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"the Last Bear Just Roared-should We Ran For Cover?"

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http://business.guardian.co.uk/story/0,,1768884,00.html

The last bear just roared - so should we start running for cover?

Some fear it spells disaster, but the former Cassandra defends his conversion

Larry Elliott, economics editor

Saturday May 6, 2006

The Guardian

Three months ago when the global business elite gathered in the Swiss ski resort of Davos for the World Economic Forum, they were greeted by the regular blast of doom and gloom from Stephen Roach.

Morgan Stanley's chief economist had become known as the bear's bear, the analyst who could always find a cloud to any silver lining. Roach could always be relied on to prophesy that the imbalances in the global economy would end in tears. Until now.

Last week, markets were taken aback when Cassandra suddenly cheered up. "I am feeling better about the prognosis for the world economy for the first time in ages," Roach said in a piece of research entitled "World on the Mend". Taken aback, and a tad alarmed. Market folklore has it that the time to sell is when the last bear stops roaring. The reasoning is that once everybody believes things can only get better, markets become gripped by a herd mentality, lose touch with reality and eventually come down with a bump.

Roach is clearly irritated by this kind of talk. "I can't get into that 'last bear growling' stuff," he said from Venice this week. He made the same call back in 1999 when there was fear of a market meltdown in the aftermath of the Russian debt default and the collapse of the hedge fund Long-Term Capital Management. "I went out on a limb but the world economy came back," he said. blush.gif :lol:

Even so, it's not hard to see why Roach's conversion to the belief that global imbalances can be sorted out without large-scale disruption has caused a stir. Markets have been in a bullish, even euphoric, mood. The three-year plunge in equities which embraced the dotcom bust, the 9/11 attacks and the corporate scandals at Enron and WorldCom has been followed by a three-year climb. The FTSE 100 has risen by almost 25% over the past 12 months to its highest level in five years...

Damascene conversion

The moment Roach became more upbeat about the future, he said, was when the finance ministers and central bank governors of the G7 - the United States, Britain, France, Germany, Japan, Canada and Italy - met in Washington a fortnight ago. In addition to the usual communique after the talks, the G7 appended an annexe detailing problems that needed fixing in the global economy. A day later, the IMF was given the task of conducting wide-ranging surveillance of the global economy with a view to coming up with a menu of policy advice for the US, Europe and Asia...

'Superbear' sees the light

Before: 'The mood in Europe is as bleak as I've ever seen it. That's the deep sense of malaise that greets you when you enter the halls of the congress centre in Davos' is holding down inflation; the most recent report on US labour costs is especially encouraging' to a virtual standstill as 2002 drew to a close. A shock in this context is the last thing a struggling world economy needs'

After: 'I am feeling better about the prognosis for the world economy for the first time in ages'

Before: 'A sputtering US economy is a recipe for an engineless global economy. It may well be that the world economy is doomed to a period of sub-par growth'

After: 'It's time to give credit where credit is due - globalisation is holding down inflation; the most recent report on US labour costs is especially encouraging'

Before:'The industrial world came to a virtual standstill as 2002 drew to a close. A shock in this context is the last thing a struggling world economy needs'

After 'The world now appears to be getting its act together ... I am delighted the global economy finally seems to be taking its medicine. Let's hope it works'

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Edited by Baz63

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  • 301 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%



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