The truth is the world since 2008 has been somewhere between recession and full blown depression. We’ve had ticks up and ticks down but for the most part we have bumped along. China seemed to be doing pretty well for a while there. The BRIC countries too. But things appear to be souring, quickly. There is the very real possibility that we are looking at another significant leg down in the Great Recession in the pretty near future.
That being said I could be very wrong. Perhaps this is just one of the down ticks we’ve seen over the last 4 years and not a down leg. But I figured I’d provide some links to some of the stories I’m reading.
The first is from Bill Gross, the co-founder of PIMCO and shaman of all things bond. In his most recent investment letter, which can be read here, he said:
“Unfair though it may be, an investor should continue to expect an attempted inflationary solution in almost all developed economies over the next few years and even decades. Financial repression, QEs of all sorts and sizes, and even negative nominal interest rates now experienced in Switzerland and five other Euroland countries may dominate the timescape. The cult of equity may be dying, but the cult of inflation may only have just begun.”
That’s pretty cheery.
Gross’ buddy at PIMCO, Mohamed El-Erian, was feeling pretty dour today too. In an interview he said;
Though he says he is not officially forecasting a leg down one senses that it’s just CYA.
So what’s going on in China? The new Chinese rich are selling their sports cars that’s what. If you are in the market for a Ferrari or Bentley Guangdong province is the place to go.
Well, this time, European leaders swear, they’ve got their act together. They have a plan to calm bond markets. They promise, they promise, they didn’t just think it up over a couple of bottles of wine last night.
Ah yes, one can just feel the confidence surging across the Atlantic!
So here the bond king is telling us that stocks are dead and that bonds aren’t much better and that folks had better get used to working harder and longer.
In China Lamborghinis are languishing, undriven, as the new rich liquidate and tighten their belts.
In Europe things are just out of control, with Andrea Merkel the only light of leadership on the Continent it appears.
And this is all without any mention of the “fiscal cliff” which appraoches quickly.
Also, not widely reported outside of the financial news, we had another flash crash like situation on August 1st in the markets.
And one last thing. The drumbeat of war continues in Syria. President Obama, has issued a “secret” order for the CIA, etc. to help Syrian rebels oust Assad. For a supposed “anti-war” candidate this guy loves waging war. If Syria spreads the ramifications for this country could be significant. Russia maintains a carrier battle group right off the coast. Between us and Assad.
And I almost forgot. The LIBOR scandal continues to unravel. Not that most of America cares even though it’s a colossal scandal and is maybe the greatest theft outside of a central bank in the history of the world.
Given all this, and much more I won’t include in this post, I think the word “caution” is very apt as we come out of Summer and look at early Autumn.
But hey don’t take my word for it. Maybe it’s time to go long Facebook and Groupon!