Wednesday, April 8, 2009

Roubini: It's Still a Bear Market

Larry Summers' former partner, Nouriel Roubini, said on Tuesday that he expected more negative macroeconomic data and problems in the banking and housing sectors, as well as pressures on consumers.

Roubini is clearly a Keynesian since he also said that the big stimulus packages will eventually slow the rate at which economies contract. Since the "stimulus" package is nothing but a transfer of wealth from the masses to the politically connected, Roubini is way off here.

The Fed's money printing will, short term, take care of the macro sector, including housing. As for pressure on consumers, as we have pointed out here consistently, a downturn in the economy is a readjustment in the economy from the capital goods sector to the consumer sector. Ultimate consumer goods such as movie tickets and concert tickets are hitting record highs in sales.

Clearly, only someone who never looks at the money supply would say something like Roubini did when he said that the current strong stock market action was a "bear market rally." It's a Beb Bernanke money printing rally.

As for his comments about the financial sector, if he is still, ahem, providing consultations to his former partner, he may know what the government has in store for banks when the "stress tests" are out. That said, given his negativity on the financial sector, it suggests some banks are going to "fail" the test.

If there is any pull back in the market as a result of announced "failures" , in our book it's a buying opportunity.

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