Nouriel Roubini, aka Dr Doom, is predicting another downturn in the markets as well as a "Greater Depression". This should come as no surprise to anyone.
Roubini is credited with calling the burst of the housing bubble and the financial collapse of a decade ago. Of course, if you scream that the sky is falling long enough, sooner or later you will be right.
Nevertheless, the situation in New York is cause for alarm. The markets are not taking the spread of the virus serious enough, believing the Fed along with the government can help to soften the landing. This is not likely to happen.
When people are locked in their homes, economic activity, for the most part, ceases. This is creating problems for any analyst out there. In short, it is impossible for anyone to guess how bad the economic impact is right now let alone what it will look like in 60-90 days.
This week we are going to see the end of the first quarter. This will start the release of some numbers which should give an indication of how bad things are getting. For example, we will see the unemployment numbers for the month of March along with the first quarter automobile sales. The numbers are going to be bad.
It is impossible to guess how long this is going to go on. My guess is we are only seeing the start of the "stimulus" packages. Over the last week I wrote how we are in a deflationary spiral. This is something that leaves the Fed completely impotent. The idea that they can stimulate demand is not only historically wrong, it is nothing more than banker arrogance.
Nevertheless, the banks and governments are going to use the calling card they turned to the last few decades. When in doubt, just start stimulating. Unfortunately, it never works as intended. Large ticket items came to a complete standstill. Automobile, housing, and travel are all seeing enormous drops from where they were just a few months ago.
Last week, the market bounced off the lows as the United States Congress passed a $2 trillion stimulus package. In my view, not providing financial advice, but it looks like a dead cat bounce to me. On this matter, Roubini and I agree.
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