Merrills CEO calling for a Major Great Depression

Merrill’s CEO John Thain at a conference yesterday:

“Right now, the US economy is contracting very rapidly. We are looking at a period of global slowdown. This is not like 1987 or 1998 or 2001. The contraction going on is bigger than that. We will, in fact, look back to the 1929 period to see the kind of slow-down we’re seeing now.“
Best Buy’s CEO on today’s earnings call:

“Since mid-September, rapid, seismic changes in consumer behavior have created the most difficult climate we’ve ever seen. Best Buy simply can’t adjust fast enough to maintain our earnings momentum for this year.”

And how ’bout this from former Goldman Sachs chairman John Whitehead:

I think [this slump will] be worse than the depression. We’re talking about reducing the credit of the United States of America, which is the backbone of the economic system. … I see nothing but large increases in the deficit, all of which are serving to decrease the credit standing of America. … I just want to get people thinking about this, and to realize this is a road to disaster. I’ve always been a positive person and optimistic, but I don’t see a solution here.

Contrast this with the guests on CNBC who are still finding excuses to buy stocks. Folks, they’re telling you stocks are cheap because they’re asset managers: They get paid based on the amount of capital they have under management. If you’re not invested in stocks, they don’t have jobs.

Consumer spending makes up 70% of the economy. “Rapid, seismic changes in consumer behavior” mean GDP will contract, significantly.

The collective earnings of the S&P 500 companies will be about $60 next year. Put a 10x multiple on that and you get an index value of 600. That means the market has, at least, another 30% to fall. I wouldn’t go anywhere near stocks now. They are not cheap relative to earnings.