So as far as the market is concerned are we near a stock market bottom?
Roubini has been one of the most accurate economists, in terms of predicting these horrific events gripping our economy and financial markets.
To paraphrase his recent comments:
1) In case of NO MAJOR BAIL OUT OF FINANCIAL FIRMS/BANKS, then we might expect an L-shaped recession similar to what gripped the Japanese economy for a decade. This probably implies overall deflation, and certainly implies long-term deflation specifically for housing prices (which fell for over ten straight years in Japan)
2) In case of PASSAGE OF HELPFUL BAIL OUT OF FINANCIAL FIRMS/BANKS…then a deep U-shaped recession is still certain (probably has already been underway for several months) that lasts AT LEAST twelve to eighteen months, where countrywide unemployment would reach at least 8%.
Either way he remarks the stock markets can be expected to fall approximately 35% to 40% from their Oct ’07 highs, maybe more.
The NASDAQ is already down 30% off the Oct ’07 highs. So another bad day tomorrow and Roubini’s prediction would already be realized (for the NASDAQ). That would only have me conluding he’s under-estimated how far down this bear market will take stock values.
