(snippet)
Given this outlook for the real economy and financial institutions, the latest rally in US and global stock markets has to be interpreted as a bear-market rally. Economists usually joke that the stock market has predicted 12 out of the last nine recessions, as markets often fall sharply without an ensuing recession.
But, in the last two years, the stock market has predicted six out of the last zero economic recoveries -- that is, six bear market rallies that eventually fizzled and led to new lows.
The stock market's latest 'dead cat bounce' may last a while longer, but three factors will, in due course, lead it to turn south again. First, macroeconomic indicators will be worse than expected, with growth failing to recover as fast as the consensus expects.
Second, the profits and earnings of corporations and financial institutions will not rebound as fast as the consensus predicts, as weak economic growth, deflationary pressures and surging defaults on corporate bonds will limit firms' pricing power and keep profit margins low.
Third, financial shocks will be worse than expected.
At some point, investors will realise that bank losses are massive, and that some banks are insolvent. Deleveraging by highly leveraged firms -- such as hedge funds -- will lead them to sell illiquid assets in illiquid markets. And some emerging market economies -- despite massive IMF support -- will experience a severe financial crisis with contagious effects on other economies.
Link
Banks are bankrupt, jobs for the politicians when they need a future job. Tax payer’s money for the "boys" who live at the expense of the institutions who protect them. Let the banks go bust as they are bankrupt and start with clean new balance sheets and jail all the bankers who had responsibility for this problem, even those retired. How do we know who to jail, all those that took "bonuses" now and in the past.
ReplyDelete