Wednesday, May 20, 2009

Hear ye! Hear ye! The ‘experts’ have spoken

Fund managers see green shoots in world economy

Investment experts around the world believe the global economy has turned, with a sizeable majority now saying it will improve in the next 12 months. Merrill Lynch’s May survey of Fund Managers has found seven out of ten investment managers are forecasting an improvement in the next 12 months and are now spending money in anticipation of an upturn by buying cyclical stocks that will gain value fastest when the economy picks up.

Posted by devo @ 05:32 PM (817 views)
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4 thoughts on “Hear ye! Hear ye! The ‘experts’ have spoken

  • What’s the recovery to be based on? Debt-leveraged gains for real estate and stocks? Getting bank credit (more debt) flowing again? No -the debt-bubble burst because it reached its debt limit. Will the interest on the debt be paid by borrowing money against inflating asset prices? Perhaps not. Maybe the financial sector will organise itself around providing productive investment and industrial credit rather than around loans collateralised against property (or income streams that are already there, or ammo for speculation and corporate raids). But productive investment would mean diverting savings away from repaying debts, and that would mean bankruptcies. But the bankrupts are propped up as the living dead so that they can keep paying their debt interest.

    Now that investors know how risky securitised instruments are there’s no chance of assets regaining their 2007 values or of a market for structured debt re-forming any time soon, even with generous government incentives to investors to buy securities backed by mortgages and other loans. (Bernanke’s idea that securities markets are frozen and that securities will regain most of their original worth is childish.) Governments can print as much money as they like but if banks are hoarding and consumers are repairing their balance sheets in response to rising unemployment and falling house prices, and companies are retrenching there will be no increase in demand.

    Also, everything has been done to prop up the credit-creation system that caused the bubble and bust. Nothing has been done to alter the incentive system that enables investment banks and their ‘vehicles’ to originate fraudulent securities and skim off the front-end before anybody discovers that the securities are junk, and nothing has been done to stop them creating breathtaking amounts of damaging leverage.

    So on what is the ‘recovery’ to be based?

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  • You can’t teach an old dog new tricks. Chewing the leather sofa before being caught by the returning owner is all it knows.

    That leathers gotta come out somewhere, apart from it not looking pretty, it’s going to be eye wateringly painful for dog and owner alike.

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  • Last move from speculators to influence the market. What if this misinformation campaign will not work?

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  • Experts?

    I’ve sh*t ’em!!

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