With a little “help” from our CNBC friends…NOT!

  • Posted: 28 January 2009 09:21 AM

    Now this is what we need at times like this….gee. Any of you pro’s knows if it will affect us/AAPL?

    Heading:  Stocks Could Drop 20%, No Safe Haven: Dr. Doom

    US and global stocks are still likely to fall because the corporate and economic news will be worse than expected, Nouriel Roubini, RGE Monitor Chairman, told CNBC.

    Investors will be hit by the realization that many banks are bankrupt, that companies will have to rein in debt and sell assets and that emerging markets may get into trouble, Roubini said.

    “I think that there’s a 20 percent downside risk to US and global equities,” Roubini told “Squawk Box Europe.”

    The transmission mechanism oiling the wheels of the banking system is broken, he said, adding that “banks are getting the money and they are hoarding it, they’re not lending it,” because they expect higher losses.

    There is no safe haven from the crisis as all countries are affected, and the collapse in aggregate demand may bring about prolonged deflation, Roubini added.

    “We have to worry today about not ending up like Japan. That’s the risk for the global economy,” he said.

    The rise in the price of gold is a signal of fear that countries and corporations may default on debt rather than of worries about future inflation, and the precious metal is used as a “safety valve.”

    Falling stock prices and very low bond yields are signaling depression, while credit spreads are still very wide, indicating fear of defaults, according to Roubini. And even the fast-growing Asian economies aren’t spared.

    “If you look at the data in emerging markets and around Asia, East Asia, there is a hard landing,” he said. “All the numbers out of China suggest? the manufacturing sector is already in a recession.”

    Protectionism is the next danger, as history shows that it prolonged the 1930s depression, he said, regarding remarks by U.S. Treasury Secretary Timothy Geithner that China was “manipulating” its currency to help its exports.

    “Certainly starting a war with China on the issue of the currency is very, very dangerous,” he said. “The US is relying on the kindness of strangers—Russia, China, the Gulf States ? to finance a huge, and growing, twin current account and fiscal deficit,” Roubini said.

    “If China were to pull the plug on financing the US dollar, then we’d have a freefall of the dollar,” he added.

         
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    Posted: 28 January 2009 10:20 AM #1

    MacB - 28 January 2009 01:21 PM

    Now this is what we need at times like this….gee. Any of you pro’s knows if it will affect us/AAPL?

    Let’s not shoot the messenger for bringing bad news. We have been warned of dangers previously many times, and it is up to each individual investor to gauge the trustworthiness of the analyst and the risk each individual is willing to assume.

    “I think that there’s a 20 percent downside risk to US and global equities,” Roubini told “Squawk Box Europe.”

    The S&P was at 1576 in October 2007 and was at 741 in November 2008. A drop of 20% is peanuts compared to what we have had so far.

    The transmission mechanism oiling the wheels of the banking system is broken, he said, adding that “banks are getting the money and they are hoarding it, they’re not lending it,” because they expect higher losses.

    Sounds like a good business decision. Why weren’t banks prudent two-five years ago, when this thing started?

    There is no safe haven from the crisis as all countries are affected, and the collapse in aggregate demand may bring about prolonged deflation, Roubini added.

    It us up to the government to bring up aggregate demand. Like a fiscal stimulus. The debt will have to be paid later on, but it is important for the country to still be here later on.

    “We have to worry today about not ending up like Japan. That’s the risk for the global economy,” he said.

    Japan kept alive many banks that it shouldn’t have. The US has allowed some banks to go down or be bought. The Japanese economy was structurally very rigid, (like Italy), unlike the US. It is unlikely the US will get to the point of Japan, if attention is given to economists and not politicians, who have no idea of history or economics.

    Protectionism is the next danger, as history shows that it prolonged the 1930s depression, he said, regarding remarks by U.S. Treasury Secretary Timothy Geithner that China was “manipulating” its currency to help its exports.

    “Certainly starting a war with China on the issue of the currency is very, very dangerous,” he said. “The US is relying on the kindness of strangers—Russia, China, the Gulf States ? to finance a huge, and growing, twin current account and fiscal deficit,” Roubini said.

    “If China were to pull the plug on financing the US dollar, then we’d have a freefall of the dollar,” he added.

    Unlikely that the Chinese would allow the dollar to go down, since would kill Chinese exports. But protectionism should also be off the table, as it will exacerbate existing problems.

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    Posted: 28 January 2009 11:05 AM #2

    Protectionism is what got Korea and Japan into the “modern” era.  (it took decades)

         
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    Posted: 28 January 2009 11:29 AM #3

    I think evry trader interviewed in the last few weeks has the same opinion: we are set for a bear market rally, then we will fall back again and even possibly retest the November lows. So, as for what Roubini is saying, I take it as planning ahead for the next move in the game.

         
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    Posted: 28 January 2009 01:17 PM #4

    kiwitrader - 28 January 2009 03:29 PM

    I think every trader interviewed in the last few weeks has the same opinion: we are set for a bear market rally, then we will fall back again and even possibly retest the November lows. So, as for what Roubini is saying, I take it as planning ahead for the next move in the game.

    Self-fulfilling or expect the unexpected?  No bear rally or turn into a bullish rally?  Bullish rally is a wishful thinking since even Vice President said things would get worse before they get better.

    What is the duration of a bear rally?  Multi-day, multi-week, multi-month or multi-year?  I always have problems grasping what these guys say.  They always leave out the timeframes, a critical context, without which any price behavior comments are worthless.  Without knowing the duration, how to tell when to sell after buying a bear rally?

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    Posted: 28 January 2009 10:14 PM #5

    I take the recent bear market rally comments to mean a duration of days, maybe enough to make it a couple weeks. Lots of talk of being stuck in a trading range of S&P 800-1000. Then a meltdown when we break 800, when we must successfully test (not break) the Nov. lows. I think that once we get through the first half of the year, if we see signs of recovery in existing home sales, then we might set up for a the start of a new bull market. But I think even then it will be a slow climb and range bound for some time. Perhaps the whole second half ? So 2009 might be the year that never was? Just my .02 based on process of osmosis.  :wink: