -2% m-o-m is another 40% to go, 50% nominal in total.

VMR

Share this post


Link to post
Share on other sites
Why do you think it will get better? Standard of living in the UK has been inflated using free and easy credit. When the credit is taken away, standard of life will fall. Remember the massive debts have to be paid back too, with interest. A decade or more of austerity awaits BXLONDONMAN, theres no guarantee the UK will ever recover.

In my opinion it won't recover; the weight of debt, dwindling resources, brain-drain, aging population and competition from the far east and eastern Europe will make the UK the sick man of Europe.

I could not agree more.

Share this post


Link to post
Share on other sites
If you're going to try and use a post to ridicule me, you may want to start with a source that doesn't agree with my predictions.

Just a thought.

In case you wanted to avoid more public humiliation or anything...... :P

Roubini.

Our research at RGE Monitor suggests that the U.S. and global recession will continue at least until Q4 2009 (a nasty, 24-month, U-shaped recession)

the probability of a severe U-shaped recession is two-thirds.

So pretty much exactly what I have repeatedly predicted then. Further declines in 09, slowing towards the end, and a recovery starting in 2010.

Nice.

Even Gordon is in agreement with me on your predictive prowess

brownbig.jpg

Edited by RajD

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.

Loading...
Sign in to follow this  

  • Recently Browsing   0 members

    No registered users viewing this page.

  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.