Monday, July 6, 2009

Roubini More Bearish

As the news of the day across most countries is downbeat, Nouriel Roubini weighs in with an updated opinion. He had been making slightly more positive comments, but in U.S. Job Report Suggests that Green Shoots are Mostly Yellow Weeds, suffice it so say that not only does he suggest as before that the green shoots of Ben Bernanke may be turning to yellow weeds, he suggests they may devolve further into brown manure. He foresees significant deflationary pressures for over a year, and then, happy fellow, he foresees sufficient deficit spending by the Feds and debt monetization (money printing) by the Fed that intermediate and longer-term Treasury yields will head upward by late 2010.

The ECRI has been pounding the table (their own words) for economic recovery soon. Those such as Roubini and David Rosenberg who "got it right" prospectively are unreservedly bearish. Both views may be correct if a very weak technical recovery comes soon but, as Roubini forecasted months ago, it will be so weak that it still feels to most people like a recession.

Treasuries may have some significant upside in price if a financial disaster occurs. Gold still looks to be a steady Eddie safe play, but would be better bought under $900/ounce than at current prices. Deflationary anxiety as occurred last fall will cause fundamentally-based plus forced selling of gold.

Coyright (C) Long Lake LLC 2009

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