From Aaron Task in TSCM...
<"I continue to worry about a U.S. economy that hits another air pocket in the early months of 2002," Stephen Roach, global economist at Morgan Stanley, wrote today. "For financial markets rallying on the premise of postshock healing and recovery, any such air pocket could come as an especially rude awakening."
Roach also warned that another downturn in the U.S. economy "could also trigger another wave of deterioration in the global trade cycle -- the stuff of an ever-deeper synchronous recession."
Lakshman Achuthan, managing director of the Economic Cycle Research Institute, expressed similar concerns in an exchange today with TheStreet.com's deputy managing editor Charlotte-Anne Lucas, who graciously passed them along to me.
On Thursday (while we were eating), Germany announced its GDP has been contracting for the last two quarters, Achuthan noted. "So we have the U.S. in a recession, we know Japan is in recession and we now know Germany is as well."
It's been a quarter century since those three major economies were in a recession simultaneously, he continued, recalling growth in Japan and Europe "made our recovery easier" in the 1990-91 recession.>
For me, the market has priced in an economic recovery until Mar/Apr 2002. Therefore, we won't have any sustained move to the downside until spring when this fallacy becomes apparent. I would not at all be surprised to see the Dow hit all time highs before this move is done. We have a monumental shorting opportunity in the making, and a huge pile of froth to skim until that time.
(~)^(~) |
