And then grab a stage break
Nobody can be right all the time, but Dr. Nouriel Roubini has come pretty darn close so far. That does not, however, preclude being correct into perpetuity.
Dr. Roubini has now grasped near constant media attention, and I believe the media’s insatiable desire for content to force down the world’s throats will eventually perpetuate the production of new material that may not fit Dr. Roubini penchant for diligence. In other words, the man is in demand, and I fear it will eventually lead to some slips (if it hasn’t already):
So what can the government do? The easy part is lowering interest rates and buying toxic assets. The hard part, he says, will be tackling housing. Roubini says that the housing market, like a company restructuring in bankruptcy, needs to have “face value reduction of the debt.” Rather than go through mortgages one by one, he says reduction has to be “across the board…break every mortgage contract.”
This proposal smells faintly like an attempt at populism – and it surely would be well received by the indebted, everywhere. However, I’m not sure if Dr. Roubini thinks that by simply restructuring every mortgage on the planet borrowers will take the lesson to heart – if he does I think he is suffering from a bit of media fatigue. I’m somewhat more convinced that such a debt reduction will eventually find its way back to the balance sheets of citizens, in the form of new digital televisions and other like-kind frivolities, the desire for in the grand scheme of keeping up with the Joneses which got us into such a nasty mess in the first place. Make no mistake about it – lowering interest rates, the first-round enabler of the Jones family’s now cracked granite countertops, will guarantee it.
On a separate note, the prognostication continues at RGE Central:
Earnings per share (EPS) of S&P 500 firms will be in the $ 50 to 60 range, but they could fall to $40. The price earnings (P/E) ratio may fall in the 10 to 12 range in a U-shaped recession. If earnings are closer to 50 or the P/E ratio falls to 10 then the S&P could fall to 600 (12 x 50 or 10 x 60) or even to 500 (10 x 50). Equivalently the Dow (DJIA) would be at least as low as 7000 and possibly as low as 6000 or 5000.
See anything you can use to leverage informed decision making? I didn’t think so. The rest of us are looking at the charts, and seeing a potential bottom on the S&P of around 450. Charts are pretty much bunk as well.
Conclusion
There are laws of diminishing returns with respect to all analysis. My suggestion is Dr. Roubini take a breather from his, before the attention firestorm results in paralysis.
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