Whither 2009?
Bill Gross of PIMCO is pessimistic these days. Forbes:
With stocks down 40% this year, he predicts Americans will shift from risk to thrift for at least a generation. He says higher savings, plus a move away from leverage by businesses and money managers, means the U.S. economy will grow no more than 2% annually for years, a third slower than its 20-year average. Profit margins will narrow, stock gains will slow to a crawl and the government will find itself lending to the private sector for a long time. Gross’ theory is that the government will arrange to get itself paid back and that his investors can safely travel on the government’s coattails.
“When you lose half your 401(k) you care more about the return of your money than return on your money,” he says. “The lack of animal spirits will influence investing for years to come. The government will have to play risk taker of last resort.”
Maybe he’s correct; he is one of the more thoughtful investors in the country. It is certainly true that there can be no recovery until the credit markets stop demanding a 40% yield-to-worst for the debt of companies that have already gotten a US government bailout. But all signs are not pessimistic — the IndyMac private equity group that is buying that company from the FDIC includes investors who were both bulls and bears during the previous period of excess.
January 4th, 2009 at 3:55 am
Would partially privatizing Social Security ala Bush’s plan jump start the stock market, or has the crash confirmed the dems belief that it is ‘too risky’?
January 4th, 2009 at 3:57 am
1 – the flight to us bonds n tbills has slowed.
2 – new filings for unemployment has been flat or down three reporting periods in a row.
3 – stocks have been edging up.
4 – excluding gas/cars/jets retail sales were off 4% for Christmas, BUT considering how much was marked down at 25-75% this means retailers moved a lot of merchandise. which also means consumers got some GREAT deals.
5 – many retailers will go bust or reduce the number of stores they have and margins will inch upward for the better competitors. this will not take too long.
6 – global central bank monetary expansion will soon REALLY kick in.
PREDICTION: recovery will be evident by end april. (barring unforeseen/NEW developments.)
NOTE: i’m the guy who correctly predicted the oil bubble crash. in writing. on my blog.
further note: i predicted the timing of the “new economy/nasdaq” correction, too.
dinocrat: things haven’t changed too much; the business cycles has not been repealed.