[lbo-talk] where we are

[Jay R]

This is interesting but the problem with comparing stock performance
is that it only shows the % change since of start of the recession and
doesn't reflect valuation multiples (so for example if the US stock
market was more overvalued going into the recession, it would make
sense that the % decline was sharper).  There are similar problems
with just looking at bond yield changes (plus I imagine some of these
countries had greater default risks than the US which would lead their
govt rates to be higher).

I have to say as someone who follows the markets regularly that I am
amazed that Wall St macroeconomists have mostly ignored work like the
IMF study and Reinhart/Rogoff, and believe instead that we are in a
garden-variety recession with GDP likely to rebound sharply.  The last
I looked (last Friday) the consensus Wall St estimates for GDP were
2.8% for 2H and 3.6% for 2011.  These estimates were even higher
before the recent economic data came in.  The most bearish mainstream
forecast I have seen is Jan Hatzius (who is a terrific economist -
Goldman Sachs) who is projecting something like 1% for 2H - even this
seems optimistic.  Obviously there is a chance that the economy builds
momentum and enters a self-sustaining recovery - but given the
historical evidence plus the drag of the simulus wearing off, I sure
wouldn't make it my base case if I were forecasting.

Jay

On Wed, Aug 18, 2010 at 11:17 PM, Doug Henwood <dhenwood at panix.com> wrote:
> life after financial crises:
>
> http://tlrii.typepad.com/theliscioreport/2010/08/index.html
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