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David Rosenberg: Paul Krugman's Doom Warning Is Spot On
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| Contributor | particleman |
| Last Edited | particleman Jun 29, 2010 08:07pm |
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| Category | Speculative |
| Author | Joe Weisenthal |
| News Date | Wednesday, June 30, 2010 02:00:00 AM UTC0:0 |
| Description | We're at a weird moment where David Rosenberg (who is normally an Austrian) and Paul Krugman (a Keynesian) are basically on the same page, though anyone who's been paying attention can't be too surprised.
We live in bizarre times.
Here's Rosenberg:
The fact that the equity market ended up in the red yesterday, even fractionally, after spending most of the day in positive territory, is an ominous sign ahead of quarter-end. A head-and-shoulders pattern is becoming highly visible and should the S&P 500 break below the 1,050 mark, it is very likely going to slide towards 880 and probably very quickly.
The bond market is telling a very important story here and it is one of a deflationary depression. We may not agree with Paul Krugman’s cure of solving a credit collapse by trying to create even more credit, but his diagnosis is spot on. The same ECRI that correctly foreshadowed the inventory-led bounce in GDP over the past four quarters is now signalling a very high chance of either a double-dip recession or a growth collapse of 2002 proportions.
The stock market bulls who got the 2009 call right were the same ones that got investors whacked hard in 2008 and they again have overstayed their call. Instead of heeding what the bond market is telling them, they are calling it a “bubble”. In realty, the bond market is sending out an important signal; decelerating nominal GDP growth ahead. This does not dovetail with notions of a V-shaped increase in corporate earnings to new record highs in the coming year and we would be looking for earnings guidance to be rather spotty during the looming reporting season. |
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