10 Reasons To Hide Under Your Bed
Economist Nouriel Roubini is known by some as "Dr. Doom" for his excessively bearish outlook. But he looks like Polly Positive compared to this piece from James Kostohryz, a former analyst and trader, a Harvard Law alum and current stock-picker.
Since early March, the S&P 500 is up nearly 45 percent. Kostohryz has called this a "countertrend rally" and he lays out 10 harrowing -- and pretty compelling -- reasons why it's over and why "there are a number of factors -- many of them from abroad -- which, taken together, should apply considerable downward pressure on global financial markets throughout the remainder of 2009 and 2010."
As if we still don't have enough trouble here at home -- the official unemployment rate is 9.5 percent (real unemployment is 16.5 percent), a looming commercial real estate crisis, stagflation -- Kostohryz says we're going to be hurt by the ticking-time-bomb that is Europe.
"Europe is in trouble -- and more than is realized," he writes. "Government debt in Europe is far greater than in the U.S. The demographics are dismal. Entrepreneurial growth dynamics are non-existent. Property values are significantly more overvalued than in the U.S. The corporate sector is considerably more leveraged than in the US. The banking system is much more leveraged than in the U.S. and capitalization levels of banks are grossly inadequate. The monetary and fiscal mechanisms in Europe to counteract the economic crisis are lame."
To the East, Kostohryz predicts flat growth in China, which has fueled the U.S. economy with imports and exports and now holds 24 percent of U.S. debt, our nation's largest foreign creditor.
He worries about trouble in emerging markets such as Russia, Mexico and Venezuela, thanks to plunging crude prices. Not to mention a reluctance by first-world nation investors to sink money into them.
Click here to read all of his reasons.
Or, just go hide under your bed.
July 29, 2009; 2:51 PM ET
Categories: The Ticker
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Posted by: Dermitt | July 30, 2009 3:34 PM | Report abuse
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