Steve, Roubini says that the bond market is predicting a recession, and the equity market is having a sucker’s rally, just as in March 01, because they bulls believe the Fed will come to the rescue, but they won’t. As soon as the recession started in 2001, the market fell 18% quickly. Roubini says the market will fall sharply as soon as the recession starts. After a recession ends, it can take 1-2 years for the job market to recover, so this recession can have a big negative effect on the 2008 elections.
Steve, you are like my friend in 2000: she thought she was so smart to be in the stock market. Then she lost half her money.